Business strategy and management decision-making are of prime importance for enterprise to survive and develop in competitions. Under the new circumstances of macro economic adjustment, industrial structure adjustment, and worse operating micro economic environment in China , it especially shows overwhilming importance. The paper based on a generic S.D. model of machinery industry, discusses several problems the enterprises face, such as shortage of working capital, raw material deficiency and intensive market competition. Those problems bring many obstacles to enterprises. In rhe paper we explore a series of solutions concerning technological transformation and new product development. Then we suggest several alternative policies. Furthermore, the paper discusses the effects of technological transformation and new product development on Chinese enterprises under the new circumstances in the long-term.