The purpose of this report is to make a detailed case analysis regarding the attractiveness of the Chinese fireworks industry The documentation used:
• According to Porter’s Five Forces model, it is easy to enter into the Chinese firework market which is leading to more fierce competition. Although, there are also more legal restrictions in other countries which means less threat of new entrants outside of China. The initial capital requirement to become a firework manufacturer is low so it is easy for Chinese farmers to start a small workshop while maintaining their farm. • After reviewing the supporting documents, it appears as though the Chinese firework industry has been steady with a slight increase in the past decade. The documentation shows that there are less legal restrictions in China which means less money for a Chinese manufacturer to produce its fireworks. In the export market, Chinese fireworks are in high demand and very little are imported. The demand for fireworks outside of China appears to continue even with new and advancing technology. Additionally, there has yet to be a substitute (i.e. lasers) that could replace fireworks, but more so they work “alongside” of them. Lastly, the cost of labor in China is far less than the cost of laborers in other countries.
• Some disadvantages of investing in a Chinese firework facility would be the fierce competition within China. The lessened restrictions also make it easier for other Chinese manufacturers to set up private shops which will eventually lead to price comparison and a price drop, which would lessen the profit margin of the manufacturer. Additionally, the safety concern for the workers is greater due to the lessened restrictions in China paired with the lack of professional training the Chinese workers have is a big disadvantage. The U.S. is one of the biggest importers of Chinese fireworks...