Written Case Analysis:
Pearl River Piano
VII.Application of Decision Criteria on Alternatives15
VIII.Recommendations – Global Diversification by Higher-Value Brand18 IX.Conclusion26
The Pearl River Piano group (PRP) had started as a Chinese state-owned firm in the mid-1950s. Due to low production cost and good access to raw materials, it enjoyed a price advantage and has successfully ventured abroad in the early 1990s. To further penetrate into the foreign markets, PRP has invited various expertises, upgraded its production methods and acquired foreign brands to improve the overall quality of its product to meet the international standard. By 2004, PRP captured 11% of US market share and exported products to over 14 European countries. However, many still thought PRP as low in quality and did not perceive PRP as “global brand”. Furthermore, PRP’s low cost advantage in the industry was threatened by the rising material cost in China and foreign players who offered higher quality products at comparable prices.
In this case study, we assumed ourselves as the management team of PRP in around 2005. The objective of this case study is to identify opportunity or problem faced by PRP from the factual information at the moment of time, develop alternatives, and recommendations for implementing the suggested alternatives.
II. SWOT Analysis
SWOT analysis (strengths, weaknesses, opportunities and threats) was used to define all the issues that PRP had to consider in making decision in terms of the present state of PRP and identifiable trends.
After analyzing the internal environment of PRP, the following strengths which gave PRP advantages over its competitors were identified.
i. Lower Production Cost – PRP had a price advantage when it was selling into the foreign market due to lower production cost in China. Furthermore, PRP was the largest piano manufacturer in China, thus it enjoyed larger economy of scale than other domestic competitors. ii. Government Support – PRP earned competitive advantage as a state-owned enterprise in mainland China market. It would be a company that the Chinese government to use as a testing ground to export local famous brands and see its competitiveness in the global market for the development of China economy. Therefore, it gained Chinese government support. iii. Stable Supply of Raw Materials - Unlike piano manufacturers in Japan and Korea, PRP had access to the local supply of vast quantities of wood and its pianos were almost entirely made of woods sourced locally. PRP’s supply of raw materials was more stable when compared to foreign competitors. iv. Commitment to Product Excellence – Contrary to PRP’s competitors, Yamada and Kawai, which had production facilities outside their home markets, PRP kept their production in China and allocated substantial resources to assure the product quality. v. Use of Foreign Expertise – Mr. Tong Zhi-cheng, PRP’s chairman, was willing to learn from others and hired prominent foreign experts despite the huge fees that he had to pay. Many staff of PRP was trained by foreign experts in craftsmanship and music knowledge. Thus, it made use of Western know-how to increase its competiveness which enabled the brand to dominate the local market and to compete in the foreign markets. vi. Good Support to Dealer – PRP provided good services backup, good margins and a sense of partner in US market for market penetration. This gave competitive advantage to PRP over other producers.
vii. Localized Sales and Promotion Scheme in US Market – All the sales staff of PRP were local people except a few management people. It also adopted US-style sales and promotion system. This helped PRP in penetrating the US market. viii. Strategic...