Shanzhai Case Study

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1. The environmental factors that help drive the shanzhai phenomenon: Culture factors:
"Shanzhai" is a Chinese term referring companies that operate outside the traditional rules. Its sprit deeply rooted among Chinese, which conjures images of fearless experimentation, unorthodox innovator and also shameless counterfeiter. Shanzhai started from very low base and can be dated back to a long history in China. Shanzhai culture drive Shanzhai companies become highly flexible , creative, innovative and will to take risks.

Policy factors:
The Chinese government want to develop the telecommunications industry and has gradually relaxed the regulation to encouraged development. In 2007 the phone production license system was terminated , this policy let shanzhai company legal in headset industry. In addition, the lack of IP right protection and copyright penalties also drive the shanzhai phenomena in China.

Demand factors:
The less-developed rural market is overlooked by major companies, which contain huge telephone demand in the high population of low/mid-income customers. Shanzhai companies target in this market and quickly expand the market share by their innovative appearance, multi-function and low price product. Shanzhai product 's Special feature design satisfied local market demand.

Supply factors:
Major companies 's slow response make Shanzhai companies 's fast response competitive. Another advantage is China's imposing manufacturing capacity and capabilities gave shanzhai company ability to keep a low manufacture cost and suprising efficiency, such as in well-developed ecosystem in Shenzhen.

Characteristics lead the success of shanzai:

Technique alliance: MediaTek chipset phone solution is one of the most critical factor , which enable shanzhai companies to avoid the important technical development and R&D cost. Government regulation release: The release of phone production license in 2007, brings shanzhai company became legitimate players...
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