Pearl River Piano

Introduction PRPG was a state-owned enterprise and was developed form an senile mild factory in Guangzhou of china. The forte- lenient factory is located beading River, so that the brand ofpianois plowed drop-offRiver. Sincetheadoptionofanopen-doorpolicy,mainland Chinaexploited a rank of in the buff opportunities provided by a market-oriented economy forexpanding intersection pointion, employments, and networks through free people trade markets. As a result, PRPG face a chance ascribable to import applied science and merchandise point of intersections, and then they were expended to become Pearl River piano Industrial Corporation.Their line of credit become moresuccessful , fter they merger with several(prenominal) small go with. In2000, PRPG had more than 130 strategic alliance through- come forths the country, in summation to 208 gross sales units. Question1 Drawing onindustry- resource- andinstitution- base postures, explain howPRPG,fromits humble roots,managed to becomeChinaslargestand theworlds second largest piano bring aboutr. 1. 1 Industry-based ideal Rivalryamongestablished quicklyswhitethornprompt genuinemoves. PRPGfacesomechallenges, since piano is traditional European musical instrument, European pianoshas a long history, and they unendingly design upper market, such as Steinway.PRPG will faceastrongchallengewhentheyobjectiveuppermarket. Forex angstromle,althoughYAMAHA is the largest piano producers, they focus on medium and menial-end markethowever, Tong would like their PRPG become vanquish brand, next entirely to Steinway. Inaddition, PRPG not only import technology of piano making, but too realise andintroduce western culture to them. Higher the entry barriers, PRPG face the troublesome entre in USmarket the US peopledo not deal PRPG laughingstock figure out low price broad(prenominal) fiber products. PRPG jackpotnot easily object glass contradictory people.US people stay loyal to their local anaesthetic pro duct. The bargaining bureau of buyers may lead to certain foreign market entries. In USmarket, there are many competitors, such as Steinway. Steinway product always target upper market. Buyers may buy Steinway product, rather than PRPG. 1. 2 Resource-based view in 1960-1980, the factory had very low productivities, lowcompetitive ability, even less than 100 labors and produce only 13 pianos per year. The industry introduced total quality of management in 1988, and they also promoteISO 9000 in 1998.Moreover, they built business supplyship with YAMAHA via joint venture. Asaresult,PRPG learnhighertechnologyskillviabusinessactivities. PRPG not only import technology of piano making, but also learn and introducewestern culture to them. Tong pay attention to communicate with their employees in order to pull in goodGUANXI. Tong also established close relationship with some famed world well-know piano players, and recommended they play their Pearl River piano in theirconcerts. This is celebritys apostrophize scheme in order to target people.Innovation included the importation of new technology in product and quality measurement and production innovation. fruit innovation can be concluded developing a liberal range of pianos to meet the upper-, medium- and low-end marketin order to target different consumers group. 1. 3 Institution-based view Regulatory risksThese risks are associated with unfavorable government policies. Since the adoptionof an open-door policy, PRPG is allowed import high technology and export theirproducts. As a WTO member, the governments has been encouraging local industries to learn from their foreign partners.Currency riskChinaisbecominganexportpowerhouse,whichcausedthe detritionwithothercountries, United States in particular. The U. S. senators urging the Whitehouse toexert pressure to China for RMB recapitulation most recently and President Obama gavean official statement to point out RMB should be appreciated. Chinas direct respons eto RMB rate issue can be found in premier Wen JiaBaos adjudicate in the pressconference just after the NPCampCPCC* this month in Beijing. Premier Wen claimedRMB is not raise in value by presenting Chinas increased figure of imp/expo absolutevalue in 2009.Question 2Why didTong believe thatPRPG essential engagein significant internationalization(instead of the current direct export strategy) at this point? Chinaisacountrywitha bigexportingactivities,recentlyitischangingitsexporting mode which from low-wage and low-labor-cost advantage towards high-tech, high-value-added exports. Pearl River indulgent Group, a state-owned social club inChina, had been stimulated from a slow-moving Chinese firm founded in the1956 toa booming global participation with growing sales in municipal market and internationalmarket.While it has a good performance in the low-end product segment in the international market, there was an issue about whether Pearl River Piano could be a well-known(a) globa l brandby ascending to themid-high product segment, and whetherit could achieve sustained growth by building a well-thought-of and high-quality brandname in the world. 2. 1 Direct exports Directexportsrepresentthemost rudimentarymodeofentry,whichcapitalizesoneconomized of scale in production concentrated in the alkali country and affordsbetter reserve over distribution.However, if the products involved are bulky. This strategy essentially treats foreign demand as an extension of domestic demand,and the firm is geared toward designing and producing for the domestic market firstand foremost. While direct exports may work if the export volume is small, it is notoptimal when the firm has a large get along of foreign buyers. 2. 2 Dissatisfied of thePearl River piano progress ThecompanyestablishedajointventurewithYamahain1995. Throughthispartnership, PRPG learned how to make a world- build and high quality product.Bythe end of 2000, PRPG was the largest piano detergent builder in ch ina, the second largest in theworld, with an annual production efficacy of over100,000 pianos. The company hadmore than 4,000 employees with a total asset value of near $130 million. Also it diversified into other musical instrument, and contains more than 50% ofpiano market in China. However, Tong did not satisfy this progress he thought thePearl River piano could be a world class brand. 2. 3 Competition in domestic marketHundreds of private companies began entering the market and competing with theirlow quality and low price products. Such as the old well-known brand Star Sea and NiEr, and bites of emerging piano builder company with a low price products. 2. 4 Future prospects of PRPG match to the case, Tong believed that the company could survive by themselvesin domestic market however it is insurmountable for an entrepreneur to stay in the sameposition permanently. And he thought that the company had made some successes, butit is not enough for a company to stay in the good position.The company is stilldeveloping and it needs to buy the farm business in the global market in order to satisfycompanys strategy. 2. 5 Challenges in international market WhencomparedwithotherChinesepianobuilders,PRPGhadgainedsomeexperience in exporting. Tong believed that although thepiano market in theUS was mature, PRPG could still detract advantage in the market. Because US presenta high levelof labor cost, PRPG could take advantage of cheap labor cost in China with high levelof product quality to gain market position in US market. On the other hand, it isdifficult to enter into the US market.If company want to extend business in USmarket, firstly PRPG need to introduce the US partner to the Chinese market, as anexchange for itsentry to theUS market. Finally, PRPG established asales subsidiaryin the US market for further expands. 2. 6 Building world class brand Direct exporting could be an efficient way for company to make sales, but it onlysuitable for a short term de velopment. For long term, PRPG must build its world classbrand and provide high quality product to target upper level markets in order tomaximize profit for sustainable development.Question 3If you were one of the professors who visited Tong in March of 2000, how wouldyou have briefed him about the pros and cons of conglomerate foreign market entryoptions? 3. 1 Non-equity modes (exports and contractual agreements) Tends to reflect relatively little commitments to foreign markets, which do notcall require independent organizations. 3. 11 Exports 1) Direct exports treats foreign demand as an extension ofdomestic demand, and thefirm is geared toward designing and producing for the domestic market first andforemost. ) Indirect exports exporting through domestically based export intermediaries. 1 Nonequitymodes 1 Non-equity modes Exports Pros Cons Economics of scale in production concentrated in home country. High transportation costs for bulky products. Direct Exports Better kee p over distribution (relative to indirect export) merchandising distance from customers. Trade barriers. Indirect exports Concentration of resources on production. Less control over distribution (relative to direct exports) No need to directly wait export processes. Inability to learn how to operate overseas. 3. 12 Contractual agreements 1)Licensing/franchisingthelicensor/franchisersellstherightsto reasonproperty such as patents and know-how to the licensee/franchisee for a royalty fee. 2) nooky projects projects inwhich clients pay contractors todesign andconstructnew facilities and train personnel. 3) RampD contracts outsourcing agreements in RampD between firms (that is, firm Aagrees to perform certain RampD work for firm B). 4)Comarketingagreementsamonganumberoffirmstojointlymarket their products and services. Non-equity modes Contractual agreements Pros Cons Low development costs. Little control over technology and marketing Licensing/Franchising Low risk in oversea s expansion. may create competitors Inability to engage in global coordination. Turnkey projects Ability to earn returns from process technology in countries where FDI is restricted May create efficient competitors. Lack of long-term presence. Ability to tap into the best locations for certain innovations at low costs. Diffecult to negotiate and enforce contracts. RampD contracts May nurture innovative competitors. May lose middle innovation capabilities. Co-marketing Ability to reach more customers. Limited coordination. 3. 2 lawfulness modes (joint ventures and wholly owned subsidiaries) Indicate relatively larger, harder to reverse commitments, and equity modes call forestablishing independent organizations overseas. 3. 21 Joint ventures a new entity given give up and jointly owned by two or more upraise companies. 3 Equity modes Joint venture Pros Cons Sharing costs and risks. diverging goals and interests of partners. Access to partners knowledge and assets. Limited equity and operational control. Politically acceptable. strong to coordinate globally. 3. 22 Wholly ownedsubsidiaries 1) Green-field operations building factories and offices from scratch. 2) learningA corporate actionin whichacompanybuysmost, ifnotall, of thetarget companys self-control stakes in order to assume control of the target firm. 4 Equity modes Wholly owned subsidiaries Pros Cons Complete equity and operational control. Potential political problems and risks. Green-field projects Protection of technology and know-how. High development costs. soggy entry speed (relative to acquisitions) Acquisitions Same as green-field (above) Same as green-field (above), overlook slow speed. Fast entry speed Post-acquisition integration problems. Question 4 Again, if you were one of those professors, what method would you have tosuggest as a way to play the US market? Method has been talked before Joint venturesNowadays, joint ventures have been the ma in form of foreign direct investment (FDI). 4. 1 Problems to take on the US market 4. 1 How toget a partnership withlocal company? US dont believe Chinese company can make good quality and cheap price products. They dont trust overseas company. They opine Chinese company as a competitormore than a partner. 4. 12 Administrative requirements US government wants their own people to social welfare from industrialization. So they pushforeign investors to ally with local firms before graniting access to market. 4. 2Suggestions 4. 21Share ownership with US companies Increase the trust each other Goal set ahead some ethnic citizens to participate in industrial development. To