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Strategic Marketing

Essay by   •  February 20, 2013  •  Case Study  •  496 Words (2 Pages)  •  1,365 Views

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Industry size and general structure

According to statistics, global revenue from firework and firecracker export was 170 million $ in 1995.

Liuyang makes 80% of export firework sales of Hunan Province; and 60% of all Chinese firework export: more than 500 manufacturers are based there. Among them only 1 is a SOE which employs more than 1000 workers. A dozen are factories with 100 - 500 workers. Other manufacturers are small private workshops from 10 to 50 people. Only four to five factories are operating year round, the rest are operating as orders coming: these factories are quick to respond to increasing demand, are low cost and can easily compete with state or private giants. Especially, they have low administrative costs, and don't have any social responsibilities.

Economic reforms allowed many small companies to appear. As a result, industries dominated by these companies are competing on prices with each other.

Markets

The demand can be divided in two large parts: domestic and export markets. And those can also be divided in display fireworks and consumer fireworks.

The domestic market

Fireworks products are part of Chinese tradition, and a Chinese spends in average 200 Yuan per year, but safety and environmental concerns led to more regulation, so one third of cities in China had banned the use of fireworks.

Disregard that, consumption is still high: products are distributed via state-owned outlets to final consumer, as well as via private local wholesale dealers. It's difficult to a company to sell far from where it's situated because of high level of competition: local producers have less transportation costs so generally they run locals markets.

Display fireworks are bought by central and local administrations for public shows: large shows can bring to a company of firework from 100 000 Yuan to several millions.

The export market

China made fireworks made up about 80% of the world's fireworks market. Market profitability is low and still shrinking because of high competition.

In 1999 4/5 of Chinese firework export were consumer fireworks: the rest are the display ones. Display fireworks represent less revenue in absolute scale, but are rising at greater pace.

An important market for the industry is European one: regulations are less strict than for example in USA or Canada.

Foreign buyers play a very important role mainly because they have big purchasing power, are well informed, and don't have switching costs.

Because of large export market, orders are coming year around, and there is no seasonality.

Key

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