PEARL RIVER PIANO GROUP CASE STUDY

| June 19, 2015

PEARL RIVER PIANO GROUP (PRPG)

Summary

            PRPG was started in 1956 in the city of Guangzhou. In 1987 it was expanded to Pearl River and in 1996 it merged with other small companies to become PRPG.

Tong was appointed the CEO in 1992. His ultimate ambition for the company was to compete in the US and Western markets. In 2000 PRPG was the best Chinese piano builder and second in the world. In order to seek advice on globalization, Tong invited business professors from United States and Hong Kong on March 2000 (Yuan, 2000).

QUESTION 1

HOW PRPG DID PRGP GROW

Industry-based view

There are five forces of competition; rivalry among firms, supplier’s and buyer’s bargaining powers, threat of other companies entry and substitutes (Peng, n.d). The Chinese market had started becoming competitive from low quality piano products. PRGP had to focus on US market (Yuan, 2000).

Strategy to use manual skill enhanced Tong competitiveness in the US market. Handcrafted products are superior to machine products. PRPG employed cheap labour which was readily available in China. This resulted into cheap pianos against the American competitors.

Penetration into US market was a step to global strategy. Globalization results into competition in the international market. As Peng (n.d) states this strategy calls for delivery of high and standardized products and services. The penetration of PRGP into US market would result into business growth.

Resource-based view

The success of a firm depends on its internal strengths and weaknesses (Peng, n.d). Peng (n.d) further notes that specific capabilities of a company are what distinct it from failure. Tong strategies of innovation and quality contributed to growth of the company. Technology importation and innovation of wide variety of pianos was a step to capture all levels of market.

Concentration to build a world class brand led to growth of PRPG. This was achieved through establishment of alliances with music stakeholders and famous pianists. This made their brand known and hence growth.

Institution-based view

Peng (n.d) argues that companies need to incorporate informal and formal regulations of business in order to grow. Tong introduced TQM and ISO 9000 (Yuan, 2000).

TQM can be defined as a policy adopted by a business for quality assurance in product and service delivery to the market. It wins consumer confidence in the products.

Introduction of ISO 9000 was another factor for PRGP growth. It ensured quality management in the business.

ISO 9000 is a quality management standardization which gives regulations to organization on how to meet customer requirements.

QUESTION 2

REASONS FOR INTERNATIONALIZATION

            International market promotes growth (Peng, n.d). Tong knew that in international market the PRPG growth would be more vigorous than at home.

Competition in China from low quality-priced products was becoming stiff. The company had to explore international market in order to ensure stability and growth.

Tong’s concern for future prospectus led to entering into international market. Tong wanted a high prospectus of the business which he could achieve by going global.

Challenges of international market are important for business growth. High technology in innovation is required in order to compete. PRGP was expected to develop alongside renowned piano builders in the world.

The advantages of cheap labour and high quality products gave Tong confidence of capturing a section of market in the US.

QUESTION 3

MARKET ENTRY OPTIONS

Export

Export requires low investment than methods. This is because the business uses the existing facilities in the target country. It also minimizes risk of investment. The speed of international market entry is higher than direct investment.

Disadvantages

The business has limited access to market information in the target country which is important for decision making. Transport cost and tariffs add to the cost of the product in the target market which reduces its competitiveness in the market. PRPG in exporting its pianos to US would be seed as an outsider.

Joint venture

Advantages

PRPG cost of providing skills to local manpower would be at the hands of the home company; a reduction in cost. The cultural diversity between China and America would be bridged. There is access to information of the target country. Finally there would be a combination of resources of two companies.

Disadvantages

High risks are involved. The assets of the two companies can not be fairly priced and fear of competition may affect the success of the venture. The business may become difficult to manage due to cultural differences between the partners.

Licensing

PRGP can enter US market by giving its trademark and production rights to US company. Licensing provides high ROI due to low investments.  The trade barriers posed by export are avoided and it is a high speed method of market entry. It has minimum risks of investment.

The period of the license is limited. It also results into low sales in the target country. The licensee can not compete in the foreign market.

Equity modes (FDI)

This is the direct ownership of business in the foreign country. This method provides the management with greater knowledge of the target market. It minimizes spill over of skills and the business is perceived as insider. The business can benefit from the skills of the target country (Yuan, 2000).

However more resources are required and higher risks are involved. Management of local resources may be difficult.

QUESTION 4

ADVICE

            FDI is the best way for Tong to invest in US market. Competition with best piano builders like Steinway would increase efficiency in production. It would offer PRPG opportunity to participate in organising music festivals and exhibitions in US hence growth.

The secret to success in a new market is to develop adaptive strategies (Peng, n.d). Tong has to develop strategies which must be converted to performance in order to survive in the US market.

CONCLUSION

            PRPG has grown to date to become China’s best and world best runner to YAMAHA in piano building. However to dominate the US market, vigorous growth in technology and brand promotion is encouraged.

 

 

 

REFERENCES

Peng, M n.d, Foundations of global strategy, 2nd edn

Yuan, L 2000, Pearl River Piano Group’s International strategy, Case study.

 

Get a 5 % discount on an order above $ 150
Use the following coupon code :
2020Discount
Where is the mango princess?
PEARL RIVER PIANO GROUP CASE STUDY,,Marketing

Category: Uncategorized

Our Services:
Order a customized paper today!