PEARL RIVER PIANO GROUP CASE STUDY,,Marketing

| 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 DID PRGP GROW

Industry-based view

There are three main factors that gave PRPG competitive advantage in the US market; Handcraft/Manual skills, Cheap labour costs and exporting experience.

Handcraft skill is a very powerful tool for quality assurance in production. Manual inspection and adjustment of products before delivery to customer is the best method to satisfy customer quality requirements. This strategy would make PRPG pianos win a greater portion of the market against US rivals.

Cheap labour reduces the cost of production and hence lowers the selling price of the product. PRPG deployed cheap and manual labour (which is available in China) and therefore the selling price of its pianos would be low in the US market. As a result, PRPG would capture a larger market in US.

Exporting experience into most Asian and European countries would have given PRPG a prior advantage of competing in international market. Therefore competing in US market would not require very new strategies for the company.

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) of business. Tong wanted PRPG to grow and this could be achieved in competing in international market.

PRPG was facing unfair competition from cheap and low quality pianos in China. It had therefore to explore international market for fair competition along side high profile companies (peng, n.d).

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

Tong’s concern for future PRPG prospectus compelled him to trade in international markets.

Challenges of international market are important for business innovation. Therefore Tong knew that company’s innovation and technology would grow in international market than it was in China.

QUESTION 3

MARKET ENTRY OPTIONS

Export

Export requires low investment than other 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. This would give the company the opportunity to compete with the best piano builders like Steinway; hence increasing its efficiency in production (Peng, n.d). It would also enhance PRPG brand promotion by organising music events with US musicians.

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.

 

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