Problem Statement
The issue in the case of China Kelon Group is whether they should push through their attempts to diversify their economy.
Situation Analysis
According to the case, the fundamental target of the company is the households in China. The case also indicated that there is a growth of the middle class in the country thus creating the demand for their products. The company is faced by competition from other appliance firms such as Matsushita, Sharp, Hitachi, Toshiba, Sanyo, Mitsubishi, Electrolux, Siemens, and Whirlpool. Despite the number of prospective competitors, the case has indicated that local brands still dominate the industry. In addition to this, the company is deeply ingrained in as the foremost refrigerator making brand in China. After acquiring several awards from state, provincial, and international organizations, there is no doubt on the capacity of the company to provide high quality of products and services. Similarly, to maintain this standard of high quality, the company is constantly in coordination with foreign corporations.
Alternatives
There were two other alternatives with regards to the recommendation of the proper course of action for Kelon. These include vertical integration of the firm, and geographical diversification. In the first one, it wasn’t chosen because this entails maintaining the status quo for the company. The other alternative, geographical diversification would not be probably practical for the company since China has already possesses a large market and the company has yet to realize its full potential.
Recommendation
The recommendation is to engage in a horizontal diversification plan. The company has long been in the refrigerator industry and has established a name for its brand. It is high time that they move into a new industry. Although there is a great risk in entering into unfamiliar territory, the company still has a wide base from its refrigerator customers which is basically the same target market as that of the air conditioning industry. What they have to carry out is the manner in this target market to purchase their products, given that they are a new entrant in the air-conditioning scene.
Implementation Plan
As a new entrant on the air-conditioning industry, the company must be able to discern how much power it possesses. This is where the company should look into the possibility of existing national competitors of cutting down their price if they are to defend their market position. Moreover, the company should also look into national regulations regarding new entrants in the national market, particularly those which directly affects the products of the company.
The company must conquer an assortment of competitive barriers such as economies of scale, capital requirements, access to distribution channels, product differentiation, switching costs, cost disadvantages independent of scale, and government policy. These obstructions lengthens the period during which active companies may be able to make use of competitive advantage devoid of laying bare the competitive rivalry or imitation from others.
0 comments:
Post a Comment