GOME Electrical Appliances Holding Ltd - Marketing - Case Study Example

INDIVIDUAL MARKETING REPORT By Name Course Instructor Institution City/State Date Table of Contents INDIVIDUAL MARKETING REPORT 1 Table of Contents 2 Individual Marketing Report 3 1.0 Introduction and Background to the Company 3 2.0 Market Description 3 3.0 SWOT Table 5 4.0 Findings Explanation of the SWOT Table 5 4.0 Recommendations 7 Place 9 Appendices 11 Individual Marketing Report 1.0 Introduction and Background to the Company GOME Electrical Appliances Holding Ltd was established in 1987 by Wong Kwong Yu and is based in Hong Kong. The company engages mainly in electrical appliances businesses and selling of electronic products in the retail stores and over the Internet. The company’s products comprise of air-conditioning, washing and refrigerating appliances, audio and video (AV) electrical appliances, as well as information technology (IT) and communication categories. GOME operations mainly happen in Hong Kong and Mainland China. Together with its subsidiaries, the company engages in retailing of consumer electronic products and electrical appliances. As mentioned by MarketLine (2016), as of 2015, GOME was operating and managing more than 1,220 stores across China and had approximately 42,105 employees. The company is one of China’s leading retailers of consumer electronic products and home appliances. As of 2015, GOME has 362 standard stores, 272 flagship stores as well as 589 specialised stores across China. In addition, GOME engages in online business since it sells its electronic products to Chines customers through business to customer (B2C) shopping platform. Furthermore, the GOME provides management services with regard to retailing of consumer electronic products as well as electrical appliances. According to MarketLine (2016), the company’s major products include electronic products, electrical appliances, books, cosmetics, clothing, food and beverages, after-sales service, and many others. The company was established in 1987, and was expanded beyond Beijing in 1999. The company was recognised as China’s “Key and Strategically Important Enterprises” in 2004 by the Ministry of Commerce. Furthermore, it merged with China Paradise in 2006 in order to expand its product portfolio. 2.0 Market Description The consumer electronics market in China has experienced some growth between 2010 and 2013 but started declining in 2014. Still, the market is projected to grow moderately by 2019. As of 2014, the total revenues of consumer electronics market in China was $40.6bn, this accounts for a 1.7 per cent compound annual growth rate between 2010 and 2014. In China, as mentioned by MarketLine (2015), the most lucrative segment of the Chinese consumer electronics market was audio & visual equipment segment accounting for 91.7 per cent of the overall value in the market (see appendix one). On the other hand, the photographic equipment accounted for 8.3 per cent of the aggregate revenues in the market. In the Asia-Pacific market, China makes up the 54.1 per cent of the consumer electronics market value as compared to Japan’s 12.8%. According to MarketLine (2015), the Chinese retail market of consumer electronics has been struggling of late because the margins of audio visual equipment have been squeezed while photographic equipment is approaching outmodedness. GOME face competition from its suppliers that sells directly to the customers, like Apple, eBay and Amazon. The Chinese market is relatively competitive and it includes independent stores and large chains retailers. Furthermore, the market is typified by many small consumers, end-users or buyers. The majority of retailers normally purchase their stocks directly from producers like Samsung, Whirlpool and LG. Such multinationals companies have a significant bargaining strength. The Chinese market is heading towards consolidation; therefore, to survive as a pure electronics retailer will become more and more challenging. GOME is competing with companies like Suning, which have enormous resources and infrastructure for retail distribution and branding. Suning has gained enormously from large economies of scale, pushing down their per-unit costs; thus, making it impossible to beat them on price. GOME also face competition from Alibaba, JD.com, Carrefour S.A., and Wal-Mart, 360buy, Tmall.com, and many other small online companies. In the global market, MarketLine (2015) posits that the electronics market has been experiencing some decline since 2010, especially in the developed economies. Still, there is an expectation that the market would recover and stabilise, and start growing moderately by 2019. The European market performed poorly because of the highly integrated economies, but emerging markets like Turkey and Russia registered strong growth. Still, the United States is the biggest consumer electronics market worldwide. The most lucrative segment at the global level was the audio & visual equipment segment, accounting for 89.3 per cent of the overall value in the market. On the other hand, the photographic equipment accounted for 10.7 per cent of the aggregate revenues in the market. Like in China, Photographic equipment is progressively turning out to be obsolete because tablets and smartphones are offering the same functionality but with improved utility. Over the coming years, the performance of the US market will improve; thus, driving growth. On the other hand, the Asian markets will grow robustly while the European market will stabilise in the coming years. At the global level, GOME faces competition from well-established companies like Amazon, Best Buy, Metro AG and many others. 3.0 SWOT Table Strength Weakness The company has transformed into a total retail community Competitive advantage attributed to strong brand position Dependence on one geographic market Overreliance on a few major suppliers such as Samsung and LG Limited geographic penetration in emerging economies and Europe Opportunity Threat Strategic initiatives for market expansion Improved branding by means of advertising Positive outlook for household appliances market in China Improving Chinese online retail business More presence at the global level through expansions and tie-up Increased competition in Chinese retail industry Increasing rental expenses Business can be affected by domestic policies and fluctuating markets Cheap products from other countries 4.0 Findings Explanation of the SWOT Table Strength With the view to how GOME has transformed into a total retail community, the company transformed itself in 2015 to a ‘Total Retail Community’ from an omni-channel retailer. Through an action plan, known as the Internet Plus the company seeks to drive the economic growth through integrating Internet technologies with business and manufacturing operations. As pointed out by MarketLine (2016), GOME has leveraged its efficient and low-cost supply chain with the aim of managing challenges associated with the Internet Plus strategy and create customer value. For this reason, GOME has adopted a three-pronged approach through utilisation of its strong linkage, a new scenario and omni-channel capabilities to sustainably develop the Total Retail Community. Regarding the omni-channel, GOME has leveraged its supply chain capabilities and retail business to develop synergy amongst its platforms like cross-border e-commerce, smart terminal, as well as financial services. Consequently, this has enabled GOME to establish an integrated ecosystem within the retail sector. Based on the strong linkage, GOME has capitalised on its expertise to meet the consumers’ changing shopping preferences in day modern dynamic marketplace. Strength is Competitive advantage attributed to strong brand position. The company’s brand value as of 2015 was approximately $11,938.1 million and this is clear evidence that the company has successfully established itself in China. Weakness The company depends on one geographic market (China) for its revenues; therefore, any slowdown or contraction in the domestic consumption growth or slowdown in country’s GDP growth could adversely and materially affect the financial condition of the company. Besides that, the company over relies on few major suppliers considering that the five largest suppliers of the company accounted for nearly 43 per cent of the GOME’s total purchases in 2015 (MarketLine, 2016). One supplier contributed 9.8 per cent of the company’s total purchases. Therefore, overreliance on few major suppliers may affect GOME’s business in the event of disruptions in the supply chain or to the existing agreements. Opportunity There are various opportunities for GOME; for instance, the company can adopt strategic initiatives to improve its market presence. In 2015, the company adopted some strategic approaches with the aim of increasing its market presence at the global level. These strategic approaches demonstrate the company’s readiness to adopt the most recent trends in the industry with the aim of improving its business scope. Furthermore, it enables the company to expand its overall addressable market. Another opportunity is the positive outlook for household appliances in the Chines market. This market has recently recorded strong growth and is expected to continue growing. Besides that, e-commerce has become the fasted way to sell products worldwide and allows companies to reach more customers while cutting the costs. In addition, factors such as increased internet penetration and increasing disposable incomes have changed the purchasing habits of the customers. Threats One threat is the increasing competition in the Chinese retail market; therefore, GOME is facing intense competition from online retailers, traditional store retailers, suppliers as well as small business in China. GOME face stiff competition from well-established companies with global presence like Suning Appliance Group, JD.com and Alibaba Group. The majority of the competitors have huge financial resources, geographic coverage and marketing capabilities than GOME. As a result, GOME has been forced to espouse efficient strategies that would enable the company to differentiate itself from the competitors. Another threat is the increasing rental expenses considering that GOME only owns 31 stores and has leased 1,192 stores. As mentioned by MarketLine (2016), 5.2 per cent of total revenues are used on the rental expenses. 4.0 Recommendations Target market The target market for the new product will mainly be households and businesses. The targeted customers will include young parents and people who are too busy to wash dishes. This would include the middle-income earners who are too busy and need to save time. Young professionals have considerably higher income and would be willing to spend more on this new product. Given that the Generation Y do not like scrubbing stubborn stains or gripping slippery dishes, they are more likely to buy the dishwasher machine to protect their finger nails. Another potential customer for the new product is the owners of fast food cafés and restaurants. The dishwashing machine will cut the costs and save time. New product description The new product is a dishwasher machine that would feature innovative ideas and modern design; thus, making life easier for business owners and households. The new product would allow for maximum flexibility and guarantees sparkling clean dishes. The dishwasher will be Energy Star certified and will utilise advanced technology to make sure that the dishes are clean while using less energy and water. In so doing, the new product will reduce utility bills, save the environment, and save a lot of water. Customer value proposition GOME strives to offer unmatched service and superior quality with this new product. Right from research and development to product conceptualization as well as actual production, the new product will be designed while keeping the customer in mind. GOME will concentrate on creating a dishwasher that is not only technologically advanced but also environmental friendly by investing heavily in R&D. in so doing the company would be able to offer customers a dishwasher machine with different functional features. The company would offer end to end customer care and improved after sales customer service. Justification of the Choice of New Product Through the SO (Strengths-Opportunities) strategy, the product was selected because GOME can utilise its internal strengths to make the most of the external opportunities. For instance, the company has started focusing on sustainability issues; therefore, the energy star certified dishwasher uses less energy and is environmentally friendly. The company has a financial backup and will be able to meet flexible customer needs, increase its turnover. This new product will enable the company to use high-level technology and find new distribution channels. Product Mix Product The Energy Star certified dishwasher will be an eco-friendly product and would offer different functionalities and services to the esteemed customers. The new product will have a definite warranty and come with 12-months free services option. Besides that, the customers would be able to get an annual maintenance contract. The product will be supplied with a unique FAQ booklet, which offers information associated with the product. Price The pricing would hover between the costs undertaken and maximising the profits devoid of going beyond the market expectations. Because of the company’s resourceful warehouses as well as organised distribution channels, GOME will be able to cut the costs of the new product by some margin. For that reason, a competitive pricing policy will be used to create a consumer base for the new product. The price of the new product will range between $2,500 and $ 5,000. Promotion For this new product, the company should opt for social media sites like Instagram, Facebook and Twitter since it is a more relaxed environment. Besides that, the new product can be promoted through end-cap marketing as well as point-of-sale promotion, customer referral incentive program, and after-sale customer surveys. Place Given that GOME is based in China, the company should set up a regional centre in Europe, America and Africa in order to expand globally. The company should focus more on US, emerging markets such as Russia and Turkey and also African countries. References MarketLine, 2015. Consumer Electronics in China. London, United Kingdom: MarketLine. MarketLine, 2015. Global Consumer Electronics. London, United Kingdom: MarketLine. MarketLine, 2016. GOME Electrical Appliances Holding Limited. London, United Kingdom: MarketLine. Appendices Appendix one Read More