Strategic Entry of Gome Electrical Appliance Holding Limited into the United States Market - Case Study Example

INDIVIDUАL МАRKЕTING RЕРОRT Name: Course Instructor’s name Institution Date Table of Contents Executive summary 3 1.0Introduction and background to the company 4 2.0 Market description 5 3.0 SWOT table 6 4.0Explanation of the SWOT table 7 4.0.1. Strengths 7 4.0.2. Weakness 8 4.0.3. Opportunities 8 4.0.4. Threats 9 5.0Recommendation 9 a)New Product Description 9 Marketing Mix 9 Product 9 Pricing 10 Place 10 b)Target market 10 c)Customer value proposition 11 d)Justification of the choice of new product using at least one strategy 12 Conclusion 12 References 13 Executive summary The aim of the paper is to come up with a report on the strategic entry of GOME Electrical Appliance Holding Limited into the United States market. The paper reveals the evident opportunity of the US electrical appliances market which is quite receptive. However, the market is also seemingly clouded with a number of competitors who might pose some difficulty to GOME Electrical Appliance Holding Limited in its efforts to expand into the US market. In the company’s course of expansion into the US market it will develop a new product customized to fit into this market. The chosen product that will be developed by the Company is the next generation video games console product. This product will be characterized with newly improved features and specs that will help it overcome the noted threats and weaknesses in the US market and also take advantage of the presented opportunities in this market. STRATEGIC ENTRY OF GOME ELECTRICAL APPLIANCE HOLDING LIMITED INTO THE UNITED STATES MARKET 1.0 Introduction and background to the company GOME Electrical Appliance Holding Limited is an investment holding company based in Hong Kong that principally engages in electrical appliances business. Operation and management of a vast network of electronic online sales and electrical appliances and consumer electronic products retail store are the company are the main businesses for this Company (GOME Electrical Appliances, 2017). The Company’s main place of operation is in the People’s Republic of China and Hong Kong. The product range for this Company include; audio and video (AV) electrical appliances, Communication and information technology (IT) categories and air-conditioning, refrigerating and washing (Mayer 2013 pp.25-25). As at 2015, GOME owned a total of 1,088 stores, a sale network that included 264 medium-sized and large cities nationwide as well as an approximate 3,589,000 sq.m. (Thomson Reuters, 2016). Some of the product line for GOME Electrical Appliance Holding Limited include; Game consoles, smartphones, TV sets, digital cameras, video and audio recorders, DVD players, navigation devices and portable music players. In addition to this the Company ne range of products which entail; e-readers and 3D printers or wearable’s. In the papers effort to come up with an effective strategy for GOME Electrical Appliance Holding Limited expansion into the American market it will embrace couple of frameworks that boosts the company’s success. Some of these frameworks include; SWOT analysis and marketing mix. The main purpose of the SWOT analysis is that it provides organization with an insight of everything that could impact the organization success while starting of a new organizational project. In this case, the SWOT analysis will help GOME Electrical Appliance to focus on the key issues facing the organization in the wake of its expansion into the American market. The marketing mix on other hand is ideal for the company in building an effective marketing strategy in the wake of its entry into the US market. 2.0 Market description The consumer electronics market in the United States is estimated to be currently on remitting US$ 1.45 trillion. The consumer electronic in the United States has been experiencing relatively continued growth as well as evolving. Due to the existing new development in terms of new products such as computers, better technology and cheaper and more diverse range of products which have led to the country’s consumer electronic market size to increase due to the evident vertical and horizontal growths which are occurring at a rapid pace(Corcoran 2012, p.14). Additionally, the US consumer electronic market revenue is estimated to hit a record high of 240 billion Euros. This has therefore made United States the largest consumer electronic market in the world. Consequently, the strongest industry trend in the US consumer electronic market is the shift towards telematics and connected devices which is in line with current phenomenon in the US consumer electronic, the Internet of Things (Carpenter &Balija2010, p.263). Asian Pacific has been an unsparingly supplier of consumer electronic products for the US market. Thus, some of the consumer electronic market leasers include; Apple Inc, Samsung Electronics Co. Ltd, Toshiba Corporation, Koninklijke Philips N.V, Koninklijke Philips N.V and Sony Corporation. However, over the years Apple has stood out as a significant market leader in the US, which is attributed to the growing popularity of its smart phones, tablets and laptops products (Conti 2009, pp.63-65). Despite some slight decline in the sales of Apple product the company still maintained to retain the top sport of the market leaders sales, this therefore led to Apple having a higher market concentration in the consumer electronic market in the US. Majority off the US consumer electronic market leaders have embrace a number of distribution methods for their product some of these methods include; hiring representation groups, sales people, using online stores, using online retailer’s portals or using distribution partners(Gil-Sauraet al. 2013,p.121). 3.0 SWOT table STRENGTHS It is largest privately-owned electrical appliance retailers based in China. Has a total of 1,088 stores in China Enjoys continued growth in its financial position and profits. Selected as one of China’s “strategically Important Enterprises" by the country’s ministry of Commerce. Has a large workforce estimated to be over 5000 employees (Mayer 2013 pp.25-25). Existing sales and distribution networks. Reduced cost of labor WEAKNESSES The founder’s public dispute on the company’s business strategy has dented it reputation (GOME Electrical Appliances, 2017). Limited geographic penetration in other emerging economies and Europe in general (Amin, Razmi & Zhang 2011, p.339). Brand portfolio OPPORTUNITIES Advertising provided opportunities for the Company’s better branding (Amin, Razmi & Zhang 2011, p.336).. Tie-ups and expansion also provides the company with a better opportunity for boosting its global presence (GOME Electrical Appliances, 2017). Creation of new products and services New acquisitions. Growing economy. THREATS Fluctuating domestic policies and markets which might affect the business (Avins 2010, p.101). Threats from other domestic players Entry of cheaper copies from Korea and Taiwan (Thomson Reuters, 2016). Tax changes 4.0Explanation of the SWOT table 4.0.1. Strengths The rationale and choice of ranking selected for the strengths is ranking these strengths from the most relevant and essential strength to the least one. This rationale is created to give the paper a more logical aspect. One of the strength of GOME Electrical Appliance Holding Limited is the largest privately-owned electrical appliance retailers based in China meaning that the company has significantly high sales potential in the market. Further, the Company’s 1,088 stores give it a high sale potential. The large workforce on the other hand means that the company will benefit from high production leading to increased profit margins (GOME Electrical Appliances, 2017). Existing sales and distribution margins are also other notable strength in the company since this means that the company will be able to benefit from in disrupted operation as well as smooth business operations (D&B Hoovers 2017, n.d). The other strength for the company is its reduced cost of labor which translates to increased revenues as a result of low labor expenses. 4.0.2. Weakness The rationale and choice of ranking selected for the weaknesses is ranking these weaknesses emphasizes on the most relevant and essential weakness to the least one. This will guide the company on what to expect. One of the notable weaknesses of the company is the founder’s pubic dispute on the company’s business strategy. This is claimed to have chased away potential investors for the company also led to its reputation to slightly decline. Additionally, its limited geographical penetration in other emerging economies as well as in Europe due to stiff completion and unfavorable business environment acts as a major weakness that needs to be addressed by the company (Helms & Nixon 2010, p.243). 4.0.3. Opportunities Advertising channels provides the company with the opportunity to improve on its branding and also put itself out there in the market. Additionally, the tie-ups and expansion which enable smooth entry of the company in other markets act as an opportunity for GOME electronics(D&B Hoovers 2017, n.d). It is potential in creating new products and services which leads to a significant increment in their profit margins. Moreover,the company’s ability to acquire new businesses which helps increase the company’s profit margins. The growing economy in China especially its influence to the spending behavior acts as a major opportunity for GOME having that it leads to increased sales and wider market penetrations (Amin, Razmi& Zhang 2011, p.337). The rationale and choice of ranking selected for the opportunities is ranking these opportunities from those the company should give a consideration first to the least one. 4.0.4. Threats The rationale is to rank the threats from the most serious ones to the least ones. This will give the company an idea on which ones to emphasize on first. One of the pointed out threat is the fluctuating domestic policies which have negatively impacted the business operation in the domestic market. The domestic players or competitors who threaten to reduce the Company’s current profit margin for GOME are a major threat to the company. The other threat is the entry of cheap copies from Taiwan and Korea which has posed a significant threat to the company’s products sales (Mayer 2013 pp.25-25). The the company’s brand portfolio, is also another threat, thus, due to the company’s multiple products and product lines it tends to focus more on some brands neglecting others. 5.0Recommendation a) New Product Description Marketing Mix Product The product is the next generation consoles product by the company comes with a full-HD graphics with top-tier game play. Additionally, it supports the 4K technology and it also supports backward compatibility meaning that one can play games from previous console generation using this new console (Conti 2009, pp.63-65). The product also has more improved facet such as wired controllers; it also has fewer remakes giving it some aspect of originality. On the other hand, this product also has the ability to run games without installing. Pricing The cost of the product will be determined through a breakeven analysis on the overall production cost of the next generation video game consoles products. In this case the production cost will be approximately $400 per unit. In addition to pricing the company will also consider the market skimming pricing policy on whether it can be imposed depending with the target market or not (Conti, 2009, pp.62-64). In this case, the product will sell for $499 per unit. Place The company will sell the product to the United States market. This market has a relatively high demand for next generation video games console products due to the high number of potential buyers who fall in the age group of 17-35 which is predominantly the company’s target group (Corcoran 2012, pp.3-16). In this case, it is estimated that the expenditure of the US next generation and video games console products in the year 2015 was $514.3 million which shows that there is high potential for sales in this particular market. b) Target market One target market being served by my country is the youthful middle class and upper middle class potential buyers of the next generation of video game consoles products. In line with this the democracy also points out to a decidedly male market to be the majority of this particular target group since demographic research show that the male market is more willing to shell out big bucks in pursuit of this entertainment pleasure which to many is seen as a hobby (Gil-Saura et al. 2013, p.117). In line with this, a research conducted in the US market revealed that the total consumer spending on PC games as well as next generation of video game consoles had hit an all-time high of $1.8 billion in the year 2015 (GOME Electrical Appliances, 2017). In line with this report it also claimed that 83% of the buyers were individuals between the ages of 18 to 35. Evidently, the report argues that with the current generations growing increasingly disjointed with physical games and the current internet boom next generation of video game consoles have become a lifestyle as a activity to pass time and also being commonly seen as a hobbies like any other (Carpenter &Balija 2010, p.273). In addition to this, a recent survey on the target group of this company claimed that this particular target group viewed these next generation consoles as more that gaming devices, in this case it was claimed that they used it to watch movies, listen to music, watch TV shows and also use it to watch live content (Corcoran 2016. pp.3-10). Therefore the behavioral aspect of this target group has contributed to it being ranked as the main target market for this Company’s product. c) Customer value proposition Consumer value proposition in the next generation and video games console products is the innovative aspect included in the product where some of its specifications include its innovative motion-sensitive controller. Additionally, the product offers customer value through its low prices and easy-to –use games (Consumer Electronics Society Board 2016, pp.C3-C3). The other customer value proposition of this product is its great graphics which is attributed to their internal cell processor, this will help keep up with other market players. On the other hand, the other customer value proposition is its built-in Blu-ray player which also contributes to better graphics thus better playing angles. d) Justification of the choice of new product using at least one strategy The products newly improved specifications will enable it to distinct itself with the copied products coming from Korea and Taiwan. Thus, the product will be able to overcome this particular threat which has been rampant in the next generation and video games console market in the U.S (Brouthers, Gao, &McNicol2008, p.676). On the other hand, this products newly improved specs will also give it a competitive advantage over the competitors in the US market enabling it overcome this threat that was earlier evident in the US market (Avins 2010, pp.99-107). The products newly improved specifications will enable it maximize on the growing economy opportunity that was noted in its SWOT analysis. Moreover, the products newly and improved specifications will enable it to maximize in the same opportunity that was pointed out. Conclusion Evidently, the US market shows a lot of promise for the success of the generation and video games console products. Hence, the product strategy to improve its features and specifications also showcases a lot of promise. This will enable it overcome the competition threat pointed out in the market. On the other hand, it will be able to maximize on the brand portfolio opportunity also highlighted in this market. Therefore, the product can be said to bet fit for this particular market. References Amin, S.H., Razmi, J. and Zhang, G., 2011. Supplier selection and order allocation based on fuzzy SWOT analysis and fuzzy linear programming. Expert Systems with Applications, 38(1), pp.334-342 Avins, J. (2010). Economic Issues Confronting the U.S. Consumer Electronics Industry An Inquiry into their Nature and Resolution. IEEE Transactions on Consumer Electronics, CE-30(2), pp.99-107. Brouthers, L.E., Gao, Y. and McNicol, J.P., 2008. Corruption and market attractiveness influences on different types of FDI. Strategic management journal, 29(6), pp.673-680. Carpenter, J.M. and Balija, V., 2010.Retail format choice in the US consumer electronics market.International Journal of Retail & Distribution Management, 38(4), pp.258-274. Consumer Electronics Society Board, (2016).2016 IEEE Consumer Electronics Society Board of Governors IEEE Consumer Electronics Society.IEEE Consumer Electronics Magazine, 5(3), pp.C3-C3. Conti, J. (2009). A sound move [Consumer electronics industry]. Engineering & Technology, 4(18), pp.63-65. Conti, J. (2009). Way down south [consumer electronics industry]. Engineering & Technology, 4(4), pp.62-64. Corcoran, P. (2012). Change and the Consumer Electronics Industry [Notes from the Editor].IEEE Consumer Electronics Magazine, 1(4), pp.3-16. Corcoran, P. (2016). Just Another Year in the Consumer Electronics Industry? [Notes from the Editor].IEEE Consumer Electronics Magazine, 5(1), pp.3-10. D&B Hoovers, (2017). GOME ELECTRICAL | Company Profile from Hoover’s. [online] Hoovers.com. Available at: http://www.hoovers.com/company-information/cs/company-profile.gome_electrical_appliances_holding_limited.7a36e41ace7aa103.html [Accessed 3 Apr. 2017]. Gil-Saura, I., Ruiz-Molina, M.E., Michel, G. and Corraliza-Zapata, A., 2013. Retail brand equity: a model based on its dimensions and effects. The International Review of Retail, Distribution and Consumer Research, 23(2), pp.111-136. GOME Electrical Appliances, (2017).GOME Electrical Appliances Holding Limited. [online] Gome.com.hk. Available at: http://www.gome.com.hk/html/bus_overview.php [Accessed 3 Apr. 2017]. Helms, M.M. and Nixon, J., 2010. Exploring SWOT analysis–where are we now? A review of academic research from the last decade.Journal of strategy and management, 3(3), pp.215-251. Mayer, F. (2013). Gaming Technologies and Trends in Consumer Electronics - A New Dawn for the Gaming Industry?.IEEE Consumer Electronics Magazine, 2(1), pp.25-25. Thomson Reuters, (2016). GOME Electrical Appliances Holding Ltd, 493:HKG summary - FT.com. [online] Markets.ft.com. Available at: https://markets.ft.com/data/equities/tearsheet/summary?s=493:HKG [Accessed 3 Apr. 2017]. Read More