Chinese Fireworks Industry
(10 pages of text)
The Chinese fireworks industry thrived after China adopted the open-door policy in the late 1970s, and grew to make up 90 per cent of the world’s fireworks export sales. However, starting in the mid-1990s, safety concerns led governments both in China and abroad to set up stricter regulations. At the same time, there was rapid growth in the number of small family-run fireworks workshops, whose relentless price-cutting drove down profit margins. Students are asked to undertake an industry analysis, estimate the industry attractiveness, and propose possible ways to improve the industry attractiveness from an individual investor’s point of view. Jerry Yu is an American-born Chinese in New York who has been invited to buy a fireworks factory in Liuyang, Hunan.
This case is suitable for use in an early section of a strategy (general management, business policy, competitive strategy, or international strategy) or marketing course, which introduces the topic of industry analysis. Students are to apply Porter’s Five Forces Model using the information provided in the case. The industry analysis will enable students to understand the dynamic forces impacting the industry, evaluate the attractiveness of the industry, and see how different industry structures can affect a firm’s strategic choices. The China background poses an extra complexity in the industry analysis, because some of the market dynamics tend to be specific to China.
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