Write-up (1) Is the fireworks industry a “sunset” industry (I. E. , mature or declining industry), or is it an Industry still worth being in for the long run? From what the case discusses, It seems to me that the Industry is dying. The future looks pretty gloom with the price wars, quality disputes, and Intense overseas competition. Could the Industry make a comeback? Yes, I believe that with China’s recent economic growth that domestic sales could drastically increase.
With China’s growth comes more opportunity in the way of celebrations as well. Regulations need to be put into place to mitigate fraudulent activities and price wars. The price wars are eating away at the Chinese markets credibility. It seems to me that the market is demanding a higher quality firework that China cannot currently meet, because of price wars enabling producers to afford appropriate materials. With price floors put into place the quality would increase and China could earn back some of the market share that they lost to Korea and Japan.
At the same time it is not necessary for China to match the level of quality that Japan and Korea are producing at, but China still has some improvement to do In order to be trusted In the Industry again. (2) If you were Jerry You, would you Invest In a Laying fireworks factory? Why? If I were Jerry You I would not Invest In the fireworks Industry because It would take a lot of government Intervention to sort out patent infringement and pricing wars.
I am a slightly conservative investor and this kind of investment is Just too risky for me because even if I have great intentions people will till my ideas and force me to maintain low levels of quality in my product lines. I also have an issue with the growth potential in the firework market. When considering investment opportunities I prefer new industries with high expected growth. While looking at China, it seems that there Is little growth. Although, looking at Japan and Korea, I see higher levels of growth. Japan and Korea are stealing market share and appealing to a new market that demands higher quality.
I would be (3) If you were Jerry You, and you decided to make the investment, what would you do o win out the competition? How would you compete? I would compete in my cost structure by moving to 100% online sales and distribution. I would not pay for brick and mortar distribution. I would appeal to a customer with high quality tastes to distinguish myself in the market. The prices would be higher that my competition hurting me until I created a strong brand for myself. I would focus hard to not share trade secrets with my competition, and make sure that underground markets did not use my brand name.
My target market would be overseas. I would brand myself as the highest trusted Chinese firework producer. I would have no problem selling at a higher price as soon as my target market realized the quality I provided. I would be very adamant about the safety of my products as well. My retained earnings would go to safety control and spending. Although not all of these goals would be be done to specialize in an already saturated market. My idea isn’t to compete directly with the low cost structured producers in China, but to start a high quality brand that could be trusted around the world.
