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Evaluate these two options and recommend which approach is most suitable for Haier - Edexcel - A-Level Business - Question 2 - 2018 - Paper 1
Question 2
Evaluate these two options and recommend which approach is most suitable for Haier. Haier is aiming to continue its global expansion in the white goods market. It c... show full transcript
Worked Solution & Example Answer:Evaluate these two options and recommend which approach is most suitable for Haier - Edexcel - A-Level Business - Question 2 - 2018 - Paper 1
Step 1
Decision for focussing on global niche markets
Answer
A global niche market is a specialized segment of a global market for a good or service. This approach aligns with Haier's strategy of adjusting the marketing mix to meet local needs, which in this case means the design of the product such as low energy washing machines for specific markets.
By concentrating on customer service and market research, Haier can identify under-served markets, such as household appliances targeted at lower-income consumers in China. Customers in these niches are often willing to pay a premium to satisfy their particular needs, thus providing higher margins.
However, this strategy must be evaluated in terms of potential long-term growth, as niche markets may not offer substantial quantities of sales and can limit the company’s overall expansion.
Step 2
Decision for focussing on global mass markets
Answer
Conversely, focusing on global mass markets involves treating the market as one large entity and producing goods that appeal to a broad audience. This strategy can yield higher sales volume but may require Haier to engage in mass production, potentially leading to lower profit margins.
Considering the competition from established multinational brands like Bosch and Whirlpool, Haier must assess whether it can compete effectively in this arena by offering similar or better quality products at competitive prices. However, this approach may pose risks, as the cost of production must be managed carefully without sacrificing quality, which can impact Haier's brand image as a low-cost provider.
Step 3
Recommendation
Answer
In conclusion, while focusing on global niche markets offers opportunities for higher margins and the fulfillment of specific consumer needs, the limited size of these markets may hinder Haier's growth potential. Therefore, a hybrid approach may be ideal where Haier targets both global niche and mass markets, leveraging its strengths in low-cost production while maintaining a focus on customer needs to adapt product offerings accordingly. This approach balances profitability and market share, ensuring long-term sustainability and competitive advantage.