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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. For Haier, targeting global niches like small, low-energy washing machines for the Chinese market would allow them to adjust their marketing mix to fit local needs.
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Customer Service and Market Research: Haier has previously succeeded in understanding customer preferences, which will aid in identifying niches such as over-sized washing machines for particular regions.
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Willingness to Pay: By focusing on global market niches, Haier can identify customers who are willing to pay a premium for products that meet their specific needs, thus increasing potential profit margins.
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Long-Term Growth: Although global niche markets may seem limited, they can provide a foundation for growth that allows for future expansion into other categories, such as mini-refrigerators.
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Brand Loyalty: Engaging with niche markets helps establish brand loyalty, creating customers who may resist switching to competitors like Bosch and Whirlpool.
Step 2
Decision for focussing on global mass markets
Answer
A global mass market involves a larger audience but often requires a different approach than niche marketing.
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Market Research Requirements: Entering global mass markets necessitates extensive market research to understand diverse consumer needs, adding to costs and potentially diluting brand identity.
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Profitability Challenges: While the sales volume may increase in mass markets, the profitability per unit may decrease, leading to a long-term struggle for Haier in sustaining its competitive edge.
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Brand Recognition: Global mass marketing may offer greater visibility but also places Haier in competition with well-established brands that have loyal customer bases, making it difficult to penetrate the market effectively.
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Price Competitiveness: As a China-based company, Haier could leverage production cost advantages; however, entering the mass market could lead to price wars that affect overall profitability.
Step 3
Recommendation
Answer
Considering the analysis above, Haier should focus on global niche markets as the most suitable approach for its expansion strategy. Niche markets allow for targeted marketing efforts backed by strong customer insights, fostering brand loyalty and enabling Haier to thrive against more established competitors. This strategy not only supports higher profit margins but also lays the groundwork for future growth opportunities in adjacent markets.