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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. In Haier’s case, targeting niches such as small, low-energy washing machines for the Chinese markets can provide a solid growth foundation. By conducting thorough customer service and market research, Haier can identify other niches, such as those suitable for over-sized refrigerators in Pakistan.
Focussing on global market niches could potentially lead to higher customer loyalty, as customers in niche markets might be more willing to pay a premium price for tailored products. Moreover, niches often avoid direct competition from larger brands like Bosch and Whirlpool.
However, the sales volumes in niche markets can be limited, which might affect long-term profitability.
Step 2
Decision for focussing on global mass markets
Answer
Conversely, the global mass market offers a significantly larger customer base. Expanding into mass markets can lead to higher sales volumes, which could outweigh the potentially lower margins per product. In regions like India, where disposable income is rising, there is an increased demand for domestic appliances.
While pursuing mass markets might involve higher competition with established brands, it provides Haier with the opportunity to leverage its cost structure to offer competitive pricing. Also, consumer preferences for established brands could limit Haier’s growth if they are perceived as newcomers.
Step 3
Recommendation
Answer
In recommending an approach, I would suggest that Haier should focus on a dual strategy. By maintaining their presence in niche markets to build brand loyalty and customer relationships, they can concurrently tap into the global mass market, capitalizing on rising incomes.
This balanced approach allows for flexibility in product diversification while ensuring engagement with existing markets. As Haier continues to develop its brand identity and adapt its offerings, a solid foothold in both niches and mass markets would provide the best opportunity for sustainable growth.