Fireworks Industry Analysis

Industry analysis:

Fireworks and firecrackers industry has a long history in China. In 2008, there were almost 6458 fireworks producers in China and there was a stiff competition in the industry.

Strenghts:

Offensive strategy: Liuyang fireworks industry started managing local offices in many provinces in China leading to managing prices in export sales. Also under this plan they resorted the relations with the governments. Due to this strategy, the overall sales were increased by 2009. It was also listed on Toronto Stock Exchange in year of 2009. The total revenue of Liuyang firecrackers and fireworks industry in the year 2007 and 2009 is US$750,000 and US$1,262,500(‘000) respectively which shows a tremendous growth in the fireworks industry

In the current market, right moves had to be taken and it is expected that it will grow. Tradition is attached to everyone and it cannot die so easily. In China as well as in the western world, firecrackers are giving the happiness to the people through its visual, audio and emotional experience. And history shows that no substitutes can really replace firecrackers. Also, Beijing Olympics has given an attention to firecrackers industry. (Jiang and Beamish, 2011)

Threats:

There are threats by the media as it is handled by the government in China. Also there are few independent NGOs pulling the companies in abusive matters as fireworks industry has many environment related issues. (Khanna, palepu, and Sinha, 2005)

According to above industrial and strategic analysis, Jerry Yu should definitely go for the investment in the Chinese Fireworks Industry. It is also important to focus on the AAA model of Ghemawat as he needs to adapt the components in the Chinese market. Also, look into the matters of economies of scale and making arbitrage by using a different strategy. (Ghemawat, 2007)

Porter’s five forces:

Bargaining power of

The rivalry to Liuyang was from Liling, Jiangxi Province, Pingxiang and Wanzai provinces which were stiff in competition in the industry in price and exports of the fireworks. (Jiang and Beamish, 2011)

As per Porter’s five forces, it is clear that Chinese fireworks industry is very attractive. In the long run, it is going to be very successful. As there is stiff competition, export oriented industry and there are no imports. Liuyang is an already established brand. Also, there’s scope for innovation and improvements, it has a growing revenue as well as lesser injuries.

Sunset or rising industry?

Political Factors:

In China, Communist party has the real monopoly in political power and the local government has economic power decision (Khanna, palepu, and Sinha, 2005). As the initial capital requirements were relatively low, government started encouraging private sector units. The industry had a great government support on financial as well as improvisation basis.

Environmental Factors:

In 1990, the industry had to go through various environmental problems. Many cities put forward regulations on the firecrackers and fireworks. Mass media has also reported about the noise, pollution and various accidents due to firecrackers. (Jiang and Beamish, 2011)

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