Pearl River Piano, International Business Strategy US market entry strategy

1. Pearl River Piano
Striking the right Chords!
Amit Chougule Mehak Narula

2. Introduction
o Established in 1956
o Located in southern city of Guangzhou
near Pearl River
o In 1970 Pearl River Piano were not well
known in China
o In 1987 The factory was expanded to be
known as Pearl river.
o In 1996 Formed Pearl River Piano Group
Corporation.

3. Industry Based
Considerations
Hundreds of domestic SME’s with low prices & low quality along
with Big players in Europe and United States
Strategic move to
merge small A high bargaining
companies & make power due to
alliance with other availability of many
companies reduced brands both local &
bargaining power of international with
supplier. different price range.
Not many threat of substitutes to a Piano apart
from few electronic equipment.

4. Resource Based
Considerations
• Innovation
• Total Quality Management
• Cheap labor in China
• Experienced craftsmen
• Higher economies of scale with
Largest factory for piano in
world.

5. Institution based
considerations
• Cultural Distances & norms
• Perception of Chinese pianos in Europe & US
• Difficulties in partnering for strategic alliances
• ISO 9000 certification in 1998
• In the mid 1980’s The factory
was granted a sovereignty for
imports and exports due to
Economic reforms in China.

6. Pearl River
Internationalization-
•
where?
A niche market of low price and high quality
pianos was identified in united states which
existing manufacturers were not able to fulfil
• Though United states piano market was
saturated , but it was a free market in a
politically stable environment
• Also an existing market ensured better
supplier and dependent industries

7. Pearl River
Internationalization-when?
• In 1980 PRPG imported technology from Europe and
initiated expatriates exchange for better
performance and quality.
• The joint venture licensed Yamaha technology to
make key components thereby a key supplier for
Yamaha
• By the end of 2000 Pearl river had almost 50 percent
of piano market in China with total asset
value of $130 million and rivalry
was at its peak.

8. Pearl River
Internationalization-how?
• PRPG relied on direct exports as partnering with
American piano builders was difficult because they
perceived PRPG as a competitor.
• In 1999 With some experience in direct exporting
they set up a sales subsidiary in United states as the
platform to expand further.

9. Pros & Cons of different
market entry options
Mode Condition favoring Advantages Disadvantages
Exporting • Limited sales potential • Minimizes risk • Trade barriers &
in target country. Less and investment. tariffs add to
product adaptation • Speed of entry costs. Transport
required. • Maximizes scale costs.
• Distribution channels .Use of existing • Limits access to
close to plants. High facilities. local information.
target country • Company viewed
production costs. as an outsider.
Liberal import policies.
High political risk.

10. Pros & Cons of different
market entry options
Mode Condition favoring Advantages Disadvantages
Licensing • Import and investment • Minimizes risk • Lack of control
barriers. and investment. over use of
• Legal protection • Speed of entry. assets.
possible in target • Able to • Licensee may
environment. circumvent become
• Low sales potential in trade barriers competitor.
target country. • High ROI • Knowledge
• Large cultural distance. spillovers
Licensee lacks ability to • License period is
become a competitor. limited

11. Pros & Cons of different
market entry options
Mode Condition favoring Advantages Disadvantages
Joint Venture • Import barriers • Overcomes • Difficult to
• Large cultural distance ownership manage, Dilution
• Assets cannot be fairly restrictions and of control
priced. cultural • Greater risk than
• High sales potential. distance. exporting &
• Some political risk • Combines licensing
• Government resources of 2 • Knowledge
restrictions on foreign companies. spillovers
ownership • Potential for • Partner may
• Local company can learning, become a
provide skills, viewed as competitor.
resources, distribution insider. • Culture Clashes
network, brand name, • Less investment
etc required.

12. Pros & Cons of different
market entry options
Mode Condition favoring Advantages Disadvantages
Direct • Import barriers • Greater • High risk than
Investment • Small cultural distance knowledge of other modes
• Assets cannot be fairly local market • Requires more
priced. • Can better resources and
• High sales potential apply commitment
• Low political risk. specialized • May be difficult
skills. to manage the
• Minimizes local resources.
knowledge
spillover
• Can be viewed
as an insider.

13. Conclusions
Industry based Resource based
considerations: High rivalry in considerations : Total quality
China and threat of new and Innovation techniques
entrants with skilled craftsmen
Foreign Entry
decisions when
where &how
Institution Based
considerations :
Cultural differences in US and
China

14. References
• www.pearlriverpiano.com
• www.pearlriverusa.com
• www.wikipedia.org
• Book – Global strategic Management
– By Mike W. Peng

15. Thank you!