Wednesday, April 29, 2015

How could Panasonic enter Chinese market?

Since the reform and open up in 1979, Chinese market has aroused great attention of developed countries. While western household appliance enterprises gave up expanding into the Chinese market in 1980s due to the low income and low consumption ability of Chinese families, Japanese appliance companies, like Panasonic, gained huge profit. And their success largely depended on their comprehensive diagnosis of the institutional contexts of China.

In regard to the political and social system, while western enterprises highly doubted that the government intervention could impede their development, Panasonic noted that the policies have been adjusted from political campaigns to economic construction. Considering that, they anticipated a stable economic development and an open market in the following decades in China. And this would finally lead to a strong market demand for home appliances or other products.

As for the product markets, Panasonic thought that the western household consumption patterns would have a significant impact on Chinese families in virtue of the increasing communication. Chinese families would experience from a period of bicycles, watches, sewing machines and radios to a time with washing machine, television sets, tape recorders and electric fans. And this process could be much faster than situation in Japan or the western countries.

And their investigation went far more intensive. On the one hand, they acknowledged the low-income level of Chinese families. On the other hand, they were also aware of the consumer psychology and the consumption habits of Chinese. Contrary to the western families, Chinese are more inclined to economical consumption and deposit. Therefore, Panasonic anticipated that within a few years of economic development, Chinese families could afford the cheap durable goods ($30-$50), like television. And even if the amount spent on appliances for each household is small, the huge population and the large amount of households would promote a huge market. Specifically speaking, if every household spends $ 35, the gross sale would be more than $100 million.

Considering the above, Panasonic finally entered the Chinese market and gained a huge profit.

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