Group Members: Fredyus Tanto 10671170 Heny 10693481 Suhendra Lukita 10671028 William Suryadi 10657486

Group Members:

Fredyus Tanto 10671170

Heny 10693481

Suhendra Lukita 10671028

William Suryadi 10657486

Agenda Company’s profile Question 1 Question 2 Question 3 Question 4 Conclusion

Company’s profile

Question 1

Question 2

Question 3

Question 4

Conclusion

Company’s Profile Established in 1956. Located in southern city of Guangzhou. 1970s  Pearl River pianos were not well known in China. 1987  the factory was expanded to become Pearl River. 1996  formed Pearl River Piano Group Corporation.

Established in 1956.

Located in southern city of Guangzhou.

1970s  Pearl River pianos were not well known in China.

1987  the factory was expanded to become Pearl River.

1996  formed Pearl River Piano Group Corporation.

Question 1: Drawing on industry-, resource-, and institution-based views, explain how PRPG, from its humble roots, managed to become China’s largest and the world’s second largest piano producer

Industry- Based View The reason for PRPG to penetrate USA market: - They are using manual skill - cheap labor The result of the penetration

The reason for PRPG to penetrate USA market:

- They are using manual skill

- cheap labor

The result of the penetration

Resource- based view In the mid- 1980s, the factory was granted a sovereignty for imports and exports. Introduced two strategic pillar: innovation and quality. Improve as an upper-class brand

In the mid- 1980s, the factory was granted a sovereignty for imports and exports.

Introduced two strategic pillar: innovation and quality.

Improve as an upper-class brand

Institution- based view To enhance quality, the company introduced Total Quality Management (TQM) in 1988. Definition of TQM Introduce ISO 9000 in 1996. Definition of ISO 9000

To enhance quality, the company introduced Total Quality Management (TQM) in 1988.

Definition of TQM

Introduce ISO 9000 in 1996.

Definition of ISO 9000

Question 2: Why did Tong believe that PRPG must engage in significant internationalization (other than the current direct export strategy) at this point?

The reasons why Tong must engage in significant internationalization at this point Due to dissatisfied of the Pearl River Piano progress. Due to tough competition  hundreds of private companies began entering the market and competing with their low quality and low price products.

Due to dissatisfied of the Pearl River Piano progress.

Due to tough competition

 hundreds of private companies began entering the market and competing with their low quality and low price products.

The reasons why Tong must engage in significant internationalization at this point (continued..) Cause Tong worried of the future prospects of PRPG if don’t go global. Tong said: PRPG can still survive, however won’t make a great success. Also PRPG is still developing. Challenges in international market  Tong believed that Pearl River piano can enter into international market, specifically US piano markets.

Cause Tong worried of the future prospects of PRPG if don’t go global.

Tong said: PRPG can still survive, however won’t make a great success. Also PRPG is still developing.

Challenges in international market

 Tong believed that Pearl River piano can enter into international market, specifically US piano markets.

The reasons why Tong must engage in significant internationalization at this point (continued..) The cheap labor costs but offer high quality product in China compare to US. This may be an advantage for PRPG to win American customers. To build Pearl River Piano as a world-class brand.

The cheap labor costs but offer high quality product in China compare to US.

This may be an advantage for PRPG to win American customers.

To build Pearl River Piano as a world-class brand.

Question 3: If you were one of those professors who visited Tong in March 2000, how would you brief him on the pros and cons of various foreign market entry options

Mode Conditions Favoring this Mode Advantages Disadvantages Exporting Limited sales potential in target country; little product adaptation required Distribution channels close to plants High target country production costs Liberal import policies High political risk Minimizes risk and investment. Speed of entry Maximizes scale; uses existing facilities . Trade barriers & tariffs add to costs. Transport costs Limits access to local information Company viewed as an outsider Licensing Import and investment barriers Legal protection possible in target environment. Low sales potential in target country. Large cultural distance Licensee lacks ability to become a competitor . Minimizes risk and investment. Speed of entry Able to circumvent trade barriers High ROI Lack of control over use of assets. Licensee may become competitor. Knowledge spillovers License period is limited

Limited sales potential in target country; little product adaptation required

Distribution channels close to plants

High target country production costs

Liberal import policies

High political risk

Minimizes risk and investment.

Speed of entry

Maximizes scale; uses existing facilities .

Trade barriers & tariffs add to costs.

Transport costs

Limits access to local information

Company viewed as an outsider

Minimizes risk and investment.

Speed of entry

Able to circumvent trade barriers

High ROI

Lack of control over use of assets.

Licensee may become competitor.

Knowledge spillovers

License period is limited

Pros and Cons of Market Entry Joint Ventures Import barriers Large cultural distance Assets cannot be fairly priced High sales potential Some political risk Government restrictions on foreign ownership Local company can provide skills, resources, distribution network, brand name, etc. Overcomes ownership restrictions and cultural distance Combines resources of 2 companies. Potential for learning Viewed as insider Less investment required Difficult to manage Dilution of control Greater risk than exporting a & licensing Knowledge spillovers Partner may become a competitor. Culture Clashes Direct Investment Import barriers Small cultural distance Assets cannot be fairly priced High sales potential Low political risk Greater knowledge of local market Can better apply specialized skills Minimizes knowledge spillover Can be viewed as an insider Higher risk than other modes Requires more resources and commitment May be difficult to manage the local resources .

Import barriers

Large cultural distance

Assets cannot be fairly priced

High sales potential

Some political risk

Government restrictions on foreign ownership

Local company can provide skills, resources, distribution network, brand name, etc.

Overcomes ownership restrictions and cultural distance

Combines resources of 2 companies.

Potential for learning

Viewed as insider

Less investment required

Difficult to manage

Dilution of control

Greater risk than exporting a & licensing

Knowledge spillovers

Partner may become a competitor.

Culture Clashes

Greater knowledge of local market

Can better apply specialized skills

Minimizes knowledge spillover

Can be viewed as an insider

Higher risk than other modes

Requires more resources and commitment

May be difficult to manage the local resources .

Question 4: Again, if you were one of those professors, how would you specifically point out a direction to tackle the US market for PRPG ?

Direction to tackle US market Equity Modes (Foreign Direct Investment), can do invest to the foreign market. Benefit of FDI: - FDI ensures a huge amount of domestic capital, production level, and employment opportunities in the developing countries.

Equity Modes (Foreign Direct Investment), can do invest to the foreign market.

Benefit of FDI:

- FDI ensures a huge amount of domestic capital, production level, and employment opportunities in the developing countries.

Cont.. - Increased Productive efficiency due to competition from multinational subsidiaries - Infrastructure and technology improve. PRPG could participate in musical event such as exhibition ,

- Increased Productive efficiency due to competition from multinational subsidiaries

- Infrastructure and technology improve.

PRPG could participate in musical event such as exhibition ,

Cont.. Presence in sponsorship events, inviting famous pianist to advertise (well known piano player), Adopt strategy by maintaining the quality of product, technology, staff and innovation

Presence in sponsorship events, inviting famous pianist to advertise (well known piano player),

Adopt strategy by maintaining the quality of product, technology, staff and innovation

Conclusion PRPG has now grown substantially in China and become the second largest in the world (Next to YAMAHA) PRPG has gone through numerous challenges in tackling US market Howeve, to be number one in the US market and the world, there is still alot of work to be done.

PRPG has now grown substantially in China and become the second largest in the world (Next to YAMAHA)

PRPG has gone through numerous challenges in tackling US market

Howeve, to be number one in the US market and the world, there is still alot of work to be done.

THANK YOU !! 