China’s Pearl River Piano – Tuning into the Global Market
The case study “China’s Pearl River Piano – Tuning into the Global Market” discusses the market growth of China’s Pearl River Piano Group Ltd. (PRPG). Pearl River Piano Group Ltd was founded in 1956, Guangzhou, China, and is today the world’s largest manufacturer of pianos. The company began to grow in the 1980s because of China’s economic reforms. In 1992, PRPG’s CEO Tong Zhicheng wanted to improve the quality standards of the pianos to meet the high standards of the European and American markets. PRPG established a 20-year joint venture with Yamaha in 1995 to gain mutual benefits. As a result of this joint venture, PRPG improved their technical skills of piano making, and how to penetrate the western market. A couple of years later PRPG took over smaller state-owned musical instrument manufacturers. The partnership contributed to PRPG success, and by the end of 2000, it had become China’s largest piano manufacturer, and second largest in the world.
To continue its success Tong wanted to expand PRPG into the global market. PRPG expanded in the American market by opening a subsidiary in the 1990s. In 2000, PRPG was the piano market leader in China, with a market share of 60%, and market share of 5% in the American piano market. Entering the American market Tong started hiring American representatives with good knowledge of the piano industry in the company’s US subsidiary. Moreover, the company hired an American piano consultant David Campbell to increase sales and to decide on the right piano to match the American consumers. After these changes were implemented, PRPG pianos were sold in over 1,000 American stores. Today, PRPG has its own distribution network of more than 300 dealers across the United States.
To enter the European used international acquisition to attract the most sophisticated consumers. In 2000, PRPG acquired the German Ritmuller, high-end consumer-grade piano brand. A couple years later PRPG acquired another German piano manufacturing company Rudisheimer. It provided PRPG with great piano production technology. Moreover, it helped garner 40% of the US piano market. In addition, PRPG acquired Herman Miller, an American furniture manufacturer. This helped PRPG design pianos for private homes. In 2004, PRPG opened its first European office in Munich, much of the design and research development took place there.
During the 2008 financial crisis, China’s pianos export decreased by 70%, while PRPG still brought 9% in sales revenues and profits grew by 18%. In the last 10 years, PRPG have made great progress with it piano quality. In addition, it is important that UPS continues to form alliances and partnerships with other piano companies and other musical instrument corporations to stronger fight competition. Today, join ventures are one of the greatest strategy for foreign direct investment. These partnerships will help PRPG to become much more competitive and therefore gain increased market share. As we seen in the past, the joint ventures has helped PRPG greatly. Moreover, since the world economy is recovering from the 2008 financial crisis, the emerging markets are growing thus it would be good for PRPG to target these markets because of the improved purchasing power.
This is a decision case because the PRPG CEO is trying to implement the best global strategy to create a large PRPG footprint in the world market.
