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Gome Key Marketing Problem

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IDENTIFICATION OF KEY MARKETING PROBLEMS
1. Key Marketing Problems Faced by Gome in 2000
In 2000, Gome Electrical Appliances was one of the biggest home appliances retail chain in China with an annual turnover of RMB 2.6 billion and 21 retail outlets spread across Beijing, Tianjin, Shanghai, Chengdu and Chongqing. It was the market leader in color television market and color television accounted for 60-70% of Gome’s turnover in 1999 and 70-80% of those were supplied by domestic brands. The key marketing problems faced by Gome in 2000 are enumerated below:
• On June 9th 2000, the Color Television Price Alliance was formed by nine of the major domestic color tv manufactureres in order to curtail price war and increase profit margins. One of …show more content…

Eliminating the middleman, enabled manufacturers to gain control of the scale of sales as well as pricing and thereby increase market share. This mode sales channel were doing pretty well until the mid 1990s due to considerable profit margins. However, as the prodcution capacity of the manufacturers started increasing during mid and late 1990s, the cities’ market was saturated and a fierce competetion started between competitors which resulted in more price cuts and furher decline in profit. Manufacture-owned sales channels were no longer able to accommodate the the high operational costs associated with big terminal networks. Barring a few big players like Changhong, TCL, Gree and Haier, most domestic manufacturers scrapped their own sales channel and started relying on specialized distribution channels.
III. Home Appliance Super Store
Another concept namely home appliance superstore also started to spring up in the 1990s whose basic operating model was letting out spaces on sales floors by its sales agents. However, this sales channel could not achieve economy of scale due to its segmented development model, its inability to carry out bulk purchases and lack of coordination in operations. This sales channel too was short lived in spite of its large number of businesses and a comprehensive …show more content…

The response of the consumer was very positive and Gome’s belief in low price strategy was reinstated. This breach of the rules set by the alliance led to another meeting of the nine members of the alliance to decide on measures to compete with Gome. If the alliance step up its actions against Gome, Gome should try and reach an agreement with Changhong whose inventory was to the tune of 1.68 million television sets as of May 2000. It would be a win-win situation for both Changhong as well as Gome. As it is quite evident from the price cuts in Prima color TVs that customers still welcome low prices, this could give great competitive advantage to Gome. At the same time it should expand its network to the rural areas and upcoming urban areas and start capturing more market share. At the same time, Gome should also use its goodwill with foreign brands and use this opportunity to lure foreign investors into the market. This opening into the growing China market for foreign brands would enable Gome to better negotiate with them and achieve lowest prices for its products. This in turn would enable Gome to offer more variety to its customers. In the meantime, Gome should raise public awareness against this alliance and create a backlash in the market. All these steps would definitely weaken the alliance and force them to retract. In the meantime, Gome should also start

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