The shadow of the price war - Assignment Example

“The sector’s output has increased by 24 percent on average since 1997 and reached 23.13 million units. Last year, accounting for half the world’ production.” The news report aid. But there are only 22.67 million units were sold last year. Therefore 2.26 million were left over. What can the producers, the sellers and the markets do with this large amount of excessive goods?

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AS China has been the member of W.T.O. , the biggest barriers, tariffs, become smaller resulting the foreign-brandeds swarm into the China market. Facing the disadvantages in technologies and models, what should the domestic producers do?

Air-conditioner industry is thought as the most beneficial industry of the households electric appliance. Many new participants are attracted to join this market. It is said that more than 400 makers are crowed in the field offering similar medium and low-end products. The gap between demand supply will certainly widen as the large number of producers and the big company are ambitiously seeking to increase their production and grab greater market share. Facing this problem, what should they do?

According to the author’s opinion, price will be the most effective weapon for makers to deal with those problem. Price reduction can stimulate the amount of demand. Some of them think the differences between different air-conditioner has become smaller and smaller. In order to seek further development, there are no alternative way except price reduction. They also think this is good for customers.

In my opinion, this is just the shadow of the price war. They haven’t revealed the veil of the price war. The price war has begun two weeks ago, the price cut ranged from 400 yuan to 1,000 yuan(US$48 to US$120). This is really a big reduction. But the most surprised thing is the amount of demand doesn’t raise up as the producer think. The sellers and customers hold their money and wait They seem like very sure the price reduction will go further. Who care you makers have benefit or not.

The companies who have joining the price war are some small producers or non main-stream brands. The cost of production can not be reduced anymore. So quality, some technology indexes and after-selling service are sacrificed. Now, the price is reduced, are the goods same before? Our customer have benefit or not.

The four biggest air-conditioner makers Kelone, Midea, Haier and Gree have claimed that they will not join the price war. “The average benefit of the whole air-conditioner is about 5%. So the space for price reduction is not very large.” the president of Kelone group said. The air-conditioner industry is not like the other household appliance, it has a important part on the quality and maintenance service. Some other main stream will also keep the price in same position and work for quality.

As a customer, we are willing to see the price goes down. But we never forget the quality. Anyway, the producers must know more than me about this.