Executive Summary
Gome Electrical Appliances: Competing for Channel Leadership tell us a story about the legendary development of Gome Electrical Appliances. Its low price sales strategy and the countermeasures toward the price control of the color television price alliance to maintain channel leadership. This case analysis identified two major problems of market strategies Gome took in the channel leadership battle, provided two recommendations, and then analyzed the feasibility of the recommendations.
General highlights of Gome:
Gome, founded by Huang Guangyu, in 1987 as a little shop selling only imported home appliances in Beijing. In 1996, following the emergence of domestic brands, Gome adjusted its operational structure and shifted its focus to domestically produced, joint-venture brands. From early 1990s, Gome has expended rapidly and established its top position in China’s home appliances market. Gome pursued a retail plus low prices operation strategy from the very beginning. Dealing with manufacturers directly with guaranteed sales volume, centralized purchase and decentralized sales obtained concessions and higher level of rebates from suppliers and hence low costs, which in turn contributed lower retail prices and larger sales volume. Gome has established a positive cycle of capital and goods.
Strike against price control by Color TV Price Alliance
Realizing that fierce price war in China’s color television industry brought them ever-decreasing profit margins hard to bear, in 2000, some core members of the color TV industry formed a price alliance intended to stifle the price war and re-establish their leadership in the value chain of home appliance. Responding to the price control, Gome initiated its powerful strike by lowering the price of ...