Recently, media have reported that BYD Company wishes to enter the consumer electronics market, the fastest in the second half will launch its first own-brand home appliances news. Taking into account all the commercial behavior of the raw power, the author is not concerned about the news itself, but what kind of BYD will approach in the consumer electronics market gold.

We all know, China’s home appliance market is very mature style is marked by the variety complete, quality, price gradient, and the gradual emergence of a few large oligopolistic competition pattern. For any newcomers, if the attempt to rely on technology or the size or brand or distribution network to appliances in a mature market that has been made with the position of the big boys are the same as in the breaks against. So, if BYD wants to have a very mature market, this system ripped a crossing, and then get enough market share, then I think its success unlikely.

But the problem is really BYD company will choose to attack the already fairly mature market? I think that is unlikely. The contrary is likely that BYD does not want to in the existing market system and get ready, but will choose to develop an entirely new market – the “zero consumption” market.

Reason for that is at the low end there is always a group of over-service customers. A sign of over-service signal that these customers are always looking for the cheapest products, and more reluctant to spend money on other alternatives, or do not consider buying such products. Or further said that the so-called mature markets home appliances (air conditioning industry in our example), the main consideration is the corresponding client 1,500 yuan to buy the ordinary type air conditioner, or buy more than 2000 yuan a better air-conditioning, or bought more than 5000 element of the high-end brands. For those who are over-service clients, the main consideration is like to buy air-conditioning, they are the more serious the only price theorist. To make its final decision whether to buy only the price of the core factors, namely low unless the price range they can afford, otherwise they will not consider buying.

Compared to mature markets, these customers constitute a new market – the “zero consumption” market. These customers do not neglect the quality of service, but they pay more attention to the prices of products and services. For example, during the year 51, the major air conditioning manufacturers crazy price war, although the gains are not small, but considering their attack to the middle and lower consumer’s helplessness (1,000 yuan, is the minimum price) – proved These customers do not want for better service or a certain price to spend money on cheaper products, because it was beyond the scope of their pay. This is BYD’s market opportunities into the home appliance industry.

Therefore, when the normal strategy and the tactics in the existing markets obviously can not do anything, the BYD can choose to implement the new market disruptive strategy. In China there are millions of “zero consumption” group have not yet bought air-conditioning, in addition to the traditional thrift habits, the ordinary families could not afford the relatively still relatively expensive machines, the market for existing products, they those who are over-service. But not without spending power of these families, and consumer demand. Every day they looked at Hisense, Skyworth TV on Haier, Midea’s air conditioning ad, there is a psychological consumer demand, but their spending power is very low.

So, if BYD to design a price of only 500 air-conditioning products (most recently appeared in India 35 dollars on a super cheap computer), will be able to successfully enter the restricted space and the Shaanxi Shanghai bottom of remote rural households family; only give those not very large room to provide adequate dehumidification temperature effects (to those users of the product experience and service requirements, even if only to the general effect is entirely feasible), the situation becomes interesting to them – that once the BYD company to establish a price on this business model can make money, then the rest of the home appliances market to promote also become very easy. (Think red-hot the past two years the Chinese auto market it, and then look for those tens of thousands of ordinary wage earnings of low-end brand, great drive. Of course, Wong has become a hero in that market.）

So the question is not about how the existing market, or how BYD’s own (with analysts that BYD should choose according to their own situation into some kind of home appliances), these are not important. Important is the ability to recognize BYD to the field of home appliance industry in the actual existence of the potential market and, based on customer demand in the market establishes a corresponding characteristics of the business model, and once they are Queding, rest is just technical and implementation power dimension. BYD from our understanding of the past, look, this is its strong suit. Therefore, its first entry in the mature markets and those who do not win the competition, as in another battle on their own and their competition!

Incidentally, the Western business executives from China must be very worried about the threat of low-cost manufacturing, they think of China’s most competitive asset is the vast untapped “zero consumption” market, which also makes China a many of the implementation of new market disruptive innovation strategy fertile ground for the company thrive. Therefore, many entrepreneurs are aware of China’s economic development may depend on the demographic dividend derived from the low manufacturing cost advantage, then why not think about the huge population of low-end bonus behind consumers? You know, this is also the market!

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Category: Business Management
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