Academic journal article
By He, Zhiyi; Chen, Xiaoyun
Multinational Business Review , Vol. 13, No. 2
This study investigates the structure of China's market by examining the profiles of consumption values from a large scale national survey of 6250 respondents. The study identifies four consumer segments that pursue distinct patterns of consumption values, including: purchase value, social status, performance and aesthetics, and "satisficing" needs. These distinct consumption value profiles help to provide a much needed understanding of China's consumer market that complements existing studies on sociodemographic characteristics. These four distinct segments provide useful positioning and marketing implications for multinational firms operating in the China market.
Today, the global consumerelectronics firms are facing a tough new world for three reasons: rapidly changing industrial technology and consumer preferences, increased competition from upstart rivals, and plummeting retail prices. These changes have slashed the profits of dominating giants and jolted the entire industry (Dvorak et al., 2005). Sony is hurting badly in its key businesses such as TVs and Walkman audio players. Its 2004 winter quarter profit has fallen by 12% (Dvorak, 2005). Philips, another giant in the field, reported that its net profit has declined by 40% due to sales declines in TVs and other home electronics. The shake-up with these global giants implies that the entire industry is undergoing a painful and drastic restructuring course. Executives of these multinationals are devising ways of reengineering their business models for survival and future growth.
Being the most populous country with a robust economic growth of 8% for the last 25 years, China has matured into the hope for the entire industry. The country's 1.3 billion consumers with fastincreasing buying power have transformed China into the world's largest consumer electronics market by volume, a market opportunity that multinational giants cannot afford to neglect. Batra (1997) and Schmitt (1999) pointed out that understanding the structure and characteristics of China's consumer market is one of the many critical issues that challenge international managers. While many studies have investigated how to enter the China market, few attempts have been made to understand its market structure beyond macro-economic profiles such as age, education, per capita income, and product ownership rates (Cui and Liu, 2000). The lack of in-depth consumer understanding may lead to distorted views on the China market and consequently lead to suboptimal marketing strategies. The study aims to fill in this gap. It focuses on the profiles of salient attributes for which consumers will consider when they shop for electronic products; this profiling of attribute salience has been pioneered in seminal papers in understanding how Chinese consumers behave (Tse et al., 1988; Tse, 1996). Through a large scale national survey, the study contributes to the literature by (1) understanding the structure of the China consumer market through their consumption value profiles; (2) identifying meaningful consumer segments based on these consumption profiles; and (3) deriving useful managerial implications based on the distinct consumer segments identified. We use consumption values to describe and segment the China market for several reasons. First, past studies have attributed differences in consumer behaviors to distinct social values they hold. Extant research suggests that these values act as powerful forces in shaping consumers' motivation, lifestyle, and product choice (Homer and Kahle, 1988; Levy, 1999; Scott and Lament, 1977; Tse et al., 1988). Both academic researchers and managers acknowledged that understanding the dominant values of the target audience is essential for effective positioning strategies (Reynolds, 1985). second, as China is undergoing overlapping phases of transition, its consumers are changing their purchase values and desires continuously. …