CHINESE

FIREWORKS
INDUSTRY
PRESENTED BY
Sakshi Gupta (34)
Sathi Paul (35)
Barkha Vig (12)
Nikhil Rawat (26)
Shitiz Gupta (36)
INTRODUCTION
• Liuyang, a city in Hunan Provinces, is known as “the home of firecrackers
and fireworks”.

• It was the top fireworks exporter in the world, covering 60% of the global
production. It export to Japan, Korea, India, Iran, Russia, etc.

• Liuyang makes 13 different types of firecrackers with more than 3000

varieties.

• Due to legal restriction, cut throat price competition, hard to penetrate

distribution channels and bad debts were negatively impact the domestic
sales of Liuyang fireworks.

• Jerry Yu was running a small chain of gift stores in New York, was asked to
invest in a fireworks factory during his visit to Liuyang.
 QUESTION 1

If you were Jerry Yu, would you in invest in a Liuyang fireworks

factory? Why?
 In short run, he can invest in Liuyang fireworks factory.

 His business experience in running a chain of gift stores in New York. His
MBA education and his knowledge of both oriental and western business
thinking.

 Through the help from his hometown relatives, Mr. Yu can obtain the specific
knowledge, technique and networking needed to break into in the Liuyang
fireworks industry.

 The capital requirement for starting business is low.

 Small family workshop 125,000 RMB
 Fatory 1,250,000
 The labour costs are very low as majority of the workers are
regular farmer. He will also get sufficient and skilled labour
force and.

 There is no real substitutes

 It is their traditional way to celebrate function which would not

die easily.

 There was higher profit margin than in the export market .

 QUESTION 2

Apply Porter’s 5 forces model and evaluate the attractiveness

of the Chinese Fireworks Industry.

SUBSTITUTE
PRODUCTS

COMPETING
SUPPLIERS FIREWORKS BUYERS
INDUSTRIES

POTENTIAL
NEW
ENTRANTS
 FACTORS DETAILS ANALYSIS
Substitute Products • Use of balloons in celebrations Moderate
instead of firecrackers
• Use of laser beams with audio-
visual effects
Threat of Potential New • Low capital requirement Unfavorable
Entrants Low labor cost available in
Liuyang
• Easy access of labor force,
materials and supplies
• Licensing Easy
Thus, low entry barriers
Competing Fireworks • Other firework industries in Unfavorable
Industry Liuyang
• Jiangxi Province, Pingxiang &
Wanzai fireworks; in terms of
price and quality
• Dongguan in Guangdong
Province near Hong Kong
• Liling fireworks; interms of price
and variety
Suppliers • Standard raw-materials Favorable
• Many potential suppliers
•Low bargaining power
Buyers • High bargaining power of buyers Unfavorable
• Customer is highly sensitive to
price
• No switching cost is involved
• The fireworks industry has high potential.
Thus, there are high opportunities to invest in
this industry.

• Since, there are low barriers to entry. Thus, it

is a great industry for new entrants, but is
highly competitive.

• Since, cut and throat competition is there in

the industry, thus product differentiation can
result in high margin of profits.
 QUESTION 3

Is the fireworks industry a "sunset" industry or an industry

still worth being in for the long run?

The fireworks industry is definitely a “sunset” industry because-

 Fireworks usage is restricted in many cities of china.

 Issue related to safety of labor while manufacturing firework.

 Fireworks facing a stiff competition from the technology (use of laser beam
combination with sound effects, computerized firing).

 Hardly any money is invested to carried out Research & Development.

 Use of out-dated technology and traditional strategy.

 QUESTION 4

If you were Jerry Yu, and decided to make the investment,

what would you do to succeed?

 Enhance R&D to develop more Environment – Friendly

fireworks

 Marketing and selling through Internet domestically as well as

for exporting

 Investing in High Quality Raw Materials

 Bring Product Differentiation or Cost Leadership

 Invest in Modern Technologies equipments like
Laser beams, computerized firing and musical
accompaniment

 Enforce Training Program such as enhancing working safety

classes and machinery in factory

 Create High Demand in International market

 Skilled Factory workers should hired & abide by strict safety

measure

 Quality of the Ingredients also significant important

 Enhance the Varieties of fireworks

 QUESTION 5

If you were asked to provide advice to the Liuyang

Firecrackers and Fireworks Industry Department, as Jerry Yu.
what would you say?
• Should hired skilled workers so that there should be proper utilisation
of resources and workers should strictly follows safety measures.

• Should invest in latest technology equipment .

• Should use high quality raw materials ( gun powder, colour

ingredients, paper, fuse and clay soil) in producing the fireworks to
lessen the possibility of accidents and also to improve the exploration
of Chinese fireworks.

• Should also ask the government to impose penalties to pirates in

order to protect the brand name and the intellectual properties.
• Should take well trained professional engineers (
out of 4,00,000 people working there were very few
engineers with advanced professional training)

• Should take measures to check the quality of ingredients

(potassium nitrate, charcoal, sulfur, gunpowder) because
of impure ingredients, there are high possibility of
accidents.

• Continuous training programs should be conducted in

order to incorporate innovations in the new products, that
the research and development department section
comes up with (for example, the old day crackers could
reach no more than 20m into the sky, while the new
ones could go as high as 400m)
THANK
YOU !!!