Pearl River is the world’s largest piano maker. It is also the fastest-growing piano maker in North America, with the largest dealer network in Canada and the United States. The company has in fact surpassed Yamaha and Steinway, both of which are reputed piano-making companies. But it is not very well-known despite its claim that it is “the world’s bestselling piano.” The reason for this is that customers do not associate a fine musical instrument with a “made-in-China” tag.
Pearl River Piano Group (PRPG) was founded in 1956 in Guangzhou, China. Though it exports to Hong Kong, its primary market has been China. Pianos earlier considered a luxury have become more affordable with rising incomes. As a result, the Chinese are the consumers of almost half of the pianos produced in the world.
The Chinese market has attracted many new entrants and with over 140 competitors, PRPG’s domestic share fell from 70% a decade ago to a current 25%. Savage domestic competition has forced PRPG to look for foreign markets. It now exports to over 80 countries including the US.
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The US subsidiary of PRPG established in 1999 managed in getting Pearl River pianos into about one-third of the specialized US retail dealers. Ten years later, the brand became the undisputed leader at the low end of the upright piano makers in North America. Efforts to penetrate the high-end market, however, proved to be frustrating. The Pearl River Brand suffered as a result of the negative trappings associated with Chinese brands.
In a bold move to overcome buyer’s reservations about purchasing high-end Chinese products, PRPG acquired Ritmüller of Germany, one of the first piano makers in Germany and one of the most prominent in the world. The German company, despite its great history, had been struggling and couldn’t survive the disruptive, mass-production technologies unleashed by companies like Yamaha and Pearl Water. The alliance between PRPG and Ritmüller has benefitted both the companies. PRPG now sells pianos crafted with German precision and is now able to enter the high-end market despite the Chinese tag. The German company, which was on the verge of bankruptcy, has been rejuvenated.
CASE DISCUSSION QUESTIONS
- Drawing on the industry-based, resource-based, and institution-based views, explain how Pearl River, from its humble roots, became China’s and the world’s largest piano producer.
- Why did Pearl River’s top management believe that the firm must engage in significant internationalization (beyond the direct export strategy)?
- Why did Pearl River use different entry modes when entering different markets?