Read the WSJ article (also in our textbook page 229) entitled \"In China, the Pe

Question

Read the WSJ article (also in our textbook page 229) entitled "In China, the Pen Is Mightier When It's Pricie" and answer the following questions: In China-the Pen Is Mightier When It's Pricier.pdfPreview the document a. Discuss the role of consumer demand in influencing Parker Pen's Strategies. b. Do you think Parker will be able to maintain its market power in China? Explain

BEIJING—Fancy pens are writing a new chapter for themselves in China. Smartphones and tablets have made expensive pens passé to business executives in many parts of the world. But Chinese professionals are increasingly snapping them up—including some that cost thousands of dollars—as a display of their new wealth. A design team in China for Parker Pen Co., one of the world's largest producers of writing instruments, has darkened its pens' ink to appeal to writers of Chinese characters and added to the pen's head a special Chinese character that says "Fu," meaning prosperity and good luck. Parker has launched several special edition pens, including a "Golden Dragon" pen costing 39,888 yuan, or about $7,500. Such moves have helped make China the top-selling market for Park status symbol in China, a sharp contrast to its image in the U.S. Similarly, French fashion brands Pierre Cardin and Cerruti also came to China in hopes of reviving their luster. Yu Liang, a 37-year-old personal trade consultant, visited a Parker kiosk in the northern port city of Tianjin recently and spent 3,688 yuan ($573) on his sixth Parker pen. Mr. Yu started buying Parker pens a few years ago. "Some people collect handbags, some people collect jewelry, and I collect pens," Mr. Yu said. The number of affluent citizens earning a household income of more than one million yuan (about $156,000) jumped about 20% last year, and they accounted for 45% of China's luxury buyers, according to consulting firm McKinsey & Co. Pens are selling well because they're an affordable accessory and useful in China's gift-giving business culture, says Shaun Rein, managing director of China Market Research Group and author of "End of Cheap China." Pen sales in China, including non-luxury brands, jumped to 7.8 billion yuan, or $1.2 billion, in 2009, up nearly 17% from a year earlier, according to the most recent data available from market research company Euromonitor International. Parker isn't the only maker of pricey pens building a business in China. Montblanc, owned by Cie. Financière Richemont SA, has opened up standalone stores to sell pens and other products, and says sales are growing quickly. Parker, and a small brand, Waterman, also owned by Newell Rubbermaid, command about a 25% share of the global market for fine writing implements, according to company estimates provided to analysts in 2010. Montblanc has about a 28% global market share, according to the same report. Montblanc wouldn't comment on its market share. Parker's success in China is essential for the brand's survival. Founded in Janesville, Wisc., in 1888, Parker was the most popular fine-writing pen in the U.S. for generations. U.S. Gen. Douglas MacArthur used a Parker pen when he signed Japan's surrender ending World War II. Newell Rubbermaid bought Parker as part of a package of companies in 2000. The company gradually lost prestige—and profits. Sales slumped in North America and Europe, though those markets still make up about half of the company's sales. So Parker turned to China. Jean-Charles Hita, Newell Rubbermaid's Geneva-based president of fine writing, came to Parker about four years ago from Bulgari, and found lots of work to do to rebuild the pen's reputation as a luxury item. The chance to restore sales, Mr. Hita and others saw, was in China, where an expensive pen remains a status symbol that climbing middle-class consumers can aspire to own. Parker dispatched its design team to the country in 2009. The company also priced the pens to make them aspirational—unlike in North America, where it had cut prices as sales lagged. "They went for volume," Ms. McIntyre said of previous Parker management teams in the U.S. "That's fine, I guess, but you denigrate your brand in the luxury space. We saw what happens if you don't pay attention to a market. It's called North America." Zhao Lin, a 40-year-old trade director at a state-owned enterprise in the northern port city Tianjin recently went to the local department store to buy a 1,518 yuan ($236) Parker Sonnet Ladies' Fountain Pen and a 528 yuan ($82) Sonnet Rose Gold as birthday gifts for a co-worker in the human-resources department. "She's always having people sign papers and she can't just pull out any pen for them to use," Ms. Zhao said.

Explanation / Answer

(a)The role of consumer demand in influencing Parker Pen's Strategies is great in the sense that the Chinese people consider keeping luxury pen as sign of wealthy thereby influencing parker pen strategies. Consumers in China are using high priced pens for gifting as it is treated as a luxury item as well and the wealthier people are growing which is increasing the buying power of consumers thereby influencing the parker pen strategy in china to keep the pen price high and using such strategies like symbolic figures like peace and prosperity on pen to give them sense of pride for keeping its product.

(b)Yes, I think the Parker will be able to maintain its market power in China as the number of wealthier people are increasing and Parkers strategy is fitting into the situation to provide them branded high priced class pen which customers use as show of wealth and gifting purpose.

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