GOME Electrical Appliances Holding Limited: The Tuangou Challenge Harvard Case Solution & Analysis

GOME, founded by Wong Kwongyu, has grown from a simple 100-square meter store in Beijing in 1987 to a leader in the field of electrical and home appliances retailer in China, with 259 traditional stores and 4 digital stores by 2006. Its success stems from its low-margin, high-volume strategy, which has been supplemented by its commitment to quality of service and innovation. In 2006, GOME new problem tuangou or group purchase. In order to gain market power to demand discounts from retailers, consumers with similar needs in China are united through the Internet and appeared en masse at retail in the pre-arranged time and date. They would put relentless pressure on retailers and will insist on big discounts. This new consumer behavior has spread like wildfire in China and retailers had a different reaction. Some succumbed to the pressure and offered deep discounts, some only entertain tuangou, which were previously arranged and / or pre-registration, and some refused to give up and to maintain a fixed price policy. It was up to GOME, to determine how best to cope with this new phenomenon. "Hide
by Benjamin Yen, Andrew Lee Source: University of Hong Kong, 13 pages. Publication Date: December 8, 2006. Prod. #: HKU615-PDF-ENG

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