1. Introduction---Objective and structure of this report
The Chinese fireworks industry has experienced significant change since China adopted "open door policy", moreover, it has huge market share in the world's fireworks market. But on the other hand, the Chinese fireworks industry also has fatal weaknesses. Therefore, whether to invest in this industry is still a considerable challenge to most investors. The objective of this report is to give some suggestions to Jerry Yu on his decision of the investment on Liuyang fireworks industry. Furthermore, some proposals on how to improve the attractiveness and the competitiveness of Chinese fireworks industry at a long-run level are worked out; from personal level, there are some strategic options to Jerry Yu in terms of handling an individual fireworks firm. To achieve this objective, an industry analysis and a market audit are carried out and a gross conclusion is drawn based on the analyses and suggestions.
2. Industrial analysis
The aim of this industrial analysis is to outline the situation of the Chinese fireworks industry in conjunction with analyzing the rivalry within this industry through Porter's five forces model (please refer to Appendix).
2.1 The Chinese fireworks industry overview
The general belief was that China-made fireworks actually made up about 80% to 90% of the world's fireworks market. But although Chinese fireworks account for most of the world's market, it can be said as a relatively messy industry in terms of its quality, packaging and timing control and distribution channels. As the most popular form in Chinese fireworks industry is family-run workshop, which is usually poorly funded and lacking of R&D and managerial input, the whole industry is basically labor-intensive and the technological innovations are also restricted. The competition is intensified by the emergence of small companies. These private workshops are flexible and quick in...