Strategic Selection Based on Industry Environment Analysis：Case Study on
Ningbo FOTILE Kitchen Ware Co., Ltd.
Shuang-shuang Shi
College of Management, Zhejiang University, China, Hangzhou
(ssslovesss@163.com)
Abstract – As we all know, strategy comes into being for
the aim of dealing with fervent competition successfully.
Nowadays, as the competition within and between all trades
is becoming incessantly fierce, it is a prerequisite for
enterprises longing for success to make the right strategic
selection to triumph over others in the competition. In the
kitchenware market, Ningbo FOTILE Kitchen Ware Co.,
Ltd. has become the leading brand in range hood
manufacturers over ten-year efforts. This essay aims to
analyze how enterprise could become the champion of
competition aided by strategic selection, through the analysis
of the status quo of the kitchenware industry, the history of
Ningbo FOTILE Kitchen Ware Co., Ltd., the industry
environment analysis on kitchenware industry and the
strategic selection of FOTILE.
Key Words - Competition, FOTILE, Kitchenware,
Strategy
As is known to all, human beings cannot survive
without four basic necessities of life, namely, food,
clothing, shelter and transportation, among which food is
given the primary priority. With the ever-improving
material living standard, families tend to attach more
attention to the living quality, which makes the
improvement of living quality a hot topic. This attention
catalyzes the rapid development of kitchenware market,
as kitchenware is of great importance to deliver delicious
cuisines.
I. The Status Quo of Kitchenware Industry
Kitchen industry has completed a qualitative change
stage from rapid growth to gradually mature period since
1980s[1]. In recent years, China’s kitchenware market
keeps a momentum of 35% increase, and its annual
turnover reaches almost 10 billion RMB. The number of
domestic kitchenware manufacturers has increased
unprecedentedly to 1000[2]. On one hand, the kitchenware
industry faces an idea opportunity for development, on
the other hand, with the limitation of technology,
production capability and brand influence of kitchenware
industry, the industry sinks into a chaotic state due to the
uneven distributions of quality among the different
products (including range hood, hob, disinfection cabinet,
dishwasher, microwave oven cupboard and so on), which
inhibits the rapid and healthy development of the industry
as a result. In 2006, the overall Chinese household electric
appliances amount to 650 billion RMB, mobile phone
(24.6%), IT (15.1%), color television (13.9%) duly
ranking the top 3. The 4th is occupied by small household
electric appliances with preponderance of kitchen
appliances, which seizes 11.7% of the total, or 76 billion
RMB[3].
Domestic kitchenware industry, especially the rang
hood one, has a history of more than twenty years and has
went through three phases, from modeling, R&D to
maturity, types evolving from under-cabinet hoods,
chimney hoods to Island hoods[2]. Different from largescale household electric appliances market, the
kitchenware market is almost fully occupied by Chinese
brands before 2002. At that time, available foreign brands
are mainly oriented to the high-end market, rare and
costly[2]. While at the year of 2002, as the purchasing
willing of consumers in full set of kitchen appliances
surges, the market margin expanses and its lucrative
potential lures large international manufacturers such as
Electrolux (Switzerland), Simens (Germany) and
Panasonnic (Japan), stepping into the Chinese market.
Meanwhile, domestic manufacturers such as Haier, Kelon
and Midea follow suit, investing heavily on kitchenware
industry. Besides, a number of emerging private smalland-medium-sized enterprises take an active part into this
market, realizing the prosperous profits and the relatively
low requirement for technique and cost of production.
Therefore, the domestic kitchenware market is in chaos,
with more than 400 manufacturers and nearly 300 brands.
However, despite of the chaotic situation, it
generates a group of spearheads in respective areas of
kitchenware appliances, such as Sacon and Fotile in range
hood, Vatti and Guangdong Micro in hobs, Gelanz in
microwave oven. In this essay, the discussion is based on
case study of FOTILE, to address how to obtain
advantageous
status
and
sustainable
business
development under such a fierce competition with nearly
1000 enterprises to share the kitchenware market margin.
II. The History of FOTILE
Mao Li-xiang, the funding father of Ningbo FOTILE
Kitchen Ware Co., Ltd., embarked on his own business
more than twenty years ago. In 1985, when township
enterprises started to implement appointment system for
factories directors in order to select capable candidates
adept at management as chief in charge, a group of
audacious township entrepreneurs full of marketpioneering spirit came to the fore. Mao commenced his
first enterprise for Cixi wireless Electricity Plant IX,
lighting up his career with electric lighter [4] [5].
Mao conceived the idea of turning to another trade
triggered by a crisis in 1994. At that year, Feixiang Group,
the winner for sixth consecutive years in sales volume
worldwide, even confronted by pernicious price war
among electric lighter manufacturers, suffering a
disastrous loss, Thinking of his talented son, he started his
second enterprise together with him, Mao Zhong-qun, as
the old Chinese saying going, “Fighting a tiger with dear
brother and fighting a war with father increase your
chance of triumph”. They cofounded FOTILE Group, the
precursor of the FOTILE Kitchen Ware Co., Ltd. renamed
in 1996, marching on the range hood industry. Although
FOTILE is the last entrant when compared with Vatti and
Sacon, it quickly occupies the second place in the
market[6].
Since its foundation, FOTILE Kitchen Ware Co., Ltd.
has been focused on the R & D and manufacturing into
high-end built kitchen appliances and integrated
kitchenware, devoting itself to providing people who are
craving for superb living standard with kitchen electric
appliances leading in design, humanistic in technology
and excellent in quality. The high-end integrated kitchen
brand “BIRCCI” and professional brand for household
water heater system “MIBOI” are the epitomes of
FOTILE’s products. Through fifteen years’ efforts,
FOTILE has ascended to the No. 1 in domestic high-end
kitchen electric appliances market, maintaining its status
as No. 1 in the high-end market with the lion’s share (in
terms of both the value and volume of its sales). At
present, FOTILE has more than 7,000 staff nationwide in
FOTILE, with excellent army of designers from home and
abroad, those internationally renowned designers
mastering the production facility and state-of-the-art
technology for Germany and Italy imported high-end
kitchen appliances. In 2008, FOTILE relocates itself to
FOTILE Binhai Industrial Park (with an area of 400 mu),
Hangzhou Bay Area, where FOTILE will continue to
spare no effort for its highest mission of “the No. 1 brand
in high-end built-in kitchen electric appliances in
China”[3].
III. Industry Environment Analysis on Kitchenware
Market and FOTILE’s Strategic Selection.
Industry structure and competitive strategy are keys
to profitability. As Michael Porter points out,the first step
in structural analysis is an assessment of the competitive
environment in which the company operates—the basic
competitive forces and the strength of each in shaping
[7]
industry structure . So in this part, we will analysis
FOTILE’s industry environment and strategic selection.
The competitive intensity of an industry is
Threat of New Entrants
Bargaining Power of
Customers
Competitive Rivalry
within an industry
Bargaining Power of
Suppliers
Threat of Substitute Products
Fig.1 Porter’s five forces analysis
determined by five basic forces（As shown in figure 1）,
those forces cooperating with each other to determine the
overall industry profitability with enormous influences on
all the enterprises in the same industry[8-10]. In essence,
the job of the strategist is to understand and cope with
competition [11]. In order to deal with these competitive
forces properly, strategic-decision makers must penetrate
the sources of each force thoroughly. Industry
profitability is generally determined by the most
competitive force or several, each competitive differing in
degree of importance. For instance, a leading enterprise in
an industry is prone to be threatened by a competitive
new entrant with declining revenue as a result, when there
are no other products in higher quality and lower price. In
that case, the first priority lies in how to take appropriate
measures to address the competitive new entrant.
A．Threat of New Entrants
Potential entrants can reduce the existing enterprise’
s profit in two ways: First, Entrants will carve up the
original market and then share some business; Second,
entry minus market concentration so as to arouse
competition between the existing enterprise and reduce
their profit[12].As it is mentioned above, new entrants are
engrossed by the booming kitchenware market need, the
average lucrative profits and the relatively low
requirement for the technique and cost of production,
anticipating a stand and share in the attractive market to
bring competitive resources for their sustainable
development. Undoubtedly, their entrance will generate a
new wave of production energy and accelerate
competitiveness, which has the potential to threaten the
“spearheads” within the industry. Hence, it is of
significance for leading enterprises to avail themselves of
their status to fortify the entrance barriers in the industry.
FOTILE holds more than three hundred top patent
technology with thirty patents for invention, and pays
close attention to the accumulation and preservation of
knowledge and patent over a long term through more than
5% of total revenue into R&D. According to the statistics
provided by National Patent Bureau, FOTILE ranks No.1
in patent application in kitchenware industry, its
application amount at more than 100% year-on-year
increase. For new entrants, the scale economy generated
by the technology, R & D capability and the incessant
financial investment is beyond compare.
Over a long time, brand-oriented FOTILE has been
putting its unique perception of Chinese kitchen and
Chinese kitchen culture into its design and R & D, and
combining marginal science such as human engineering
and aesthetics with technology to create the most suitable
kitchen appliance tailored to China’s current kitchenware
market. Brand awareness, brand loyalty, and pre-purchase
rate all come out first. This high degree of brand
recognition erects a high barrier for new entrants to break
down at a high cost as entrance fee. Even those entrants
with abundant reserves, they are unable to build their
brand loyalty in a day.
Persisting in independent development, FOTILE is
willing to conduct open cooperation, and has been
cooperated with first-class enterprises worldwide such as
SASAFU, Schott Glaswerke, Microsoft and UFIDA
Software. The establishment and management of logistics
and distribution system bring huge benefits to sales.
Through years of improvement and revolution in
management,
FOTILE
obtains
and
maintains
distinguished competitive advantages, and consolidates
further achievement in core competitiveness.
From the analysis above, despite the easy access to
kitchenware industry and the lowered barriers by low
requirements on technology and production cost, FOTILE
builds a higher access barrier different from the average
of the industry through its competitive advantages by rare,
valuable and inimitable strategic resources such as scale
economy, brand and reputation, and sales channel.
B．Demanding Consumers and Suppliers
For members inside an industry, suppliers can
improve bargaining power through raising price or
lowering purchase volume and service quality, while
consumers can beat down the price, demanding higher
product and service quality [8]. Generally speaking,
enterprises can improve their strategic situation from
suppliers or customers who post the minimal impact on
them. Most commonly, enterprise has a say for the target
of products, that is, for choosing customers.
For FOTILE, covering a wide rang of customers
with different background, age, cultures, habits and
occupations such as gourmet, businessman, scholar,
doctor, lawyer, and artist to name a few, all its customers
have one thing in common that they have a demanding for
superlative life and are perfectionists who love live
fervently and think independently. Like its customers,
FOTILE advocates Thatcher-way of success: at work,
they are supreme leaders; off work, they are people who
appreciate the art of cuisine. All these people manage
their family life exactly the way they manage their career,
as they firmly believe that the true successor must be a
master at the balance between work and life.
So far, FOTILE focuses itself on high-end kitchen
electric appliances, adheres to the idea of first-rate, superb
quality and uniqueness in product development with more
than 5% of total revenue into prospective R & D, and
keeps upgrading products to satisfy the ever-changing
customer needs. When confronting demanding customers
and lower price by fierce competition, FOTILE’s CEO,
Mao Zhongqun, always comments, “The market has its
inherent product positioning and price positioning since
the very beginning, dividing customers into several
corresponding groups. We position FOTILE at the highend; therefore lowering the price equals lowering product
positioning.” While encountering international household
magnate Simens’ entrance, headed by Sacon, ROMAM
and Vatti, most domestic brands choose to lower their
price as the countermeasure to drag their customers back.
In the short term, this measure could maintain or increase
market share a little, while in the long term, it will
encroach enterprise’s own profit margin, meanwhile
crippling product class and comprehensive competition
strength. Through efforts from technology, quality and
service improvement, FOTILE preserves and even
increases sales price to some degree, and succeeds in
maintaining its market share[13].
It is what FOTILE has chosen as strategic selection
makes what it is now. Today，although being much more
expensive than foreign brands in price, FOTILE still
exceeds them in sales; this best testifies FOTILE’s
strategic selection.
C. Substitute Products
Substitute Products or Services (addresses as
“Product” below) refers to alternatives through
improvement in quality and price to replace their
predecessors. They will influence current products and
services more or less. Substitute Products usually plunge
into the market with a wave of lower price or improved
function, when there is aggravated competition impelled
by development. FOTILES is quite an expert in this
aspect. By conducting elaborate market research and
cooperating with Zhejiang University Industrial Design
Department, FOTILE succeeds in designing and
developing the kitchenware appliance in accordance with
Chinese market reality. The first FOTILE artificial
intelligent range hood, the first FOTILE automatic gas
water heater and the first FOTILE disinfection cabinet
combining high ozone technology with high ultraviolet
technology are all specified to the features of Chinese
kitchen[3].
Therefore, one of the survival strategies in
kitchenware industry is product innovation. Making a
breakthrough from the current and obsolete products, an
enterprise should penetrate new market based on
consumer needs, and then rely on product innovation with
technology innovation as the core so as to achieve the
tremendous transition from manufacturing to creation.
Only by the accomplishment of such a transition can an
enterprise be able to satisfy the various customer needs
through new products and reduce the threat brought by
substitutes to the minimum.
D．Competitive Rivalry within an industry
As above-mentioned, kitchenware market is in such
chaos with more than 400 manufactures and nearly 300
brands. The intensity of competitiveness is obvious to all.
As we know, the competition to seize advantageous
position among current rivalries will compel enterprises
take strategies like price competition, new product, and
advertising war.
Compared with domestic household names such as
Vatti and Sacon, FOTILE is the latest entrant in
kitchenware market. With Ms. FOTILE’s frequent
appearance on the screen, FOTILE’s rang hoods enter into
thousands upon thousands families. Relying on product
innovation, technology innovation, marketing innovation,
management innovation, brand innovation and culture
innovation, FOTILE stands out among competitors; on
humanized professional kitchen technology, fashionable
design, excellent quality and improved service system, it
becomes the spokesman of Chinese kitchen culture,
advocator of new life style and kitchen expert among
consumers.
IV. Conclusion
This paper takes Ningbo FOTILE Kitchen Ware
Co.,Ltd. as an example, introduce the kitchen industry’s
industry environment analysis and FOTILE’s strategic
choice for the enterprise, in order to analyze how to be
big winners in the industry by the strategic choice . In fact,
not kitchenware industry alone but all trades have to deal
with above-mentioned competitive forces, as they are
components of Industrial Organizational economics. The
strategic decision makers should design the action plan
after taking all these influential competitive forces into
serious evaluation, including: positioning the enterprise
properly to optimize all the available resources and talents,
anticipating the changes in the elements inside all the
competitive forces, and making the appropriate strategic
action plan, and so on.
All in all, if an enterprise wants to establish a foothold
in an industry out of cutthroat competition, it has to make
it through various ways, neither being easily shattered by
the current or new rivalries’ frontal attack, nor being
crippled by demanding suppliers, buyers or substitutes[8].
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