CHINESE FIREWORKS INDUSTRY

BACKGROUND
Liuyang
Liuyang is the city capital of Hunan Province, China. It had been known as
the hometown of firecrackers and fireworks in China the fireworks history emerged
during Tang Dynasty and flourished during the Song Dynasty. Liuyangs fireworks
were the biggest exporter in the world that covers 60% of global production.
Jerry Yu
Jerry Yu who was running a small family-owned chain of gifts stores in New
York. During his holiday in Liuyang, he was invited to invest in a fireworks factory. He
was impressed by the extravagant fireworks shows he had seen during the festival
he wanted to assess how attractive the Chinese Fireworks Industry along with the
specific situations of its industry.

STATEMENT OF THE PROBLEM

Should Jerry Yu invest in the Liuyang Fireworks Industry? If he did invest,
what was the best way to capitalize on the potential that remained unexploited in this
industry?

OBJECTIVES
To give suggestions to Jerry Yu on his decision on investing in the Liuyang
Industry. Improving the attractiveness and competitiveness of the business.

ANALYSIS (SWOT)
Strengths
Low labor costs
Low initial capital requirement
Easy access on raw materials
Weaknesses
Fierce in price and quality competition
Stringent safety regulations
Shrinking profit margin due to imitations
Minimal technology application
Opportunities
Greater demand in international market
Quality improvement (
Chinese imports dominated the entire Canadian market
Internet as a marketing outlet
Threats
Environmental consciousness of the people
Substitutes (make-believe firecrackers, laser beams with sound effects and
use of balloons in weddings)
Safety issues (to humans and properties)

CONCLUSION
It is advisable for Jerry yu to grab the invitation of his relatives to invest in a
fireworks industry whereas there is a relatively potential to generate return on
capital since initial capital requirement and labor costs were low. Luiyang also
claimed an impressive pooled of skilled labor for nearly 50% of all jobs or about
one third of the total population in Liuyang district and luckily was the top
fireworks exporter in the world.

RECOMMENDATION
He should invest because aside from the fact that Liuyang as the top fireworks
exporter in the world, the industry would not die if the right moves were made by the
industry.
Established long-term relationship with suppliers to guarantee the quality of raw
materials in producing finished goods.
Employ skilled workers and trained them in order to eliminate waste and low
quality of the products.