White price war can not fight

Recently, there have been more discussions about whether the white electricity industry will experience a new round of price wars. An analyst in the industry told the author that he frequently received calls from some manufacturers' sales personnel to discuss the price of white electricity this year and feared that the price war was about to start.

The above concerns are not groundless. In the second half of 2011, the rapid growth of white electrical industry came to an abrupt halt. In particular, in October, domestic sales of ice-washing saw a large decline, export performance also weakened, excess production capacity began to appear, and inventory levels remained high. , to become the fuse to ignite the price war.

Compared with the relatively stable development of refrigerators and washing machines, the air-conditioning industry seems to be even more likely to be the source of a large-scale price war. It is also the white electric category with the largest decline in 2011. At the end of 2011, air-conditioning industry inventory was twice as much as in 2009. The high inventory has increased the precipitation of funds, increased the financial pressure on companies and distributors, and brought security risks to business operations.

In the history of air-conditioning industry development, there have been at least two price wars caused by overcapacity. The first time was around 2000, when the industry had just entered a period of rapid development, attracting a lot of investors to enter, causing the branding, overcapacity, and eventually led to the prevalence of price wars; the second time around in 2005, the mainstream brands Gain a competitive advantage in scale and start a new round of production layout. This round of capacity expansion directly contributed to the deterioration of the industry's competitive environment, resulting in a number of brands forced out.

However, history also tells us that today's domestic air-conditioning industry does not have the foundation for a large-scale price war in the short term. In the current air-conditioning market, the duopoly structure is very stable. As of December 2011, Gree and Midea have occupied approximately 60% of the market share. And they will not easily adopt price competition strategies, and the price adjustment of the industry is often conducted through its leading price or collusion pricing. Both of the above companies are listed companies, which further reduces the probability of their initiative to set off a large-scale price war. The drop in price will inevitably affect the profitability of the company's main business. According to statistics, as the price of a product falls by 1 percentage point, the profit rate of the main business will decrease by 0.3%. This is not what the listed company would like to see. At the same time, the price war will also be initiated by some small brands, but in the air-conditioning industry where the advantages of both are obvious, the war cannot be expanded.

In fact, the white electricity industry has gone through several rounds of price cuts over the years. The pulling effect of price on consumption has gradually weakened, and the price that approaches the bottom line of profit has also made the development of white electricity companies bearish. The price war has a certain contribution to improving the visibility and awareness of the sponsors, but it has a very limited role in improving product reputation, preference, satisfaction and loyalty, and sometimes even has side effects. Just as TCL Chairman Li Dongsheng stated, the advantage of China’s home appliances in the future is not a price advantage, but must be a product advantage. Japanese and South Korean home appliance counterparts have also experienced price competition, but they have found that users are initially dissatisfied with the joy of low prices, and they are beginning to pursue better products. In order to avoid the turbulent price war, White Power must strengthen the use of non-price means, and win the "heart" of consumers with high-tech and personalized products to expand its market share.

However, it needs to be pointed out that the risk of a white-charged price war that is lower than the marginal cost will not be zero in the future. If the demand for air-conditioning inside and outside the market continues to slump, inventory remains high for a long time, the state support for the New Deal has not been introduced lately, do not rule out a large enterprise that has waited and watched before in order to obtain a favorable market position preemptive, and the war may spread to other categories of home appliances.

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