Mobile version map: The clash of the thumb empire

Author: Lu Yue
Publisher:
Publish Date: 2006-10-01
Features: The Super Bet of the Supply Chain, China's Showdown in Globalization, Technological Showdown for Licensing, Local Channel Positioning. A seasoned journalist conducted an in-depth investigation over eighteen months, with the support of industry experts and consulting firms, revealing the hidden rules of marketing and providing practical insights worth reading for managers in other fields. Preface by Li Kaifu, President of Google China; Chen Tong, Editor-in-Chief of Sina News; Qin Shuo, Editor-in-Chief of the Caijing Daily; endorsed by senior executives from Nokia, Sony Ericsson, Motorola, Lenovo, and Broadcom. Some cases were discussed in the Tsinghua University EMBA classroom.
1.3.2 Rural Encirclement Strategy
Around 1999, some domestic mobile phone manufacturers obtained production licenses. However, due to the late start of the market and weak technological foundations, most companies felt helpless in the face of the strong foreign competition. How to break through the "fortress" built by foreign companies? Many domestic mobile phone manufacturers were confused about this. But even the strongest opponents have weaknesses, and it is impossible for them to be familiar with every field. Starting around 2000, domestic mobile phone brands began to explore self-built channels. They discovered that foreign companies only reached large cities and knew nothing about the consumer characteristics and needs in small and medium-sized cities. The first domestic manufacturer to recognize and capitalize on this "weakness" was Broadcom in Ningbo, Zhejiang. Subsequently, TCL's sales reforms, Konka's massive "Thousand Counties, Thousand Stores" project, and the mobile phone shop model of Southern High-Tech all followed suit.
After 2000, Broadcom Mobile adopted a new distribution mechanism, quickly establishing 28 provincial sales companies, over 300 local offices, 4,000 marketing and after-sales service personnel, more than 15,000 distributors, and tens of thousands of retail outlets, extending to county and even township levels. It was hailed as the "Chinese Sales Network" and pioneered the self-built channel strategy for domestic mobile phone manufacturers.
The advantages of self-built channels are: manufacturers can extend the channel to the end according to their needs, reaching city, county, or rural markets directly; they can achieve direct supply to terminals, firmly controlling prices and avoiding the drawbacks of agent-based systems such as channel conflict and price wars; the channel is completely under the manufacturer's control, free from the constraints of distributors. However, the problem also arises. This flat structure minimizes intermediaries, easily breaking the model, but also involves the interests of some distributors and touches their sensitive nerves. As a result, some agents do not just represent one company's products but often sell them based on product models rather than brands, leading to a complex and crisscrossing sales channel. Their enthusiasm for a specific brand is not high. Meanwhile, the quality, loyalty, and stability of channel partners are crucial for winning the market.
To attract distributors to join their ranks, domestic mobile phone companies had to find alternative ways, offering profit-sharing incentives and using nearly double the profit margins of foreign brands to attract distributors. They also invested heavily to cultivate a high-quality sales team. As domestic mobile phone profits rose, Chinese manufacturers gained far greater control over secondary and tertiary markets than foreign companies. During their peak, their overall momentum even surpassed foreign manufacturers. At this time, telecom operators began to customize mobile phones directly from manufacturers, and retailers like Suning and Gome created models where manufacturers supplied products directly. These developments severely compressed the market space, causing foreign companies' market share in China to plummet.
At this point, foreign companies had no choice but to undergo a radical self-revolution in their channels to "turn things around."
1.3.3 Foreign Counterattack
In 2004, Motorola announced at its national agent annual meeting in Hainan that its China mobile phone business would be split into four parts—east, west, south