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1.3.2 Products and Services for “Good-Enough” Product Markets

China is an economic giant that has overtaken Japan to become the world's second largest economy. However, China's population is ten times that of Japan, and the per capita GDP is approximately USD 5,000 or one-tenth that of Japan. On average, the standard of living in China is still low, requiring products appropriate for these circumstances. China has large income disparities, and many households are said to have income greater than the average Japanese household. However, this so-called wealthy class comprises a small part of China's overall population of 1.3 billion. On the other hand, it is not realistic for Japanese companies to compete with local companies for providing products to lower-than-average income classes, given the overwhelming cost competitiveness of local companies. Accordingly, it is more effective for Japanese companies to provide products and services to middle and upper-income classes that have strong purchasing power, despite their relatively low income levels compared with the wealthy class. These middleand upper-income classes are called a “volume zone” and are witnessing rapid expansion in developing countries such as China and India. For example, in China, high-ticket consumer electronics such as televisions and refrigerators are premium products for the average Chinese; these products were traditionally purchased only by the wealthy. However, China's recent economic growth resulted in growth among the middle class, thereby making these products a common item in most urban homes. These products are sold by local companies such as Haier and Hisense; however, Japanese consumer electronics manufacturers hold high repute for their brands in China. Therefore, if products can be offered at prices that are affordable to the middle class, they are likely to become popular sellers. In addition, products with a certain level of quality and high cost performance attract the wealthy. The market for “goodenough” products by foreign companies in China's consumer electronics market is growing rapidly (Gadiesh et al. 2007).

An important rule in a “good-enough” product market is product development that has just the level of quality demanded by customers. High-quality products will be priced commensurately high, which may be problematic for products that target the volume zone. On the other hand, it is necessary to differentiate premium-priced products from products marketed by local companies. In the “Innovator's Dilemma,” Christensen states that when the speed of a product's technological progress exceeds the level of technology demanded by customers, low-priced products with lower functionality and quality (i.e., destructive innovation) enter the market, creating market completion for products that are based on their high level of technology (Christensen 2001). When developing products for developing countries, there is a high likelihood that customer demand for product functionality and quality will be lower than that in Japan. Therefore, it is important for companies to determine the product level that target customers will accept, and develop products at that “goodenough” level.

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