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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 19

China Business Intelligence No. 19

Samsung Economic Research Institute Beijing Office

Feb. 12, 2007

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Highlights

I. Electronic Retail "High-End" Strategy Lacks Maturity

  • Pengrun Electronics and Best Buy both have implemented high-end strategies in China's burgeoning electronics markets with potentially diverging results. Pengrun, Guomei's "high-end" electronic arm, has fought to establish its own identity outside of its parent company's shadow. However, Pengrun's differing management style and products have not delivered expected returns. In contrast, Best Buy, which opened its first high-end store in Shanghai in 2006, has leveraged several advantages, including brand name recognition as well as differences in management and customer service.
  • Retailers need to gravitate toward the high-end market, which is quite small but growing steadily. However, considerable time and preparation will be needed. Moreover, Substantial disposal income will need to be channeled toward sprucing up store appearances and bolstering customer service.

II. State-Run Oil & Gas Firms Facing Criticism over Monopoly Profits

  • China's state-owned oil and gas companies are facing mounting accusations of abusing their market dominance. The three main state energy producers, China National Petroleum Corporation (CNPC), China Petrochemical Corporation (SINOPEC) and China National Offshore Oil Corp (CNOOC), have all achieved record profits.
  • Overall, SOE energy providers face competing mandates from the government and from stockholders. In spite of WTO commitments, the Chinese government will continue to strengthen its hold over the companies in order to promote energy security. At the same time, stockholder pressure will increase for profits, particularly in the lucrative Chinese domestic market. This conflict will not be resolved in the short-term.
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