Ruihua Jiang wrote this case under the supervision of Professor Paul W. Beamish solely to provide material for class discussion.
The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
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Firecrackers and fireworks had become the pillar industry of Liuyang, accounting for nearly 50 per cent of all jobs or about one-third of the total population in the Liuyang District (including Liuyang City and the surrounding counties). In 2008, Liuyang claimed 2,702 fireworks manufacturers with an additional 2,144 in the surrounding area. In total, there were 6,458 fireworks producers in China. While there has been some trend towards consolidation in the industry, most factories were still owned either by villages or families. Among them, about a dozen or so were medium to large factories with employment between 100 to 500 workers. The rest were small workshops employing anywhere from 10 to 50 people, depending on market demand.
Liuyang was the top fireworks exporter in the world, making up 60 per cent of global production. The trademarked brand “Red Lantern” had become well known to fireworks-lovers around the world. China now accounted for 89 per cent of worldwide fireworks exports with the vast majority of that coming from
Liuyang. In addition, over the past ten years, China had become the largest market for fireworks. The ratio of domestic use to exports was 6:4, and Chinese imports of fireworks were negligible.
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The increase in demand in the Chinese market had only intensified the competition. All new