【正文】 t national brand all support the costs of an extensive distribution system. The product line, in particular, supports the distribution investment by permitting a cost effective, focused offering to each major region and city. By contrast, Sony has so far created only a niche for itself in China. The Sony brand is an aspirational brand with excellent connotations of quality and prestige. But this serves only a small portion of the market, and the product line offered in China is relatively small. Hence, the Sony distribution system consists of only two general agencies who focus their efforts on the premier urban markets. Sony will benefit in the long run as it extends its highend image down to the middle of the market, and the distribution system will be built out gradually. 　　Pricing: 　　For years Chinese brands have been waging a price war. Profitability has been driven down in industries like appliances, television, and puting equipment. Leading Chinese brands threatened by foreign petitors have used price cuts to maintain their dominance,　while overproductive industries like appliances have suffered through a “natural selection” process prior to the expected consolidation around 23 domestic brands. Building market share through pricing actions is definitively a major part of the petitive game.　 The strategic question in the midst of a price war is: “how do we position ourselves to own both shareofmarket and shareofheart as the war es to a close?” The big question following in the wake of any price war is: “how can we convince our customers to begin paying for brand value again?” 　　After twenty years of rapid development, China has reached a productive capacity in many sectors that exceeds internal market demand. There are twenty million TV sets that remain unsold. Eight million airconditioners, ten million refrigerators, and eleven million washing machines join this surplus. The result is savage price wars that deflate the value of consumer and business products. One response to this situation is consolidation of panies in the different industries. But this will not relieve the excess inventory in either the short or medium terms. One popular strategy has been to dump this excess volume through importers into foreign markets, leading to antidumping litigation and little gain in longterm market penetration potential.　 　　Haier, a leading Chinese brandname manufacturer, already has a 25% market share in the . small refrigerators market. Haier Wine Coolers are sold in Best Buy outlets, which is a value retailer of discounted 1st tier brands. Haier has recently made moves to diversify its product lines into electronics and other areas. This is one way to capitalize on its success as a manufacturer and brand builder. But there is another strategy available that leading brands around the world are increasingly turning to. Instead of burdening returns on their brand investments with the costs of maintaining diversified product lines they have instead opted to focus their energies on brand management, with third party manufacturers carrying the production load. The premier example of this trend is, of course, Nike.　 　　Can Chinese TV and electronics manufacturers partner with a pany like Haier to market a diversified product line in the . under the Haier brand name? Should Haier invest in creating burdensome manufacturing assets for unfamiliar technologies, or should it focus on product line growth through leveraging its brand assets and marketing expertise?　 　　A second strategy for quality manufacturers carrying surplus is to storebrand their products for pricebased mass retailers. This would require a joint venture marketing partnership rather than the typical JV manufacturing organizations. These arrangements will fetch a better price than simple “dumping,” which is only　a bonanza for buyers. The motto should be “Don’t dump…Market instead!” Ames in the . has 298 stores with $79 million in appliances sales. Its shoppers trust　the store brand and its promise of quality at a low price. They do not shop at Ames for 1st tier brands. Chinese appliance manufacturers need a private label strategy for this segment of the mass retailer market. 　　Product: 　　There are three strategic product issues facing Chinese manufacturers. The first is quality. The second is product specialization. The third is product innovation. Quality improvement can make China more petitive in the market for standard products, like refrigerators, cell phones and TVs. Product specialization can get China into the high performance segment of product categories. This means higher prices and better margins. The third stage is product innovation, which enables China to not only get the highest prices and margins from early adopters of advanced technology, but also positions panies for market dominance.　 　　Chinese executives have been wrestling to overturn the general impression that “Made in China,” means low quality and low price. In order to succeed in the Chinese market against foreign petitors, as well as to win market share for value added brands in global markets, managers must match foreign quality. When Zhang Ruimin, Chief Executive of Haier assumed direction of Haier he moved with a passion for quality. When a customer plained about a broken refrigerator, he stalked through the factory and identified 76 defective appliances. He piled them up and handed sledgehammers to the workers who assembled them. At his signal, they all set upon the fridges, reducing them to junk. That singular act of destruction impressed on employees that poor quality would no longer be acceptable (NYTimes, July 23, 2000). This heavyhanded approach paid off. Haier now has 62 distributors and 30,000 sales outlets in developedcountry markets.　 　　In the era of WTO accession, Mr. Zhang believes that Chinese panies will not be able to dominate the Chinese market unless they succeed in cap