Research On Effects Of Market Entry On Market Performance And Market Structure In Domestic Household Appliances Industry

The development of domestic household appliances industry is full of competition, from competition at market entry at the very beginning to competition at prices, service and brand, benefit from so much competition, China has become the worldwide household appliances production centre, while at the beginning of the history of the industry, there was huge lack of supply. During the past about 20 years, household appliances industry of China has been growing rapidly, and the product and technology have been upgrading quickly. Meanwhile, the production has been concentrated to some leading companies gradually, and the comprehensive competing advantage has been strengthened. Although there are still a lot of problems in the development of the industry, it is widely accepted that household appliances industry has already become one of the most competitive industry of China. Based on the theory about the effect of market entry on market performance, the paper analyzes the barriers to market entry and the effect of market entry on market structure of the industry at various stages, and the effect of market entry on profit of the industry, price level, innovation and market share of companies. The analysis of market performance of the industry shows that although there was "excessive market entry" which means that there were too much companies at the beginning of the industry, which had negative effect on the development of the industry, generally speaking, the entry of new companies especially those market-oriented ones increases the output, promotes the competition, and stimulates innovation. The competing advantage of companies has been strengthening, market structure of the industry has been improving, the degree of concentration has been enhanced, and the barriers to market entry and exit has been adjusting, the prime mover for micro and macro economic performance has been fortified. The market performance as above are formed in market competition, the experience, lessons, and revelations provide very good references for the development of other industries of China. The arguments of the paper are as follows: 1. Some scholars called the "excess market entry" as "irrational investment", however, this paper argues that it is caused by the joint effect of economic system and market. With the mass market and rich profits, the entry of a lot of companies should be considered as rational behavior. Although this did have negative effect on the development of the industry, the production capacity was enhanced rapidly, competition was fortified, market performance was improved, economic growth was promoted, and the social welfare was increased. 2. The competition at price of household appliances industry was blamed by some scholars and medias, the paper argues that the competition at price is a result caused by the switch of relation between demand and supply after the quick expansion of production capacity, although the competition caused the profit of the industry to decline, demand was enlarged, real output was enhanced, and the consumption level of the residents was improved. More importantly, the fierce competition improves the competing advantage of household appliances industry largely, enlarges the gross output of the economy, and contributes to the employment and the economic growth of the whole economy. While other industries such as automobiles and civil aviation are facing huge competing pressure in the transitional period after China's entry into WTO because of forbidding competing at price and protecting monopolistic profit. So the competing advantage gained by full market entry and full competition of household appliances industry should be used for reference.