ECN501 Grantham In China the Pen Is Mightier when It’s Pricier Article Analysis Read the article entitled “In China, the Pen Is Mightier When It’s Pricier”

ECN501 Grantham In China the Pen Is Mightier when It’s Pricier Article Analysis Read the article entitled “In China, the Pen Is Mightier When It’s Pricier” by Cameron McWhirter and Laurie Burkitt. Next, analyze the role of consumer demand in influencing Parker Pen’s Strategies. Critically examine whether Parker will be able to maintain its market power in China. 3/10/2019
Expensive Pens Become Luxury Item in China – WSJ
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BUSINESS
In China, the Pen Is Mightier When It’s
Pricier
Parker Writing Instruments Find a New Prestige Market for a Category That’s Been Fading in the West
By Cameron McWhirter And Laurie Burkitt
November 2, 2011
BEIJING—Fancy pens are writing a new chapter for themselves in China.
Smartphones and tablets have made expensive pens passé to business executives in many parts
of the world. But Chinese professionals are increasingly snapping them up—including some
that cost thousands of dollars—as a display of their new wealth.
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A shopper in China looks at upscale pens, which are selling briskly there. LAURIE BURKITT THE WALL STREET JOURNAL
Co.,
one
of the world’s largest producers of writing instruments, has darkened its pens’ ink to appeal to
writers of Chinese characters and added to the pen’s head a special Chinese character that says
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Expensive Pens Become Luxury Item in China – WSJ
“Fu,” meaning prosperity and good luck. Parker has launched several special edition pens,
including a “Golden Dragon” pen costing 39,888 yuan, or about $7,500.
Such moves have helped make China the top-selling market for Parker, says Penny McIntyre,
head of the o?ce products division of Atlanta-based Newell Rubbermaid Co. NWL -0.39% ,
?
which owns Parker. Sales of Parker have surged 30% to 50% within the past three years in many
of the nearly 500 department stores in China, where Parker sells its Chinese-inspired collection
at special kiosks, she says.
Parker’s Golden Dragon PARKER PENS
The o?ce products division, which includes Parker, is Newell Rubbermaid’s most pro?table,
and in 2010 accounted for about 40% of operating pro?t and 30% of sales at Newell
Rubbermaid, which had 2010 revenue of $5.76 billion. The company does not release speci?c
sales ?gures for its individual units, but a company spokesman said ?ne pen sales in China now
contribute “substantially” to sales growth for the company. A restructuring and 500 layo?s
announced by Newell Rubbermaid on Friday won’t a?ect the Parker division, in which the
company plans further investments, the spokesman said.
Parker is one of many companies attempting to gain a second wind in China, where pre-existing
images can be recast for a brand new set of consumers. Best Western International Inc.
launched in China in 2009 as a three-star hotel instead of maintaining its budget image in the
U.S. General Motors Corp. GM -0.13% positioned Buick in China as an upper-class brand and it
?
has largely become a status symbol in China, a sharp contrast to its image in the U.S. Similarly,
French fashion brands Pierre Cardin and Cerruti also came to China in hopes of reviving their
luster.
Yu Liang, a 37-year-old personal trade consultant, visited a Parker kiosk in the northern port
city of Tianjin recently and spent 3,688 yuan ($573) on his sixth Parker pen. Mr. Yu started
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Expensive Pens Become Luxury Item in China – WSJ
buying Parker pens a few years ago. “Some people collect handbags, some people collect
jewelry, and I collect pens,” Mr. Yu said.
The number of a?uent citizens earning a household income of more than one million yuan
(about $156,000) jumped about 20% last year, and they accounted for 45% of China’s luxury
buyers, according to consulting ?rm McKinsey & Co.
Pens are selling well because they’re an a?ordable accessory and useful in China’s gift-giving
business culture, says Shaun Rein, managing director of China Market Research Group and
author of “End of Cheap China.” Pen sales in China, including non-luxury brands, jumped to 7.8
billion yuan, or $1.2 billion, in 2009, up nearly 17% from a year earlier, according to the most
recent data available from market research company Euromonitor International.
Parker isn’t the only maker of pricey pens building a business in China. Montblanc, owned by
Cie. Financière Richemont SA, has opened up standalone stores to sell pens and other products,
and says sales are growing quickly.
Parker, and a small brand, Waterman, also owned by Newell Rubbermaid, command about a
25% share of the global market for ?ne writing implements, according to company estimates
provided to analysts in 2010. Montblanc has about a 28% global market share, according to the
same report. Montblanc wouldn’t comment on its market share.
Parker’s success in China is essential for the brand’s survival. Founded in Janesville, Wisc., in
1888, Parker was the most popular ?ne-writing pen in the U.S. for generations. U.S. Gen.
Douglas MacArthur used a Parker pen when he signed Japan’s surrender ending World War II.
Newell Rubbermaid bought Parker as part of a package of companies in 2000. The company
gradually lost prestige—and pro?ts. Sales slumped in North America and Europe, though those
markets still make up about half of the company’s sales.
So Parker turned to China. Jean-Charles Hita, Newell Rubbermaid’s Geneva-based president of
?ne writing, came to Parker about four years ago from Bulgari, and found lots of work to do to
rebuild the pen’s reputation as a luxury item.
The chance to restore sales, Mr. Hita and others saw, was in China, where an expensive pen
remains a status symbol that climbing middle-class consumers can aspire to own.
Parker dispatched its design team to the country in 2009. The company also priced the pens to
make them aspirational—unlike in North America, where it had cut prices as sales lagged.
“They went for volume,” Ms. McIntyre said of previous Parker management teams in the U.S.
“That’s ?ne, I guess, but you denigrate your brand in the luxury space. We saw what happens if
you don’t pay attention to a market. It’s called North America.”
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Zhao Lin, a 40-year-old trade director at a state-owned enterprise in the northern port city
Tianjin recently went to the local department store to buy a 1,518 yuan ($236) Parker Sonnet
Ladies’ Fountain Pen and a 528 yuan ($82) Sonnet Rose Gold as birthday gifts for a co-worker in
the human-resources department.
“She’s always having people sign papers and she can’t just pull out any pen for them to use,”
Ms. Zhao said.
Write to Cameron McWhirter at cameron.mcwhirter@wsj.com and Laurie Burkitt at
laurie.burkitt@wsj.com
Copyright © 2019 Dow Jones & Company, Inc. All Rights Reserved
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