Question

In: Accounting

Young, urban professionals (Yuppies) in Asian markets appear to have found the right combination for “having...

Young, urban professionals (Yuppies) in Asian markets appear to have found the right combination for “having it all.” Due to high housing costs, most young people continue to live with their parents after starting work and even after getting married. Income from their highpaying professional jobs is therefore available to spend on a wide range of expensive, upscale consumer items such as cars, clothes, consumer electronics and club memberships. Prestigious European brand-name apparel is the most sought after, such as Ungaro, Hugo Boss, Ermenegildo Zegna and Gianni Versace.

In the Sunrise Department Store of Taipei (Taiwan), Timberland deck shoes sell for $172; Ralph Lauren shorts for $90; Allen Edmonds shoes for $306 and Giorgio Armani sports jacket for $1,280. Dickson Concepts of Hong Kong concentrates on luxury brand-name products such as Bulgari and Hermes watches, Guy Laroche and Charles Jordan clothing and accessories and a variety of Ralph Lauren/Polo products. Sales have grown 50 percent each year for the last five years. Tang’s of Singapore takes upscale shopping one step further by targeting a subgroup of Yuppies which it calls NOPEs – not outwardly prosperous or educated consumers – whose goal is to create an understated, discreet image of wealth and success.

Not all Asian Yuppies are able to spend extravagantly even though they want to project an upscale image. Seagrams launched a whiskey in Seoul (South Korea) called “Secret.” It sold for $9 a bottle and achieved a 5 percent share of the total whiskey market, against the big-name brands of Chivas Regal and Johnnie Walker Black Label, which usually sell for about $100 a bottle. Also in South Korea, Hyundai introduced the flamboyant, brightly-colored Scoupe sports car for $10,000, aimed at those Yuppies who cannot yet afford a BMW.

Surprisingly, Asian big-spenders may not be considered wealthy by western standards. As an illustration, average annual income 2005 for a 32-year old banker ranged from $12,000 in Bangkok (Thailand), to $18,000 in Taipei, $31,000 in Seoul, $32,000 in Singapore and $35,000 in Hong Kong. Nevertheless, Yuppies’ incomes have been rising in these markets by 15-20 percent annually in recent years. Other factors that promote big spending are relatively low taxes, fringe benefit such as company cars and housing allowances and big end-of-year bonuses. This relatively high level of disposable income becomes even more significant when one remembers that there are about a million people in their 20s and 30s in professional, managerial or technical jobs in the four markets of Singapore, Hong Kong, Taipei and Seoul. In addition, single, young, college-educated women in Japan are rapidly gaining a worldwide reputation as conspicuous consumers.

1. Why some companies are willing to introduce new products or to reformat its existing products as to suit the Yuppies’ purchasing power?

2. Which segmentation strategy is likely to be most effective (i.e. concentration on individual market niches or a multisegment strategy)?

Solutions

Expert Solution

1) Why some companies are willing to introduce new products or to reformat its existing products as to suit the Yuppies’ purchasing power?

First of all, most important criteria for a business survival is the satisfactor of the customer and make available high quality goods to the customer in cheap rate or within the purchasing power of the customer. Hence, it is important for business to customize their products time to time by decreasing the products cost but increasing the quality. Moreover, the customer wants to explore new products instead of using the same kind of products over the years. For example, a company starts to produce "Yippis noodles" while "Maggi" had demand at that time. However nowadays, both the products are competing with each other.

2. Which segmentation strategy is likely to be most effective (i.e. concentration on individual market niches or a multisegment strategy)?

The company has to focus on multisegment strategy instead of concentration of only individual market niches because of the economy growth rate is dependant on the business strategies.


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