Z. John Zhang - Faculty Research in Knowledge@Wharton

Back to the Future: Will Rising Commodities Prices Create a New 'Inflation Generation'?

Wed, 13 Apr 2011 15:12:19 EST

Commodities prices are surging -- from oil to cotton to grains to gold. These higher costs pose challenges for companies in industries like apparel, food retailing and appliances as they try to pass on price increases without alienating consumers. At the same time, higher commodities prices raise the specter of a spike in inflation down the road, a major concern for policymakers and the Federal Reserve.

The Hu-Obama Summit: Big on Symbolism, Less So on Substance

Wed, 02 Feb 2011 15:51:26 EST

Chinese President Hu Jintao's state visit to the U.S. last month ended with a spurt of export agreements that his country has recently become known for. But after 2010's escalating trade tensions, summit-weary observers are not celebrating just yet. They note that thorny issues, like China's currency policy, were stubbornly sidestepped, and they wonder whether the summit achieved what business leaders in both countries now need -- a mutual trust and assurance that their companies will be allowed to prosper.

Computer Compatriots: Taiwan and China Draw Economically Closer

Wed, 01 Sep 2010 16:07:02 EST

Despite the diplomatic and military twists and turns between China and the island of Taiwan, the two countries are fast becoming virtually one in the vital field of information technology. The extent of this collaboration is stunning: Taiwanese factories on the mainland make more than 85% of the monitors for the world's desktop computers, for example, and more than 90% of all laptop computers. Knowledge@Wharton looks at the pace -- and the challenges -- of this rapidly evolving economic integration.

Betting on Future Movie Receipts: Beware the Hollywood Lemons

Wed, 28 Apr 2010 14:56:07 EST

Wouldn't it be great if you could invest in a new film that you thought might be a real blockbuster? Now maybe you can. On Tuesday, April 20, the U.S. Commodity Futures Trading Commission approved a movies futures exchange -- sponsored by Cantor Fitzgerald investment bank -- that will match buyers and sellers of future movie receipts. But given the way some futures exchanges work, how good an investment is this for individuals? In this personal finance column, Wharton professor Kent Smetters offers some answers.

How Much Should You Charge? Why 'Smart Pricing' Pays Off

Wed, 14 Apr 2010 11:36:17 EST

Your company has developed a new product that you think will be a winner. A lot of money has been poured into research and development, analysis of the competition and advertising. But there is one key element you may have overlooked: What do you charge for the product? Wharton marketing professors Jagmohan Raju and John Zhang say companies frequently don't put anywhere near as much thought into pricing as they should. In their new book, Smart Pricing, Raju and Zhang argue that firms ought to engage in innovative pricing to achieve maximum profitability, and they show how companies like Google are doing just that.

Google's Next Search: A New China Strategy?

Wed, 31 Mar 2010 14:51:19 EST

After discovering that hackers based in China had broken into the Gmail accounts of Chinese human-rights advocates, Google halted operation of its Internet search engine on the Chinese mainland earlier this month and started directing users to its Hong Kong site. On March 29, Chinese officials retaliated by blocking some of Google's mobile Internet services. While conflict may have seemed inevitable, what does it mean for Google's long-term plans for operating in China? And what lessons can other multinationals learn as this story plays out? Knowledge@Wharton asked Wharton management professor Marshall Meyer and marketing professor John Zhang these and other questions.

China's Rebalancing Act: How Much Do Consumers Stand to Gain?

Wed, 06 Jan 2010 15:21:35 EST

After a tough grind through the Year of the Ox, it's easy to see why China is looking forward to the beginning of the Year of the Tiger in February. Thanks in large part to the government's ability to keep the Chinese economy moving in 2009 with a massive, two-year, RMB 4 trillion ($585 billion) stimulus program, most analysts expect robust growth in the year ahead. The challenge now is to reduce its overreliance on exports and manufacturing by increasing domestic consumption. Meanwhile, some experts warn that unemployment and the specter of inflation could threaten any new-found consumer confidence.

The iPhone in China: Will Apple Connect with the World's Biggest Mobile Market?

Wed, 16 Sep 2009 16:45:37 EST

Global launches can be rocky, as Apple knows well. Last year, the company introduced its iPhone in India, but instead of the throngs of consumers seen at launch events in the U.S., the journalists assigned to cover the rollout reportedly outnumbered the customers. According to experts, the problems included a lack of marketing and a price tag set too high for Indian consumers. Now, as Apple prepares for an October launch of the iPhone in China in cooperation with service provider China Unicom, many are wondering if it will face similar hang-ups in the world's largest cell phone market.

The Economic Incentives of the 'Store-within-a-Store' Retail Model

Wed, 02 Sep 2009 16:37:02 EST

The sign above the entrance may say Macy's, Nordstrom or Neiman Marcus, but the salespeople at the cosmetics counters inside do not work for the store at all. Instead, they are employed by brand name cosmetics manufacturers which lease space from the marquee retailers. In an arrangement that is common in stores across Asia and in other parts of the world, U.S. department store retailers often cede the cosmetics category to branded manufacturers in return for fees paid to occupy prime retail real estate. New Wharton research looks into the dynamics of this model.

How Hyundai Sells More When Everyone Else Is Selling Less

Wed, 10 Jun 2009 17:08:51 EST

In 2008 -- a brutal year for the auto business -- Hyundai Motor's global unit sales rose 2%, lifting revenues by 5%. In the first three months of this year, the South Korean automaker's global market share rose to 4.7%, compared to 4% a year earlier. With industry-leading guarantees, an intense focus on quality and a program to reassure buyers worried about their economic future, the once-derided company has won hearts -- and business.

Chinese Manufacturing in an Age of Resource Price Volatility

Wed, 03 Jun 2009 16:43:34 EST

China is slowly moving away from energy subsidy policies that hold down prices -- especially for industry. Those subsidies protected exporters from devastation when energy prices shot up to record-setting levels in 2008 and helped to keep social unrest somewhat under wraps. No one knows for sure how far China will go in reducing energy subsidies for business in the future, but China could use subsidy policies as a tool in pushing particular industries away from low-value exports that generate a lot of waste to higher-value goods that produce less waste.

Rising Giants: Industrial Clusters Are Changing the Face of Chinese Manufacturing

Wed, 03 Jun 2009 16:43:44 EST

Regional specializations have always existed in China. Tailors from the city of Cixi, for instance, controlled clothing manufacturing in Beijing for some 250 years. Now China has taken the idea to a new level by creating huge manufacturing clusters that specialize in a single industry or product. Thousands of manufacturers in Datang in Sichuan province, for instance, crank out more than six billion pairs of socks annually. But with a shifting world economy, expect manufacturing clusters in some sectors -- such as simpler textiles and toys -- to fade in importance, even as others, such as biotechnology, grow.

Best Buy vs. Wal-Mart: Is There Room for Both, and Others?

Wed, 01 Apr 2009 17:13:39 EST

With the demise of electronics retailer Circuit City in March, Best Buy and Wal-Mart Stores are ramping up their struggle to capture added share of the consumer electronics market. Best Buy is positioning itself as the provider of quality service and sales help; Wal-Mart is using its dominance across all retail categories to position itself as the low-price option in consumer electronics. Wharton faculty and industry analysts say instead of fighting to the death, both stores can coexist if they follow clearly defined strategies focusing on service and price.

Backlash: How Early Adopters React When the Mass Market Embraces a New Brand

Wed, 18 Mar 2009 17:02:42 EST

A well-established principle of product development holds that a small group of early adopters can spur mass-market acceptance of a new product. What is less well understood is how those early adopters react when that product or its brand is accepted by the mass market. As Wharton marketing professors David Reibstein and John Zhang explain in this video, the company could experience a backlash as early adopters move on to other new products. A case in point: Porsche saw a decline in sports car sales after it entered the SUV mass market. Research by Reibstein and Zhang discusses reasons for the backlash and suggests a strategy for dealing with it.

How About Free? The Price Point That Is Turning Industries on Their Heads

Wed, 04 Mar 2009 14:25:43 EST

Giving products away -- think Adobe Reader or access to online news -- has become a legitimate business model on the Internet and even beyond. Once companies accept that price need not be tied to the cost of production and begin thinking creatively, new possibilities emerge -- even for offline products, according to Wharton faculty and others. Welcome to the world of "freeconomics."

When the Going Gets Tough, the Tough Don't Skimp on Their Ad Budgets

Wed, 26 Nov 2008 12:18:24 EST

With corporate managers under enormous pressure to control costs and maintain liquidity in the current credit crisis, advertising budgets often appear to be a dispensable luxury in the struggle to survive. According to Wharton faculty and marketing experts, that attitude can result in short-term gains, but long-term trouble.

Navigating Olympic Sponsorship: Marketing Your Brand without Alienating the World

Wed, 16 Apr 2008 16:43:25 EST

Images of Chinese guards and local police protecting the Olympic torch on its journey to Beijing were hardly the kind of publicity the IOC or the Chinese government were hoping for. Nor can the 12 "Worldwide Olympic Sponsors" be thrilled at the latest images of hand-to-hand street fighting. How can sponsors make the August Olympics a brand builder for their products rather than a public relations nightmare for their companies? Wharton professors suggest they figure out a way to reap the benefits of associating with the event while maintaining reputations for corporate social responsibility outside China.

Why Firing Your Worst Customers Isn't Such a Great Idea

Wed, 12 Dec 2007 14:42:26 EST

Fire your bad customers. That piece of advice has become widely accepted in recent years as companies have sought to manage their relationships with customers in more sophisticated ways. The rationale is clear-cut: Low-value customers end up costing more money than they provide. So why not jettison them and focus your customer-relationship efforts on more profitable individuals? Or, as an alternative, why not try to increase the worth of the low-value customers to your firm? Not so fast, suggests a new study by two Wharton marketing professors -- Jagmohan Raju and Z. John Zhang -- which concludes that firing low-value customers actually decreases firm profits and that trying to increase the value of these customers may be counterproductive.

Who Owns You? Finding a Balance between Online Privacy and Targeted Advertising

Wed, 12 Dec 2007 14:42:26 EST

On November 6, Facebook outlined a strategy to integrate more targeted advertising into its popular social networking website. Facebook CEO Mark Zuckerberg saw the new initiative as an opportunity for users to refer products to each other and allow friends to share information as they shopped online and visited other websites. The system, called Beacon, was also intended to lead to more relevant -- and profitable -- advertising through precise targeting based on a user's buying habits, social circle and geography. But on December 5, after receiving numerous complaints, Zuckerberg issued an apology and changed the way Beacon operates. The whole incident, according to Wharton experts, raises questions about privacy, marketing tactics and what consumers can expect in the future.

Retail Price Maintenance Policies: A Bane for Retailers, but a Boon for Consumers?

Wed, 08 Aug 2007 15:43:21 EST

In June, a high-profile Supreme Court case held the attention of retailers and manufacturers alike. In a five-to-four ruling, the high court overturned a lower-court decision to award $1.2 million to a Dallas-area clothing store that was cut off by a supplier, Leegin Creative Leather Products, because the retailer refused to abide by the manufacturer's retail price maintenance (RPM), or no-discount policy. The decision means that manufacturers no longer face a blanket prohibition against implementing an RPM policy. The case has spurred concern among consumer groups, who claim it overturns a century of precedent and will lead to price fixing and unjustifiably higher prices. But Wharton faculty suggest that any changes will be gradual, and may ultimately benefit consumers.

Will the 2008 Olympics in Beijing Showcase Pollution as Well as World-class Athletes?

Wed, 10 Jan 2007 15:27:02 EST

For many, the 2008 Beijing Olympics are seen as a "coming-out" party for the world's most populous nation. China is investing billions of dollars in sports venues such as the Bird's Nest in Beijing, the modernist national stadium currently under construction; subway-line extensions, and other infrastructure improvements to make the games a world-class spectacle. But some wonder whether air pollution will crash China's Olympic party and focus world attention on deepening environmental problems that threaten the country's economic growth.

How and Why Chinese Firms Excel in 'The Art of Price War'

Wed, 13 Dec 2006 15:19:43 EST

When it comes to price wars, Wharton marketing professor Z. John Zhang can't help but notice that companies in the West and companies in China are quite literally worlds apart. In the West, Zhang says, the outbreak of a price war is viewed as the failure of managerial rationality. In China, the outbreak of a price war is considered a legitimate and effective business strategy. In a recent paper, Zhang and Dongsheng Zhou, a marketing professor at the China Europe International Business School in Shanghai, analyze two price wars that took place in China in the mid-1990s.

Out of Shanghai's Shadow: Why Hong Kong Is Becoming China's New Financial Services Center

Wed, 15 Nov 2006 16:21:19 EST

Contrary to rumors about its imminent "death" following the transfer of power from the British, Hong Kong has emerged as the financial intermediary through which foreign investors seek to invest tens of billions of dollars into mainland China. Meanwhile, once-booming Shanghai's star is starting to fade. What happened? According to Wharton faculty and other experts, while Hong Kong was crafting a strategy to position itself as both a legal and financial services center for China, Shanghai was weighed down by corruption and a largely state-run financial services sector.

Navigating the Labyrinth: Sales and Distribution in Today's China

Mon, 16 Oct 2006 22:17:17 EST

Experts from Wharton and Boston Consulting Group say that firms should not underestimate the skills they will need to navigate the labyrinthine networks of state-owned distribution companies and small, private wholesalers in China -- particularly as they try to expand outside the country's largest 30 or 40 cities into its 500-plus other large markets.

One Billion, Three Hundred Million: The New Chinese Consumer

Mon, 16 Oct 2006 22:17:12 EST

Despite rapid urbanization and the emergence of a strong, status-conscious middle class, experts from Boston Consulting Group and Wharton point out that China is still "a country of extremes," where it pays to understand the differing habits and mindsets of the rich and poor, as well as the subtleties of consumer rationales for trading up and down when making purchases.

Chinese Firms: Taking a Gamble on Finding Customers Abroad

Wed, 10 Aug 2005 15:55:55 EST

In recent years, U.S-based companies have flocked to China to set up manufacturing and other operations, taking advantage of favorable labor rates that are often a fraction of those in America. Now, however, Chinese companies that previously only served their domestic market are beginning to expand to the U.S. and other countries. Witness Beijing-based Lenovo's acquisition in 2004 of IBM's personal computing division. Last week, 30 Chinese executives met with several Wharton faculty members and visited nine U.S. companies -- including a casino in Atlantic City, N.J. -- to learn more about how business is conducted in the U.S.

What Consumers -- and Retailers -- Should Know about Dynamic Pricing

Wed, 27 Jul 2005 16:50:59 EST

According to a recent study, 64% of consumers who shop on the Internet do not know that "it is legal for an online store to charge different people different prices at the same time of day." Yet dynamic pricing is not new. Retailers have been using it for years in ways that benefit not just themselves but also their customers. The challenge is to establish dynamic pricing in ways that lead to profitability rather than price wars. As one expert noted, companies should "engage in flexible pricing practices in order to honor their responsibilities to their shareholders. If retailers charge a flat, low price to make everyone happy, they're leaving a lot of money on the table."

Watch Out, Coke and Pepsi -- Here Comes Wahaha

Wed, 13 Jul 2005 15:36:49 EST

Wahaha, whose main products are milk drinks, bottled water and mixed congee, is the number one beverage company in China, with revenues of 11.4 billion yuan ($1.37 billion) and profits of 1.35 billion yuan ($162.7 million) in 2004. The company was started in 1987 by Zong Qinghou, its 60-year-old chairman and CEO. In an interview with Wharton marketing professor John Zhang, Zong talks about his first entrepreneurial ventures selling beverages and ice cream, the success of his first major product, "Wahaha nutritional liquid," his joint venture with the French giant Danone Group, and his rapid growth over the past eight years through the establishment of 40 subsidiaries in 16 Chinese provinces. In 1998, Wahaha launched its own brand, "Future Cola," to compete against Coke and Pepsi.

Sourcing From China: No Longer Just for Shoes, Toys and Clothes

Wed, 01 Jun 2005 16:48:32 EST

Twenty years ago it was widely believed that companies that wanted to source products from China were best off focusing on simple, labor intensive products such as shoes, toys and clothes. That was true - and it helped drive tremendous success for companies such as Perry Ellis, which targeted these product categories. Today, however, the sourcing landscape in China has changed. High-tech companies such as Dell, IBM, Philips, Samsung and Nokia are turning to China to source parts and products that demand sophisticated technology and considerable R&D. According to experts at The Boston Consulting Group and Wharton, companies that figure out how to take advantage of this trend can reap enormous rewards.

Attention Shoppers: Great Deals in Retail Mergers

Wed, 30 Mar 2005 10:07:57 EST

Federated Department Stores' acquisition of The May Department Stores will give the company added national scope and reduce costs, and may even result in some short-term savings for consumers. But Federated will still face the challenges of department store retailing, which has been in decline for decades, according to Wharton faculty and retail analysts. Some predict more consolidation in the industry and a greater effort by stores to better position themselves against both high- and low-end competitors.

Choosing the Wrong Pricing Strategy Can Be a Costly Mistake

Wed, 04 Jun 2003 00:00:00 EST

Prices have been at the center of human interaction ever since traders in ancient Mesopotamia began keeping records. Who doesn�t love to guess what something costs � or argue about what something ought to cost? So it should come as no surprise that companies spend a lot of time figuring out how to price their products and services. But two professors in Wharton�s marketing department, Jagmohan S. Raju and Z. John Zhang, say firms do not always go about pricing the right way despite the huge impact that pricing strategy can have on a company�s profits.

The Hidden Dangers - and Payoffs - of �Targeted Pricing�

Wed, 26 Mar 2003 00:00:00 EST

Should your firm target your competitors� customers with lower prices than the competition charges them? When might it make sense, instead, to offer discounts to your own customers? Under what conditions might this sort of approach � known as �targeted pricing� � backfire by driving everyone�s prices down too far? Recent research by Wharton marketing professor Z. John Zhang and several colleagues examines the complex dimensions of �targeted pricing� and suggests guidelines to help companies understand when �targeted pricing� might play an effective role in their marketing strategy.