The name is absent

RMB 20.84 (less than $3) per handset, indicating that most mobile phones sold by Bird were
low-end products. Joint ventures eventually lost the low-end market because of their relatively
higher costs in labor and distribution. Even in the midrange segments, joint ventures are facing
strong competition - mainly from Chinese companies.

Second, local manufacturers usually have more extensive distribution channels which
assist the capture and maintenance of their market throughout the country, especially in small
cities and in the countryside. More than twenty handset manufacturers in China (including Bird,
Kejian, TCL Mobile, and other small and medium-sized companies) primarily sell handsets
through their own retail stores or dealers throughout the country. In recent years, some
manufacturers also began to supply handsets to the mobile communications carriers. Figure 5
shows the distribution channels of a typical mobile handset manufacturer in China. Many
specialized handset producers built their distribution channels on their own while electronic
goods producers or PC manufacturers used their existing distribution networks. Manufacturers
usually give the dealers a commission for each handset sold by the dealers. The commission
rates vary in accordance with the number of handsets sold in a certain period of time. Some
dealers offer incentives, reducing their commissions in an attempt to attract more customers and
to obtain higher rates of commission later. Joint ventures usually do not have their own sales
networks, but depend on a complicated three-level hierarchical agency system, which increases
their distribution costs. As a result, domestic firms usually have more distribution channels than
their foreign competitors. Nokia sells its handsets through a reseller network with 900 outlets in
China and has begun to work with regional distributors such as electronics store chains. In
contrast, Bird sells its products through 40 distributors, 400 sales offices, 15,000 resellers and
50,000 retail outlets (ChinaNex, 2004).

China's Mobile Handsets FINAL DRAFT 2006.sph ERSA2006 Greece

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