Concentrating on the commercial high end in China (1997)

What could not be chosen led to the optimum

What is interesting about this decision is that Daikin did not choose the high end after superb market research; it was simply the only place left where it could choose at all. With joint ventures with local air-conditioning makers already taken by others, and the consumer segment a battlefield of some four hundred firms, all that was left to the latecomer Daikin was the gap in commercial systems. A narrowing driven by constraint ended up producing a high-margin model that stayed out of the price-cutting war.

That a poverty of options should lead to the optimal strategy is not something one can reproduce by design. Even so, the stance of stepping off a ring you cannot win and concentrating on the ground that remains is continuous with the 1994 decision to fold up diversification and narrow to air conditioning, and it was carried on into the later local acquisitions in Europe. Deciding where not to fight sways profit as much as deciding where to fight — the choice in China is a case that forced that question at the early stage of overseas expansion.