Question

Q1. Read the extract carefully and apply the problem-solution pattern of analysis to it.

Electronics Industry Warns of Palladium Shortage

Warning was given yesterday of a severe shortage of palladium, a metal essential for some components of portable electronic equipment such as mobile telephones and laptop computers, as well as for catalytic converters that remove pollutants from car exhausts.

“Palladium use continues to grow very strongly but production lags behind. Soon after 2000 we could be in a difficult situation unless industrial users take attention now,’ said Mike Steel, research director at Johnson Matthey, the world’s biggest platinum and palladium marketing group. He said consumers had been relying on Russia’s palladium stocks to fill a substantial gap between demand and supply.  JM believes these stocks will run out soon after the end of the century.

Mr. Steel said there had been a preview of potential trouble earlier this year when Russia, which exports 70 per cent of the world’s palladium, stopped exporting the metal for six months. This helped to drive the price to its highest level for eighteen years… Although it has fallen back since Russian Exports restarted, the price remains roughly double its level at this time last year.

1. What is the starting situation?
2. What is the problem?  
3. What is the underlying cause of the problem?
4. What solution has been proposed?
5. How successful is the solution?

Q2. Please apply SWOT framework to analyze the following Case study, try to find out 2 strengths, weaknesses, opportunities, and threats. Then write 150 words in essay format.

The Swedish clothing company Hennes Mauritz, also known as H&M, opened their first store in 1947 in Västerås and was founded by Erling Persson. At that time, the company name was Hennes because they were only selling womenswear. During the following ten years the company opened several stores in Sweden, and in 1964 they took their company abroad when they opened up in Norway. In 1968 the company changed their name to Hennes & Mauritz when the selling of men’s and children’s clothes begun. A few years later, in 1974, the company was listed on the Stockholm Stock Exchange. Between 1976 and the 1990s H&M continued to expand in Europe.

In 1998 they started selling their clothes online in Sweden, and soon in other European countries. In 2000 the first H&M store opened up on Fifth Avenue in New York. To differentiate H&M from other cheap clothing companies they started to do collaborations with designers as Karl Lagerfeld, Stella McCartney, Madonna, Jimmy Choo and David Beckham. In 2007 the first Asian stores opened in Hong Kong and Shanghai. This year they also launched a new store concept called COS. To develop the store concept even more and penetrate the market, H&M launched H&M Home in 2009. Since the start up in 1947 H&M has made a big expansion at the global market, with approximately 2600 stores in 44 different markets.

For some companies the brand name can be a problem when they go international, since differences in the language can give the brand name another meaning, For H&M this hasn’t been a problem. But religious differences can in many ways be a problem for a clothing company like H&M. In Sweden there’s no problem for women to wear short skirts and dresses, but in countries with a strong religious view it may not be accepted for women to show their legs and dress provocative. This can also be an obstacle in H&Ms advertising.

We think that it is important to adapt the advertising to the different countries to maximize the profit. When it comes to material culture it is important for a company like H&M to be aware of which materials will work in which country. In Sweden, many people are against fur and because of that it would be a bad idea to launch a clothing line only made of fur in Sweden. But in other countries, like China where people are not that against fur, it could be a success.

H&M value to have good relationships with their suppliers to lower their production costs. In that way it will be possible for H&M to sell fashionable clothes to a low price to the customers. 60 percent of the goods are produced in Asia and 40 percent are produced in Europe. Even if H&Ms clothes are cheap, they still have a gross profit of 53 percent. They have also set up a growth target for the company to increase the number of stores by 10-15 percent per year.

Answer 1

Ans- a) The starting situation is that The Electronic Industry has issued a public warning about output gap of goods like mobile phones , laptops , converters etc due to the shortage of Palladium - an essential metal used in these products.

Ans - b) The problem is about severe shortage of palladium used in electronic devices which would further affect the sales/production of the Electronic Industry .

Ans-c) The underlying cause of the problem is that majority supply of Palladium comes from Russia meaning that the Palladium reserves in other countries are either not available or unexplored . This heavy dependence on Russia has the risk of high price volatility and also the constant extraction of this metal will create a scarcity of the metal , furtherhaving adverse impact on the electronic industry.

Ans - d) The proposed solution should be to search for other substitutes for palladium through research and innovation or explore other sources of Palladium (apart from Russia) .

Ans - e) The solution will be successful in the long run if investment is made on research and innovation for the same . This would reduce the dependency for palladium on One country and will check the price volatility as well .