Question

What does the case teach about strategies that enterprises must adapt to in a competitive market?

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Vizio and the Market for Flat Panel TVs Operating sophisticated tooling in environments that must be kept absolutely clean, fabrication centers in South Korea, Taiwan, and Japan produce to exacting specifications sheets of glass twice as large as kingsize beds. From there, the glass panels travel to Mexican plants located alongside the U.S. border. There they are cut to size, combined with electronic components shipped in from Asia and the United States, assembled into finished flat panel TVs, and loaded onto trucks bound for retail stores in the United States, where consumers spend over $35 billion a year on flat panel TVs.

The underlying technology for flat panel displays was invented in the United States in the late 1960s by RCA. But after RCA and rivals Westinghouse and Xerox opted not to pursue the technology, the Japanese company Sharp made aggressive investments in flat panel displays. By the early 1990s Sharp was selling the first flat panel screens, but as the Japanese economy plunged into a decade-long recession, investment leadership shifted to South Korean companies such as Samsung. Then the 1997 Asian crisis hit Korea hard, and Taiwanese companies seized leadership. Today, Chinese companies are starting to elbow their way into the flat panel display manufacturing business.

As production for flat panel displays migrates its way around the globe to low-cost locations, there are clear winners and losers. U.S. consumers have benefited from the falling prices of flat panel TVs and are snapping them up. Efficient manufacturers have taken advantage of globally dispersed supply chains to make and sell low-cost, high-quality flat panel TVs. Foremost among these has been the California-based company Vizio, founded by a Taiwanese immigrant. In just six years, sales of Vizio flat panel TVs ballooned from nothing to over $3.1 billion by 2013. In early 2009, the company was the largest provider to the U.S. market with a 21.7 percent share. Vizio, however, has fewer than 500 employees. These focus on final product design, sales, and customer service. Vizio outsources most of its engineering work, all of its manufacturing, and much of its logistics. For each of its models, Vizio assembles a team of supplier partners strung across the globe. Its 42-inch flat panel TV, for example, contains a panel from South Korea, electronic components from China, and processors from the United States, and it is assembled in Mexico. Vizio's managers scour the globe continually for the cheapest manufacturers of flat panel displays and electronic components. They sell most of their TVs to large discount retailers such as Costco and Sam's Club. Good order visibility from retailers, coupled with tight management of global logistics, allows Vizio to turn over its inventory every three weeks, twice as fast as many of its competitors, which allows major cost savings in a business where prices are falling continually. On the other hand, the shift to flat panel TVs has caused pain in certain sectors of the economy, such as those firms that make traditional cathode ray TVs in high-cost locations. In 2006, for example, Japanese electronics manufacturer Sanyo laid off 300 employees at its U.S. factory, and Hitachi closed its TV manufacturing plant in South Carolina, laying off 200 employees. Sony and Hitachi both still make TVs, but they are flat panel TVs assembled in Mexico from components manufactured in Asia.

Answer 1

The case provides a simple case for outsourcing and manufacturing at places where the enterprises can benefit from the low-cost manufacturing and keep research and development in those areas which are most efficient in doing them. This is just benefiting from the comparative advantage of the countries in the international trade.

As per the case given above, flat screen TV manufacturing companies are using various Asian countries like Taiwan, South Korea, and China to manufacture their flat screens and then ship them to Mexico for assembling, ultimately selling them to the consumers in the US. All these countries have a comparative advantage in the production of electronic goods making the things cheaper. On the other hand, several countries have also shut down their manufacturing operations in the US and moved it to these countries except their research and manufacturing units. The US being a capital extensive country spends a huge amount of research and development, these companies have their research wing in the US benefit from low cost and efficient research in that area.

If the companies have to be successful in the International market, they have to reduce the cost of their product and for that, they should take into account the comparative different nations have in manufacturing business.