Question

Read the following case study carefully and analyze it by answering the three Questions for Discussion.   

Hot-Shot Pix is a global digital camera manufacturer headquartered in the U.S.  The company designs, manufacturers and sells various digital camera models at different price points through various channels.  Design is carried out at the company’s R&D labs located in England and the U.S.  The company manufactures cameras at four different locations:  one factory is located in Singapore and supplies the Asia-Pacific region; another factory is located in Texas and serves the North American and Latin American markets;  the third factory is located in France and serves the EU markets.  This factory was established during Hot Shot’s first expansion outside the U.S. in the 1960s to manufacture film-based cameras and sell them across Europe.  Currently, the factory in France is somewhat outdated, and the company is involved in a labor dispute with the unions.  The last factory is located in Hungary and serves Africa and the Middle East.  Currently, 30% of the company’s total revenues are generated domestically and the rest comes from foreign markets.

            Hot Shot’s cameras have traditionally been well-regarded in the marketplace and the company is considered a leader in technological innovation.  However, in the last ten years the company has been facing increased competition. Newer, more nimble competitors have established large factories in Asia.  Theses companies serve the entire global market from one or two factories at a cheaper.  Digital camera manufacturing is subject to significant economies of scale.  In addition, the demand for digital cameras is seasonal, with a significant portion of the demand generated during the holiday season.  This variability of demand has forced Hot Shot to outsource some of its manufacturing to various subcontractors in Asia who have varied considerably in their ability to adhere to quality specifications.  In general, warranty costs have been slightly increasing.

            The digital camera market is expected to grow at a healthy 8% rate for the next decade.  Bob Wilson, the COO, is thinking of several significant operational changes.  At the top of his list is closing the factory in France (which is technologically outdated) and establishing a new factory, possibly in China, that would serve the EU, North America and Latin America markets.  The factory in the US would then focus on premium, higher-priced, cameras and represent around 20% of the global market for digital cameras.  Another alternative is to purchase a Chinese camera maker and upgrade its facilities.  The Chinese Foreign Investment Authority indicated that it would look favorably on this investment, as long as Hot Shot also established a design lab in China to develop the next generation cameras.  This would be structured as a joint venture with a Chinese company.  Meanwhile, European manufacturers were having a hard time competing with foreign camera makers and were arguing that foreign manufacturers were dumping excess production into their markets.  One camera maker recently appealed to the EU for protection from ‘unfair foreign competition’.  At the time, China had a sizeable trade surplus vis-à-vis European countries.

            As a soon-to-be graduate of one of the most internationally diverse business schools in the U.S., you have been retained by Bob Wilson to prepare a report that identifies and briefly discusses the major international issues.  Note that, at this time, Mr. Wilson is not looking for any specific recommendations.

Questions for Discussion:

1. What, if any, political issues should Wilson consider?
2. What, if any, economic issues should Wilson consider?
3. What, if any, social/cultural issues should Wilson consider?
4. What, if any, technological issues should Wilson consider?
5. What, if any, other issues should Wilson consider?

Answer 1

(1)

There are 2 which stand out in terms of political issues. One is the Chinese joint venture. So long so they establish a testing center, it seems as if the Chinese Foreign Investment Authority is okay with this. The other problem will be that a camera manufacturer in Europe asks the EU to put in place a regulation to avoid or restrict the amount of international competition, as they are considered to have unfair competition. This may bring a halt to international production at Hot Shot Pix.

(2)

Economic concerns to address will be that you are now attempting to build 20 per cent of your American factory's foreign market and investing in a new business venture in China. It may be causing concern due to the massive investments being made. The camera industry is supposed to see a sales increase of 8 percent which is likely to bode well for them in this time.

(3)

Within their production site in China, social and cultural issues would be facing up to. There may be many language differences and cultural barriers influencing the way they do business. It is vital to keep these cultural barriers in mind and what is appropriate or not within their culture to ensure that you are well received within the community and that you have better profits and that you are a respected company in the market.

(4)

The research and development plant within China will have technical issues. There may not be a major problem here but it is vital to keep up with the latest technologies in a competitive market , particularly with a increase in cameras demand as the best technology would gain the most of the share.

(5)

Other problems would be to keep a roadmap for the future in mind if the EU were to attempt to curb international competition and unfair market competition. That would lead the camera business to be in the United States almost entirely, which would greatly limit their position on the world market.

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