Case Study One

9 September 2016

They begin as glass panels that are manufactured in high-technology fabrication centers in South Korea, Taiwan, and Japan. Operating sophisticated tooling in environments that must be kept absolutely clean, these factories produce sheets of glass twice as large as king size beds to exacting specifications. From there, the glass panels travel to Mexican plants located alongside the U. S. border.

There they are cut to size, combined with electroniccomponents shipped in from Asia and the United States, assembled into finished TVs, and loaded onto trucks bound for retail stores in the United States. It’s a huge business. In 2006, U. S. consumers spent some $26. 4 billion on flat panel TVs, a 63 percent increase over the amount spent in 2005. Projections call for U. S. sales to hit $37 billion—despite the fact that due to intense competition, prices for flat panel displays have been tumbling and are projected to continue doing so.

Case Study One Essay Example

During 2006 alone, prices for 40-inch flat panel TVs fell from $3,000 to $1,600, bringing them within the reach of many more consumers. In 2007, half of all TVs sold in the United States will be 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 industry. As production for flat panel displays migrates its way around the globe to low-cost nations, clear winners and losers have emerged.

One obvious winner has been U. S. consumers, who have benefited from falling prices of flat panel TVs and are snapping them up. Other winners include efficient manufacturers who 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 four years of sales, Vizio flat panel TVs ballooned from nothing to $700 million in 2006. The company is forecasting sales as high as $2 billion for 2007.

Vizio, however, has only 75 employers, These employees focus on final product design, sales, and customer service, while 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 its 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 is a major source of cost saving in a business where prices are falling continually.

If Vizio exemplifies the winners in this global industry, the losers include the employees of the manufacturers who 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 another Japanese company, Hitachi, closed its TV manufacturing plant in South Carolina, laying off 200 employees. Both Sanyo and Hitachi, of course, still made TVs, but they are flat panel TVs assembled in Mexico from components manufactured in Asia.

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