Problem Statement
The company has to decide whether to expand geographically into other regions that have cost benefits and other cheap resources, or should it pursue the market penetration strategy in theexisting market-Japan.Perhaps, each option has certain cost and benefits related to supply chain efficiency. Additionally, the issue of thevolume fragmentation and increased cost is also an issue which might not off-set the cost of production at two factories.
Situational Analysis
Renesas has formed through the joint merger of Hitachi and Mitsubishi. These parent companies already dealt in DRAM and microprocessor chips to consolidate the programming capacities and reduce the cost of production. Later, Renesas Corporation merged with NEC Corporation due to the economic downturn in Japan, making the companies loose a substantial amount of revenues. These three mergers made Renesas the biggest group in the region surpassing even Motorola. Also, this allowed the company to consolidate the overall expertise, resources and customer segments in order to generate high sales and revenues.
Renesas Electronics Harvard Case Solution & Analysis
Since Hitachi and Mitsubishi already operated in the automotive industry, this gave Renesas an easy entry in the automotive industry capturing the attention of big automobile dealers to develop business relations with them. However, the incident of theearthquake in NAKA caused the company a big substantial shock as the main resources, inventory and supply chain starts with the NAKA factory in Japan. Also, since the shockwaves were severe and that the buffer inventory had been destroyed out of which, somecould not be prepared again till the next 5 years and some in 3 months, it posited a great threat to the operations of company A and Company B, which in turn pressurized Renesas to offer a solution to the problem.
The particular situation, thus, not only put the OEMs under pressure but also Renesas, as the inability to meet the customer demand and client order on timewill affect the brand image and brand value of the company and will affect the goodwill in the market. Not only this, the particular incident would draw the clients to other competitors of Renesas due to negative reputation and threat of future failure, which might take other companies into the grip.
Apart from this, by analyzing the market position and business strategy of Renesas, it is also eminent that the company is ineffective and incapable of meeting the demand in the market and offering low volume in the market due to limited production capacity. This has put the position of the company in jeopardy as the limited market share will make the company lag behind the competition, putting the sustainability of the company in question.
Alternatives
Alternative: 1 Rebuild the factory in NAKA and increase the inventory store level along with buffer inventory level.
Pros
- Since Japan is the homeland of the company and that it is well-aware of the external factors like labor laws and operational base, the establishment and expansion of the NAKA facility will allow the company to maintain its cost structure, allowing it to remain cost effective for the OEMs in the long run............
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