AIC (Introduction of Netbook) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction:

Advanced Integrated Circuitry (AIC) is operating under the hardware industry of computers and it has achieved a great success in the shortest period due to its nature of producing innovative products for the market. It is situated in Taiwan which is production hub of technological products like computers, tablets and mobile phones.

In 2007, the company is looking to diversify its portfolio and it has an interest in diversifying into the consumer market segment that should be manufactured and sold to the end consumers rather than producing intermediary goods. In the recent past HP, Dell, ASUS and several other industry manufacturers have introduced the new Ultra book computers with low cost to grab the market share through competitive products. AIC is also willing to introduce its Netbook to grab the Asian market and other regions. In Asian region the demand for electronic products like mobile phones and other technology products is increasing therefore its main focus is Asian market. It is willing to sell the Netbook for $240; the price is very competitive and it is under consideration to earn better profits from such production.

Problem statement:

The company has completed its final phase of production but the issue is that its current production lines are producing only 118,491 units per month, whereas the demand for AIC Netbook is 130,000 units. The company is under consideration to increase production up to 130,000 units, but not more than that and less than this to meet the current market demand and price stability in the market (Appendix 1). The company has a good reputation and if it cannot satisfy the demand of its customers, then the switching cost is low for the customers, therefore it has to increase the production (supply) of its units to meet the demand of its units.

Quantitative analysis:

The quantitative analysis is about the numbers, in which it is discussed about the most suitable alternatives that can work for to increase the production up to 130,000 units per month. Currently AIC is producing only 118,491 units with unsatisfied demand of 11,509 units (Appendix 1). Its current assembling structure takes 50 seconds to assemble 1 unit at one production line and it has 4 production lines. It has to increase the assembling to satisfy the market demand and earn good profit through Netbook. Its current profitability is $22.275 million per month and the increase in production can generate higher profits (Appendix 1). The alternative options to increase demand are defined below in detail.

Alternative 1:

The first option, it has to hire more employees for all production lines to increase the production through 3 shifts a day. If it has implemented this system, then it has to hire more employees that are willing to work in the third shift. In three shifts of assembling department 8 hours each can give 21 effective hours, 1 hour in each shift is for the break because it is not possible to work for 8 hours non-stop. Through this approach it can assemble 155,520 units per month, the result is excess production of 25,520 units (Appendix 2). The increase in such a huge supply may affect the price i.e. $240. This is a concept of market equilibrium of economics that the increase in supply will push the price to decline in order to achieve market equilibrium where demand and supply curve intercept. The increase in supply will push the price low and demand high to achieve a market equilibrium point.AIC (Introduction of Netbook) Case Solution

The decline in price may affect the profitability because the margin is only $19.2 and if the price declines just by $20 then AIC has to suffer losses from Netbook’s production which is not acceptable to any firm in the industry. The excess production is only acceptable if the net profit increase in total term, the unsatisfied demand gives opportunity to the competitor to grab market shares.The supply is around 20% excess of the current demand.

Alternative 2:

The second alternative option is to increase the production lines. Currently AIC is operating with 4 production lines and there is an alternative to increase one more production line.If AIC hires more skilled employees and has 5 production lines, then it can assemble 148,114 units per month with an excess production of 18,144 units (Appendix 3)....................

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