Market Expansion At Cms Electronics Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Market Expansion At Cms Electronics Case Study Solution

Threat of New Entrants

Threat of new entrants was high because of governmental import and export rules. The China’s government imposed high restriction over import and exports rules along with minimizing the local production shares. This policy leads toward a high threat of new local service providers in China.

Threat of Substitute Product

Despite of traditional services, the substitute product was emerged with the new ODMs (Original Design Manufacturing) model, which produces the end user products on the contract basis.In addition to this, many companies were not adopting the outsource strategy and relied on its own production capacity instead of purchasing electronic components from EMS. Thus, it could be seen that the threat of prevailing substitute product was moderate.

Economies of Scale

From 1990s to 2000s, many OEMs approached EMS, which increases the economies of scale and bundled the production capacity. OEMs became able to concentrate fully on their core competency and able to purchase electronic at cheaper prices which eventually leads toward increased return on sale.

When the economies of scale increases, a negative equal proportional effect between cost and profit could be seen. When the market trend had changed during 2000s, then the economies of scale has evolved due to decreased fixed cost, Apple had generated a 26.6% sales return.

Competitive Structure

The company’s major customers representing German market. Forfacilitating its major customers, cms Electronics had establish its sales office at Kassel to provide boarder local services to its customers. The customers in the region prefer transparency in the offer and used “open book calculations” for tender.

From 1990s to 2000s, many OEMs approached EMS, which increases the economies of scale and bundled the production capacity. This trend pushed toward increased demand for EMS. Thus, the two giant players evolved, who captured the worldwide markets of personal computers, mobile phone markets and consumer electronics. These two giants were Hon Hai/Foxconn and Flextronics, and both have large production capacities around the world. Despite of these two giant competitors, cms electronic was facing a high threat of competition from other Asian competitors which was dominating the global markets.

Recommendations

After analyzing the China’s external environment with the help of strategic analysis tools, following possible options has been suggested for cms electronics with respect to factory setup in China.

Setup Factory in Other Country

It has been suggested to the cms electronics that it should open a new manufacturing plant in China because of growing consumer demand and favorable China’s economic policies. Because of increasing demand of electronics in China, the automotive supplier and its sub-suppliers were forced to shift toward China. This approach called for “Follow the customer” strategy. In addition to this, the China’s government also imposed high restriction over import and exports rules along with minimizing the local production shares. These prevailing policies generated a need to have a company’s own manufacturing plant in China. Thus, it is recommended that cms electronics should establish a new factory in china.

Expand A Business Part at Other Geographical Area

It is recommended that the company should approach toward new markets. The analysis represented that Asian market was favorable with respect to labor rate and entry options. The company could open a new factory in any country- near to China. So, that thelogistic or transporting cost could be minimized in order to achieve economies of scale. In addition to this, it is recommended that company could start any of its related activity, such as inventory handling process, at any other nearby country.

Virtual Business- Outsourcing

The company could outsource some of its production facilities or the marketing department to some other companies on the contract basis. This option will help the company to concentrate on its core competency along with minimizing the production cost. But, on the other hand, this approach might impact company’s product’s quality.

Market Entry Options

For cms electronic, possible entry options could be joint venture, subsidiary and commercial agents, which has been discussed in detail below:

Joint Venture

In joint venture, cms electronics could approach another party for making a contract to satisfy its major customers, in china. Through this approach, the company would be able to focus on its core competency, while staying in its own country along with approaching other country’s customers. this would require low cost and enable the company to provide the desired product with timely delivery(Fratzscher, 2012).

Subsidiary Company

Subsidiary companies were mainly controlled by its parent companiesbecause of greater equity share. The parent company would make its strategic decision and would have full control. This would be a best option for cms to enter in the Chinese market. Through this option, the company would enter into the Chinese market easily along with having full control. This option requires a huge investment, because it will require to purchase more than 50% shares of its subsidiary company. In addition to this, this will impose a threat on the intellectual property and core competency because of shared manufacturing processes and models. But, despite of all this, it is recommended that this option would be best because it will maximize profits and the existing customers could be approached the company with the help of this approach.

Commercial Agents

The company could make a contract with a commercial agentwho would be responsible for targeting a specific area and distributing the company’s products. This option could be considered as the best option because, it will require low investment and would be considered as the legal relationship. The company would enjoy full control over the product, increased sales and would eb able to reach unexplored markets.

Conclusion

The major cms electronics gmbh’s customer, had established a new company in China. The company wanted to have same manufacturing and engineering services, as provided by cms electronics gmbh, in China. Thus,Velmeden was considering the possible action which should be taken to expand its business in China. The Chinese government presented a five year for the period of 2011-2015, in which its main focus was on electronic industry’s improved innovations levels. It has been suggested to the cms electronics that it should open a new manufacturing plant in China because of growing consumer demand and favorable China’s economic policies. In addition to this, it is recommended that company could start any of its related activity, such as inventory handling process, at any other nearby country. The company could outsource some of its production facilities or the marketing department to some other companies on the contract basis. This option will help the company to concentrate on its core competency along with minimizing the production cost.................................

This is just a sample partical work. Please place the order on the website to get your own originally done case solution.