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 Analysis

Competitive Structure

The company’s major customers represented German market. Forfacilitating its major customers, cms Electronics established its sales office at Kassel, in order to provide boarder local services to its customers. The customers in the region preferred transparency in the offers and used “open book calculations” for tender.

From 1990s to 2000s, many OEMs approached EMS, which increased the economies of scale and bundled the production capacity. This trend pushed towards an 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 had large production capacities around the world. Despite of these two giant competitors, cms electronics was facing a high threat of competition from other Asian competitors, whowere dominating the global markets.

Recommendations

After analyzing the Chinese external environment with the help of strategic analysis tools, following possible options have been suggested for cms electronics, with respect to its 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 the growing consumer demand and favorable Chinese economic policies. Because of an increasing demand of electronics in China, the automotive suppliers and its sub-suppliers were forced to shift towardsthe Chinese market. This approach called for “Follow the customer” strategy. In addition to this, Chinese government also imposed high restrictions over import and exports rules, with an inclusion of minimalized local production shares. These prevailing policies generated a necessity for the companies to have their private manufacturing plants 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 the new markets. The analysis represented that Asian market was favorable after taking into consideration the labor rate and entry options. The company can open a new factory in any country- near to China. So, that thelogistic or transporting cost could be minimized in order to achieve the economies of scale. In addition to this, it is recommended that company should start any of its related activity, such as inventory handling process, in any other nearby country to China.

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 competencies, along with the minimization of the production cost. But, on the other hand, this approach might impact the product quality of the company.

Market Entry Options

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

Joint Venture

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

Subsidiary Company

Subsidiary companies were mainly controlled by their parent companiesbecause of greater equity shares. The parent company would make its strategic decision and would have full control. This would be the best option for cms to enter in the Chinese market. Through this option, the company would enter into the Chinese market easily, with an inclusion of 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, it will impose a threat on the intellectual property and core competency because of the shared manufacturing processes and models. But, despite of all this, it is recommended that this option would be best because it will maximize the profits and the existing customers could be approached bythe company with the help of this approach.

Commercial Agents

The company could make a contract with a commercial agent,who 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 be able to reach the 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 could be taken to expand its business in China. The Chinese government presented a five years’ rules and regulations for the period of 2011-2015, in which its main focus was on the electronic industry’s improved innovation levels. cms is suggested to establish a new manufacturing plant in China because of the growing consumer demand and favorable Chinese economic policies. In addition to this, it is recommended that the company should start any of its related activity, such as inventory handling process inanother 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 its production cost................................

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