VIZIO Inc. Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Summary

William Wang had made number of unsuccessful attempts to establish a business in electronic industry and finally got the idea of manufacturing cathode ray tube (CRT) TVs and presented his idea to his former business partner Waitt, who was running his PC business with established retail stores. The launch of CRT TVs at a price, which was one third of the current market price of CRT TV proved to be a successful business but Waitt’s losses from PC business could turn overall business profitable so Waitt decided to wind up his company and then Wang raised capital by mortgaging his house and took loan from his friends in order to establish his own company in the year 2002 and named it “V”. In the year 2003, Vizio produced 46-inch plasma TV for $3,800/- and approached Costco retail stores to sell its TV at their retail stores and they concluded to initially place the TV at 10 outlets at a price, which was half of competitors price and later on when TV proved to be successful Costco started to sell it from all the stores. During the year 2004, Wang changed the business name as Vizio and had six employees with annual revenues of $18 million. Wang raised more capital by selling shares of Vizio and continued to grow the business. Further in the year 2007, Vizio reported $1.9 billion revenues and by November 2008, Vizio portfolio of product included 5 plasma screens and 22 led screens with price in the rage of #399.99/- to $1,699.99/-. Additionally, Vizio introduced many other television accessories such as remote control devices, multimedia display monitors, high-definition sound systems etc. Meanwhile, Vizio reached national and international retail market through Wall-Mart, Dell Inc., City Security Stores, Target.com, Sears Holding Corporation, and Kmart., Vizio had won number of awards such as number one ranking in INC., which confirmed their successful business operations.

Strategic Problems

The 85% to 90% of the LCD and Plasma TVs component is panels, which are currently being supplied by only limited number of suppliers and the quality and price is dependent on the strategic relation between these suppliers and Vizio but these suppliers are dealt by ODMs.
Vizio highly rely on original design manufacturers (ODM), Amtran, which could lead to troubles in future if somehow they stop working for Vizio for provision of high-definition TVs (HDTVs).
Vizio’s HDTV brand is not very much recognized and customers perception is being built that this low price is because of the low quality panels used HDTVs.
Vizio is relying on suppliers in order to finance its working capital funding, which can lead to shortage of liquid funds for fulfillment of other short term payments.
Strategic relationship with LCD and plasma panel providers

Strategic Objectives and Alternatives Discussion

Vizio’s strategic objective is to produce quality product in order to attract and retain more and more customers because Vizio HDTVs are new in market and consumers do not know about the quality and reliability of their HDTVs, therefore, it is a strategic objective of Vizio to ensure that quality of components are used in the production of HTDVs. However, the main component of both types of HDTVs is LCD panels and plasma panels, which comprises of around 85% to 90% of complete HDTV. In addition to this, the quality and price of these TV panels depend on the quality of strategic relationship between suppliers and buyers, however, the suppliers of panels are dealt by Original Design Manufacturers (ODM), who tries to put the shipping cost burden on panel suppliers and pushes them for the early deliveries, which damages the relationship between them.

Alternate to resolve this problem can be that Vizio’s strategic management, specifically Wang, should create direct relations with panel suppliers, as per their tradition they prefer to meet with similar level management. Therefore, in order to build reliable and long term strategic relationships with panel suppliers, such as Samsung, AU Optronics Corp., for LCD plasma panels and LG Electronics and Panasonic for plasma panels, Wang will have to meet with their CEOs more frequently, which will ensure that good quality of panels are provided for production of Vizio HDTVs.

Another alternate can be that Vizio can encourage ODMs to perform this relation-building process by meeting with lower level management of panel suppliers, which will further ensure the timely delivery of panels as ODMs has been asking or the quick supply of components.

High reliance on one original design manufacturers (ODM)

Vizio is highly reliant on single Original Design Manufacturer (ODM), who is Amtran that has been providing 80% services to Vizio for their procurement and assembly of HDTVs and Vizio’s objective for that much high reliance on Amtran is to achieve economies of scale advantage, which will potentially lower down the cost of HDTVs .........................

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William Wang, Director General of VIZIO, Inc is proud of the success of the enterprise in providing affordable flat-screen TVs. Since its founding in 2002, VIZIO has grown to more than $ 2 billion in revenue and was one of three flat panel TV brand, along with Samsung and Sony. Faced with the increasing price pressure from industry leaders and the unprecedented economic downturn, Wang wondered how VIZIO can best support its growth and to finance its business. "Hide
by Krishna G. Palepu, Liz Kind Source: Harvard Business School 27 pages. Publication Date: September 8, 2009. Prod. #: 110024-PDF-ENG