Please answer the following questions. The questions are at the end of the articles.
Please answer these questions separately.
Vizio and the Market for Flat-Panel TVs
Operating sophisticated tooling in environments that must be kept absolutely clean, fabrication centers in South Korea, Taiwan, and Japan produce sheets of glass twice as large as king-size beds to exacting specifications. From there, the glass panels travel to Mexican plants located alongside the U.S. border. There they are cut to size, combined with electronic components shipped in from Asia and the United States, assembled into finished flat-panel TVs, and loaded onto trucks bound for retail stores in the United States, where consumers spend more than $35 billion a year on flat-panel TVs. The underlying technology for flat-panel displays was invented in the United States in the late 1960s by RCA. But after RCA and rivals Westinghouse and Xerox opted not to pursue the technology, the Japanese company Sharp made aggressive investments in flat-panel displays. By the early 1990s Sharp was selling the first flat-panel screens, but as the Japanese economy plunged into a decade-long recession, investment lead- ership shifted to South Korean companies such as Samsung. Then the 1997 Asian crisis hit Korea hard, and Taiwanese companies seized leadership. Today, Chinese companies are starting to elbow their way into the flat-panel display manufacturing business. As production for flat-panel displays migrates its way around the globe to low-cost locations, there are clear winners and losers. U.S. consumers have benefited from the falling prices of flat-panel TVs and are snapping them up. Efficient manufacturers have taken advantage of globally dispersed supply chains to make and sell low-cost, high- quality, flat-panel TVs. Foremost among these has been the California-based company Vizio, founded by a Taiwanese immigrant. In just eight years, sales of Vizio flat-panel TVs ballooned from nothing to more than $2.5 billion in 2010. By late 2011, the company was the second largest provider to the U.S. market with a 15.4 percent share. Vizio, however, has fewer than 170 employees. These focus on final product design, sales, and customer service. Vizio outsources most of its engineering work, all of its manufactur- ing, and much of its logistics. For each of its models, Vizio assembles a team of supplier partners strung across the globe. Its 42-inch flat-panel TV, for example, contains a panel from South Korea, electronic components from China, and processors from the United States, and it is assembled in Mexico. Vizio's managers scour the globe continually for the cheapest manufacturers of flat-panel displays and electronic components. They sell most of their TVs to large discount retailers such as Costco and Sam's Club. Good order visibility from retailers, coupled with tight management of global logistics, allows Vizio to turn over its inventory every three weeks, twice as fast as many of its competitors, which allows major cost savings in a business where prices are falling continually. On the other hand, the shift to flat-panel TVs has caused pain in certain sectors of the economy, such as those firms that make traditional cathode-ray TVs in high-cost locations. In 2006, for example, Japanese electronics manufacturer Sanyo laid off 300 employees at its U.S. factory, and Hitachi closed its TV manufacturing plant in South Carolina, laying off 200 employees. Sony and Hitachi both still make TVs, but they are flat-panel TVs assembled in Mexico from components manufactured in Asia.
India's Software Sector
Some 25 years ago, a number of small software enterprises were established in Bangalore, India. Typical of these enterprises was Infosys Technologies, which was started by seven Indian entrepreneurs with about $1,000 among them. Infosys now has annual revenues of $6.99 billion and some 149,000 employees, but it is just one of more than a hundred software companies clustered around Bangalore, which has become the epicenter of India's fast-growing information technology sector. From a standing start in the mid-1980s, by 2010 this sector was generating revenues in excess of $60 billion, and combined software services, hardware sales, and business process outsourcing exports were expected to exceed $70 billion in 2011 on the back of rapid growth despite a sharp global economic slowdown during 2008-2009. The growth of the Indian software sector is based on four factors. First, the country has an abundant supply of engineering talent. Every year, Indian universities graduate some 400,000 engineers. Second, labor costs in India are low. The cost to hire an Indian graduate is roughly 12 percent of the cost of hiring an American graduate. Third, many Indians are fluent in English, which makes coordination between Western firms and India easier. Fourth, due to time differences, Indians can work while Americans sleep. This means, for example, that software code written in America during the day can be tested in India at night and shipped back via the Internet to America in time for the start of work the following day. In other words, by utilizing Indian labor and the Internet, software enterprises can create global software development factories that are working 24 hours a day. Initially, Indian software enterprises focused on the low end of the software indus- try, supplying basic software development and testing services to Western firms. But as the industry has grown in size and sophistication, Indian firms have moved up the market. Today, the leading Indian companies compete directly with the likes of IBM and EDS for large software development projects, business process outsourcing con- tracts, and information technology consulting services. These markets are booming. Estimates suggest that global spending on information technology outsourcing rose from $193 billion in 2004 to more than $250 billion in 2010, with Indian enterprises capturing a larger slice of the pie. One response of Western firms to this emerging competitive threat has been to invest in India to garner the same kind of economic advantages that Indian firms enjoy. IBM, for example, has invested $2 billion in its Indian operations and now has 150,000 employees located there, more than in any other country. Microsoft, too, has made major investments in India, including a re- search and development (R&D) center in Hyderabad that employs 4,000 people and was located there specifically to tap into talented Indian engineers who did not want to move to the United States.
1.) Management Focus: Read the Management Focus on Vizio (page 9) and answer the following questions:
- Why is the manufacturing of flat-panel TVs migrating to different locations around the world?
- Who benefits from the globalization of the flat- panel display industry? Who are the losers?
- What would happen if the U.S. government required that flat-panel displays sold in the United States had to also be made in the United States? On balance, would this be a good or a bad thing?
- What does the example of Vizio tell you about the future of production in an increasingly integrated global economy? What does it tell you about the strategies that enterprises must adopt to thrive in highly competitive global markets?
2.) Country Focus: Read the Country Focus section on India and answer the following questions:
- What factors have contributed to the growth of India's software industry?
- How has India's software industry changed in recent years? What are the implications of these changes for American companies like IBM and Microsoft?