GEP Case Challenge

2
nd
September2014

Submitted by
Team SK
Contact person
Sumit Khanna (sumit_khanna2015@isb.edu)

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Agenda

I. Current State Assessment

II. Business Problem/Key Issues

III. Information Required

IV. Recommended Strategies

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I. Current State Assessment
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Major share from Mobile phones product segment
Display unit is a major component of the mobile manufacturing cost : 35-40%
Delta, a top global manufacturer of LCD/LED display unit for mobile phones, has been a
key supplier for 20 years
Contract Manufacturer works on assembling Deltas LCD/LED display units and other parts,
and sends the assembled Display Panel to Vizo for further application.
About Vizo &
its Value Chain
Includes manufacturing, distribution and sale of communications and entertainment
devices such as LED/LCD TVs, mobile phones, laptops, cameras, etc
Complex manufacturing value chain owing to a multi-tiered structure spread across
several regions
Short Product life cycles
High concentration of suppliers
Multiple supplier partners ; Access to best in class technology for each component
Global
Consumer
Electronics
Industry
Overview
Home-grown high-tech, low-cost mobile phone manufacturers have increased their
market share significantly in India.
Indian Mobile
Phone Market
Vizo is a US based global manufacturer and distributor of consumer electronics, which
is currently facing shrinking market share in India
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II. Business Problem/Key Issues
Below are some of the key issues faced by Vizo in the Indian Market resulting in loss of
overall Market Share
Overall surge in the number of local low cost /low-priced Smartphone
manufacturers
Recent innovations in Mobile Device supply chain has enabled rival products
to come to market more quickly
Currently product costs are higher than industry standards
Display units alone make up for 35-40% of the total product cost
Rising production and labor costs in China are additional concern
Indian government introduced tariffs for electronic goods imported -with a
7% tax on handsets priced above US$33 (2,000 rupees), compared to locally
manufactured products which are taxed just 1%
Current supply chain includes inefficient way of transportation of equipment
amongst DELTA, VIZO and Contract Manufacturer
In this supply chain setup, a high degree of coordination is required which
increases the time to market
Much of the supply chain remains uncontrolled by the firm due to highly
dispersed activities in the value chain. This can lead to low responsiveness to
changes in demand or disruptions in Supply Chain
Maintaining quality control is difficult in such a supply chain model
Key Issues Causes
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Increased
Competition
High Product
Costs
High Import
Tariffs
High lead time
&Transportatio
n Costs
Loss of Control
of supply chain
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For further detailed analysis, we would require the following set of information
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Data Brief Description Level/Granularity
Import Tariff Cost of importing unit from China
to India
Per Unit Cost
Other components of product
costs
Besides display unit what are the
other costs involved in producing
a mobile phone
Per unit Cost structure
Operating System costs Includes licensing costs. Also
some OS like Android can run on
cheaper chip sets
Per unit Cost
Firm Strategy /Supply Chain
Strategy
Overall company strategy
differentiation or cost leadership
? Supply chain strategy ?
Mobile Manufacturing Unit
Supply chain Design,
Coordination and Execution
Further information on
procurement, logistics and
transportation
Mobile Manufacturing Unit

III. Information Required
Increases responsiveness and time to Market
Lower labour costs in India as compared to China
Lower transportation costs and high co-ordination of value chain activities
No import tariffs

A. Manufacture and Assemble Locally in India
Increased economies of scale in procurement

Production forecasts require less safety stock when certain purchase
orders can be pooled together

Helps negotiate/bargain prices with suppliers
C. Standardize components across product lines
Facilitate agreements such that Contract Manufacturers can procure
components directly from Suppliers Savings in transportation costs yet
retain full control of quality
Helps in reducing inventory


B. Procurement of display unit directly by Contract Manufacturer
IV. Recommended Strategies
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Opportunity to reach out and market your brands to students from global B-schools
D. Explore opportunity of outsourcing design to ODMs