Foxconn Case Study

- Used business strategy called vertical integration, which a company would control every stage of industrial process, from mining the raw material to transporting to product.

Vertical integration is a concept in which a company develops or acquires production units for outputs which are

MTC initially needed to obtain substantial investment capital due to two main factors: a research-heavy industry, and the need to create most of the markets for its products. Although the founders' goal was to become a major manufacturing company, they did estimate that the company would need $50 million in capital before it would become self-sufficient. Their initial financing model was to first recruit a superior technical team, use that to attract additional equity investment and development funding from interested corporations, and then develop manufacturing capabilities. Commercial sales began 2.5 years after inception, and MTC is nearing the break-even point in 1990.

Vertical integration is when one firm joins with another at a different stage of the same production process. Forward Vertical is when the other firm is at a later stage and Backward Vertical is when the other firm is at an earlier stage. Vertical integration as a whole allows for a firm to control key stages of the production process; guarantees access to a market; and gains control of supplies. Companies such as Zara and American Apparel are vertically integrated, especially at key stages of

Vertical integration- a company controlled all parts of production from raw mats to the finished goods

Vertical integration is a business growth strategy for economics of scale. It is typified by one firm engaged in different parts of production example; growing raw materials, manufacturing, transporting, marketing, and/or retailing to expand business in existing market for the firm. It can function in two directions both forward integration and backward integration.

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Integration Business-Level: Hewlett Packard (“HP”) is an example of an organization that is using the integration business-level strategy, which is a combination of the differentiation and cost-leadership strategies (Rothaermel, 2013). HP utilizes this strategy because Apple holds the differentiation position while Dell holds the cost-leader position in the mobile devices market (Rothaermel, 2013). For this reason, HP must seek to implement both the cost-saving strategies in supply chain management, like Walmart, and the differentiation strategies in product design, like Apple (Rothaermel, 2013). There are differences, however, in the value chain between HP and the two companies above. HP

Foxconn Technology Group, a subsidy of the Hon Hai Precision Industries Ltd. is one of the world's largest electronics manufacturers. It ranks 112th

A company won’t integrate vertically its production if it against its business interest. There are some vertically

Companies such as Apple, Dell, HP, IBM, and Sony outsource labor and hardware manufacturing to a company called Foxconn Technology Group. Foxconn Technology Group is a multinational business anchored in Shenzhen, China. Some of the typical hardware being manufactured are, motherboards, chipsets, smartphones, tablets, and laptops. The majority of the factories are in China, three in Europe, one in India, and four in Mexico. Currently there are contracts to expand and build a new factory in Brazil. I believe that there are many ethical problems related to this example; first, the general idea of outsourcing mass amounts of labor, and secondly the mistreatment of

Lastly, bureaucratic standardization could not be neglected in the suicide tragedy in Foxconn. This essay will analyze how the strict standardization influences Foxconn factory. Pun and Chan (2012: 38) have found that a frontline worker in Foxconn factory must finish 5 tasks in 10 seconds, so each task only takes 2 seconds to complete in an assembly line. They (2012: 38) also explain that Foxconn factory uses non-human technology, like stopwatches and industrial electronic devices to monitor frontline workers, in order to ensure the output target. Setting strict standardization for production is a practice of just-in-time method, aiming to maximize productions and keep workers under close surveillance. Furthermore, every employee in Foxconn factory is designed and predicted in a standard way to perform their own duty. For example, workers in assembly lines have been trained to follow fixed steps in manufacturing process. Although leaders and managers in Foxconn factory believe that strict standardization ensures bureaucratic efficiency, frontline workers feel themselves as parts of the machines or even lower than the machines. (Pun and Chan, 2012: 38) This essay explains that the whole process in Foxconn factory runs like machines, which does dehumanization to some extent and demotivates innovation among employees. (Grey, 2013, p.87) To conclude, bureaucratic standardization partly leads to the jumping event in Foxconn factory.

In terms of communication and coordination, vertical integration leads to efficient and effective collaboration between supplier and Dell, and between Dell and customer through the physical proximity, established patterns of communications, and greater willingness to cooperate with other members of the same group. Another rationale for vertical integration is real time responsiveness and inventory management. Dell has real-time updating of order status and is able to check order status regardless of where the order is in the fulfillment process, which provided Dell with differentiating capabilities. Improved inventory

U.S. Semiconductor, a semiconductor manufacturer decided to expand their business to UK market in 1980. Their new business plan needed specialized technical support facility in UK. In order to minimize the equity investment, they decided to fund their assets mostly with debt. As Semiconductor owned subsidiaries, which spread all over the world, they face great exchange risk. Besides, instead of building a production department in UK, Semiconductor kept producing their products domestically and delivered them to UK by plane. British firms also confronted exchange risk due to the difference between import costs and sales revenues. This case mainly involves the discussion on the method of debt funding.

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