Ans: With pressure to remain sustainable and profitable under increasing competi
ID: 373241 • Letter: A
Question
Ans: With pressure to remain sustainable and profitable under increasing competition, the organisations are increasingly looking east for making their manufacturing processes cost effective. Use of technology has improved access, transportation and monitoring, leading to formation of global supply chains that offer advantage of low cost sourcing of products and services from countries like China, India and Viet Nam. As a result, it is not uncommon to see leading businesses setting shop in China.
The given case emphasises on the demand of time for CMS to set up unit in China to offer services to its long time customers moving there to take advantage of low cost manufacturing.It will be a strategic move that would involve some risk, but will be a long term asset in form of local capability for the existing as well as future customers. The absence of such capability will only result in loss of business to the competition.
It is highly recommended to start a unit in China as early as possible, not only to avoid the loss of business, but also enhance the capacity for future. Company should also work on the assessment of risk and its mitigation with effective preparations like selection of local partners,employee recruitment and training, cultural adaptation and compliance with local laws among the others .
Explanation / Answer
INTERNATIONAL JOURNAL OF CASE STUDIES IN MANAGEMENT HEC Volume Issu June 20 Market Expansion at ems electronics Case prepared by Professor Dietmar STERNAD Michael Velmeden, managing director of ems electronics gmbh,2 headquartered in Klagenfurt, Austria, was just returning from a visit to China with a German customer in the automotive supplier industry. The customer's company had built a new facility in China for which it required the same engineering and manufacturing services for electronic components as cms electronics had previously supplied for its main production site in Europe. The Austrian electronics company had no facility in Asia, however. Velmeden therefore recommended that cms electronics manage the entire project for the customer, including the engineering, but outsource manufacturing to a local service provider. The proposed model had functioned well with another customer. Velmeden and his customer visited two factories owned by the proposed subcontractor, one in Shenzhen and the other north of Shanghai. The customer seemed impressed by the production facilities but somewhat skeptical about the idea of having his electronic manufacturing services (EMS) provider subcontract to a different service provider