Analysis of Strategic Management at Foxconn International Holdings

The Foxconn International Holdings is a transnational concern group which is anchored by the Hon Hai Precision Industry, a Taiwan-registered corporation. Foxconn is the largest maker both in electronics and constituents and in CMS ( Contracted maker service ) including EMS ( Electronic Manufacturer service ) and ODM ( Original Design Manufacturer ) for other companies.Foxconn produces the Mac mini, the iPod, the iPad, and the iPhone for Apple Inc.

; Intel-branded motherboards for Intel Corp. ; assorted orders for American computing machine makers Dell and Hewlett-Packard ; motherboards for UK computing machine maker Zoostorm ; the PlayStation 2 and PlayStation 3 for Sony ; the Wii for Nintendo ; the Xbox 360 for Microsoft, cell phones for Motorola and Nokia, the Amazon Kindle, and Cisco equipment.Purpose of the studyThe intent of the study is to derive more net income and market portion for Foxconn International Holdings meanwhile cut down the useless disbursal in order to increase the net income of the entire group. The estimated gross revenues turnover is traveling to be $ 8400 million USD, which has a 16 % addition company with 2009.

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The disbursal besides will be cut down to $ 6000 million USD which is 10 % diminution. Therefore the gross net income will be $ 2400 million USD. The figure of staff will be diminution from 825,000 to 750,000 meanwhile the per centum of skilled workers will be in increased.Strategic AnalysisThe Internal Analysis of the OrganizationMission of FoxconnSupply electronics users the most cost-efficient, high quality 6 Cs merchandises ( computing machine, communicating, consumer electronics, and channels for electronic merchandises, auto, and content ) .

Vision of FoxconnThrough the most efficient “ Entire Cost Advantages ” to do comfort of electronic merchandises usage an come-at-able world for all world ;Through the proprietary one-stop shopping perpendicular integrated eCMMS theoretical account to revolutionise the conventional inefficient electronics outsourcing theoretical account ;Through the devotedness to greater societal harmoniousness and higher ethical criterions to accomplish a win-win theoretical account for all stakeholders including stockholders, employees, community and directionCore Value of FoxconnContinual instruction, puting in its people long term and localisation globallyAims of FoxconnContinued development from a fabricating leader to a engineering leader and to beat up the best of our work force ( FIH, 2009 ) .Past and nowadaysHon Hai Precision Industry Company Ltd. was founded in 1974 as a maker of plastic merchandises by Terry Gou. The company opened its first fabrication works in Shenzhen, China in 1988, which is now the company ‘s largest works, with 420,000 employees working in displacements and populating inside the compound.

Currently Foxconn employs 800,000 people in mainland China including those working at the monolithic Shenzhen composite.Get downing in 1994, Foxconn purchased development centres in the United States and Japan. In 1997 and 1998, it established extra fabrication workss in the United Kingdom and the United States. As of 2007, the company and its subordinates owned workss in the Czech Republic, Hungary, Mexico, Brazil, India, and Vietnam.

By 2010, the company had been granted over 25,000 patents worldwide. It is the largest exporter in Greater China ( FIH, 2009 )Culture and StructurePower Culture and StructureThe power civilization depends upon on a strong leader, with cardinal power, pull stringsing all the activities of the organisation. For illustration, Mr. Terry Gou is the strong leader of the Foxconn Technology Group.

The construction is chiefly base on the foreman.Role Culture and StructureThis sort of civilization, logic and ground, impersonal systems and processs rule behaviours.In the function construction, everyone has their designated occupation description, procedural enchiridion and so on ( Elearn, 2005 ) .Organization direction construction and stakeholdersThe organisation construction of Foxconn Group is the Followings:Foxconn group is headquartered in Taipei.

The group ‘s ground tackle companies, Hon Hai Precision Industry Co. Ltd. Hon Hai ‘s Broad of Directors are responsible for protecting the involvements of the stockholders, and sing positions of stakeholders, such as employees, clients, providers, communities, authorities, NGOs and others. Foxconn has organized commissions to supervise human resources, finance, logistics and different industry processes.

The commissions provide concluding blessing of the senior-level hiring and publicity procedure in their specific Fieldss ( FIH, 2009 );PESTEL Analysis ( See Appendix 2 )PoliticalThe Political tendencies are chiefly the authorities influences, statute laws and administrative facets.The Foxconn chiefly ain workss in mainland China, particularly in the coastal country such as Sheng Zhen etc. With the specific state of affairs in Mainland China, the authorities influences have a large consequence on the operation of the organisation.EconomicThe economic tendencies are the economic indexs affects industry, .

The Foxconn is chiefly effected by the rising prices rates, exchanges rates, revenue enhancement rates and so on.SocialThe societal tendency is the descrying tendency and the apprehension of the new attitudes.The Foxconn is a maker which chiefly taking the ODM and CEM concern, since the ODM and CEM are chiefly determined by the demands of the clients, therefore descry the tendencies of the clients is really of import.TechnologicalTechnological tendency is the technological revolutions.

The Foxconn is a mass production maker ; the technological tendencies are including the innovations, inventions and diffusions which may impact all the facets in the merchandise process from planing to the after sale service.EnvironmentalThe environmental tendencies are the beginnings needed by the organisation.The Foxconn have a great demand for the resources they need for operation and besides they have to confront the jobs such as the environmental jobs.LegalThe legal tendencies chiefly behaviours in the development of the legal system.

The Foxconn is now confronting the legal facets such as the lowest wages and labour protections and so on ( Porth, 2002 ) .Five Force Industry Analysis ( see Appendix 3 )From the exhibit below we can analyse the undermentioned factors. ( Appendix 3 )Menaces of new entrants ( High )The new entrants possibly the experience rivals or can besides be the freshly entered cub makers without any experiences, since the industry Foxconn now in need really small investing but what most demand is the low cost of money and clip. Thus we can state that the menaces of new entrants are rather high.

The deal power of the providers ( Low )The provider for Foxconn is called the Vendor-managed Inventory Supplier. The VMI theoretical account can be conclude as there is merely one provider for Foxconn, all the stuffs Foxconn demand is order through the VMI provider. The provider and organisation may hold contract which is in the high hazard that the contract between purchasers and company possibly relieved.The deal power of the purchasers.

( High )As the makers as Foxconn is, what and how the clients ( purchasers ) wants is most of import. The purchasers for Foxconn may merely be the group purchasers, such as the universe good known trade name companies such as the Apple IncNokia and Cisco or those freshly entered unwell-known companies. The demand from these companies all demanded a low cost and fast production meanwhile with the good quality. Most of the clip the companies may hold 30 or longer yearss of due day of the month after acquiring the merchandises from the industries which may besides a compete factors among all the makers.

In this instance we can state the deal power of the purchasers is high.Menaces of replacements ( Medium )There may be possible replacements for Foxconn like such organisations which merely specific in individual class but got more variegation and faster R ; A ; D velocity. But since the Foxconn already existed in the market for so long, there is something they can depend on which we can state the menaces is merely medium.Industry competition among bing rivals ( High )The rivals for the Foxconn may chiefly take steps such as take downing the cost in order to win the other rivals.

The other ways of viing may besides be the service and clip. With the steady growing of the industry and low exist barriers, the competition among bing rivals is rather high ( Porter, 1998 ) .;Therefore from the market Foxconn is in, we can reason following market cleavages:The markets which has a big size, pursuing of great profitableness, with a great volume and frequent purchase of the merchandises. The merchandises for this sort market are chiefly focus in the public presentation.

The maker is merely produced the merchandises under the demand from the purchasers which the market is besides called the ECM ( electronic contract fabricating ) market. Briefly, we can state the company merely requires the maker to fabricate the merchandises following the contract.The markets which require companies that design, trial, industry, assemblies for original equipment makers which are called the EMS ( electronic fabrication service ) market. For illustration, the company may necessitate the maker to make all the design, maker and after-sale service.

The market which requires a company designs and manufactures a merchandise which is specified and finally branded by another house for sale. For illustration, the company requires the maker to plan and fabricate a sort of merchandises but with the company ‘s logo and the company is responsible for the service and fix of the merchandises. This market is call the ODM ( original design fabricating ) market.As we can see more and more OEM market are developing into the ODM or the EMS markets which will take the new tendencies of the market cleavage ( Krishna, 2005 ) .

 SwotSWOT analysis ( See Appendix4 )Critical DeductionThe critical deductions emerge from the SWOT can be followerss:Keeping gait with the latest engineering which may better Foxconn ‘s fight in cost, invention facets.Use public dealingss decently in order to derive the good relationship with the local authorities.Widen the market in Africa and Middle East meanwhile strengthens the market portion in Asia, Europe and America market.The Foxconn should establish constabularies which may better the operation efficiency.

Foxconn should better the planetary distribution abilities.Strategic ChallengesChallenge statementThe most challenge is to doing constabularies in order to better the operation efficiency. The operation efficiency can be concluded as the efficient supply concatenation, extremely motivated and loyal, educated and skilled employees, just publicity and honoring policies, good productiveness and so on.Deduction of ChallengeThe challenge may increase the competiveness of the Foxconn in the hereafter since it can increase the company ‘s touchable, intangible and human capablenesss.

In order to accomplish such nonsubjective, the company should execute in the undermentioned ways:Construct the group institute in order to supply instruction to the employees, which enable them to accommodate the engineering revolution.The group institute could supply employees who have small instruction great chances to go on their survey. This may besides assist them to get the hang the latest technological accomplishments in the operation. On the other manus, employees with good instructions may besides take the development of the company civilization and employees trueness.

Provide just publicity and honoring chances to the employees.This may increase their motive and loyal. It besides may assist company maintain every bit many as skilled employees every bit much as possible. In the modern universe and modern organisation, skilled workers are the hoarded wealth of the concern.

The other manner is provide good public assistances for the employees, such as supplying free tiffin, dinner and so on,The company should set up an e-supply concatenation direction system in order to increase the efficiency of the supply concatenation direction. The e-system may straight increase the efficiency of all the facets during the operation which cut down $ 10 million USD disbursal in the direction facet.Automatization of equipment.The Automatization of the equipment may increase the quality of the merchandises meanwhile decline the figure of material needed in the production process.

An optimistic appraisal is that the figure of staff can be declined to 750,000.Strategic OptionsSWOT Matrix AnalysisStrategy RecommendationThe undermentioned schemes are recommended as the strategic options:Strategic Option 1: Develop the Human Resources and thin fabrication schemes.The Human Resources Strategies are including the followerss:Provide uninterrupted instruction for employees.The Foxconn should supply instruction opportunities to the employees which may increase the figure of the skilled workers.

On the other manus it may assist cut down the figure of cubs which can salvage the disbursal on staff.Provide publicity, honoring and public assistance for the employees.Provide just publicity and rewarding chances and besides good public assistance for the employees may increase their trueness and motive to the company.For illustration, company could supply free tiffin and dinner for the employees since sometimes money can non fulfill everyone, humanity may besides affect people.

The Human Resources Strategy may assist Foxconn cut down 75,000 of staff interim cut the disbursal down of $ 100 million USD.The thin fabrication scheme will cut the disbursal down of $ 300 million USD.Strategic Option 2: Dressed ore on the OEM and CEM concern.The Foxconn should be concentrate on the ODM and CEM concern which may additions more net income than the normal OEM concern, since in the ODM and CEM concern are the end- to stop service where there are more net income points than the individual ODM.

For illustration, an ODM may include following stairss: design, proving, fabrication, assembly, fixs and refurbish. The company can bear down for more net income than merely making the individual fabrication.The scheme may increase about $ 400 million USD yearly.Strategic Options 3: Development in high value low volume merchandises:The high value low volume merchandises such as the workss equipments, digital control tools, and numerical control tools and so on.

All these merchandises contain high net income but need less labour.This scheme may increase $ 100 million USD turnovers and diminish $ 100 million USD disbursal due to low volume and high value.Strategic Option 4: merchandises variegation and selling in Asia and Africa.Asia and Africa are two of the fastest developing continents in the universes, the market at that place necessitate all sorts of merchandises from low-end to high terminal.

Thus variegation of the merchandise may assist the company to busy the market portion to approximately 40 % . On the other manus, the variegation besides enables the company net incomes more in a high demand market.It estimated that there might be $ 700 million USD turnover added yearly.Strategic Option 5: Use engineering to increase the quality.

In the mass production, the quality control is really of import. The good quality control can assist company derive net incomes meanwhile decrease the disbursal since there are less deficient goods produced.The usage of the Six Sigma may assist the company with the quality control. On the other manus, with the automaziton of the equipments, quality can besides be addition.

The scheme might cut down the disbursal for about $ 200 million USD yearly.ExecutionExecution for Strategic Option 1Develop the Human Resources Strategies is including the undermentioned points:The Human Resources Strategies are including following points:The employees publicity, honoring and public assistance policies, the Foxconn should ha s a series of policies which could offer employees just publicity and honoring right and can be provided with good public assistances such as the free tiffin and dinner.The employee instruction policy which will set up an institute provides employees uninterrupted instruction in order to better their accomplishments.The thin fabrication scheme is followerss ( See Appendix 5 ) :Elimination of Waste and Pull system scheme.

The thin fabrication scheme is designed to extinguish waste and heighten the value of the company ‘s merchandises to its clients.Kaizen ( uninterrupted betterment )Kaizen refers to patterns that focus upon uninterrupted betterment of procedures in fabrication. The Kaizen is to extinguish waste by bettering standardised activities and procedures. ( ReVelle, 2002 ) .

The Kaizen may merely be company few million USD per twelvemonth, but the consequence is profitable asince there will be a batch saved by eliminate waste. The estimated aomunt is $ 10 million USD which can be invested in to other strategic options.Execution for Strategic Option 2Dressed ore on the ODM and CEM concern.The ODM is the Original Design Manufacturing ; the CEM is the Contract Electronic Manufacturing.

Foxconn should concentrate in these two concerns. The company could establish a series of service in order to attractive the purchasers, such as set up proving Centres, shorten the period of development or even supply terminal to stop service. These services may be company $ 3-4 million USD yearly.Execution for Strategic Option 3Development high value and low volume scheme.

The high value and low volume can be concluded as all sorts of digital control tools, the numerical control tools and works equipments.In order to development the high value and low volume scheme, the Foxconn must utilize their ain trade name alternatively of fabrication for other company. The ain trade name could gain more than the OEM concern, even the ODM concern. Foxconn should pay attending in the quality and service.

When first enter the market, company can utilize the lower monetary value to derive the market portion every bit much as possible. After have a base in the market, the company should maintain forward come ining the high-end market. The option might necessitate company to drop some of the net income devising concern temporally since it needs tonss of resources which may be company $ 10 million USD initally.Execution for Strategic Option 4Merchandises variegation and market in Asia and Africa.

Asia and Africa are the two fastest grow market, consumer of those markets have a less branding consciousness than the clients in Europe and America market. Thus Foxconn could utilize its ain trade name to come in this market. The merchandises variegation could be utile for the company since the market in these countries need all sorts of electronic merchandises in low terminal to high terminal. Besides the Foxconn could collaborate with the local telecom operators in order to derive every bit much as market portion they can.

Foxconn could utilize the postmodern selling to busy market portion in those market.They could hold a good chances in symbolic their merchandises and ain trade names which will assist company to derive the market portion. On the other manus, the size of the company may hold advantage in after-sale service;Six Sigma includes quantitative and problem-solving facets, along with implicit in direction issues. It seeks to better the quality of procedure end products by indentifying and taking the causes of defects and minimising variableness in fabrication and concern procedure.

Foxconn could utilize the DMAIC methodological analysis with few tools to better the quality ( Devane, 2004 ) .;PESTEL AnalysisPolitical TendenciesGovernment InfluencesGovernment may straight act upon the operation and determination devising of the organisation. Nowadays, mass production makers like Foxconn possibly greatly influenced by the authorities since it can non do much net income but may take to Numberss of serious jobs such a offense degree etc.Legislations facets.

The statute law may besides consequence the organisation, such as constitution of the ordinances, and Torahs. With reinforce of all sorts of Torahs and ordinance in China, Foxconn has to face and accommodate this alteration by all agencies which may increase the cost.Technological TendenciesTechnological RevolutionsThe technological revolutions can be concluded as the innovations, inventions and diffusions. These 3 factors non merely changes the terminal merchandises of the maker but besides act upon the R ; A ; D, merchandises and other processs which many greatly change the manner that Foxconn operations.

Social/Culture TendenciesDescrying tendenciesThe societal tendencies presents are people willing to pay money for the latest merchandises and the clients particularly immature clients demand inventions in the merchandises which is most of import in the ODM concern since Foxconn is responsible from Designing, fabrication and after-sale service. How to descry the tendencies is of import.Economic TendenciesInflation tendenciesThe rising prices is non merely act upon the cost of all sorts of stuffs and service, but has consequence the cost of the labours, which may be a great challenge for Foxconn to confront since maintain the lowest cost is the manner of survive in the fabrication industry.Exchange ratesThe exchange rate has a great influence on the organisation such as Foxconn, since they chiefly used USD as their colony currency.

With the even little fluctuate of the currency may besides take the great lost in concern.Legal TendenciesDevelopment of the legal systemThe Foxconn now face a great legal tendency in mainland China. Many metropoliss have launched jurisprudence to modulate the lowest wage for the employees which may on the other manus increase the cost of the operations.The other job is that there are more specific ordinances and Torahs on labour protection and environment protection and so on which may besides take to in the increasing cost for operations.

;SWOT AnalysisStrengthsThe strong productiveness is a mark of the mass production while will efficaciously take down the cost of the merchandises.Foxconn set up the R ; A ; D centres near the chief clients ‘ workss in order to shorten the merchandise developing clip meanwhile guarantee the quality of the merchandises.The Foxconn invest $ 196,499,000 USD in the long and short term R & A ; D.The Foxconn use the extraordinary schemes in Human resources and operation direction in order to actuate the center and high direction category.

The Foxconn offer the employees a integrated life topographic point which looks like a campus. The campus provides all sorts of service needed by the employees.Since being the providers of the Foxconn is a sustainable manner of net income, the competitions among the providers are really ferociously, therefore Foxconn can acquire advantage among the providers.The Foxconn got different concern from nomadic phone to laptops and personal computer constituents which may great diversify the merchandises of Foxconn.

FailingThe turnover of 2009 is $ 7,213,628,000 USD and the cost of gross revenues of 2009 is $ 6,785,266,000 USD which is over the 70 % .The low instruction of the labour may take to low efficiency. The rising prices and statute law on labour protection may great impact the cost of Foxconn due to the addition of the lowest wage.The mainly workss are located in Mainland China which may be greatly influenced by the increasing monetary value of the fuel monetary value and so on.

The planetary distribution is non so effectual that can non fulfill the demand of the planetary clients.The employees are deficiency of motive due to the low wage and long clip over clip working.The relationship with the authorities is non so good, which may take to the prejudice from the authorities to the Foxconn. This would greatly act upon the operation of the company.

OpportunitiesPeoples presents are looking frontward to new electronic merchandises, therefore lead to a higher demand of the latest merchandises, the company still has a empty market to busy.The engineering revolution may assist Foxconn moo the cost, for illustration when Foxconn update the equipment which may assist the company increase the efficiency meanwhile low the cost.The less investing required will assist the organisation to spread out concern easy.With the development of the Asia and Africa market, the merchandises from Foxconn can run into the demands of low monetary value and good quality which has advantage in busying the new market.

More and more companies are willing to give the concern to Foxconn in the type of ODM or CEM, which they merely need use their trade names, the Foxconn will making the design, fabrication and service occupation for them, which may take down the cost of the companies meanwhile maintain the quality.MenacesThe authoritiess ‘ policies are ever altering all the clip, in some instance the ordinance from the local authorities is even vary from the national jurisprudence which would do many obstructions in the development of the states.The rising prices is now become a major menace due to it might increase both labour cost and the supply costs such as the natural stuffs, the operation cost, transit and public-service corporation cost.The rapid alteration of foreign currency may take large job particularly to Foxconn who use the Foreign exchange colony may be influenced greatly chiefly because of the float of the USD with the local money.

The consumers presents are more concern about the environment issues. Consumers may necessitate for greener merchandises which may increase the cost and engineering troubles.Appendix 5Thin fabricationIn the past, companies merely passed costs on to the client. The pricing expression wasCost + Profit=PricePresents, in competitory market, clients insist on a competitory market every bit good as first quality and merchandise characteristics.

This means that companies must cut down costs to do net income.Price – Cost= Net incomeThe thin fabrication gives a company a cardinal competitory advantage by let it to construct high-quality cheaply because clients non makers set monetary value and find the acceptableness of the merchandises and service they use. The thin fabrication has 3 rules:Definition of valueValue must be defined merely from the ultimate client ‘s position and should non be adjusted by preexisting organisation, engineerings.Elimination of wasteThe waste can be defined as the activity that absorb resources such as cost or clip but adds no value.

There are two sorts of wastes existed, the obvious waste and concealed waste.The undermentioned wastes may emerge in operation of Foxconn:Waste of stock list.Waste of stock list affects every production procedure which depends on the stuffs and old procedure. In the mass fabrication, it may be estimated 20-40 % of the company ‘s gross.

Therefore to extinguish this, company should utilize pull- system.Waste of rectification.Waste of rectification chiefly go on when rectifying or mending a mistake in stuffs or parts that adds non value but unneeded costs because of extra equipment, labour and stuffs needed. A JIT ( Just in clip ) can assist to extinguish the waste.

Waste of gesture.Gesture of people or equipment which does non add value to merchandises is a waste.Waste of waiting and overprocessing.Waste of waiting is that the labour or the equipments waiting for information or each other.

This requires a agenda and an efficient supply concatenation to extinguish.Waste of overprocessing is that procedure adds no value to the merchandises or service in the position from the clients.

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