Flat Panel Tv and the Global Economy

It is a producer of consumer electronics and primarily produces television sets. It grows fast despite a limited number of staff. Now, there are over 160 employees and it remains the first American brand in over a decade to lead in U. S. LCD HDTV sales. This passage has mentioned two main issues, which are related to what I have learned in the lecture. They are globalization of production and the reasons for businesses to become international.

Globalization of production Vizio has achieved globalization of production.

Globalization of production means sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production, for example, land, labor, capital, and energy. Vizio sources the components of televisions around the world. It source panel, electronic components, and processors from South Korea, China, and United States respectively.

Order custom essay Flat Panel Tv and the Global Economy with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

The assembly of the TV is in Mexico, while the final product design, sales, and customer service are in California. The final products are sold in retailers, such as Circuit City or Wal-Mart. Globalization of production makes companies more competitive by improving their quality or volume and lowering their costs. According to William Wang, Vizio CEO, he can undercut his competition because his overhead is low. The company has about 85 employees and they are mainly responsible for technical support or engineering. It outsources manufacturing to Asia because there are low-cost, for-hire factories. Because of reduced cost and high quality TV, it allows Vizio to compete with it rivals, e. g. Sony, Samsung, and Panasonic more effectively.

Reason to become international – proactive & reactive

There are some initiatives for Vizio to become international. The proactive reason why Vizio become international is that it can generate greater profits by reducing the costs of acquiring resources. By souring the television components worldwide and lower costs in labor and factories in Mexico, Vizio gain advantages to reduce its total cost.

From Vizio’s perspective, greatly reduced production cost cause it able to offer lower selling price of TV sets to customers. This becomes Vizio’s competitive advantage and allows it to beat its competitors- Sony, Samsung, and Panasonic. From customers’ perspective, they are benefited from falling price and improved living standard because they can enjoy high quality flat-panel TV. The reactive reason is because of the competitive pressure in the domestic market. There are many competitors in the United States, for example, Sony, Samsung, and Panasonic.

In order to survive, Vizio has to enhance its competitive advantage. Therefore, it sources suppliers of components around the globe, which can offer low-cost and high-quality products. This makes Vizio’s TV become competitive and attracts many customers to buy its products. Globalization also has its pros and cons. One of the advantages of globalization is that competition can increase the quality of products. Since Vizio now have to compete with rivals worldwide, it has to provide customers with better flat-panel TV than Sony, Samsung, and Panasonic.

Also, competitions force Vizio to create more innovative products so as to attract more customers to buy its products. Customers are thus benefited under globalization. On the other hand, globalization causes companies to lay off employees in their home country. Since many manufacturing works is outsourced to China or Mexico, which can provide low-cost labor and factories, employees in home countries are laid off because of their high labor cost, or the factories in home countries are closed down, causing unemployment.

As there is a trend toward globalization, many firms are involved in cross-broader trade and investment. Managing international business becomes not as easy as managing a purely domestic firm. Managers are now facing more difficulties related to globalization. The issues that managers have to grapple with are as follows.

Difference in culture

The firms are doing business with many other firms or investing in other countries around the world. Since the countries are not the same, there are differences in cultures, political systems, economic systems, legal systems, and levels of economic development.

Because of these differences, international businesses need to vary their practices country by country. Take General Electric as an example, GE invests in China in infrastructure. Since China is a communist society, many businesses are still operated by the government although it has opened its market to outsiders to invest in China. Therefore, the government is a large customer in China and GE needs to work closely with the bureaucrats. It is difficult for outsiders, who are not familiar with Chinese culture, to gain cultural sensitivity.

Even if they are exposed to the Chinese environment, they still need time to learn Chinese Culture. For example, eastern and western people are different in expressing their anger. Western gives unhappy faces when they are angry while eastern gives smiling faces even they are angry.

Therefore, when GE do business with Chinese people, businessmen have to be careful with their conversation with bureaucrats because they may not know bureaucrats get angry or unhappy with them. Since eastern people may not adapt to this cultural difference or may not get used to it, they cannot do business successful with the Chinese.

Besides, about punctuality, western are punctual while it is common for eastern to arrive a little earlier or late. When GE do business with the bureaucrats, it is better to come a little earlier. So the government bureaucrats need not wait for too long. Moreover, about confronting a problem, western faces the problem and think about prompt action to deal with the problems while eastern tends to avoid the problems. If eastern managers work in China to manage their subordinates, it is easy for them to have conflicts or argues because of different methods in handling the problems.

Eastern managers may force their Chinese subordinates to give prompt action but the subordinates may not get used to it and may feel unhappy or pressured. Therefore, different culture leads to changing management skills and skills in doing business. Country managers are often local internationals as they have a deep understanding of the local language.

Which foreign market to enter and which to avoid? It is suitable for the firm to choose an economically and politically stable market to invest in or cooperate with. Take General Electric as an example.

It chooses to invest in China because China is an emerging country. Since it is a developing country, it has a high demand for infrastructure investments, such as airports and railways to facilitate trade. Without these infrastructures, products imported or exported to and from China become difficult. Globalization is then difficult to take place. Also, China is economically stable. It is the world's third-largest economy in 2007 and contributes more than 5. 5% of the world's GDP.

Besides, China is politically stable because there are no wars, and riots rarely happen.

It is not suitable for company to invest in a politically unstable market, such as Iran and Iraq, because wars usually happen. Otherwise, firms will suffer from political risk resulting in expropriation, confiscation, violence, and conflict. Since China is politically stable, there is a low possibility for GE to suffer from political risk

Adaptation for the global market

When companies do business with countries around the world, it is important for them to beware of the difference in culture. Differences in culture require companies’ products to adapt to the local environment for business success.

There are some factors encouraging adaptation, for example, differing use conditions, differing buyer behavior patterns, and government regulatory influences. In the case of GE, GE Health Care makes MRI scanners that cost $1. 5 million, while the Chinese research center is designing MRI scanners that are only priced at $500,000. If GE sold scanners that cost $1. 5 million in China, the sales may not be very good because China may not afford this expensive scanner. Even if Chinese companies can afford $1. 5 million, Chinese citizens, who are not rich enough, cannot afford the fee for using MRI scanners.

Therefore, GE should seek ways to lower the cost of MRI scanners to better suit the needs of the Chinese. GE Chinese research center can serve this purpose because it can easily gain more information about the consumption pattern of the Chinese and design equipment that is more likely to gain sales.

Mode of entry

When a company wants to enter a foreign market, managers need to decide which mode of entry is the best. Exporting, Turkey projects, licensing, franchising, joint venture, and wholly owned foreign direct investment are the six mode of entry.

The six entry modes have their pros and cons. Besides, the higher the profit potential, the higher is the amount of firms’ financial commitment, risk, and marketing control. Thus, firms have to seriously consider which global market entry strategy to use. GE uses a foreign direct investment strategy (FDI) to enter Europe, Latin America, and Asia. The pros of FDI are that GE can have total control over its foreign business. When there are strong interdependencies between headquarters and local operations, total coordination achieved through ownership will guarantee acceptable performance.

On the other hand, the current international environment mat be hostile to full ownership by GE. It has to bear all the risk.

Reference

1. Kessler K, “Vizio's unexpected flat-panel kin”, USA Today; 2007.
2. Yang L, Differences between Eastern and Western culture, [homepage on the Internet], 2008 [cited 2011 Feb 7], Available from: http://mountainrunner. us/2008/01/differences_between_eastern_an. html
3. Xin H. Hey, hey: Look how China's growing, [homepage on the Internet]. 2007 [cited 2011 Feb 10]. Available from: http://www. atimes. com/atimes/China_Business/II20Cb01. html

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer