Quanta research institute is a company that has been dealing with PCs from its inception. This means that it has been able to compete with such companies as Merck, Oracle Corporation and Amazon.com. Supplying notebook computers to companies such as Apple and Toshiba, Quanta became one of the most successful companies in Taiwan, due to these companies` demand for notebook computers. Over the years, the goals and objectives of this company have undergone many changes. This is because, as time passes, the demand in the market changes. This means that the relevant companies also have to adjust to the same. However, there was a problem related to the fact that Quanta research was receiving lower market valuation, as compared to its competitors. For a company that had grown so enormously, it was expected to be at the market leader. However, this was not the case. The reason was attributed to the fact that the company was dealing with one product only. This means that the market was not diverse. The number of people who supplied with the company`s products was limited, as well as the number of suppliers it worked with. This called for a need to increase the market share. Therefore, this essay is based on the transformation of the company from producing one product to a more diverse company. First, it states the problem and analyzes the data to support the same. Then, alternatives are also considered and recommendations are made for the company.
At the time, most Taiwanese suppliers, such as Wistron, Compal and Hon Hai were showing extremely low profit margins. There was a global economic downturn which ensured that these companies did not achieve the profits they desired. However, every company had immediate issues that were unique to it. For Quanta, the major problem that needed to be addressed by the CEO was the problem of the production of one product only. There was a need for the company to follow a strategy of product diversification. This was in a bid to increase the market share, as well as its valuation in the global market. While companies like Apple, Dell, Toshiba, Oracle Corporation and others were registering huge profits, this company was showing a decline in its margins. Most Taiwanese companies suffered from this issue. However, Barry Lam was in a dilemma. For the sake of the long term interest of the company, he had to ensure that the range of its products was increased. This had several implications, since the company`s clients and suppliers were mostly interested in the product produced by the company at the time. Therefore, there was a need to take care of its interest. It takes a long time to build trust and partnership in business. Therefore, this is not something that the company can just throw away. There had to be a balancing act, which however created a new dilemma. The major question was, “How could Barry transform a one-product company into a human based company?”
Quanta research was a manufacturing company that had skills in that field. This means that even its employees relied on the same fact. Therefore, there was a problem of taking care of its employees’ interest. Another question was, “How could Barry transform a manufacturing company into better, more innovative and dynamic company that could keep up with market changes?” Issues related to retention of employees, suppliers and clients are very important issues, however, there are more urgent issues that have to be addressed. Any issue that affects profitability of a company is an urgent issue that needs to be addressed. This is because if a company is not profitable, all the other issues are irrelevant. A company is run due to profits it gains from its activities. Therefore, the issues that Barry had to address first are those that affected profit margins (Parsian, 2005). However, this does not mean that he had to forget and ignore all other vital factors that had to be considered. As CEO, he had the major challenge of carrying out a balancing act in order to transform the company. Since most of the other similar companies were suffering from the same problem, there was a need to look for other sources that could provide viable and important information for Quanta. This was the major hurdle that the CEO had to go through. There were many options that were on the table for the company to seize. However, there was a great need to come up with the best ways and methods in order to deal with the problem, including important collaborations with other companies which would be instrumental in its transformation.
The problems that have been identified above have to have a source, which is the origin of the problems. This forms the major basis of this part of the research. The major problem that led to the poor performance of Quanta was its reducing competence in the market. The reduction of competence of a company in the market can be caused by three factors. First, it can be caused by deterioration of a company’s strategies, as well as means to make itself the market leader. Secondly, the competitiveness of a company in the market can be influenced by changes in the market itself, for example, entrance of new competing companies, which makes it look like a noncompetitive company. For Quanta, it was a combination of the market changes and entry of new competitors. In the mid-1990s, Compaq came up with a new strategy of acquiring about 60% of the US household market. This was when it decided to introduce PCs sold at as low as $999. This meant that the market for these products had to increase tremendously (Shih, 2010). As it is recorded, most of these products were to be produced by Taiwanese companies. These were companies that had initial contracts with such companies as Dell. This is where the issue of innovativeness and originality came to an end. At the time, there were some companies that preferred contract manufacturing, meaning that those products manufactured which had been demanded in the market. Therefore, it did not have to produce products. The advantage of this is that there was no risk of having products that were obsolete or irrelevant in that market. This was because it only dealt with the products that were being required at the time. This was opposed to the companies that were producing its own brands. These are the companies that produced hardware. Therefore, their manufacturing did not depend on the demand in the market.
Quanta research was manufacturing notebook computers at that particular time. It specialized in them and was blind to other products that were demanded at the time. Fortunately for the company, it was able to get away with it. Researches show that the companies that were dealing with branded products were gaining more profit than the companies that were engaged in contract manufacturing (Sivia & Skilling, 2006). Therefore, there was no problem experienced by Quanta, at the time. During this period, Quanta became one of the largest manufacturers in Taiwan and it was even able to beat most of its biggest competitors.
However, the market began to change with time. The demand for notebooks was massively increasing, as compared to that for PCs. Therefore, there was a need to alter the volumes of production. The company also had to make sure not to mess anything up, in its pursuit of getting better profit margins. Companies such as Microsoft, Apple, Dell, Toshiba, Compaq, NEC, Lenovo, HP, Acer and others began to change and increase the variety of their products. This means that the companies were able to come up with ways to attract more consumers and increase demand for their products. Therefore, the companies involved in supplying these companies had to adjust to the same. This is where the problem arose for Quanta. There was a huge need to restructure, as well as to keep up with the changing market.
Each company has stakeholders. These are people who are affected by any decision made. In this case, there were a number of stakeholders. To start with, there were customers. These are people who provided market for Quanta. These companies had a dynamic nature of demand. This is because they are in an industry that needs a lot of changes. Also, there were numerous developments that took place every day. Floppy disks became irrelevant while hard disk were demanded more. Microprocessors and memory chips took sudden turns every month being constantly improved. Therefore, there was a need to adjust its activities in order to satisfy the needs and demands for its customers. This led to the involvement of other shareholders. The company`s employees also had to be considered. The introduction of new activities meant that other activities would be left behind. This is because a company cannot deal with products and activities that exceed its resources. Furthermore, the introduction of new products means that the older ones have now become obsolete. However, this company had employed many people at the time. These were people who had been working in the company since its inception. However, the introduction of new methods and ways to conquer the market meant that the company had to fire some employees. Although some of the employees could still be needed by the company, it had to employ some new ones who had the knowledge and skills required at the time (Azzalini, Scarpa & Walton, 2012). Therefore, this was another major problem for the CEO to deal with. The trust that had developed between the company and the employees was at the risk of being lost. What are the major steps that could be followed in order to ensure that both sides of the coin are balanced?
The clients and suppliers of Quanta research cannot be left out of the list of shareholders. This is because they will be absolutely needed in the future. Just as Quanta research is having a problem with transformation, the suppliers and clients involved in the production process are in the same dilemma. However, the party that suffers the consequences first is Quanta Company. This is because the company has to deal with the constant growing demand and ensure its relevance in the market. The products that the suppliers manufacture were seemingly becoming obsolete. That is why there was a need for Quanta to come up with new strategies. According to its size, at the time, it is clear that Quanta Company was a major source of income to its clients. This is because of the scale at which it was operating. Therefore, there was a need for the CEO to ensure that he did not upset the clients. Apart from the facts listed above, there is also a need to look at actual figures. This is because figures help in determining whether the findings and problems identified were actually real. In 1998, the shipment volume in Taiwanese market was recorded to be about 6 million. Over the years, this figure continued to increase, up until 2004, when it was recorded to be about 33 million. This was the same case for the shipment value. In 1998, it was recorder to be $8 billion. This figure continued increasing up until 2004, when it was recorded to be $21 billion. These figures might be confusing. This is because one might mistake these figures for ones in a flourishing market. However, these figures only depict a changing demand of products. The consumers in the US and other parts of the world which formed the market for these Taiwanese companies had an increasing demand for these products. This means that people demanded more goods that were produced by Taiwanese companies. This caused an increase in volumes of products being shipped overseas. In return, the shipment value also had to increase. However, the actual measure of profitability is a profit margin. This way, it will be easier to insert Quanta into the equation and determine how it was affected by the same (Williams, 2005).
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The average sales prices were seen to be decreasing. This happened due to a trend that was vividly observable. In 1998, the average sales price was about 1384. This figure continued to reduce up to 2004, where it was recorded to be 655. This proves an important factor. Despite the fact that the sales were constantly increasing, profit was still low. This is because a lot of efforts were put into the manufacture of these products. Another fact is that the products continued to have lower process. This is because notebooks and PCs were constantly improved. At certain times, Quanta had to make changes that involved the use of large amounts of money. For example, there was a time when it had to use LCDs due to an increasing demand for them. For this reason, profit margins could not be proportional to the volume of sales made by these companies. Although Quanta research was responsible for the manufacture of a large share of the market in Taiwan, it still did not get proportional profits from the same. This was the main reason as to why the mentioned problem existed.
There are numerous alternatives to how Lam could have dealt with this problem. Some are those which he mentioned, while some are those that are recommended by the essay. However, it is vital to analyze the criteria that should be used in the analysis. First, pricing is an important factor. This essay is about Quanta Company, and not the whole Taiwanese market. Since this is not a monopolistic market, the changes made in pricing in Quanta do not affect the market as a whole. Pricing is one of the best methods that companies have used to counter competition. This is because competition is all about consumers. There is no better compulsion for a consumer than reduction in products` prices. This is the reason as to why it is considered as an alternative for this company. However, it would have to be applied in a timely and wise manner. This is because it may be done when other companies are doing it. This would render the move irrelevant and unproductive. However, this does not disqualify it as a possible alternative. For this reason, a deep analysis of the market will be conducted before naming pricing as a possible alternative.
In addition to pricing, there are other alternatives that can be seized in a bid to solve the problem of low profit margins. For example, the cost of the idea would have to be considered. It is vital to remember that the major aim of this essay is to come up with an idea how to increase profit margins. However, there are ideas which may cost too much, and especially when the result is not achieved. Therefore, this fact has been considered when coming up with the best idea to be implemented by the company. However, it is also important to remember that there is a difference between long term and short-term results of every undertaking. Therefore, it is possible that a certain undertaking costs a company a huge amount of money at the beginning. However, if it has a promising future for the company, it is worth the risk. Furthermore, there is no idea that would come without a cost. It is only a matter of deciding which idea is worth the cost that it demands. Therefore, this fact has been used to come up with the best methods.
Another factor is that the company might decide to change or expand its market. The company might also decide to alter its activities. However, the fact that should not be forgotten is the objective of all these alternatives. When choosing the best alternative, the best candidates would be the ones who favor and attract more customers, reduce the cost of production, reduce additional costs and increase profit margins. This would be the best alternative for this research. Also, previous relations should be taken care of. This is because a company is never completely done dealing with other companies. This is because there will always be future references to past relations in a bid of a company to improve its performance. Therefore, there is a need to choose an alternative that does not ruin relations with important people in the production process of the company. As it can be seen from all these requirements, it is impossible to come up with the ideal alternative in order to find a solution of this problem. This is because there is no alternative that can meet all the stated requirements (Zey, 1992). This is the point where a company has to evaluate its choices and accept the existence of opportunity cost. In this case, it can be easier to ensure that it comes up with an alternative that does the least harm to the stakeholders of the company. This way, it can be referred to as a healthy transformation that does not cause more harm than good to the parties involved. The change of products is one of the alternatives that require serious analyses to ensure that people and previous clients do not feel left out of the transition process. Therefore, one of the alternatives had to be chosen. This would be the most favorable to everyone.
The first preferred alternative was one that had been identified by Lam. This was the alternative of a change in the market. The company had to find and enter a new market. According to Lam, China was a good candidate for this alternative. This was because the products of Quanta had not penetrated Chinese market by a large scale. There are several factors that led to this decision. First, China was very close. Shipping costs would be cut down. This is an important fact for an increase of price per sale. This is because it cuts down the cost at which the products of the company reach the consumers.
Another advantage that came with entering Chinese market is that the company was well informed about the development plans of China. Through this, it was easier to maneuver its products in line with the development plans. Some of the development plans included cloud computing, green energy and bio-pharmaceuticals. If the company was able to identify the areas in China to develop, with reference to the market for its products, it would be easier to increase the profit margin. However, there are a few disadvantages that come with this option. First, the market where the company was operating was bigger than that which it could get in China. This is because China offers a much smaller market. Also, diversification of the market is important. This is because it ensures that the company is in touch with the current market trend. It also ensures that the company is able to compete at a global scale. Therefore, shipping prices might not be worth eliminating, by the mere fact of shifting of the market to China. The best way in which this alternative can be utilized is by maintaining the initial market, then exploring the new market in China. This would require the use of more resources; however, it would prove to be productive to the company, in the long run (Cl?maco, 1997).
Another option would be an increase in the range of products that the company deals with, in accordance with changing demands of the market. This takes the discussion back to the problem stated above. This was the problem of how the company can be in a position to transform from a conservative company that produces note books to a company that shows a lot of innovativeness and keeps up with the market trends. All the developments that were made, especially in the improvement of computers from second to third generation computers, should have been incorporated in the company. This means the employment of more and more experts in the field. Even the components incorporated in the notebooks were extremely important. This is because there are other companies in Taiwan that are ready to take advantage of any laxity observed in competitors. This would be the best solution of the problem stated. This is because it would ensure that the company is constantly developing. Another factor that is vital to consider is that the company needs to get rid of its old practices. However, a research shows that all companies had the same trend as the one discussed above. For this reason, it had to be a solution that none of the companies had tried before. The major disadvantage of this method is that it would cost more than others. There is nothing that is expensive in this business as the ability of a company to have resources that keep it updated, according to the existing market. Therefore, taking into consideration cost, this would not be a perfect option (Belton & Stewart, 2002).
The last alternative that the company would use is merger. This is where the company would merge with another company that is in the same field. This would greatly increase the competitiveness of the company. Supply chain collaborations have been known to be one of the best ways to remain competitive in the market. Design and manufacture of such products as servers require a lot of resources. Quanta research has been able to manage this by itself. However, the addition of an extra force would mean that the company is able to acquire the resources that are necessary to meet the ever growing demand of the market. However, Quanta would lose its own identity. This is a negative point, especially when it comes to customers. Therefore, this is one of the ideas that would require serious scrutiny by experts before it is implemented.
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The first step of the implementation plan would be to hire highly skilled staff. The alternative of this step would be education of the current employees of the company. This could solve the problem of the loss of previous stakeholders` trust. The company would still retain its employees whose jobs that do not require any change. Secondly, the company would require a research team. This team can conduct market researches. From its previous experiences the company has learnt that it is operating in a highly dynamic industry. This is an industry that has developments taking place every day. Therefore, the presence of such a team would be vital. After the research has been conducted, the company can decide which products to use in its next production processes. For example, it would put all the important incorporations in its notebooks, to ensure that it remains competitive. Another step would be identification of other markets where the company can operate as well as the new products that the company may decide to come up with (Gorman, 2007). The manner in which these procedures have been put down may make one think that it is as simple as that. However, these are carried out in large scale. Therefore, there is a need to have teams that are assigned to each and every task. These are teams such as HR department and sales among many others. This way, the company can ensure that every step is carried out in a perfect way. The degree to which this action will be successful depends on the company`s efforts. This is because planning does not determine the company`s success. Instead, an actual implementation of a plan is the major determinant of the same. Therefore, the company needs to give itself a time frame, over which it should implement all the ideas that have been resolved. After the process of implementation there should be a severe and thorough analysis, as well as evaluation of the steps taken in order to determine the achievements that the company has reached, with reference to the ideas that have been resolved. This way, new ways can be implemented, once again, in a bid to reach the goals that were not previously realized.
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According to the alternatives stated above, the best idea would be to increase the range of the company`s products, and to keep up with advancements that take place in the industry. This is an alternative that would require a lot of resources and networks. It could even require hiring of other companies to help in the process of transition. This is because it would involve research and incorporation of the newest technologies. There is no way that this can be done without the use of as many resources as possible. This is a fact that almost caused this idea to be ruled out. However, it was determined to be worth the risk. The reason behind this is that in the absence of advancement in a company, especially the one related to the industry of consumer electronics, all the others are rendered useless. When products of a company become obsolete, the company will face massive losses in the market. Also, this idea involves the use and application of more innovative ways in a bid to be more competitive. Therefore, this would involve the company`s flexibility to allow the incorporation of more vigorous methods in the application of better technology. It would also involve the use of serious personnel who are qualified to be involved in the production process. With this, the company can sell its products at higher prices and increase its profit margin. This was the whole idea of the research conducted. It was meant to reduce the company`s costs and increase profit. However, this idea is meant to increase the cost income at a much higher scale. This way, it is easier for the company to achieve the desired profits. Another advantage of this idea is that it is recurrent. Anytime there are new developments, the same idea can be implemented to cater for the same. Therefore, it is an idea that has an ability to ensure that the company maintains a competitive edge over other companies for a longer time. At the same time, it assures profitability at all times, as long as it is implemented in the right way. After this recommendation, there is a need to look at the actual plan that the company would undertake, which is presented in the next part of the research paper.
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