Foxconn Technology Group: Acquiring Sharp to Move Up the Value Chain – Case Solution

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Foxconn Technology Group: Acquiring Sharp to Move Up the Value Chain Case Answers

Step 1: Situation Audit for Foxconn Technology Group

The situation audit for this case can be described by SWOT analysis of Foxconn Technology Group as below:

Strengths

• Foxconn is the largest manufacturer of computers, communication, and consumer electronics.
• Foxconn is one of the most prominent innovation leaders worldwide.
• Large customer base due to the global presence of Foxconn Company, which deals with well-known companies like Apple, Sony, Dell, and Blackberry.
• Foxconn was the largest exporter in China and the second-largest exporter in the Czech Republic.
• The collaboration of Foxconn with Apple Company to improve employees’ working conditions.
• Foxconn has experience in handling its operations.
• The success of Foxconn Technology Group is due to the efficiency-driven culture based on Confucian dynamism.
• Sharp is one of the most recognized brands worldwide and is the leader in R&D.
• Sharp Company is a leader in the LCD industry and has revolutionized calculators, computer screens, home appliances, and handset devices.
• Sharp’s business model is based on a “one and only” and “spiral” strategy.
• Sharp’s products were enjoyable and user-friendly.
• Foxconn bought 50% of Sharp’s LCD plant, which marked their dominance in global manufacturing.
• Acquisition of Sharp Company moving up the Foxconn value chain.

Weakness

• Foxconn has a lack of flexibility and low responses to operational risk and changes.
• Poor work environment leads to suicide crisis and child labor scandals in Foxconn factories.
• Sharp developed its technology at its own pace, neglecting rapidly changing market demands as well as the social, political, and economic environment.
• The 2008 financial crisis led to a financial loss for Sharp Company.
• Sharp Company liquidity problems.
• Sharp’s business model of vertical integration was strangling its profitability.
• The strength of the Japanese yen and the lack of a marketing strategy led to a decrease in Sharp’s sales.
• Culture clash problem where it is unable to maintain a positive, innovative environment.
• A poor business model that has failed to control the operating costs of the entity.

Opportunities

• Sharp is the leader in LCD plant and innovation.
• Expand the liquid crystal display (LCD) capacity for Foxconn.
• Expand and move up the Foxconn Technology Group value chain in both research and development (R&D) and brand building.
• To extend growth through the acquisitions made.
• Innovate in OLED technology.
• Improve flexibility and agility in the workplace.
• Investing in automation will help in managing operational costs, increase output, and improve revenues.
• Accelerating increase in demand for electronic devices.
• Developing a new business model to promote localization and cost reduction.
• Sharp ability to focus more on advanced, higher value-added activities after downsizing its TV and LCD factories.

Threats

• Sharp’s hierarchical, bureaucratic style of Japanese management might not assimilate well within Foxconn Technology Group’s organization.
• Rising labor costs in China.
• Intense competition from latecomers to LCD technology and televisions, like Samsung and LG Electronics Inc.
• The slowdown in Apple’s growth, since Apple is one of Foxconn’s important clients.
• There is no guarantee that Sharp could regain its status as a leading LCD TV manufacturer.
• Inability to effectively manage the LCD and solar cell business.

Step 2. Problem Define

Prior to the acquisition of Sharp Company, Foxconn Technology Group was seeking to integrate the two entities in order to move up the value chain and create its own global brand.

A lot of issues and challenges have appeared due to the differences between Foxconn and Sharp in business models and cultural aspects related to the difference between Taiwanese and Japanese lifestyles and mindsets. However, the main critical issue that Foxconn has been facing is competition and managing cultural differences.

Foxconn will face challenges related to the competitive business model and position of Foxconn, as the competitors, especially Korean companies such as Samsung and LG, have competitive products and a strong value chain.

The company hopes to improve its competitive position by improving its business model to ensure creativity and an innovative environment.

Thus, the key problem is…