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Tom Wrixon BINT 1009 Michael Barnhart Friday March 29, 2012
it helps Helius provide with rationale of considering Chinese suppliers and manufacturers. and Technological aspects of any case. perform a brief PEST analysis for Helius when considering Chinese suppliers and manufacturers? A very effective method of reviewing and evaluating the impact of external environment is to perform a PEST analysis.1. Political aspects: • • China has a stable political environment domestically Discretionary copying of the proprietary information because of weak Intellectual Property (IP) protection laws • China is opening up for foreign investments by maintaining good relationships with other nations • The development of the industry is not planned by the government but it is based on the market demand • Free competition and development with in the industry is encouraged by the government Economic aspects: • • • • • • China’s economy is growing at a rapid pace China has become one of the highest GDP producing nations in the world Low cost labor is one of the key factors for its economic development Surging buying power of China’s growing middle class Increasing income levels and growing living standards Growing product demand . In this case. Using the information provided in the case study. PEST analysis helps to analyze the Political. Social. Economical.
production capabilities of the suppliers. choosing a sourcing model. What are the key considerations Helius will need to formulate in their Chinese sourcing strategy? The key considerations Helius will need to formulate in their Chinese sourcing strategy are competitive advantage of suppliers. cost effective supplier. The core competencies of the Chinese suppliers will help Helius to meet their set objectives of venturing into the mid-ranged market. legal issues. language and cultural issues. Helius should look for the suppliers who can promise quality and suppliers with similar business objectives. Knowing the competitive advantage of the supplier gives an edge to source a particular product to the supplier. . lead times.• Fierce competitive rivalry in the industry Social aspects: • • • • Chinese affinity towards American products The young population is very much aware of the technology driven products Growing education levels of the young population Increasing health and environmental consciousness Technological aspects: • • • Technologically advancing nation Development in the logistics and transportation systems with the help of technology Growing interests of industry in technology innovation and R&D 2.
It is crucial for Helius to look for the suppliers having enough raw materials to manufacture sufficient product to meet demand. penalties. The legal aspects of manufacturing and distributing domestically by a foreign player should be considered. it has to consider the language issues for communication because any misunderstandings and miscommunications may lead to serious business problems. These legal issues can raise some serious concerns such as loss of profit margins. Language and cultural issues are the concerns which cannot be ignored. Helius has to build good relationships with the suppliers in China to achieve their long term goals and to succeed in Chinese markets. and that supplies are obtained at the right price. right place and right time. As Helius is venturing into the Chinese industry for the first time. China is a culture sensitive nation and any foreign firm venturing into China should consider the cultural issues for better relationship. Due to the fierce competition in Chinese industry there is a possibility of loss of sales if the customer demands are not met on time.Production capabilities of the suppliers or manufacturers should be determined by the Helius in order to meet the demands. Knowing the production capacities of the suppliers or manufacturers will help to avoid running out of stock. Knowing the lead times of the suppliers is very crucial because the growing customer demands have to be met in order to gain the market share. One of the key consideration Helius should look for are the legal issues. . As Helius is venturing into the Chinese markets and a due diligence of the legal issues should be made before entering. trade embargoes for violations and even closing down the business if ignored or neglected.
3. There are a few other areas of negotiations like volumes. Transportation is one of the key considerations that Helius should look for as transportation costs are less in China and the ease of logistics through domestic and international airport. Another competitive force driving global sourcing is called the . in regards to their plans to source design and manufacturing in China? Explain.. There are a number of competitive forces that have pushed companies towards global sourcing. One is the factor-input strategy. Negotiating terms can be a key consideration for Helius to look for. Choosing a relevant and apt sourcing model will help Helius to perform well in the Chinese markets. payment terms. sea port and rail system access will provide reduced transportation times. which aims to give companies a competitive advantage by using the lowest priced or highest-quality components available anywhere in the world. Price is obviously a vital area of the deal to negotiate.Cost effective supplier will help Helius to provide low cost cameras to the Chinese customers thus fulfilling their demands. Cost effective supplier with uncompromising quality will help to increase its profit margins and to increase its market share in the midranged product segment. The above key considerations will help Helius to choose the right strategy to enter into the Chinese markets. logistic costs. Helius may choose factor-input strategy or the market access strategy. modes of payment. Is Helius investigating a factor input strategy or a market access strategy. insurances and IP protecting agreement etc.
With these benefits it helps to manufacture products at lower costs than Sajin Corp. Companies should ensure that they use due diligence processes when investigating for potential suppliers or outsourcers to minimize the levels of risk. This offer has made Helius to rethink about its sourcing plans. Because the factor input strategy will help them to produce low cost products with good quality thus helping them to increase their profit margins. they are going to source their materials from China. 4. As part of Sajin’s strategic plan for expansion and growth. which create cost saving for both the companies. As China has a low wage workforce and thus manufacturing in China will lead to reduction in costs involved with capital assets. Sajin Corp’s new strategic plan offered a great deal for Helius. What risk factors will Helius need to consider when planning a sourcing strategy for a move into China? There are several risks associated with sourcing internationally. Helius should be ready to tackle and overcome the sourcing crises in the future by conducting a thorough sourcing process and to identify the potential suppliers or manufacturers which better suit their factor input strategy who can offer a mix of cost quality product. Due diligence will help to identify potential . construction and support services.market-access strategy. The aim of this strategy is for the company to obtain a local presence in markets in which they want to conduct business. Helius is investigating into the factor-input strategy for their plans to source design and manufacture in China. Helius’s primary objective should be to offer low cost quality products to capture the mid-ranged market and the demand for American products in China.
5. Quality compromise is one of the risk factors of outsourcing because Helius is not aware of the quality standards of the suppliers in China.source markets and suppliers. 4. The risk factors which Helius need to consider while planning a sourcing strategy for a move into China are 1. If reliable partner or supplier is not chosen then it may cause serious business problems. Fierce competition from the domestic players can pose a significant threat. Ethical consideration risks. 3. It also helps to know about the business practices of potential suppliers and identify possible problems. The domestic companies in China can produce low cost goods because of the less tax regulations and will create a tough competition for Helius. Supplier reliability can be a risk factor because it’s the first time that Helius is dealing with these Chinese suppliers and to establish and build a relationship will take some time for it. Helius cannot compromise on quality as it is known for its quality products and may lose its brand if good quality products are not delivered. 2. Intellectual Property (IP) issue is one of the key factors to be considered because of the weaker IP protection laws in China. there are possible ethical concerns such as child labor. Counterfeit products can make Helius to lose market share thus loosing profits. excess pollution and poor wages can seriously damage Helius’s reputation and leading to consumer protests and boycotts. .
New entrant: there is also a potential risk from the new entrants who can enter into Chinese markets.6. Inflation may also affect the business because during inflation times the labor and raw material prices soar high thus increasing the variable costs of the business which decreases the profit margins. If currency fluctuates compared to the US currency then Helius may lose a margin of its profits. It can lose the flexibility to control business activities and product development. 8. 9. Risk of loss of company control may be there. 10. As Sajin is planning to expand. Currency fluctuations and inflation may also be possible risks involved. 7. as change of governments can make new regulations thus affecting the foreign business in China. it may eye on its neighboring nation as China is a growing potential market. Political risks may also be involved. . Any new regulations or additional tariffs on foreign firms may pose serious threat to the operations of Helius in China. Risk of differences in the business objectives and goals between Helius and the suppliers can be a potential risk causing serious damages to the company’s profits and reputation.
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