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Vizio Manufacturing

In: Business and Management

Submitted By jodonnadix
Words 1873
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Vizio is a California based company, created by a Tiawanese immigrant, that sales flat panel TVs. Vizio started production in 2004. While based in California, “Vizio outsources all of its manufacturing. For each model, they put together a team of suppliers around the world to do their manufacturing. This consists of getting the panel from South Korea, electronic components from China, processors are in the United States, and each model is assembled in Mexico. (Hill, 8) The reason that manufacturing is migrating to different locations are because of the competitive market of flat panel TVs, countries becoming democratic, labor wages are lower, and declining trade and investment. “As production for flat-panel TVs migrates its way around the globe there are clear winners and losers.” (Hill, 8) The beneficiaries include consumers, the company itself and company shareholders. The losers include competitors and the box TV manufacturers. Since Vizio relies on a global manufacturing process, if the government put a restriction on manufacturing outside the US Vizio would be in an unfavorable state due to price, quality, raw materials, and employment situations. By manufacturing outside of the United States, Vizio’s sales have ballooned by $3 billion in 2012 and owns 18-19 percent share of the US market while only employing 500 employees. (Hill, 8)
1. So you may ask why do you do all the manufacturing outside of the United States. Vizio manufacturing of flat panel TVs are migrating to different locations around the world for many reasons. These reasons are a competitive market, countries are becoming democratic, labor wages are lower than the United States, and declining trade and investment barriers between countries. * Flat Panel TV manufactures share a very competitive 9 million dollar market a) Margins are small, so you have to find ways to increase economic activity to increase profit. b) If you think about the equation revenue-expenses (costs) = profit, then in order to increase the ending result (profit) you need to outsource your products to decrease your cost. * Countries are becoming Democratic c) This allows a country to become more attractive for investment because the government is not fully controlling the country d) When a country becomes more inviting, most home countries offer tax benefits or land of production benefits in order to increase economic activity. i. When a country has economic activity, the demand goes up because people have money to spend which drives the price down of each good. * Labor Wages are lower than the United States a) As stated above, Vizio outsources their assembly to Mexico. They do this because Mexico’s labor wages are much lower than the United States so it saves Vizio money on their costs. * Declining Trade and Investment Barriers between countries a) Most countries will decline barriers to trade from a developed country in order to produce economic activity in their country. i. If a company increased those barriers then it would make them far less attractive, but with the decreases in these barriers they become attractive to do business with.

2a. When taking a first look at who benefits the most it appears to be consumers, the company itself and company shareholders. * Vizio has created a company highly interdependent upon globalization, taking advantage of national differences in the cost and quality of factors of production (Hill) i.e. low production and labor costs to name a few, thus allowing them competitive advantage within the industry * Vizio uses manufacturers around the globe for different parts of one product, being able to find the best quality material and the lowest cost of labor their overall cost decreases * A global web of suppliers yields a better final product enhancing the chance of more total orders over a competitor (Hill) * It for the company to produce their products at a faster pace, when different parts are being assembled simultaneously, the quantity of products produced increases also reducing the cost of labor * Labor costs are also maintained at a lower rate by employing staff globally. In most cases the pay rate in areas such as South Korea, Mexico and China are significantly lower than wages in America * Even as a multinational enterprise Vizio manages to keep the number of employees below 500 with specialized/skilled teams throughout the globe adding to the low labor costs

As a shareholder of Vizio one would benefit by receiving greater dividends from the cost savings from manufacturing and production. * When a shareholder receives a greater dividend they may invest back into the company creating an opportunity for expansion, financing more into research and development, creating new products or new equipment * When said areas are invested in the employees of those areas benefit allowing them to invest more of themselves into the company

When shareholders and the company can benefit from globalization of their product(s) by decreased costs their employees benefit. * Employees can benefit by (ideally) quality working environments, higher wages and additional benefits * Should employee receive higher wages they in turn spend more money stimulating economic activity

As a globalized company, Vizio has managed to maintain lower overall expenses allowing them to sell their product at a lower cost benefiting the consumers. * Consumers take advantage of the low prices, they in turn save money to spend elsewhere continuing the economic activity * Vizio’s quality product AND low prices establish return customers

2b. Anyone directly invested in the company benefit, however the losers would comprise of any competitors of Vizio * Companies who produce flat-panel displays * Competing manufacturing companies

3. If the United States Government passed some law that required all flat-panel displays sold here in the United States also be made within the United States, it would give the few domestic companies, like Vizio, that produce these flat-panel displays a huge advantage in the market by removing foreign competition all together. While keeping our money locally sounds like a great idea, you must also think of the ramifications that will ensue to both the company and the consumers. First off, Vizio buys many of their flat-panel display’s parts from many different suppliers from around the globe and they outsource most of their engineering and manufacturing work from other companies in foreign countries. The 42-inch flat-panel screen come from South Korea, electronic components come from China, processors are made here in the United States, and the flat-panel displays are assembled at a plant in Mexico. Depending on how the law was worded, one would assume that at the bare minimum the company would need to move their assembly plants into the United States, and at the most they would have to make every last piece, processor, or component at domestic plants then assemble their final product domestically as well. There are a few favorable outcomes if a law such as this were to be passed here in the United States… * Vizio would need to expand domestic operations bringing jobs to citizens, creating wealth and purchasing power. These new employees will then spend their incomes creating Economic Activity fueling our economy. (currently employing 500) * Not only will Vizio create jobs within their company, they will also be forced to be a major buyer in the domestic economy while having to build plants to make parts they need to build their flat-panel displays that they previously could buy cheaply in bulk from foreign suppliers. (Also applies to an assembly plant, like what they have in Mexico) * Vizio would be selling their flat-panel displays for a lot more money per unit
While removing competition for this one small market you also will create countless new obstacles for which the company has to find new solutions, making the business more complex. Complexity only leads to higher costs everywhere which ends up being pushed upon the consumer or being realized by the company as a loss of profits which we cannot have in a successful business. One must always be aware of how others might perceive their actions and how it affects their surroundings. For example, if Vizio is forced to stop buying their electronic components from China, who is also one of the World’s top producers of copper, and they then attempt to buy copper (integral raw material in electronics) from China but they choose not to sell to someone who would just stop doing business with them in that manner. There are many unfavorable outcomes that could result from forcing all flat-panel displays sold domestically to also be produced domestically…

* Price of finished goods go up considerably for the consumer because of the new costs incurred; purchasing land for plants, excavating land, building plant(s), raw materials for said plant(s), equipment for the new plant(s), staff for new plant(s), raw materials needed for production (and tariffs if applicable). * Quality in their finished product is likely to diminish simply due to the fact that so much is needed to change in order to continue business. Also, it would be easy to cut some corners, but this would likely be at the expense of their high quality. * Raw Materials such as copper could become unattainable from their best sources, potentially they would have to start up their own mining operation to get the amount of copper required for their flat-panel displays. * While new jobs domestically would be created, countless foreign jobs would be lost due to something like this. While we may not think about them having an effect on our economy, foreign workers still spend money and create Economic Activity where they’re at and somewhere along the line they’re either directly buying our domestic products sold abroad, or building someone else’s wealth up enough until they can buy our products creating more Economic Activity. * If the United States Government required by law that all flat-panel displays sold here in the minish simply due to the fact that so much is needed to change in order to continue business. Also, it would be easy to cut some corners, but this would likely be at the expense of their high quality. * Raw Materials such as copper could become unattainable from their best sources, potentially they would have to start up their own mining operation to get the amount of copper required for their flat-panel displays. * While new jobs domestically would be created, countless foreign jobs would be lost due to something like this. While we may not think about them having an effect on our economy, foreign workers still spend money and create Economic Activity where they’re at and somewhere along the line they’re either directly buying our domestic products sold abroad, or building someone else’s wealth up enough until they can buy our products creating more Economic Activity.
If the United States Government required by law that all flat-panel displays sold here in the United States also be made here in the United States it would have very adverse effect on domestic companies in that market. Especially a company holding the majority of the United States market share at nearly 20% like Vizio who would be forced to undergo massive domestic projects, invest many millions in plants and equipment, hire countless more employees for all their new responsibilities gained by forcing out foreign competitors from a single market.

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