Sometime in mid-2016, Foxconn Technology Group gained a stake in Sharp Corporation. The latter company was about to go bankrupt. After the acquisition and during the integration, Foxconn was faced with some challenges. It is now challenged on how to effectively integrate the two companies.
Wiboon Kittilaksanawong and Teeta Erikate
Harvard Business Review (W19260-PDF-ENG)
June 14, 2019
Case questions answered:
- Prepare a SWOT analysis for the Foxconn Technology Group.
- What are the problems the company is facing and will be facing?
- What are the solutions to the problem?
- Provide your recommendations.
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Case answers for Foxconn Technology Group: Acquiring Sharp to Move Up the Value Chain
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:
- 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, where it 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.
- The Foxconn experience in handling its operations.
- The success of Foxconn Technology Group 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 of the LCD industry and revolutionized calculators, computer screens, home appliances, and handset devices.
- Sharp business model based on “one and only” and “spiral” strategy.
- Sharp’s product where it is enjoyable and user-friendly.
- Foxconn bought 50% Sharp’s LCD plant, which marked their dominance in global manufacturing.
- Acquisition of Sharp Company moving up the Foxconn value chain.
- 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 that led to a financial loss in Sharp Company.
- Sharp Company liquidity problems.
- Sharp’s business model of vertical integration was strangling its profitability.
- The strength of the Japanese yen and lack of 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.
- 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.
- Invest 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.
- 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 growth, since apple is one of Foxconn’s important client.
- 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 is 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 and especially Korean companies such as Samsung and LG has competitive products and a strong value chain. The company hopes to improve its competitive position by improving its business model to ensure creativity and innovation environment.
Thus, the key problem is…