CMS electronics

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Agenda

 Abstract

 Introduction

1. Analysis

1. Context
2. PESTL Analysis
3. SWOT Analysis
4. Corruption in China

1.  Results of the research

1. Action strategy followed

1. Factors that lead the company to internalization
2. Factors that prevent the company to internalization
3. The alternative
4. Recommendations

1. References and appendices

Abstract

The study analyses the expansion plan of CMS Electronics. The company’s purpose is to provide manufacturing services.

The company adopts a “follow the customer” strategy because there is a big shift of geographic location of its potential and existing customers. If the company opts for a manufacturing firm, the costs will be significantly increasing.

The case will study a feasibility plan on the best strategy for CMS to penetrate the Chinese market, a potentially growing one.

This case analysis focuses on a study of the analysis of CMS's external and internal environments in order to familiarize itself with the electronics industry.

Introduction:

The electronics sector plays a major role in the modern economy, given that this sector is constantly evolving.

Concerning this case, the story begins with the opening of the production site called Royal Philips Group in 1962, which manufactured electronic equipment. In 1990, a German company AIK purchased part of the company in order to change the Philips strategy. At the beginning of the 20th century, a major crisis affected the electronics sector in Europe. This crisis has affected several companies including AIK-Electronics pushing the company to bankruptcy. The German group sent the general manager to find a solution to protect the jobs of employees and save the company from bankruptcy.

Following this, CMS Electronics is created in 2003. Concerning CMS electronics; CMS is a small Austrian company that operates in EMS. However, a potential market has been identified for CMS; which is the automotive industry; which saw an increase compared to the 1990s due to the high demand.

1. Analysis

1. Context:

CMS Electronics is a diversified company manufacturing automotive parts; medical technology and energy systems. Most of the company's main customers are actually in the automotive sector.

Indeed, automotive parts are becoming increasingly rare but the demand is constantly growing which justifies the high price of auto parts, thus the automotive industry is a sector of the future due to the steady growth in spare parts prices.

The main problem of CMS is that there is no longer competition of the automotive industry; the company has been surpassed by the large volume of the industry due to its small structure. To overcome its structural problem, CMS wants to address the Chinese market, but this is particularly problematic because the company has encountered problems of family management, which have hindered its development, as well as recruitment problems leading to a limitation of production.

In fact, the company is financially constrained and has encountered problems in its management and also it is surpassed by the progress of Chinese people in terms of electronics.

Despite the difficulties that CMS faced, the company decided to move on and its plan into effect. In order to survive, CMS has to keep up with the market trends. The company needs support as it already knows the market and has already proved its worth, given that small companies avoid launching in China for fear of being overtaken by the competition. Even with the help of an already established company, the risk is still present given that the market reserves a lot of surprises.

The approach of a market like China is a major challenge for CMS; it will bring an advantage in terms of technical progress and know-how, as well as in Research and Development. The particularity of China is that it has taken advantage of its human capital to promote the development in the EMS sector so that it permits an increase in production and also take advantage of innovation, as Chinese companies continually offer new products in a way not to disappear from the market. CMS will also benefit from the diversification of Chinese customers given that the company will be confronted to different kinds of customers so CMS will be able to progress and show what it is capable for. It will also be able to strengthen itself by creating contacts with customers and suppliers who know the market very well. The company will also be able to project itself towards the future by approaching the Chinese market given that the company will be present in the core of electronics.

Main competitors:

In EMS, many companies share the market proving the intensity of competition so in order to increase their sales, companies are ready to leave their country to take advantage of progress in terms of innovation and production capacity.

Indeed, China is the most important country in terms of labor and also companies have no choice if they stay they will be defeated by competition and a large majority of companies

will experience crisis. Also there are lots opportunities in China as it is one of the most important countries in terms of electronic progress.

However, companies that represent a threat for CMS are: Foxconn, Shenzhen Sun Limited Hardware Company, Hubey Zhiyuan Limited Electronics Company, Edgar Automotive Accessory,  Zhejiang leipeide co Technology, and the Shanghai International Language.

In EMS, Foxconn takes first place; the Taiwanese group installed one of the most important production sites in Longhua, outside the city. Just on the site, they have 450,000 employees and the company itself has more than one million employees. However, Foxconn has benefited from its production capacity to meet the needs of the Chinese market, but the problem is that many employees have committed suicide due to pressure and workload.

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