Assignment: Global Supply Chain Management and Suppliers
The big picture Founded almost 45 years ago in the US, Helius is a well established camera firm. Andreas Mitropoulous, a Greek immigrant, established a small one-man shop in Boise, Idaho just after the Second World War. The company has undergone substantial growth since its humble beginnings. Originally, they made their mark producing 35mm film cameras, and have realized considerable success with a transition into the digital market. Helius is a mid-level brand that specializes in affordable digital SLR cameras that rival higher-end digital models, but at a cost considerably lower than their higher- end competitors. These cameras are sold predominantly to the North American market, and sales are augmented with a healthy online retail channel.
Helius have a long-standing and trusted relationship with SajinCorp, a Korean original design manufacturer. Sajin design and make digital SLR's under the Helius name. As a result of this wellestablished business relationship, Helius are Sajin's biggest customer. An unexposed firm?
Helius executives have become concerned that they are losing market share, particularly to two other large firms that market more innovative product lines. In addition, the recent drop in the price of high-end digital SLR's worldwide has directly impacted Helius' overall profit margins. Executives are contemplating a company-wide move into the Chinese market. The favoured market entry strategy involves locating Chinese suppliers and manufacturers. Once design and manufacturing has been established, Helius would distribute and sell their cameras throughout China. Currently in China, there is an abundance of cheap and mostly unreliable digital cameras, and exclusive highend cameras that are sold at a high price. With the surging buying power of China's growing middle class, and the Chinese appetite for American products, the Helius brand is in a position to rank favourably in the mid-ranged market. Some managers have serious reservations with this suggestion. They are nervous that Chinese manufacturers will not be able to produce the quality product that Helius requires to maintain brand reputation. On top of this, there are some grave concerns as to whether Helius' proprietary information would be safe with a new Chinese supplier. With a well established and trusting relationship with Sajin, would they be able to sell in China and maintain their competitive prices and quality, while keeping Sajin as their sole manufacturer? Is Helius out of focus?
Helius, interested in the possibility of sourcing components and manufacturing in China, have started to scope out the potential. On the ground, the situation looks very promising. In Beijing, the sheer ease of logistics makes the choice all the more attractive. Nanyuan Airport provides domestic air transport, while the international airport, sea port and rail system are all within an hour's drive. Helius have met with two potential sourcing and manufacturing firms. The prices these companies quoted were much more competitive compared to that offered by Sajin, but Helius' sourcing team are not convinced these other companies could compete with Sajin's quality.
While in Asia, Helius executives decided to pay Sajin a visit. Sajin revealed a new strategic plan, which has caused a great deal of concern for Helius executives. Sajin are planning a bold move aimed at expansion and growth. They are going to source their materials from China, which they claim will create cost savings for both Helius and Sajin. In addition, Sajin have plans to establish a research and development centre in the US, so they can collaborate more effectively on digital SLR innovation. They plan to create smaller compact models, and to improve the LCD viewer capabilities. This would in turn allow Sajin to ship products directly into Helius' warehouses, cutting their transportation costs. Helius wonder if Sajin is making a move that would end up putting Helius in direct competition with Sajin. They have no direct knowledge that Sajin is in the process of developing their own product line. They certainly have the expertise, and their strategic plan may very well include that possibility. Helius are now extremely concerned that they are going to face a sourcing crisis in the very near future. On top of this, they are troubled that their primary supplier and manufacturer would end up creating their own brand and product, and compete head on with Helius in North America, and possibly in China as well.
Task
A. Using the information provided in this case study, perform a brief PEST analysis for Helius when considering Chinese suppliers and manufacturers.
B. What are they key considerations Helius will need to formulate in their Chinese sourcing strategy?
C. Is Helius investigating a factor input strategy or a market access strategy, in regards to their plans to source design and manufacturing in China? Explain.
D. What risk factors will Helius need to consider when planning a sourcing strategy for a move into China?