In 1991, the US Connector Industry was in a vulnerable situation. With more than 900 suppliers burdened with capacities and reduced demands, the price competition intensified. In such powerless times, the Sunnyvale plant of the American Connector Company in USA was facing the threat of competing against a new plant to be set by DJC Corporation, a company well established in Japan. This write-up addresses the situation between the two companies and provides justification and recommendations as to what plan of action ACC should implement in their operational, strategic and financial management in order to compete.
Using cost indices, ‘Exhibit 1’ displays the cost variation between the new prospective plant of DJC Corporation in the USA and the existing one in Japan. It illustrates that if DJC Corporation uses its existing strategy in the USA, it would manufacture products at a price which would give it a competitive edge over ACC on the basis of cost.
‘Exhibit 2’ relates the different cost drivers and the cost elements for the companies. This matrix gives an insight towards the various options ACC can explore in order to improve its market position in the event of DJC Corporation setting up a plant in USA.
If DJC Corporation uses its existing strategy in USA, it would hamper growth of ACC by quickly grabbing some market share on the basis of having a $13.59 cost advantage per thousand units. In order to compete, ACC would be compelled to make changes in its operational efficiency or on the extreme, change its business strategy.
ACC can consider improving its operations efficiency and help reduce the cost by $4.19 per thousand units. This reduction in cost is achieved by better utilization of the existing facilities. One of the ways in which efficiency c ...