External and Internal Analysis of Foxconn
Foxconn, or Hon Hai Precision Industry Co, was founded 37 years ago in Taiwan by Terry Gou. The company initially started as a local computer component manufacturer. Over the past decades, Foxconn had been continuously growing to become the world’s largest electronic components manufacturers with the consolidated revenue of 59.32 billion US dollars in 2010.
As the largest electronic manufactures, Foxconn provides electronic components to major electronic devices manufacturers across the world. Its clients include Apple, Amazon, Sony, Nintendo, Microsoft, Dell and HP. Since 2011, Foxconn has been expanding its operations in Brazil to ...view middle of the document...
Today’s society has required the company to communicate frequently with external stakeholders. This foreseeable trend will require Foxconn to become a more transparent company in the future.
Political: Foxconn’s manufacture sites are located in developing countries. These countries have the trend to change in laws and regulations frequently. For example, China has changed its labor regulations in recent years. It therefore becomes important for the company to foresee the trend and be ready to adjust its business when necessary. In the future, the company will see a political trend that the developing countries will pay more attention to labor working conditions and environments. This will increase the production cost since the company needs to spend more money taking care of employees and environments. Furthermore, contracts with the local governments are valuable resources to create competitive advantages, such as establishing tax exemptions while initiating capital investments. There is also a trend that developing countries will provide economic incentives to attract more investments.
Economic: Business is always influenced by the changes in economy. Inflation, interest rate, and foreign exchange rates will contribute to a business’s outlook. For instance, inflation influences the amount of interest rate that a company has to pay. High interest rates can constrain a firm’s ability to make new ventures and to expand. Foreign exchange rates can become another source of uncertainty since Foxconn has worldwide operations and uses different currencies to seal business deals. From recent economic trends, economy will remain at a low interest rate and fluctuate rapidly in the near future. High Inflation rate is highly possible because developing countries have more purchasing power than ever. Foxconn must be able to take advantage of low interest rate and react with possible inflation concerns and economic fluctuations.
Technology: Technology is constantly evolving in the electronic manufacturing services industry. Over the past decades, technology advancement has helped the industry to produce higher quality products at the lower costs. It also requires manufacturers to update production equipments frequently in order to meet market demand. These trends are expected to be continued in the future. In order to sustain a technological edge over its competitors, Foxconn needs to keep production process in pace with technology advancement and to have knowledge of the most updated technology.
Rivalry: High FIX THIS IN PHASE 2
* Slow industry growth
* High fixed cost
* Lack of product differentiation
* A large number of competitors
* High exit barrier
The overall demand growth for electronic manufacturing services has been slow in the recent years due to the economic recession and the slow demand growth. The industry utilizes a robot-focused manufacturing process to enhance product quality and...