The Strategy of Taiwanese Handset ODM Company to Cope With “Shan Zhai” Handsets
Date Issued
2010
Date
2010
Author(s)
Chou, Huang-Kun
Abstract
The global mobile phone market grew rapidly over the past 10 years. With good R&D capabilities and production efficiency, Taiwan’s mobile phone foundry industry rises by ODM companies getting the orders of low-end handsets from international brand mobile phone companies. From 2007, Chinese “Shan Zhai” handsets emerge to meet the huge demand of Chinese farmers and migrant workers, and exporting to other emerging markets by its low price. "Shan Zhai" handsets rapidly sweep through low-cost handset market, and bring great impact to Taiwanese handset ODM companies.
In this study, we use secondary data to investigate the global mobile phone market, "Shan Zhai" handsets developing trajectory and the current status of Taiwanese handset ODM companies. Then use the value chain, the threat of the new entrants within Porter’s five forces and business model framework to analyze the competitiveness of "Shan Zhai" handsets.
"Shan Zhai" handsets adopt MediaTek''s integrated mobile phone solution, through hundreds of mobile phone design houses and thousands of phone integrators, to form a resource sharing system. This system not only owns economic scales, but also vitality and flexibility. Through this industry value chain innovation, "Shan Zhai" handsets owns the advantages of low cost and short product development cycle, coupled with active access to distribution channels and rapid response to market demand. All of these create the competitiveness of "Shan Zhai" handsets. But they don’t focus on quality, not getting certification of network testing, which will be the limit of their development.
Finally, we analyze the industry value chain activities and the difficulties that "Shan Zhai" handsets encounter. We propose four strategies to Taiwanese ODM companies with their competitive advantages.
(1)Develop new MediaTek’s integrated solution to enter "Shan Zhai" market
(2)Develop new MediaTek’s integrated solution to design and manufacture for international brand mobile phone company.
(3)Design and manufacture handsets for worldwide distributors that are with scale and willing to have own brand.
(4)Cooperate with worldwide telecommunication operators.
In order to cope with disruptive innovation of "Shan Zhai" handsets, we review the resources, processes and values of Taiwanese handsets ODM companies, then we suggest to create new organization for the effective implementation of the above strategies. There are below two methods for new organizations.
(1)Split out one team to set up a new company.
(2)ODM company merge and acquire "Shan Zhai" company with scale, and add the R&D human resources, but no process and value integration.
By above strategy and organization suggestion, we hope to help Taiwanese handset ODM companies out of current predicament.
Subjects
industry value chain
business model
disruptive innovation
Shan Zhai handset
Type
thesis
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