A Study on the Development and Evolution of ShanZhai Mobile Phone Industry from the Perspective of Vertical Specialization
Date Issued
2012
Date
2012
Author(s)
Chen, Lien-Hong
Abstract
By comparing PC and mobile phone industry from different perspectives, including technology visibility, major market characteristics, level of standardization, and critical path of value creation, the intention of major large PC ODM companies in Taiwan to replicate their success story in mobile phone industry can be concluded as a failure. On the contrast, there is a different story in China mobile phone market that changes the industry landscape and competitive dynamics by a group of small companies with entrepreneurship.
To better understand how different strategies take effect on their approaches, investigation on Taiwanese ODM companies’ vertical integration strategy and China ShanZhai mobile phone companies’ vertical specialization strategy has been carefully reviewed. The present study therefore submits that the purpose of outsourcing should be migrated from cost reduction to value creation. The empirical result shows that ShanZhai companies have successfully increase the total value creation of the industry sector by moving business operation to whom with best knowledge and resources no matter previously viewed as core competencies. The relationship within the supply chain is no more supply-demand relationship; it has been transformed to complementary, value-creating, and inter-dependent. The reduced transaction costs resulted from reduced uncertainty of business relationship lead to high operation efficiency close to that within a corporate. In fact, the Shanzhai industry, in my view point can be treated as a virtual organization.
Understanding competitive environment is the key for Shanzhai mobile phone companies to success. While the environment keeps changing, the companies need to change accordingly. The present study summarizes their core competencies, including agility of small organization, creativity on product differentiation, and value-creation from complementary value-chain, to suggest new positioning in mobile phone industry to be “supplementary to mainstream”. The study also suggests ways to build barriers to new entry by proper market selection where preemption advantage can be developed.
Subjects
Vertical Integration
Specialization
ShanZhai Mobile Phone
Supplementary Product
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-101-P98748028-1.pdf
Size
23.32 KB
Format
Adobe PDF
Checksum
(MD5):a63bc4add72d004ebd7026030364c3f4