Effect of Strategic Positioning, LVHM vs. HVLM, on Corporate Financial Performance - Exemplified by Small-to-Medium Sized Semiconductor Companies in Taiwan
Date Issued
2012
Date
2012
Author(s)
Chao, Yung-Sung
Abstract
In the semiconductor industry, which is technology-driven, capital–intensive and has nature of rapid changes in its industry structure as well as market, how can a small-to-medium sized company operate and sustain? Should it pursue economic scale that stresses on high growth dynamics or position itself in niche market that focuses on stable growth? The answer depends on the corporate positioning and business ambition adopted by the company’s top executives. The differences of Low-Volume-High-Mix (LVHM) and High-Volume-Low-Mix (HVLM) models are analyzed in this investigation. It is found that the reaction speed and resources allocation that a company adopted to cope with market fluctuation, industry structure change and competition were quite different. The foci of management were also different.
This investigation collected information of small-to-medium sized Taiwanese semiconductor companies with capital under NT$ 3 billion and categorized them into 2 groups, i.e. the HVLM type and the LVLM type. Their financial performance from 2001 to 2010 was subsequently analyzed to reveal whether the performance was influenced by the adoption of HVLM or LVLM strategic positioning.
Major Finding of the Investigation:
1.In the 10-year span from 2001 to 2010, the average values of ROA (Return on Asset) and ROE (Return on Equity) of the HVLM model were better than those of the LVHM model. And, the cross-company variations, as measured by standard deviation, of the ROE and ROA numbers were lower in the HVLM model.
2.On the annual basis, the beneficial effect of HVLM model vs. LVHM model on ROA and ROE is significant only on some years, not every year from 2001 to 2010. In addition, in the period from 2002 to 2004, where the semiconductor industry underwent higher-than-average annual growth rates, the beneficial effect of HVLM model was more substantial than the one-decade average, indicating that the effect of HVLM model is linked with the economic prosperity of the overall semiconductor industry.
Subjects
Low Volume High Mix
High Volume Low Mix
ROA
ROE
Type
thesis
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