External and Internal Analysis of Foxconn

Topics: Occupational safety and health, Electronics manufacturing services, Inflation Pages: 11 (3418 words) Published: May 10, 2012
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 increase its supply of Apple products. It has also announced that the company will increase the wage of employees working at the Apple manufacturing sites in China by 16 to 25 percent and opened itself up for further inspection. Broad Environment

Sociocultural: During the course of a society transition all over the global developing countries, the current working class will grow and evolve into the middle class. Those workers who, once forced by circumstance to stand for fourteen hours a day, are the workers that no longer need or want what seemly meager financial benefits employer has to offer. In the past year, Foxconn’s image has been tarnished by reports of labor protests and employee suicides. These were the result of harsh working conditions, unfair wages and a lack of communication with the media. The sociocultural trend has driven Foxconn to improve its working surroundings and its impeccable image in society. Political: Foxconn’s manufacture sites are located in developing countries. These countries have the trend to change in laws and regulations frequently. It therefore becomes important for the company to foresee the trend and be ready to adjust its business when necessary. The purchasing countries are too sensitive to the work conditions of the manufacturing countries. In the future, the company will see a political trend that the developing countries as well as the purchasing 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. 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, 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 and rapidly 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. Desktops cost well over $1,000 are not under $500. Fancy gadgets like ipods, tablets or smart phones are affordable to typical consumers. 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. Task Environment

Rivalry: High
* Slow industry growth
* High fixed cost
* Lack of product differentiation
* A large number of competitors
* High...
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