Learning
Plan 1
Assignments
LP1 Assignment: Vizio
Directions: Read the
case study Vizio: Disrupting Another Market in Chapter 4 on page 124 of the
textbook. Answer the following questions:
? What challenges does Vizio
face as it attempts to introduce a new line of products into a mature industry?
? Use the Internet to learn more
about Vizio. Describe the company’s strengths and weaknesses.
? What opportunities and threats
does the company face?
? Which of the three strategies
described in this chapter is Vizio using? Do you think that Vizio’s strategy
for competing in the PC and laptop market will be successful? Explain.
Write a 1-2 page paper
detailing the above questions, and be sure to cite your references.
Submit this assignment
to your instructor via the dropbox “LP1
Assignment: Vizio.” This assignment is worth 50 points.
Vizio: Disrupting Another Market
Before he turned 30, William Wang was a successful entrepreneur
whose company, MAG Innovision, specialized in computer display screens. In
2002, Wang used 600,000 from the sale of MAG Innovision to launch Vizio Inc.,
which has surged past industry icons such as Sony, Sharp, and Samsung to become
the fastest-growing maker of flat-panel televisions in North America. Wang’s
well-excuted cost leadership strategy, much of which he developed from the
mistakes he made at MAG Innovision, is the key to the company’s success. When
he started Vizio (“where vision meets value”), high-definition televisions sold
for 8,000, but Wang’s vision was to offer quility products and keep costs low,
enabling his company to sell televisions at half the going price. “When I
started this business, I believe we could do all of the things we’re doing
today,” he says.
A lean operating
strategy has been a hallmark of the Irvine, California-based company since its
first day of operation. Out-sourcing most functions, including tech, support
warehousing, shipping, and research and devolopement, and keeping its employee
ranks lean hold operating costs well below the industry average. Vizio’s
overhead costs are less than 1 percent of its sales, far below the 10 percent
of sales that those costs represent at its competition. “Every single dime
counts,” says Wang. Because concept development, marketing, and customer
service are keys to success, Wang intentionally keeps them in-house. Vizio’s
distrbution network is consistent with its low-cost strategy, relying on
discount chains such as Sam’s Club, Costco, and others to reach mass-market
purchasers who tend to be price sensitive.
Wang recently
extended Vizio’s low-cost strategy to another maturing market that is ripe for
a shake up: personal computers. “ If you rewind eight to ten years, the TV
market looked similar to the PC market today,” Says Matt MCRae, Vizio’s chief
technology officer. “It was a mature market with lots of companies. We did
pretty well. We’re now the number one TV company in the United States. We’ve
done this before.” Vizio introduced a line of computers and laptops that are as
stylish as Apple’s successful Macintosh line but run the Microsoft Windows
software that drives 90 percent of the world’s computers. The computer sport
clean lines, machined lightweight aluminum bodies, and powerful,
high-performance components. “PCs have become a sea of black plastic,” Says
McRae. “We’re building a product people want.” What Vizio’s computers don’t
include is the “bloatware,” the preloaded software that clogs most other PC’s,
which means that Vizio’s computers boot faster and run cleaner.
Maintaining
consistency with its low price image, Vizio’s computers are priced below Apple
products and below competing PC’s and laptops with prices that start at $898.
The company’s high-end computer, an all-in-one desktop with a crisp, 27-inch
display, starts at just $1098. “Our target audience is people who can’t afford
a $2,000 computer,” says Wang. Vizio, which has a very small engineering staff,
spent two years designing its line of computers and worked closely with key suppliers
such as graphics card manufacturer Nvidia, chip maker intel, and software
designer Microsoft to optimize designs on the components and the systems that
run them. “Vizio is doing a good job listening and taking advice from the
experts on how to optimize hardware and software,” says Steve Guggenheimer of
Microsoft. Relying on experienced companies to assist in the design of its
computers not only maximizes the machines’ performance but also controls costs
and allows Vizio to focus on providing a positive customer experience. Because
the people who purchase computers are more likely to require technical support
than those who purchased televisions, Vizio has decided to maintain all
technical support services for computers in-house at its service center in Dakota
Dunes, South Dakota. Vizio also keeps distribution costs under control by
sellings its computers through most of the same outlets that it uses to sellv
its popular line of televisions, including Walmart, Sams Club, Amazon, Costco,
and Target. The company also sells the computers through portable pop-up
mini-stores made from old shipping containers that it sets up on college
campuses, at music festivals, and other events. “If anyone says you can’t
disrupt a mature market, they’re wrong,” says McRae.
1.
What challenges does Vizio face as it attempts to
introduce a new line of products into a mature industry?
2.
Use the resources of the internet to learn more about
Vizio. Describe the company’s strengths and weaknesses. What opportunities and
threats does the company face?
3.
Which of the three strategies described in this chapter
is Vizio using? Do you think that Vizio’s strategy for competing in the PC and
laptop market will be successful? Explain.
