please read one page case study below and answer the questions in the end at the bottom

GLOBAL VALUE CHAIN MANAGEMENT AND SUPPLIERS

The Big Picture Founded almost 45 years ago in the U.S., Helius is an established camera firm. Andreas Mitropoulous, a Greek immigrant, established a small one-man shop in Boise, Idaho, just after the Second World War. The company has undergone substantial growth since its humble beginnings. Originally, it made its mark producing 35mm film cameras, and has since realized considerable success with a transition into the digital market. Helius is a mid-level brand that specializes in affordable digital SLR cameras that rival higher-end digital models, but at a cost considerably lower than higher-end competitors. These cameras are sold predominantly to the North American market, and sales are augmented with a healthy online retail channel. Helius has a long-standing and trusted relationship with SajinCorp, a Korean original design manufacturer based in Seoul. Sajin designs and makes digital SLRs under the Helius name. The business relationship has been advantageous for both companies, with Helius becoming Sajins biggest customer. A New Market Helius executives have become concerned that the company is losing market share, particularly to two other large firms that market more innovative product lines. In addition, the recent drop in the price of high-end digital SLRs worldwide has directly impacted Helius overall profit margins. Executives are contemplating a company-wide move into the Chinese market. Helius feels the most prudent market entry strategy is to identify Chinese suppliers and manufacturers. Once design and manufacturing have been established, Helius would distribute and sell its cameras throughout China. Currently in China, there is an abundance of cheap and mostly unreliable digital cameras, and exclusive high-end cameras sold at a high price. With the continued growth and buying power of Chinas middle class, and the Chinese appetite for American products, the Helius brand is well positioned for the mid-range market. Some managers have serious reservations with this suggestion. There is worry that Chinese manufacturers will not be able to produce the quality product that Helius requires to maintain brand reputation. On top of this, there are some grave concerns as to whether Helius proprietary information would be secure with a new Chinese supplier. With an established, trusting relationship with Sajin, would the company be able to sell in China and maintain its competitive prices and quality, while also keeping Sajin as its sole manufacturer? Is Helius Losing Focus? Helius, interested in the possibility of sourcing components and manufacturing in China, has started to scope out the potential. On the ground, the situation looks very promising, with Beijing logistically well positioned. Nanyuan Airport provides domestic air transport, while the international airport, sea port and rail system are all within an hours drive. Helius has met with two potential sourcing and manufacturing firms. The prices these companies quoted were much more competitive than those offered by Sajin, but Helius sourcing team is not convinced these other companies could compete with Sajins quality. While in Asia, Helius executives decided to pay Sajin a visit. Sajin revealed a new strategic plan, which has caused a great deal of concern for Helius executives. Sajin is planning a bold move aimed at expansion and growth. It plans to source its materials from China, which it claims will create cost savings for both Helius and Sajin. Additionally, Sajin has plans to establish a research and development centre in the U.S., allowing it to collaborate more effectively on digital SLR innovation. It plans to create smaller compact models and

Global Value Chain Management and Suppliers

to improve the LCD viewer capabilities. This would in turn allow Sajin to ship products directly into Helius warehouses, cutting transportation costs. Helius wonders if Sajin is making a move that would end up putting Helius in direct competition with Sajin. It has no direct knowledge that Sajin is in the process of developing its own product line. It certainly has the expertise, and its strategic plan may very well include that possibility. Helius is now extremely concerned that it is going to face a sourcing crisis in the very near future. On top of this, it is troubled that its primary supplier and manufacturer would end up creating its own brand and product, and compete directly with Helius in North America, and possibly in China.

Questions 1. Using the information provided in this case study, perform a brief PEST analysis for Helius when considering Chinese suppliers and manufacturers. 2. What are they key considerations Helius will need to formulate in its Chinese sourcing strategy? 3. Is Helius investigating a factor input strategy or a market access strategy, in regards to its plans to source design and manufacturing in China? Explain. 4. What risk factors will Helius need to consider when planning a sourcing strategy for a move into China?