American Connector Company (ACC) faces a threat from the competitor market of electrical connectors. A very strong producer of connectors DJC is planning to expand to the USA. The company is well known for its high quality, low price connectors in the Japanese market. Its strategic location in Japan, its high fixed capacity utilization, inventory management, and technology investments has allowed it to produce low- cost connectors. In the American market, the costs for the company, DJC, will be significantly reduced because of market conditions. This includes the cost of raw materials and labor. The quality control at DJC is high while that in ACC is low. ACC needs to restructure its company and prioritize funds allocation in its plant to improve its position in the American market.
· Cost Comparison
· Raw Material: Product
· Raw Material: Packaging
· Total Labor
1. How serious is the threat of DJC to American Connector Company?
2. How big are the cost differences between DJC’s plant and American Connector’s Sunnyvale Plant? Consider both DJC’s performance in Kawasaki and its potential in the United States.
3. What accounts for these differences? How much of the differences are inherent in the way each of the two companies compete? How much is due strictly to differences in the efficiency of the operations? How much of the differences are due to the market conditions? Focus your analyses on material, labor, and depreciation (capital) components of the total difference that you have identified in the answer to
#2. You write-up must have some quantitative analyses to support your answers.
4. What should American Connector’s Management at the Sunnyvale plant do?