MBA Case Study - Creation of an Asian Production Network

In the early nineties, the US was the most important producer of computer hardware. U.S. PC makers needed low-cost, reliable sources of components and peripherals, and initially turned to Japan, with its well-developed electronics and components industries. The U.S. companies also wanted to move labor-intensive production to lower-wage locations, and needed cheap sources of simple components that were becoming too expensive to source from Japan. Their search led them to Asia's newly industrializing economies of South Korea, Taiwan, Singapore and Hong Kong, which were already making consumer electronics and electronic components. At the same time, those countries were looking to move into higher technology industries to sustain economic growth, and saw the emerging PC industry as providing just such an opportunity. The governments of Korea, Taiwan and Singapore all enacted national strategies to promote the creation of personal computer industries in the early 1980s and supported them with government spending and incentives for infrastructure development, R&D, technology transfer, education and training, and industry promotion.

This confluence of interests between U.S. companies and Asian countries led to a rapid growth in computer production in Asia, as U.S. companies developed a vast supply and manufacturing network throughout the region. Countries such as Taiwan, Korea and Singapore moved rapidly upstream from simple assembly and production of cheap components to challenge Japan's leadership in large segments of the PC market. Korea's Samsung moved into first place in memory chips, while Taiwanese companies took the lead in motherboards, monitors and other peripherals, and Singaporean companies such as Creative and Lancer ,controlled the world sound card market. Meanwhile, U.S. companies focused on their strengths in software, design and marketing, and leveraged the manufacturing capabilities of Asia to maintain their leadership in the PC industry

The rise of the Asian giants

The late nineties saw the rise of the tech triangle of China-Taiwan- Malaysia who with lower input costs such as labor virtually began controlling the hardware components markets. U.S companies such as HP, Gateway and Compaq continued to be market leaders but Asian brands such as Acer and Toshiba started making dents in their market shares. Asian companies were also better positioned to take advantage of the huge market potential in the Asian region. This rising power can be best demonstrated from the fact that a former hardware manufacturer Lenovo has taken over the IBM thinkcenter and thinkpad brands.