School of Economics, Finance and Management

Management
Coursework Assignment
Unit ECONM1013

MSc in Accounting, Finance and Management
MSc in Economics, Finance and Management

Unit Leader: Dr Rutvica Andrijasevic

ASSESSMENT DETAILS
The Unit is assessed through both Group Presentation and Individual Assignment.

Group Presentation (25%) of your final course mark:

Format:
Your presentation is to follow the report format (see Blackboard for more information on the report format). You are a consultant to the CEO of the multinational below and you must convince the CEO either to invest more money or reduce investments into robotics. You have been hired to conduct an environment analysis using case materials, library research and electronic data sources. Your presentation must demonstrate clearly the rationale, motives and implications of your decision, as well as how and why such as strategy is to be carried out by the business. You will be expected to engage with the literature discussed in class and specified in your reading list.

Topic:
Over the past decade, multinational firms have pursued various diversification strategies. One of these firms is Foxconn, the world’s largest electronics manufacturing firm, which in 2015 put to use more than 30,000 robots. Thousands of these are at its factory in Chengdu that has fewer than 100 workers (for more info see the enclosed text from the Economist). For this assignment you are required to examine the business environment and the operations of Foxconn that led to its investment into robotics. Please pay attention to the competitive landscape in the electronics manufacturing services industry (in particular Foxconn’s relationship to Apple) as well as political and social environment in China (such as labour practices and the peculiarity of migrant workers).

Marking:
Next to the content of your presentations, markers will pay attention to the effectiveness of your presentation such as speech, posture, maintaining eye contact with the audience instead of reading off the script, timing and the answering of questions. Referencing standards should also be in evidence. Note that not all members of the group have to present, but everyone must contribute in some way to the presentation. We encourage all members to be present.
In addition, each group must keep a diary of all meetings and discussions. These should be submitted on the day that your group presentation is scheduled and should indicate how the work was divided and the tasks completed. Normally, everybody in the group will get the same grade, however, if there are any significant social loafers, please note this in your group diary. The Unit director reserves the right to award different marks if such evidence exists. Please notify your class tutor if there is early evidence of conflict within your group.

Text from The Economist for Group Presentation Assignment
Kicking the Apple addiction
The Taiwanese firm strives to avoid over-dependence on its main client
Sep 5th 2015 | SHENZHEN | From the print edition

INSIDE an obscure warehouse in the southern Chinese city of Shenzhen, the robot revolution is under way, but it is far from glamorous. The test lab is hot, steamy and a bit dusty. Dozens of giant, aquamarine-coloured units are whirring and gyrating in patterns designed to test their endurance as they do polishing, machining and assembly. And forget about artificial intelligence: these tireless drudges will not move autonomously or learn by doing.
“We are a business,” explains Day Chia-Peng of the robotics group at Foxconn, the contract-manufacturing arm of Hon Hai of Taiwan. And his frugal bosses will not pay for his team to make flashy kit that does not add value. Foxconn says it already has more than 30,000 robots in use, including thousands at a factory in Chengdu that has fewer than 100 workers. Besides making bespoke robots in-house, the firm has also invested $118m in a division of Softbank, the Japanese firm that makes Pepper, an advanced automaton (pictured).
The push into robotics as a producer, not just a user, is just one part of Hon Hai’s strenuous attempts to diversify. Foxconn is so good at high-quality, high-volume manufacturing that it has long been the contractor of choice for Apple, which provides around half of the Taiwanese firm’s revenues. However, the American tech giant is trying to reduce its reliance on Foxconn, which once made 90% of the firm’s handheld devices but now makes perhaps two-thirds of them.
So, Hon Hai has been trying lots of new things. Its latest effort is in chip-packaging, a profitable business that bundles semiconductors into products like wearable bands and smart watches. On August 28th it said it would take a 21.2% stake in Siliconware Precision Industries (SPIL), a Taiwanese chip-packager, which in return will get a 2.2% stake in Hon Hai. Their agreement thwarted an effort by another compatriot, Advanced Semiconductor Engineering (ASE), to take a big stake in SPIL. ASE has said that it has not yet given up.
Last month Foxconn agreed to invest $5 billion to build an electronics factory in India—giving little detail on what it would make—and hinted that it might open up a dozen more across the country. Hon Hai is also said to be in talks to take a stake in a division of Sharp, an ailing Japanese firm that makes liquid-crystal displays (LCDs), or to form a joint venture with it. A deal in 2012 between the two parties fell through.
Nicolas Baratte of CLSA, a stockbroker, says branching out makes sense for the group. Foxconn, which is 95% of Hon Hai’s core business, has margins below 4%. Over-reliance on Apple is not its only problem. Around two-fifths of Foxconn’s revenues come from making servers and networking equipment for just a few firms, such as Cisco, Juniper, HP, Huawei and Dell. “It’s maxed out its market share in this area, too,” Mr Baratte says.
But diversifying successfully is not easy. Moving into chip-packaging seems sensible, but ASE, assuming it cannot unpick Hon Hai’s deal with SPIL, will be a formidable rival, and margins may well fall. Getting into other semiconductor-heavy sectors, such as LCDs, could in theory bring higher margins, but in practice Sharp has bled red ink. Entering factory automation also seems a good way to add value, but Mr Baratte thinks the mass manufacturer is not capable of selling customised bits of kit to thousands of small customers. “Today, it has just fifteen big clients,” he says.
Still, at least all these efforts have some connection with Hon Hai’s core capabilities. Some of its other initiatives do not. It has made a big push into mass-market retailing in China and Taiwan, which has not taken off. It has splashed out to win a 4G mobile-telecoms licence in Taiwan, on the dubious ground that this would help it sell equipment to telecoms providers. It has been throwing money at e-commerce ventures without a clear strategy. It even has plans to start making solar panels.
Alberto Moel of Sanford C. Bernstein, a research firm, calls these efforts “diworsification,” and urges the firm to stick to deals that have industrial logic. He points out that the biggest success Hon Hai has had so far in cutting its reliance on Apple has come from making handsets for the American firm’s rising Chinese rival, Xiaomi.