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Case discussion
American Connector-A
Competitive environment
Cents to $100
Typically ~ 2% of product
1200 suppliers
Gs/ AmCon-A/Apr10
American Connector-A
Intense competition
900 firms
Declining sales
Gs/ AmCon-A/Apr10
American Connector-A
Competitive Position: American Connector
Market share 5%
computer
telecom
scientific instruments
4500 SKUs
Gs/ AmCon-A/Apr10
American Connector-A
Market share 4%
1991 sales between US$ 500- 800 million
Computer, telecom & consumer electronics
Gs/ AmCon-A/Apr10
DJC-86
ACC-86
DJC-91
ACC-91
RM, Prod
14.32
10.40
12.13
9.39
RM, Pack
3.27
2.25
2.76
2.10
Labour, D
7.63
3.02
Labour, Ind
2.30
0.75
Total labour
9.93
8.53
3.77
10.30
Electricity
2.47
1.80
1.40
0.80
Depreciation
7.63
5.52
1.80
5.10
Other costs
4.12
4.41
4.24
6.10
Total
$41.74
$32.91
$26.1
$33.79
DJC cheaper by
$7.69= 23%
Costs
In 1991
DJCKawasa
ki
JapanUS
Index
DJC-US
ACCProposed
Sunny
plant
vale
7.28
9.39
RM, Prod
12.13
0.6
RM, Pack
2.76
0.6
1.66
2.10
Total labour
3.77
1.1
4.15
10.30
Electricity
1.40
0.8
1.12
0.80
Depreciation
1.80
1.80
5.10
Other costs
4.24
4.24
6.10
Total
Gs/ AmCon-A/Apr10
$26.1
$20.25
$33.79
DJC-K Cheaper by
$7.69 =22.75%=
DJC-US $13.54=
40% cheaper
American Connector-A
Utilisation?
Operational effectiveness?
Strategy?
Gs/ AmCon-A/Apr10
American Connector-A
Gs/ AmCon-A/Apr10
American Connector-A
American Connector
DJC
Current Depcn
$5.10/1000
$1.80/1000
Current prodn
420 million
Annual Depcn
$2.14 million
$1.26 million
Rated
capacity
600 million
800 million
Target cap
utilisation
Full capacity at
target utilisn
Depcn at full
capacity
Gs/ AmCon-A/Apr10
85%
100%
510 million
800 million
$4.20/1000
$1.58/1000
[2142000/510]
[70%]
700 million
American Connector-A
Gs/ AmCon-A/Apr10
American Connector-A
Gs/ AmCon-A/Apr10
American Connector-A
Gs/ AmCon-A/Apr10
American Connector-A
Summary
Gs/ AmCon-A/Apr10
American Connector-A
Summary
Gs/ AmCon-A/Apr10
HIGH
American Connector-A
ACC
COST
Service &
customised
solutions
DJC
LOW
Cost-sensitive
customers
LOW
Gs/ AmCon-A/Apr10
FLEXIBILITY
HIGH
American Connector-A
Operating Efficiency
$0.21
$0.48
$0.18
$1.05
Mould
design
Cheaper
resin
Smaller
housing
Reduced
waste
Total
Strategy related
$3.50
Tin plating
$0.59
2000 piece
reel pack
Total
$1.92
$4.09
Per 1000
Per 1000
ACC higher cost due to ACC costs higher due
Gs/ AmCon-A/Apr10
design & material
to strategy- packaging
American Connector-A
Labour cost
ACC output per employee=1.06 million
DJC output per employee=7.45 million
@DJC's productivity, ACC would require
only 420/7.45=56 people [not 396
ACC has $[10.30-4.15]=$6.15 cost
disadvantage
Even if ACC ran at 100% capacity; labour
cost=$7.21; still cost difference=$[7.214.15]=$3.06
Gs/ AmCon-A/Apr10
American Connector-A
American Connector-A
American Connector-A
American Connector-A
Gs/ AmCon-A/Apr10