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The Flattening Forces Affecting the Japanese Optical Industry: How Netscape Changed the World
In “The World is Flat, A Brief History of the Twenty-First Century,” New York Times author and author Thomas Friedman talks about the “Ten Forces That Flatten the World” and the Revolution. How we do business. Over the past 15 years. What he means is the force that is “raising the pitch” and allowing the whole world to work together and compete. Compete in unexpected ways.
In summary, they are as follows:
1) The Fall of the Berlin Wall (1989/11/09) – This opened east and west and allowed the two cultures to meet.
2) Netscape IPO (08/09/2015) – This started the growth of dot.com, which led to a large number of companies receiving funding for crazy projects, laying many Fiberoptic cables around the world and the basis for the cheapest internet connection with the world.
3) Workflow program – People can now send files to each other via email, work on these files on their computers and have long-distance collaboration effect.
4) Open source This movement leads to affordable, free and available software that is available on many different platforms on the Internet, creating business servers to run the Internet and communicate more efficiently.
5) External resources – This movement is the result of companies trying to “reduce fat” by finding cheap places to work “outdoors”. Because the Internet and the Internet are affordable, companies can export from abroad to cheaper workplaces, re-importing finished products and finishing for the market.
6) Cultivation By taking the whole factory to a country where labor is cheap and the number of workers is large, it is possible to achieve an “economy of scale” and significantly reduce production costs.
7) Supply chain – It can create a system where all the ingredients for your product are sourced from around the world where one can get the best product at the cheapest price. Take a look at Dell computers as a perfect example.
8) Insurance – Logistics was born and the shipping company redesigned itself to take care of the entire part of the company that had some involvement in the product transition from A to B. It could be inventory, computer repairs, and more.
9) Form – It is now possible to research everything on the Internet and learn about everything in more detail than ever before due to the large amount of data in storage on connected systems to the world.
10) Steroids: Digital, Mobile, Personal, Virtual These extra small devices act as catalysts to make the other nine flat machines more powerful. People can now communicate freely anytime, anywhere and on a wide range of mobile devices. Free Internet telephony (Skype) is one example.
I will now talk about the Japanese optical industry and how these speakers are changing the face of how businesses are doing in this industry.
The most important flatteners affecting the optical industry today
The largest market for glasses is the United States, and from the optical industry point of view (perhaps others as well), the United States seems to only want “cheaper” products. The desire for “falling prices” (by cost of quality) has driven a large number of businesses to China. Manufacturers in China produce acceptable quality at significantly reduced prices compared to the rest of the world. Japan has the competitive advantage of being able to produce titanium and titanium alloys, which are in high demand in the world. Due to the “nickel-free” policy in Europe, many “standard metals” are being phased out and titanium, which is considered “nickel-free”, has become a hot commodity.
Japanese production is very high quality (the whole world can not get the quality of manufacturers here for glasses) but also very expensive because in this small industry we do not use production line. . Although everyone liked the Japanese quality, the price point pushed them to China.
Many Japanese manufacturers have gone bankrupt, and survivors do the same because they have moved to specialty production for smaller markets, or they have left their production to companies in China. . Exporting to China for the Japanese market is very difficult because even though Friedman talks about “high quality manufacturing in China” I have to disagree with the optical industry. Poor quality from Chinese factories and the way of doing business is very frustrating for companies that place their orders to companies there.
To overcome this, companies that could afford to do so began their business by building their own factories in China and self-managing, or working with existing Chinese manufacturers, but sending Japanese people to control the production of their products. They. .
Outsourcing is not a new concept in optical manufacturing in Japan. There are really few real eyewear manufacturers that do the whole process from A to Z. The Japanese system is such that everyone uses a small company that specializes in one or more of the 200 steps needed to make a frame (gripping, painting, polishing, forming, etc.). Part of the outgoing order is completed and returned to the company that sent it out for the next process. This is very common in this industry.
However, the whole process abroad is very difficult for the industry. It has become a necessity and a necessity for survival for frame makers without competitive advantages in production. They need value benefits to survive.
In the optical industry, shifting their entire process through the development of new factories overseas to compete is a new way of thinking for eyewear manufacturers / suppliers to the global market.
How those forces influence / influence industrial strategy
This necessity hit the company hard and forced them to do one of two things:
i) Move deeper into niche markets to keep production in Japan at a high price, but produce specialized products that cannot be replicated or manufactured in large markets of Chinese production. These frames are more expensive than products made in China (on the retail market) due to the eyeglass identification system in Japan. Manufacturers here also have to reduce their margins to sell Made in Japan products, despite the niche market they have, due to the huge differences in Chinese frames that have pushed the market down, pushing up prices. Of Japanese quality declining. Regardless of its quality.
ii) Accept low quality products at low prices to gain greater market share. This is tense for Japanese companies involved in the business, however, it may seem like a “high quality Japanese demand”, a completely false external observation for this market (or other product after watching the market change). Large to “Made in China” goods). Those who are interested in this fact are the first to enter the “three price glasses market” and make huge profits from it. They have refined their strategy of buying overseas through OEMs in China rather than making them in Japan at a higher price.
Another interesting effect of this change is that even in Europe the “native” of European-made eyeglass manufacturers is no longer a profitable option. Europe does not invest in titanium or special production, so when the Chinese learn from Japan how to make European materials can not create anything That China can not produce at a fraction of the price. My partner / customer in France who used to buy my equipment can no longer buy it because all the manufacturers have stopped making glasses in France. They have to completely change their strategy to survive and instead of making their own frames now use their in-depth understanding of fashion and design to paint products and have them made in China. They order through companies like my affiliated colleagues. With the manufacturer.
Industrial restructuring that can improve a company’s competitive position
Since this process has continued for many years, the structure has been gradually changing, such as low-end products (or “standards”), now we can say that because the quality has really improved over time. (Years ago) are made in China through export to Chinese factories or exported by the company’s own factories overseas, while high-end products are stored in Japan made in Tradition of exporting to professionals who specialize in certain aspects. This has put the industry in a polar line and created a very different market segment for companies to target.
Outsourced companies in Japan are finding that as time goes on, overseas customers are turning to high-end products because they understand that quality really makes a difference in profit. There is a new move that rewards those niche market players with an increase in orders for high quality products.
Another change that could improve the company’s competitive position is to determine whether it can offer products in both ranges, purchase low / standard models for customers requesting them and retain high end / specialty products. “In the house” (in the country). This requires the development of relationships with other companies with ties to foreign manufacturers (as in France).
China has a clear comparative advantage in terms of economies of scale. Initially, when a company wants to order with a Chinese company, they can get a great price, but are required to order a ridiculous number of products, such as 10,000 frames! No one in Japan can do that, so it is very difficult. Chinese companies have finally reworked their production lines (like any company around the world to get more orders) to meet the needs of customers who can not order such large quantities. Over the past five years, these numbers have dropped dramatically from tens of thousands to thousands, and now to hundreds. This is causing a real increase in the Japanese optical market as well as other manufacturers around the world who can get orders on “small quantities”. China has now determined their position to capture even that market. This change has really improved the competitive position and comparison of Chinese manufacturers.
The “broker” system in the optical industry is very popular for a number of reasons: Japanese companies rely on so many importers / exporters that many small to medium players do not have the capacity or understanding for Import / export for home use. They are also famous for their lack of English language skills. In addition to this, another factor is their fear of “collecting money from abroad”.
Due to these factors, many companies are afraid to go out directly. They need business, so brokers contract / take risks on their behalf. This, of course, drives up prices because brokers are known to be highly profitable in the industry. I believe that this change in mindset, a better understanding of the global industry and better command of international business is necessary for manufacturers in Japan to take full advantage of the low prices of Chinese products. Which is acceptable and combines it with their competitive advantage. Maintaining their special production in the high quality marketing segment.
Having said all that, the fact that China can now produce low- and medium-priced eyeglass frames for Japan (for the world) will allow for lower profits on these products (in Japan) is crossed. And manufacturers can focus on the more profitable areas of the market instead. Finally, those who want cheap glasses can get it and those who want expensive glasses can get it too. The total market surplus from this new business is positive and exceeds the decrease in producer surplus as consumer surplus outweighs producer losses. The market wins.
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