American Connector Corporation makes electrical connections at a works in Sunnyvale. California. With applications from military. aerospace to consumer electronics and contraptions. there is great difference in footings of specifications besides. Standard designs were established by International Institute of Connectors and Interconnect Technology. the National Electronics Distributors Association or by the terminal user. There is rumour of entry of DJC Corporation of Japan which was a dominant provider of electrical connections in Japan. DJC had non established itself in the US as it had no workss in the US and but a little gross revenues force. This created job for ACC who besides had jobs of their ain with respect to Sunnyvale works where costs were increasing and quality of production was diminishing. Menace of DJC to American Connector Company

Due to the operational excellence that DJC has. ACC should be highly concerned with their entryway to the US. DJC will be willing to run at smaller borders to capture the market portion. The strength of the market fight can ensue in combination of the menace of the lower monetary values. ACC will hold a limited sum of clip for the realisation of this menace and to measure the following class of action. Main menace to ACC from DJC comes from the operational efficiency and inactive cost difference and hence ignoring the reaching of fazing rival like DJC can instantly interrupt ACC’s pricing scheme and long term profitableness. Following factors reinforces the menace of DJC to ACC-

( 1 ) Lower Material merchandises cost – Following tabular array shows that cost incurred by DJC as compared to ACC is lower in both the old ages 1986 and 1991. In 1986. DJC had 7 % more COGS incurred as compared to ACC while at the terminal 1991. they were reduced by 40 % . If DJC sets up fabricating base in US Landscape. there will be significant natural stuff cost decrease for DJC as compared to ACC. ( 2 ) Lower defect rate and greater efficiency- The quality losingss for ACC is 1. 6 % against 0. 7 % of DJC. The defect rates at Sunnyvale’s are every bit high as 26000ppm of production and its quality control is end merchandise review as compared to treat centric quality control in DJC. ( 3 ) Higher Fixed Asset utilization- The effectual use of fixed assets ( in % ) for DJC is 75. 4 % as compared to mere 30. 2 % of ACC. ( 4 ) Lower Work In process inventory- Kawasaki Plant of DJC had treating lead times and work-in-process stock lists averaging for merely two yearss against high stock list degrees of ACC’s Sunnyvale Plant. ( 5 )

Lower Raw Material Inventories- The natural stuff stock lists of ACC averaged for 10. 8 yearss which is more than double than DJC’s norm of merely 5 yearss. which in consequences in less stock list cost and reduced finished good cost. ( 6 ) Higher reactivity to client order delivery- Because of extremely automated production procedure at Kawasaki works of DJC. the velocity of order bringing is one twenty-four hours whereas ACC works on batch production procedure which produces about 4. 500 assortments of connections. hence they have more than one twenty-four hours

However. DJC will confront a figure of challenges in implementing its Kawasaki Factory theoretical account in USA which are mentioned below- ( 1 ) Customer Contacts- DJC would non be able to leverage its strength to the fullest in USA as it would hold to vie in a new market with no major contacts. ( 2 ) Flexibility of Production process- Batch production procedure of ACC renders it great flexibleness in footings of customization of merchandises to its clients as compared to DJC. ( 3 ) Production and Inventory Control- There are 700 standard connection merchandise lines in North America entirely and ACC makes 4500 SKU’s and some merchandise lines were run on about continuously footing. So it would be really hard for DJC to be able to keep such long tally times when they need to bring forth about 8 times the figure of assortments of connections they produce at Kawasaki. ( 4 )

Finished Goods Inventory- DJC carries 56 yearss of finished goods stock list every bit compared to 38 yearss of ACC and given the short life rhythms of electronics. DJC faces high hazard of being disused. ( 5 ) Demand Variability- DJC’s merchandise oriented layout operated on high volumes and low assortment production. therefore cut downing costs. However USA does non hold a certain demand for such high volume merchandises. How large are the cost differences between DJC’s works and ACC’s Sunnyvale works? See both DJC’s public presentation in Kawasaki and its potency in the United States. To analyze the cost difference between DJC’s Plant and ACC’s Sunnyvale works. we need to retrieve the of import fact that the two workss operate in an wholly different scenarios ( Countries ) . Therefore in order to convey in a direct comparing between the two the cost indices between United States and Japan in 1991 comes really ready to hand. The assorted indices that compare Japan with US are given in the undermentioned tabular array Cost Indices ( Us to Japan )