Strategy Paper: Vizio

1. Analyze competitive forces in the US LCD TV industry.
Porter’s Five Forces
Intensity of Rivalry – rivalry intensity is very high as evidenced by the severe price competition as the case references (24% decline from 2006 – 2007 alone). Competition comes from the plethora of players, both established ones such as Phillips, Sony and Panasonic as well as upstarts such as Syntax-Brillian Corp.

Threat of Entry – traditionally the barriers to entry for this industry have been very high as distributors were vertically integrated (a la` Sony and Panasonic) and had high capital investment costs. However, the Vizio model has proved that executing a contract-manufacturing, asset light model dramatically reduces the
Suppliers can also hold the company hostage in a supply-constrained environment. Given the low barriers to entry, repeatability of Vizio’s business model, and inability to increase WTP over the long-term as costs are expected to decline and match Visio’s, its competitive advantage is not sustainable unless it offers a product that is differentiated beyond price (e.g. quality or features).

4. Evaluate Vizio-AmTran corporate arrangement. Is it the best of the available corporate alternatives?
AmTran owns a minority stake in Vizio. The resulting corporate arrangement ensures several things:
1) alignment of interests (shared prosperity and failure); 2) preferential treatment in order delivery;
3) subsidization of shipping costs; 4) oversight by supplier of quality control and timely delivery. The relationship is symbiotic as AmTran obtains roughly 80% of its revenue from Vizio and Vizio sources 85% of its TVs from AmTran. This arrangement makes sense since it addresses a few critical aspects of Vizio’s business model. Firstly, Vizio needs to deliver its products at a cost-competitive price in a timely manner. This is especially critical because it has a limited track record and its relationship with the so-called ‘big boys’ can be terminated in a heartbeat if it fails to deliver on its promise. The same cannot be said of Vizio’s competitors,