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Vizio Inc Case Solution

Solution Id Length Case Author Case Publisher
2745 1521 Words (6 Pages) Krishna G. Palepu, Liz Kind Harvard Business School : 110024
This solution includes: A Word File A Word File

Vizio was founded in 2002 by Wang, and it manufactured economical, top-quality flat-panel TVs. Wang realized that companies like Sony and Samsung were earning huge margins on TVs and that there was a need for a company that could make good quality TVs at much lower margins. He utilized the experiences and relationships of his corporate career and was able to source key components at great prices. Vizio had great relationships with its suppliers, which got it financing and on-time delivery. 

It primarily sold through big discounters like Costco and Walmart, which helped it stay competitive. It invested wisely in marketing by onboarding a famous football player as its ambassador and having a top-notch customer service infrastructure in the form of call centres and friendly return policies. The secret behind its low pricing was its overhead structure comprised of few employees and limited inventory. Wang was worried as competitors also introduced economical TV sets, and the economic crisis reduced consumer purchasing power. 

Following questions are answered in this case study solution

  1. Why was Vizio able to build such a large business in such a short period of time? What are the key strategic choices made by Wang and his team in driving this success? (The student describes clearly Vizio's strategy, its business model, and its partner’s ecosystem. The student clearly explains the market opportunity and how the company was able to build a low-cost position (provides 4 examples linking to suppliers, partners, inventory, reputation, and logistics)

  2. How profitable was Vizio at the time of the case? (The student clearly analyzes the business model in financial terms. The student is able to identify the financial information to calculate ROE and operating profit to explain the business profitability.)

  3. What are the potential threats to Vizio's ability to sustain its success going forward? How concerned should Wang be about these threats? (The student identifies 2 potential threats and describe these potential threats.)

  4. Should Vizio expand globally? If so, where and how?

Case Analysis for Vizio Inc Case Solution

1. Why was Vizio able to build such a large business in such a short period? What are the key strategic choices made by Wang and his team in driving this success? (The student describes clearly Vizio's strategy, its business model, and its partner's ecosystem. The student clearly explains the market opportunity and how the company was able to build a low-cost position (provides 4 examples linking to suppliers, partners, inventory, reputation, and logistics)

Wang saw a gap in the market: companies were charging too much for a flat-screen TV. With Vizio, he envisioned more value for money as his projected retail price was around $5000 lesser than the prevailing prices. He used his past relationships to secure the supplies of critical components. Periodic and frequent formal and informal meetings were held to discuss tactics and strategies to ensure that the end product was of high quality and reached the retail outlets on time. Wang was very well-acquainted with the owner of Amtran, and Vizio contributed to around 80% of Vizio's business. This bonding also helped Vizio in getting financial support as Hon Hai and Amtran possessed 31% ownership in the company, and with these funds, Vizio could hire more employees, increase its product lines and expand its retail footprint. Vizio placed its products in discount centres like Costco and Walmart BJ's, which were happy with a gross margin of up to 10%, another reason for its competitiveness. 

These centres were huge warehouses that allowed Vizio to place its boxes on the floor containing crucial marketing information. Third-party logistics companies held Vizio's inventory, so there was no burden on Vizio regarding the carrying and return costs. It was also able to secure credit insurance and working capital from its partners because of its high credit rating, concrete customer base and high inventory turnover. Vizio operated on low gross profit margins and few overheads, including limited employees and inventory. Low inventory resulted in big price savings because the panels' prices decreased monthly. Vizio's customer-friendly policies, including call centres and return policies, were crucial in forming a reliable brand image. In-house warranty was another feature that helped customers save money because they didn't have to pay to bring it to the service centre if it needed repairs. 

2. How profitable was Vizio at the time of the case? (The student analyses the business model in financial terms. The student is able to identify the financial information to calculate ROE and operating profit to explain the business profitability.)

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