Saturday, September 7, 2013

How Vizio makes money

Vizio is an America's best selling TV company. One of the strengths of the company is low prices compared to major brands such as Samsung and LG. Vizio have started to sell their TVs since 2002. By selling HDTVs for $2,999, many manufacturers were surprised with this unprecedented price. This price was three times cheaper than Sony and Panasonic's product. Many people expected that this low cost leadership will not work longer. However, this price strategy is still working until now.

Why is Vizio's TVs so cheap? If we closely look at its supply chain, we can understand how it works. Unlike other manufacturers, Vizio reduced the costs of goods by contracting with ODM companies like AmTran. Only tasks Vizio does is provide marketing plans, strategic planning, and customer services. Other than these, ODM companies produce TVs. In addition, there are no employees for R&D department which saves more budget.

Firstly, when they forayed into the TV market, they did not display their product in electronic retailers like Best Buy because those retailers took about 25% of margins from selling TVs. Comparatively, Costco and Sam's club takes less than 10% of margins. That is why Vizio provided their TVs in Costco and Sam's club instead of electronic retailer. Even though Vizio was a late comer in this market, they targeted customers who needed regular HDTVs. Subsequently, they expanded their retail chains from Cost Co to Walmart and Kmart.

However, Vizio could not convince customers easily because they doubted its quality. Since major manufacturers like Samsung and Sony predominated the TV market, Vizio needed to do something to improve its brand image. Thus, they introduced 'No Bright Pixel' marketing campaign which provided free repair services by vising customers' houses. By doing this, customers recognized Vizio as one of the good brands.

Nowadays, Vizio focuses on various range of product like tablet and notebooks. However, companies have already provided them at low prices. Thus, Vizio's new entrance in these markets will not be optimistic; however, by innovating its supply chain from ODM and reducing costs of retail chains, Vizio will have competitive advantages to compete with other manufacturers.

Works cited

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