Hon Hai Precision Industry is sometimes called the biggest company you have never hear of. Yet it is one of the world’s largest contract electronics manufacturers who produce many of the world’s...

Hon Hai Precision Industry is sometimes called the biggest company you have never hear of. Yet it is one of the world’s largest contract electronics manufacturers who produce many of the world’s computer, consumer electronics and communications products for ers such as Apple, Dell, Nokia and Sony. Since it was founded in 1974, the company’s growth has been phenomenal. It is now the world’s biggest contract manufacturer for the electronics industry. Why? Because it can make these products cheaper than its rivals. In fact, the company is known for having an obsession with cutting its costs. Unlike some of its rivals, it has no imposing headquarters. The company is run from a five-storey concrete factory in a grimy suburb of Taipei and its annual meeting is held in the staff canteen. ‘Doing anything else would be spending your money. Cheap is our specialty’, says chairman Terry Gow, and he is regarded as having made Hon Hai the most effective company in his industry at controlling costs. The extra business this has brought has enabled the company to achieve economies of scale above those of its competitors. It has also expanded into making more of the components that go into its products than its competitors. Perhaps most significantly, Hon Hai has moved much of its manufacturing into China and other low-cost areas with plants in South-East Asia, Eastern Europe and Latin America. In China alone, it employs 100,000 people, and with wages rates as low as one-fifth of those in Taiwan many of Hon Hai’s competitors have also shifted their production into China. Slack. N., Stuart, C., and Robert, J. (2010) Operations Management. Harlow, England: Financial Times Prentice Hall. Discussion Questions Question 1 (300 words, 30 marks) Identify the various ways in which Hon Hai has kept its costs low. Question 2 (200 words, 30 marks) How easy will it be for Hon Hai’s competitors to copy the way it has kept its low costs. Question 3 (400 words, 40 marks) Explain the five performance objectives of operation. Discuss the effect of the four objectives on the cost objective. Support your answer with relevant examples.