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Shifting The Balance Of Power Between Two Of Europe’s Biggest Electronics Companies

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For the past decade, global terror events have further deepened the concerns of supply chain managers. However, while these happenings are particularly newsworthy, other natural disasters, political and economic disturbances may present a more pressing matter for upper management. Nonetheless and regardless of the source, disturbances within the supply chain will either be tactical thus leading up to short term losses or strategic whereby inducing long term hindrances for the supply chain.

Amongst these strategic risky occurrences, and without loss of generality, we recall the events of March 17,2000 when a 10-minute fire outburst triggered by a lightning strike rendered the Albuquerque Philips Electronics semiconductor plant in New Mexico incapacitated for 6 weeks. The disruption decreased production levels for the foreseeing 6 months by 50 % and Forever, “touched off a corporate crisis that shifted the balance of power between two of Europe’s biggest electronics companies…” (Wall Street Journal, January 29, 2001). At that time, the semi-conductor corporation was the prominent supplier of micro-chips for the European market, counting down the cellphone conglomerates Ericsson and Nokia. This incident brought about 2 different responses within the market ,whereby Nokia’s well-articulated process of managing chip inflows and order backlogs allowed it to recognize the “disruption” And take proactive measures in a timely manner. Upon realizing that the shortage would last for more than a month, they begun negotiations with Philips’s other facilities and sought out alternative supply opportunities.

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Contrariwise to Ericson, who underestimated the impact of the chip supply shortage mistaking it for a one-week shipment they not only acknowledged the problem after it was too late (once officially disclosed by the produce) but also did not follow-up ,nor undertake any measures until April when all of the reserves belonged to Nokia Consequently, these 2 responses accounted for two different outcomes as Nokia’s swift response and proactive measures assured a 42 % profit raise and a 30 % global market expansion by the 3rd quarter . Just as Ericson’s lack of supply chain ‘s responsiveness induced a second-quarter operating loss of $200 million, an estimated lowered annual earnings between $333 million and $445 million, a divisional annual losses of $1.68 billion in 6 months, a 3% loss of market share, and corporate operating losses of $167 million… Thereby, prompting the decision to outsource production and resulting in numerous layoffs; Evedently, Ericsson recovered in 2004, but as a much smaller company. In hindsight Ericsson’s loss was other firms’ gain, as unsatisfied customers shifted loyalty to other brands. Subsequently, these disruptions can be seen as a missed or seized opportunity pending on the responsiveness of the supply chain allowing for either strategic gain or loss.


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