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Is Vizio's business strategy ready for the future?

Written by Rich Fiscus (Google+) @ 21 Oct 2007 22:30 User comments (5)

Is Vizio's business strategy ready for the future? Vizio's strategy to build low priced HD displays has taken them from a virtually unknown manufacturer to one of the top consumer flat panel manufacturers. In order to make such an impressive splash on store shelves they've taken an approach that could leave them at the mercy of their suppliers at any time.
Using a business model reminiscent of up and coming PC manufacturers a decade ago, Vizio depends on high volume, heavily discounted sales and an unprecedented market boom in several hundred dollar televisions in order to maintain profit margins. While this strategy has clearly been beneficial for consumers over the last few months, it remains to be seen what the long term affect will be on Vizio's bottom line.

A look at the changes that accompanied the computer boom market of the late 1990s should give anyone with a financial stake in Vizio some pause. The most obvious problem with the strategy, as borne out by companies like eMachines and Gateway, is that no boom market lasts forever. Like PCs a few years ago, more people are buying HDTVs than have at any time in the past, or are likely to at any time in the future. In order for a company like Vizio to thrive beyond the inevitable sales decline, they're business model will need to adapt.

A second potential stumbling block, and one that may become an issue before declining sales, is their reliance on suppliers to deliver parts at a price that will keep televisions moving off store shelves while maintaining at least a small margin. Unlike much larger competitors like Sharp and Sony, Vizio's low margins may be a liability that will put them in serious financial trouble.

"In times when there are tight supplies, the premium brand is likely to benefit," said Riddhi Patel, principal analyst of television systems for market analysis firm iSuppli.

The most important fact to remember may be this. Although companies like Dell and Gateway seemed to have rewritten the book on PC sales, Hewlett-Packard, once considered in critical condition with regard to the PC industry, has made a comeback with rejuvenated workstation and server sales, while Dell struggles to return to their glory of a few years ago and Gateway prepares to be bought out by Taiwanese giant Acer.

Source: Washington Post

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5 user comments

122.10.2007 8:39

Quote:
more people are buying HDTVs than have at any time in the past, or are likely to at any time in the future
I'm not so sure about the "in the future" part. with only about 10-15% of homes with HDTV's,the impending switch from analog to digital broadcasts, and the number of HD channels finally making it up to an acceptable amount, I think that consumers are poised to buy more televisions than ever over the next 2-5 years. That's just an educated guess but it seems to make sense to me.

222.10.2007 12:18

it's gonna end up when almost verybody who can afford one have one. wich i think will be in the next 2 years and then ppl won't buy as much maybe ppl upgrading or getting two cuz every house has like 3 or 4 tv but not flat i think they will still sell but not as much vizio is a good company i hope they do well

322.10.2007 16:18

I love my Vizio and so far 20 or so people i know bought one since i got mines and have been to my house to see it. Word of mouth and the quality for Vizio on top of the price should keep Vizio's future intact as long as nothing company doesnt buy them out and change what they have started they should be good.

422.10.2007 22:36

What ever happened to that super super tv screen that was going to kill all the other lcd and plasma with more lifelike colors and at a much lower price.,and better than anything on the market

524.10.2007 3:24

Well as long as the stratgy works i dont see the problem.

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