Businessmodel of Foxconn

Customer segment

Foxconn serves original equipment manufacturers (OEMs) either as a foundry manufacturer or supplier of components.

Among others, the company has a subsidiary called FIH Mobile that is mainly engaged in providing product development and after-sales support. FIH Mobile, which has won a contract to produce Nokia-branded devices designed HMD, a company formed by former Nokia employees, has its corporate headquarters in Cayman Islands.

Value proposition

The company strives to bring solutions that result in convenience in the everyday lives of people. It achieves that through low-cost manufacturing model that enables brands to enjoy the lowest total costs possible.

Foxconn’s areas of business focus are computer, consumer electronics, communications, digital content and auto parts. The company operates on five key tenets namely: technology, speed, quality, flexibility and cost efficiency.

Channels

The company employs multiple strategies to grow its customer roll. These strategies include participation at trade shows and conference.

The company also uses traditional media and the Internet to advertising to its products and services with the main reaching new customers and expanding the business.

In addition to these efforts, Foxconn also has direct sales team on the ground to hunt for new business deals. The company also maintains key accounts team headed by Key Account Managers.

Customer relationship

As a provider to the OEMs market, Foxconn doesn’t maintain traditional customer relationship. The company’s engineers are at the forefront of customer support because they are the ones who work closely with customers at various stages of product development and prototyping.

Key activities

Contract manufacturing: Foundry manufacturing is one of Foxconn’s main business activities. The company produces and assembles a range of electronic products such as computers, tablets and smartphones on behalf of brand OEMs. Foxconn operates manufacturing factories in several locations around the world. The plants that Foxconn operates globally enable it to produce close to customer and they also provide a channel to appeal to new customers.

Parts supply: Foxconn is also engaged in the production and supply of mostly components for electronic devices.

Diversification: In the recent times Foxconn has stepped up efforts to diversify its business at a time when it is also facing growing pressure in foundry business. For instance, the company is no longer the exclusive contract manufacturers for Apple. As such, the company can be seen diversifying into areas such as medical devices, where profit margins are greater than typical consumer electronics and where more growth is expected in the future. Foxconn is also diversifying into robotics business, with the company itself planning to deploy robot workers at its factories.

Key resources

With more than 1.3 million employees running its factories globally, Foxconn counts its workers as its greatest asset. Without them operations at Foxconn’s research centers and production plants around the world would literally grind to a screeching halt. These workers not only help with product innovation and manufacturing, but they also help to bring new customers on board to ensure that the business keeps growing.

The many manufacturing plants that Foxconn owns around the globe are also a major resource for the company. Because of them, Foxconn has the manufacturing capacity to meet the production demands of its customers. Additionally, the mega factories also enable Foxconn to enjoy greater economies of scale. That explains why Foxconn is a cost leader in contract manufacturing.

The other key resource that Foxconn can boast of is its portfolio of intellectual property.  Foxconn had more than 55,000 worldwide patents by 2012. Proprietary technologies that Foxconn owns are a great source of competitive advantage.

Key partners

Foxconn’s customers are also its major partners as it works with them in areas of product innovation, testing and production.

For instance, Apple has made a number of investments in Foxconn to go toward robotics, R&D and factory expansion among others.

Cost structure

One of Foxconn’s main objectives is to increase affordability of electronic products so that every human being can have access to them. As such, the company has modeled its business to ensure that customers enjoy the lowest total cost possible in their production of consumer goods.

Labor cost is one of Foxconn’s major expenses. But the rising labor cost has seen Foxconn contemplating deploying robots on its factory floors to help with works such as welding, spraying and assembling.

But using robots in production could result in massive job losses in places where Foxconn operates factories. The company’s factories in China employ close to 1 million people.

Revenue sources

Foxconn has and continues to diversify its operations, which means it generates revenue from more than one stream. One source of Foxconn’s revenue is contract manufacturing. The company also generates revenue through the sale of branded components for computing systems and devices. The acquisition of Sharp is likely to accelerate Foxconn’s expansion into consumer market.

Foxconn generated consolidated revenue amounting to $135.6 billion in 2015, up from $133.04 billion in 2014 and $91.6 billion in 2011.