Abstract

Whether Cooperation Models Create Synergy Depends Even More on Timing than on Partner

The cooperation between upstream and downstream companies in the industry frequently is a source for making progress in a changing industry environment. However, cooperation often creates cash flow, logistics and human resource problems, and there are differences in company culture and invested resources. Many cases of cooperation in the market tend to be harmonious at first, but later on dissolve due to market factors or different corporate considerations.

Cooperation is a long-term consideration; if information exchange between companies is not transparent enough or if there are opposing viewpoints, oftentimes cooperation will result in a situation whereby the sum of the cooperation is less than the two individual companies' capabilities combined. Not only does the collaboration not achieve its intended benefits, it becomes difficult for companies to extract themselves from these partnerships.

For these reasons, pursuing synergy is the foremost consideration in these partnerships. However, companies, which do not fully think through all aspects of cooperation or only focus on short-term market developments when starting cooperation, will find it hard to exit when the market abruptly changes, as exit barriers become high.

Market trends and consumer usage models should be considered in cooperation. When consumers attach greater importance to price than value, pursuing high-end products is infeasible. Vice versa, if it can be foreseen that the next market wave will witness growing sales of large-sized models due to either price trends or replacement purchases, advance deployment in terms of design and development of large-sized products by OEMs will yield new opportunities for OEMs.

Timely Cooperation Can Overcome Production Barriers, Strengthen Customer Relationships and Enable Quick Reaction to Market Changes

Past cooperation stressed vertical integration between up- and downstream sectors. However, with end-market prices falling rapidly, cooperation changed and moved beyond production and sales scopes. Cooperation models developed for individual regional markets. Besides saving material costs and achieving cost-down targets, this also improved localized design capabilities and improved regional markets' logistics issues. Through regional market cooperation, companies can affectively gauge changes in market demand. This will have an important impact in the future on the selection of product functions and changes in product sizes.

Using a cooperation model which integrates the two partners' regional resources can be beneficial for all involved, especially in light of the promotion and production of large-sized TVs. Panel manufacturers can provide higher-quality and inexpensive large-sized panels to OEMs with their assembly capabilities. OEMs then ship products to brands for end-market sales. Downstream brands can gain more market share for their product lines. OEMs can gain increase their profits for the production of large-sized TV, and upstream panel manufacturers can use surplus capacity with large-sized panels. This could improve the state of the LCD industry.

Appendix

List of Companies