Switches are electromechanical elements that serve to control the current in the system by closing and opening an electrical circuit. Even the popularity of touchscreens has not changed that they are still the leading method of user interaction with the device. Therefore, they perform an essential function and at the same time seem to be such simple elements that many engineers do not pay due attention to the selection of a suitable component. Indeed, the many types and models of switches available on the market are exceptional. However, it is worth looking for products that combine quality and reliability with an attractive price.
An example is the components of NKK Switches, a Japanese manufacturer that, working since 1953, has established itself as a leader in innovation in the production of switches. The company’s products are considered the best in the industry, and many solutions developed by the company have become the standard. Based on NKK’s current situation, it is assumed that a more promising strategy for them will be specialized production focused on a limited market.
Currently, NKK is in a position where it is necessary to choose whether to remain a manufacturer of switches for the general consumer or to enter a more limited market and focus on particular products. Of course, the initial universal strategy of the company is obvious: the switch market is relatively unknown and did not have many prominent participants before. These factors have allowed NKK to become a leader in this industry and set high-quality standards, satisfying even the most demanding consumer (Case Study: NKK Switches). Nevertheless, at the moment, the company’s serious competition is made up of Chinese manufacturers, which do not lag behind NKK, having low labor costs and massive growth rates.
The fact is that there are more and more competitors in the switch market who are able to offer, if not the same quality, then approximately similar and in a large assortment. Certainly, NKK is widely known for its high quality; however, it is likely that switching to a limited market designed for the production of specialized goods would allow the company to remain a leader in this industry. The Chinese market is gaining more and more influence precisely because of its broad consumer reach and low prices, which accelerate production and sales (Case Study: NKK Switches). It seems unlikely that the Japanese company NKK will be able to make prices lower than the Chinese ones, and if it does, it will definitely hit its revenues.
Moreover, the production of general-purpose switches, offering a wide range of products, includes touch panels that do not need the technology in which NKK stands out. It is assumed that the Chinese manufacturer will, in any case, capture the entire broad segment of the market and will lead it in most industries due to cheap labor (Case Study: NKK Switches). Thus, it makes no sense for NKK to remain a manufacturer for the general consumer, offering low prices for its products since this segment is likely to stay with China.
Moreover, it does not make sense to invest a lot of energy, time, and monetary resources in areas that cannot be solved by the company’s core competencies, that is, in touch panels. The leading NKK technology in which it is perfect is mechanical engineering, so it is difficult to deal with touch panels where there is no physical confirmation of the user’s actions (Case Study: NKK Switches). It should also be mentioned that the profitability of touch panels is low since the company cannot use most of its experience in the field of mechanical engineering (Case Study: NKK Switches). Recruiting new people with the appropriate skills could solve this problem, although it would take a lot of time and money to train new employees and retrain old ones. That is impractical in conditions of fierce competition with China.
On the other hand, no matter how contradictory it may sound, a limited market will provide the company with new opportunities that will favorably distinguish it from the emerging competitors. Specialized manufacturers have several advantages over those focusing on a broad consumer market. They have a more comprehensive, concentrated assortment of goods of a specific group and, therefore, more opportunities to choose goods. In addition, they have better conditions for a more thorough study of customer demand and professional development of employees. The main characteristic feature of specialized manufacturers that distinguishes them from universal ones is the saturation and depth of the trade assortment. A specialized manufacturer is designed to meet the broad needs of consumers in goods of a particular assortment category as much as possible.
Certainly, specialization has some opposing sides: the number of enterprises selling individual goods decreases, respectively, they are geographically removed from the buyer. It leads to an increase in the time spent on making a purchase and limits the possibility of comprehensive public services. Nevertheless, the advantages of a specialized production strategy in the conditions of NKK’s position seem much more weighty and convincing than the disadvantages:
- The company will be able to fully implement mechanical engineering technologies by developing its products for a limited market rather than focusing on competitors.
- Specialized products have a great prospect of increasing the company’s revenue since NKK will not have severe competitors in the highly specialized production industry soon.
- The company will be able to entirely focus on the quality of its products, using all its reserves and skills to their full potential, and not wasting time on retraining and hiring new employees to produce unprofitable goods.
Thus, having familiarized with the situation of NKK, it is possible to conclude that focusing on a limited market and highly specialized products will be the most advantageous strategy. Market conditions are constantly changing, so it is necessary to adapt and overcome the difficulties that arise. Ten years ago, Japanese switch manufacturers had no serious competitors in this industry. Today, they have to come up with new solutions to the problems that have arisen in the form of Chinese companies.
Indeed, it is difficult to accept the fact that NKK, despite its merits and the high quality of its products, is no longer an unambiguous leader in the broad switch market. Nevertheless, this fact should encourage the company’s management to new solutions and strategies that, despite the risks, may turn out to be advantageous and correct and provide the company with leadership in another area. Summing up all the above, a reasonable solution for NKK would be to switch to a specialized production focused on a limited market and capable of taking the company out of the race for the championship.
Reference
Case Study: NKK Switches. From manufacturing to creating new markets “Intelligent Switch”. (n.d.)