INDUSTRY OVERVIEWConnectors are used to connect wires to wires and other electrical components. In 1991, it was a fragmented $16 billion industry. DJC and American Connector Corporation were second-tier companies in the market, with sales of between $500 million and $800 million. IMPACT OF DJC'S ENTRY INTO THE US MARKET The year 1991 saw a sharp decline in sales (3.9%). The abundance of suppliers forced competition on the basis of quality, cost and speed of delivery. Therefore, already struggling American companies like ACC were wary of DJC's entry into the US market. DJC THREAT TO AMERICAN CONNECTOR COMPANYMr. Larsen, ACC's vice president, believes the Sunnyvale plant is grappling with operational problems including deteriorating quality and rising costs. With better production methods and higher quality, DJC would be able to take away some of ACC's market share. Some of the important factors that could tip the balance in DJC's favor are:• Manufacturing excellence has been DJC's strength, driven by continuous process improvement and careful attention to customer needs. Their approach to cellular manufacturing, dividing the factory into small, homogeneous and cohesive production units, facilitates production and quality control. Continuous plant operation and good plant layout ensured maximum resource utilization, low work-in-process inventories, and relatively higher finished product inventories. of problems and correction, ensuring quality production. Internal technological development and cross-functional coordination of all technological development activities creating value for the customer, process efficiency and differential advantage for the company. • Emphasis on high supplier quality by applying rigorous quality standards. The emphasis on just-in-time delivery of raw materials has ensured low inventory and, consequently, lower warehousing and inventory holding costs. COMPETITIVE COST ASSESSMENT AND POTENTIAL OF DJC IN THE US MARKETTable (2) shows the cost evaluation for both ACC and DJC with their current cost structure . ACC has a significant material cost advantage due to its geographic location, while DJC has a labor cost advantage. DJC has an efficient production system and employs less labor, which facilitates the reduction of labor costs. DJC's wise investment in technology development has helped it reduce depreciation costs. For DJC, the depreciation cost contributes 6.89% to the total product cost, while for ACC it is 15.09%. The overall production cost for DJC is $7.69 lower than the potential of ACC.DJC in the US market is analyzed in the exhibition (3).