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Chi Mei Optoelectronics
CASE SYNOPSIS
capacity had to be made carefully lest the company lose money due to a supply demand imbalance.
Because component costs were 60-70% of LCDs, the company made a decision to vertically integrate.
CASE OBJECTIVES
The Chi Mei Optoelectronics case involves a high technology product that most people had never heard
of. Also, it is a product that goes into another product – TVs, notebook computers, etc. As such, the
The nature of leadership in a technology company
POSITION IN THE COURSE
The book chapters that are relevant to this case are:
1. Chapter 7 – Long-Term Objectives and Strategies (for vertical integration)
2. Chapter 9 – Multibusiness Strategy
3. Chapter 10 – Implementation
4. Chapter 12 – Leadership and Culture
Given that the case deals with corporate strategy, implementation, and leadership issues, it is best
positioned in the second half of the course.
TEACHING PLAN
The instructor should plan on covering three important pastures in the discussion of this case: the logic
SUGGESTED ASSIGNMENT QUESTIONS
1. What prompted CMO to diversify from its core petrochemical base? What were the risks
involved?
2. How did CMO implement its strategy of being a leading LCD manufacturer?
3. Why did CMO vertically integrate? Was this a sound move?
4. How did CMO’s leadership and culture impact the company’s performance?
ANALYSIS OF ASSIGNMENT QUESTIONS
1. What prompted CMO to diversify from its core petrochemical base? What were the risks
involved?
CMO’s petrochemical business. He believed that it was going to be increasingly challenging to continue
to be a successful Taiwanese petrochemical producer because of the small size of the country’s home
company into that market.
The risks for CMO were many. The technology was completely different, in that, petrochemicals were a
more mature industry with tried and tested processes and CMO had built considerable expertise in
diversification could be called unrelated because petrochemicals and electronic did not have anything in
common.
2. How did CMO implement its strategy of being a leading LCD manufacturer?
Given the risks involved in making the move from petrochemicals to electronics, CMO went about
core team. CMO insisted on controlling its own technology and so did not go in for turn-key operations
where they could, in effect, inherit somebody else’s processes. CMO insisted on creating its own
also need to get approval from the original technology licensor.” The case, in several places, points out
instances that illustrate CMO’s desire to control its technology. That is key in its implementation.
3. Why did CMO vertically integrate? Was this a sound move?
Vertical integration is defined in Chapter 7 as the strategy of acquiring firms that supply it with inputs
to assemble finished LCDs. Vertical integration gave CMO control over inputs because, as the case
states, the severe shortage in the market for display drivers meant that CMO couldn’t entirely rely on
polarizer films, etc.
In terms of Chapter 7, CMO went in for backward integration by supplying its own inputs. The strategy
4. How did CMO’s leadership and culture impact the company’s performance?
The instructor has to point out to students, if they don’t realize it on their own, that two key leaders
figured prominently in CMO’s success: the founder, Wen-Long Shi, and president, Jau-Yang Ho. Shi as
Business was a way to pursue fulfillment
Why were these important? They were important because they informed the company’s culture and
President Jau-Yang Ho is also to be credited for CMO’s success because he was the one who saw the
Strategic leadership and organizational culture are keys to succeeding in a competitive
environment.
