Gemini - What Was the Business Model of Gemini?

201620 Spring 2016 MBA 6204 22302

Professor Ohaness Paskelian

Monday 6:00 PM

Prepared by Eugene Salazar

Case 1 - Gemini:

Question-1. What was the business model of Gemini? What were the key success factors that determined its past profitability? What are the risks Gemini is facing now?

Gemini’s business model centers on being a low cost provider of quality electronics, such as big screen televisions.  A key success factor was the firm’s ability to provide cost savings to their customers by taking advantage of Just-In-Time delivery.  By having a domestic operation, the reduced transportation and warehousing cost (distribution cost) were shared with their customers.  The firm was also counting on the patriotism of consumers, preferring domestic products versus imported products.  

The recession in 2008 and 2009 had a significant impact on the firm’s logistics advantage. Many of the Asian firms began to lower their prices to match Gemini’s low prices in response to the dropping value of the US dollar. The national trade deficit was a clear indication that domestic firms no longer held a clear logistics advantage.

Question-3.  Does Gemini need to establish operations outside the U. S. or can it survive as a domestic company? What operational issues are Gemini likely to face if it expends internationally? 

It is my recommendation that Gemini should remain a domestic firm.  The financial statements show that the firm has consistently increased their net income until the recession hit in 2009.  This change in their financials is a result of the global economy and not a result of management inefficiency.

If the firm were to outsource, they could have to contend with the established electronics firms flooding their new markets with loss leaders, acting as a deterrent.  These firms would now be competing for the same skill level employees to work in their production facilities. There may also be added costs, such as added tariffs.  The new distribution points would also possibly have to deal with government rules and regulations.