Q1: Despite its growth and size, why is Inventec not very profitable?
Even though the Inventec firm has a rapid growth of market share and a huge production scale, the profitability of corporation does not perform well. Anyway, Porters’ forces influence some areas in the company.
1. The intensity of rivalry among existing firms. There are many competitive firms such as Compal, Quanta and Mitac. Which lie in ODM industry therefore the completion among there corporations is ferocious.
2. The threat of new entrants is high in Taiwan. The interests in the ODM industry can step into this field without any difficulty owning to less government restrictions.
3. The bargaining power of buyers is high and the power of sellers is low. Considering of buyers, it only has a limited customers list and the buyers will achieve more say in transactions. To be more precise, the major portion of its sale is accounted by the HP and Toshiba so that it cannot switch customers easily. Consequently, the firm has no choice but to accept aggressive pricing strategies from the principal customers which force their profit margin to drop below 4%. To sum up, the pressure from customers and rivalries leads to low profit margin.

Q2: What are the drivers of the average profitability of the Original Design and Manufacturing industry?
The driving force of profit in original design and manufacturing industry is the designing process which provides high end services to clients. In the manufacturing process, the utilization of facility investment is crucial which may develop the scale of economy and decrease the operating costs. However, China now is no longer a low-cost area; every labor has the same cost structure. Therefore, it is hard to utilize the company’s logistic system to provide quick response supply service becomes the key to make profit.

Q3: What are the key factors that a