Assignment #2 Adam Ohanesian Email: Adam.Ohanesian@nichols.edu Table of Contents I. Why Inventec is not very profitable a. Industry competition b. New entrants c. Bargaining power II. Drivers of average profitability of the Original Design and Manufacturing industry d. Process of manufacturing products costs e. Low cost distribution III. Key factors Inventec needs to manage to earn above-average profits f. Comply with product standards and quality
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Case Study: Inventec Q1: Despite its growth and size, why is Inventec not very profitable? One of the major causes of low profits is that despite Invectec’s expected growth of 50% of volume production of notebook PCs by 2005, its principal clients implemented aggressive pricing strategies, which forced its gross margins for notebooks to dip below 4%. With notebooks accounting for 80% of Inventec’s revenues, coupled with comparatively high bargaining power from suppliers, this drop in gross
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Question 1: Despite its growth and size, why is Inventec not very profitable? Inventec is not very profitable due to: 1. Extensive industry competition: - Personal computers have become commodities and OEM’s aggressive pricing strategy leaves Inventec with little profit margins. - The industry is saturated and fragmented. There are many big competitors on the market already. EMSs and ODMs are increasingly competing for the same client base. - High ratio of fixed to variable costs: Inventec has to
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Inventec Corporation Case Study 1. Despite its growth and size, why is Inventec not very profitable? Inventec Corporation, one of the leading Original Design Manufactures (ODM), specializes in designing and manufacturing electronic devices. Although the firm had a rapid growth in market share and a huge production scale, the company did not perform well in terms of profitability. There are several factors that may lead to lower profit margins .The great amount of rivalry among existing firms
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1. Despite its growth and size, why isn’t Inventec very profitable? Inventec isn’t a profitable company due to three reasons: increased competition, loss in profit margin from notebook manufacturing, and loss of contracts. Inventec was one of the first Taiwanese companies to open an original design and manufacture plant in China in 1991. During that time, the company had been successful in the venture. However, in 2001, the Twainese government eased the restrictions on high tech investments in
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Q1: Despite its growth and size, why is Inventec not very profitable? Ans: Applying Porter’s 5 Forces it is evident that the Taiwanese ODM industry is highly competitive and hence it is hard for any ODM to gain high profits. Following are a few reasons why Inventec is not able to earn a handsome profit: * There is intense competition among ODM vendors such as Compal, Quanta, Mitac etc. All these firms manufacture similar products and hence there is very little differentiation. * Excessive
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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
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Inventec Questions: 1. Despite its growth and size, why is Inventec not very profitable? There are several factors that account for the lack of profitability at Inventec. The end result of the changing industry is dwindling margins. Inventec lost its uniqueness in software development early on by packaging it with the hardware to show a competitive edge and extra value to the OEM’s. This worked well early on, however as the competition continued to increase that value was lost in the murky
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activities and rely on a network of allies and suppliers to help them create and produce innovative products. In such innovation networks, a key question for managers and students of firm strategy is who captures the most value from innovation, and why? This article addresses the question of who benefits financially from innovation in global value chains by looking at specific products: higher-end iPods and notebook computers. We apply a novel methodology for measuring value captured by firms across
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also offered some useful comments. The paper was subsequently revised and reworked while I was a Visiting Researcher at the International Centre for the Study of East Asian Development (ICSEAD), Kitakyushu, Japan, 10 July to 9 September 2006. I am very grateful to ICSEAD for its generous Visiting Researcher scheme and ICSEAD colleagues for their comments on an earlier version of this paper that was presented at an ICSEAD public seminar and appeared as an ICSEAD Working Paper (No.2006-16). Further
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