Premium Essay

Inventec Corporation

In:

Submitted By jasonryan
Words 873
Pages 4
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 can affect the firm’s profitability. Many firms, such as Compal, Quanta, Mitac, etc., have virtually the same services as Inventec; therefore, the competition amongst these corporations is ferocious. Secondly, a threat of new players within the industry is extremely high in Taiwan. Due to lax government regulations, any company with interests in the ODM industry can easily venture into the industry. Another issue affecting the firm’s profitability is the bargaining power of buyers and sellers. Inventec Corporation, from the perspective of buyers, has a limited customers list; this could give more power to buyers. The major portion of the company’s sales is comes from HP and Toshiba. Therefore, Inventec cannot switch customers easily. Consequently, Inventec has no choice but to accept aggressive pricing strategies from its principal customers. This forces their profit margin to drop below four percent. Due to the highly competitive nature of the ODM industry, Inventec faces a huge amount of pressure from internal and external sources. Despite the company’s large market share, the pressure from customers and rivalries leads to a lower profit margin. 2. What are the drivers of the average profitability of the Original Design and Manufacturing industry?
There are several drivers which contribute to the average profit margin of the ODM industry. One of the factors is the

Similar Documents

Premium Essay

Inventec Corporation

...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 fragmentation in the ODM market has caused lower bargaining power for the ODMs. In 2005 both Apple and Cisco split their contracts to multiple ODMs which lead to a drop in Inventec’s stock price. * Inventec had exclusive contracts with Compaq and Toshiba leading to customer lock in. Thus, when HP acquired Compaq, stocks of Inventec plummeted amidst speculation. However, other ODMs’ stocks were safe as they supplied to multiple OEMs. * Computer products greatly became commoditized in early 2000s. As a result, the OEMs had to squeeze their profits. In turn the OEMs used their bargaining power to squeeze the profits of the ODMs. Thus, for the ODMs profit plummeted from 10% in 2001 to 3-4% in 2004. * Since 2001 easing of Taiwan Government restrictions of high tech investment in China lead to huge cost saving to Taiwan ODMs. This reduced the entry barrier in the ODM industry fueling the already fierce competition in this industry. Q2: What are the drivers of the average profitability...

Words: 766 - Pages: 4

Premium Essay

Inventec Case Study

...1. Inventec was deeply committed towards increasing its market share in the mobile phone segment, but had to contend with a high channel development and alliance cost. Lower levels of brand awareness, and missing consumer information compounded Inventec’s problems of enhancing sales volume and market coverage. From analysis of accounting information: * Comparing with the others leading Taiwan Original Design Manufacturers in 2005, Inventec has a low net income figure of 59m while three of them are over 250m, also gaining a negative income growth in the leading manufacturers in this industry. * Its dominate product is NB PC, which occupies 80 per cent of its products, however this product does not contribute to the revenue growth at all with only servers contribute to 19 per cent. We can interpret from this is that Inventec’s NB PC product is not competitive among the leading manufacturer industry. Others perspectives: * Underutilization of China plants * Electronics manufacturing services take a large stake in the manufacturing industry. High margin products in server market, which will be the commodities tomorrow * Holding a client’s inventory and taking on an additional risk * Small ODM sector had grown more steadily * Increasing competing for the same client base between ODM and EMS companies * EMS providers offered production site closer to the final market, global lofistics and integrated IT services comparing to ODM provider, which may...

Words: 577 - Pages: 3

Premium Essay

Task Environment

...enterprise, and are also affected by it. 2. According to Porter, what determines the level of competitive intensity in an industry? According to Porter, the level of competitive intensity is determined by 5 basic competitive forces namely: (1) Threat of new entrants to a market (2) Bargaining power of suppliers (3) Bargaining power of customers or buyers (4) Threat of substitute products and (5) Degree of competitive rivalry 3. What should be scanned in the task environment? There should be an analysis of relevant elements in the task environment such as: (1) Competitors (2) Suppliers (3) Regulators (4) Strategic Partners (5) Labor and (6) Customers. 4. Discuss how a development in a corporation’s societal environment can affect the corporation through its task environment. 5. How can managers identify external strategic factors? a. Environmental uncertainty b. Issues priority matrix c. New entrants d. Entry barriers e. Rivalry f. Substitute products g. Bargaining power of buyers and suppliers h. Bargaining power of other...

Words: 269 - Pages: 2

Premium Essay

Dba 7553 Unit Viii Article Critique

...Unit VIII Article Critique Columbia Southern University DBA 7553 1. Introduction of the Article This article is found in the Directors and Boards magazine. It is written by Donald P. Delves who “is president of the Delves Group, a compensation and corporate governance consulting firm that advises boards of directors” (Delves, 2012). The article is titled “What about everyone else? The problem may not be that executives are paid too much, but that employees are paid too little.” 2. Statement of the Problem Studied In this article, Mr. Delves examined why people complain about executive pay, how companies used to inflate employee earnings, and how companies can increase employee wages now. 3. Significance of the Problem Studied With sky rocketing pay for many executives over the last few decades, many employees have wondered why their pay has not also increased. In the past companies have used stock options to provide incentive for employees and to use these as a pathway to increase employee pay. However with the economic recession and many of the changes in accounting practices, companies could no longer use this incentive to increase wages for employees. Thus Mr. Delves presents the question, “what do we do about [increasing employee incentives]?” (Delves, 2012). If this question can be answered, it has the potential to not only increase employee productivity but also to provide them with increased opportunities. ...

Words: 585 - Pages: 3

Premium Essay

Notes

...1) Why do you think Starbucks has been so concerned with social responsibility in its overall corporate strategy? Starbuck is a known corporation local and international for their freshly brewed coffee and other products that are offered. Social responsibility helps the company image, to care about the community and the environment, these are positive stand points that define the company self portrait. It's important how you look on the outside, in the end it's all about sales. As mention in the text “people first and profit last” once a corporation can fulfill its duties that benefit the consumer and the parties involve then there is no need to worry about the business profit. 2) Is Starbucks unique in being able to provide a high level of benefits to its employees? The text mention “it is better for a company to take some short-term loses than to lose sight of its core values in the long term “yes Starbucks is unique because not many restaurant offer the kind of benefits as Starbuck. The employees are important to the business and it helps to retain them. Offering health insurance, paid time off, and other perks are ways to keep employees happy which lead to great work effort and a successful business. It also helps to lower the business employment turnover rate and save the corporation money because they do not spend much money and recruiting new employees and to train them. 3) Do you think that Starbucks has grown rapidly because of its ethical and socially responsible...

Words: 334 - Pages: 2

Premium Essay

Management

...to maximize a firms [sp] profit potential, a corporation should match its greatest strengths, with external factors to create opportunities. When assessing opportunities to acquire a new business unit, firms should only seek to acquire units that have strengths that match, enhance or can be combined with the firms established strengths. The article [which? there is no list of references -- you’re supposed to discuss an issue from class before discussing the article] is about how firms are purchasing business units that do not align with their strengths or the vision/mission of the parent corporation. Once the business unit is acquired the viable option is to sell if off in pieces because it is not contributing to the corporations strengths. We agree with the author [sp] premise that diversification should not be pursued unless it will help a parent corporation achieve its already established mission. Corporations should avoid acquiring firms that possess strengths or missions not aligned with the parent corporation. A firm should not see purchasing business units as strength [clumsy]; a corporation’s strength is not an action. A corporation should see the reason why they have accumulated the financial resources necessary to purchase additional business units as their strength. Once that strength is identified the corporation should be pursing business units that have underlining strengths that will enhance the parent corporations [sp] ability to pursue their mission and maximize...

Words: 689 - Pages: 3

Free Essay

Accounting

...Introduction and Course Philosophy: This course covers accounting theory and practice for business combinations, segment and interim reporting, foreign exchange and partnerships. Business combinations cover most forms of mergers and acquisitions, which are common among business entities. Segment reporting is how management disaggregates financial results into meaningful business performance. Foreign exchange covers the basics of currency transactions and translation including hedging, which are common in the global economy. Finally, in partnerships we cover more extensively the formation, operation and dissolution of general partnerships, the most prevalent form of business in the United States. In my career in financial services, I was personally involved in 3 large business combination involving aspects of mergers, segment reporting and foreign exchange that we will discuss in class. You will be exposed to the authoritative accounting literature covering each area and get hands on experience in solving typical problems faced by accounting practitioners. We will complete the entire syllabus. Required Text: Advanced Accounting---11th edition, Hoyle, Schaefer and Doupnik McGraw Hill/Irwin 2013. A separate loose leaf edition, with only the chapters we cover will be available exclusively at the Queens College bookstore. The ISBN for the looseleaf edition is 9780077772932. Acquiring the loose leaf edition gives you the convenience of being able to bring only the chapters...

Words: 360 - Pages: 2

Premium Essay

Legal Form of Bussiness

...LEGAL FORM OF BUSSINESS In this paper we will compare and discuss different forms of business and their advantages and disadvantages. Following are the different type of business formed to conduct work: 1. Sole proprietorship. 2. Partnership. 3. Limited liability partnership. 4. Limited liability company. 5. S corporation. 6. Franchise. 7. Corporate. 1. Sole proprietorship, The sole proprietorship is a type of business entity that is owned and run by one individual. All the decisions of the business are made by that individual and there is no legal distinction between that individual and the business. Following are the advantages and disadvantages of Sole proprietorship Advantages They have the ability to raise capital either publicly or privately. To limit the personal liability of the officers and managers. Limit risk to investors. Sole proprietorships have the least government rules and regulations affecting it. Owners have complete control over all the aspects of his or her business. The owner can take any managerial decisions that he/ she wants to take. Disadvantages Raising capital for a proprietorship is more difficult because an unrelated investor has less peace of mind concerning the use and security of his or her investment . The investment is more difficult to formalize other types of business entities have more documentation. The enterprise may be crippled or terminated if the owner becomes ill. The business is the same legal entity...

Words: 1135 - Pages: 5

Premium Essay

Business Law

...Anthony and Karen were partners doing business as the Petite Garment Company. Leroy owned a dye plant that did much of the processing for the company. Anthony and Karen decided to offer Leroy an interest in their company, in consideration for which Leroy would contribute his dye plant to the partnership. Leroy accepted the offer and was duly admitted as a partner. At the time he was admitted as a partner, Leroy did no know that the partnership was on the verge of insolvency. About three months after Leroy was admitted to the partnership, a textile firm obtained a judgment against the partnership in the amount of 50,000. This debt represented an unpaid balance that had existed before Leroy was admitted as a partner. The textile firm brought an action to subject the partnership property, including the dye plant, to the satisfaction of its judgment. The complaint also requested that, in the event the judgment was unsatisfied by sale of partnership property, Leroy’s home be sold and the proceeds applied to the balance of the judgment. Anthony and Karen own nothing but their interest in the partnership property. What should be the result: With regard to the dye plant- With regard to Leroy’s home- Since Leroy was admitted before the judgment was actually brought upon the partners It would make him liable to subsequent debts of the partnership along with Anthony and Karen, since the dye plant was part of the deal when Leroy entered the partnership it would be considered...

Words: 312 - Pages: 2

Premium Essay

Forms of Business Organization

...organization. The single owner of business has entire ownership and control over the assets and capital invested in the business and he or she is individually responsible (subject to some restrictions) for the expenses and liabilities of the business. • Liability A different advantage, nonetheless, is that the proprietor of this business form is responsible for all the business liabilities. Therefore, if a sole owner business undergo into financial crisis, creditors can originate lawsuits against the sole proprietor. If lawsuits are successful then proprietor has to pay the liability with his or her money. The owners of this business form can, and frequently do, combine business and personal funds and property, unlike partnerships, LLCs and corporations, they cannot do this. • Income taxes Due to the fact that sole proprietorship is not distinguishable from its owner, its characteristics...

Words: 2123 - Pages: 9

Premium Essay

Random

...business owner, companies growing at hyper speed sometimes pay the price for its success. 1.2 DEFINE THE TERM “ MARKET LEADERSHIP.” WHY DO FIRM WORKHARD TO OPTAIN LEADERSHIP? Market leadership is the position of a company with the largest market share or highest profitability margin in a given market for goods and services. Market share can be measured by how much the goods sold in the market. Market leadership is usually understood in terms of the position of a given company within an industry or market, based on three factors. When determining whether a corporation can properly be referred to as a market leader, the profitability of the company will play a major role. Along with how profitable the company happens to be, the market share volume and value will also be considered. While market leadership does not necessarily require the highest profitability margin or largest market share in the industry, a corporation is normally expected to demonstrate a consistent level of profitability from one financial period to the next. That level of profit should be significant and represent a sizable share of the available market. When the company is able to sustain the profitability through shifts in the general economy as...

Words: 450 - Pages: 2

Free Essay

Rfm History

...One of the most prominent food and beverage companies in the Philippines is the Republic Flour Mills (RFM) Corporation, established in 1958 by aspiring Filipinos. Dr. Salvador Araneta pursued and succeeded his dream of making a way to save foreign exchange and create local jobs by starting out a local flour mill. Along with his wife, Victoria Lopez de Araneta, son-in-law, Joe Con and associates, Jose Concepcion, Sr., BJ Server, Pete Grimm, Albino Sycip, Zoilo Alberto, Leonardo Eugenio, Francisco Gamboa, Sr., they have come together to become a strong team. Their strength carried throughout endeavors during the difficult state of the Philippine economy in order to operate the mill. One of the issues was the American monopoly in the Central Bank of the Philippines for resisting to grant RFM the mandatory dollar allocation. With persistence and cooperation, RFM has then pioneered the flour-milling industry in the Asian region by starting out as a single company manufacturing bags of flour to a distinguished multi-company enterprise leading a number of branded products. RFM Corporations stands as a strong contender in the Philippine consumer market for offering a wide variety of food and beverage products such as: White King (cake mixes and flour-based products), Fiesta (Pasta and Sauce), Swift (meat based products), Sunkist (fruit juices), Selecta (milk- based products) and Selecta (ice cream, under the joint venture with Unilever). A variety of partnerships, acquisitions and...

Words: 414 - Pages: 2

Premium Essay

The Corporation

...The Corporation: The Corporation is today's dominant institution, creating great wealth but also great harm. This 26 award-winning documentary examines the nature, evolution, impacts and future of the modern business corporation and the increasing role it plays in society and our everyday lives. The birth of the corporation: How the corporation came to be. Originally, corporations were set up to serve the public good. Corporation lawyers gained rights through the US Supreme Court using the 14th Amendment (set up to protect slaves) that gives them the rights of a person. In the last century, the corporation is given more and more rights while people are increasingly stripped of theirs. Origins of Corporations Although definitions and descriptions of corporations have changed dramatically through the last few hundred years, the first corporation actually began long ago – as early as the sixteenth century. It was a benchmark in the history of money and business, transforming an economy from what was essentially a debt economy (when it came to merchant work) to a state-sponsored enterprise. This type of business was brilliant and revolutionary for the early business world, allowing businesses to take risks and expand in ways they had been unable to do before. The concept spread and grew, and by the seventeenth century, the corporation was well on its way to being an acclaimed and established center for regular commerce. When corporate business came to the newly born United...

Words: 2045 - Pages: 9

Free Essay

Bashundhara Group

...Country”. At the crux of all industrial processes deployed at the Group’s enterprises stands the need to ensure environmental stability. As a result, conscious efforts are made to use re-cycled material as industrial input. The Group's efforts seek to: Create affordable housing (developed land & homes) for people Foster better living environments and pleasant surroundings Ensure environmental balance and sustainability Use re-cycled raw material in industrial production Treat industrial effluents Establish recreational and shopping facilities for people. Develop a meaningful partnership with others for development Provide better working conditions for its staff members The BG works in close partnership with the City Corporations, the Government of Bangladesh, other private sector companies, multilateral institutions, the environment department, and myriad financial institutions. The BG has its headquarters in Dhaka, Bangladesh. Its Chairman and a Board of Directors frame the Group’s policies. The Managing Director acts as the Chief Executive Officer. The contact details of the Corporate Office are shown below. Bashundhara Group Corporate Office Bashundhara City 13/ka/1 Panthapath Dhaka-1205 Bangladesh Phone: (880-2)8158025- 34 Fax: 880-2-9128319 Web Site: www.bashundharagroup.com E-mail:...

Words: 269 - Pages: 2

Premium Essay

Forms of Business

...are subject to financial liability if one partner is negligent.A partnership is exempt from double taxation. In a partnership owners can claim their portion of income generated through the business as personal income tax (Chesseman, 2010). When in a partnership, partners owe a contractual and fiduciary duty to one another (Chesseman, 2010). Partners have to trust one another because they have a fiduciary duty to each other. Partners should not borrow money, enter into secret contracts, or do anything illegal without other partners knowledge. Partners have equal amount of voting power regardless of who contributes the most capital to the business. Limited Liability Company is another business one can establish. An LLC is similar to a corporation and a partnership. Members and owners of an LLC are protected from liability from debts and liabilities from the company. For personally and directly injuring someone, or...

Words: 516 - Pages: 3