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Inventec

In: Business and Management

Submitted By gerrys
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Inventec
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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 waters of what had become, a commodity industry. In addition a significant event occurred in 1999. A major earthquake became a wakeup call to OEM’s to diversify. By diversifying they quickly learned that that they could bid out there contracts to several companies. This would insulate them against future disasters and also served to drive the prices down to the level of a commodity and with it the margins of companies like Inventec. Finally Inventec’s decision to move all of its PC manufacturing to China may have sealed their fate and any hope of regenerating profitability mainly because the shear abundance of manufacturing capacity in China drove the prices down. 2. What are the drivers of average profitability of the Original Design and Manufacturing Industry? The drivers that dictate average profitability for an ODM are the types of products the ODM is manufacturing for the OEM, and the number of contracts for the same type of device packaged specifically for each of the ODM’s. For the last several years this has consisted of predominately PC notebooks. For example, given the fact that operating systems and chips were common between companies, an ODM could assemble the mother boards and other hardware and then house them in the OEM’s outer shell. Keeping changes to a minimum, managing similar products, they could then keep their costs low enough to function...

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