Inventec Corporation

Case Study Inventec Corporation

1. Despite its growth and size, why is Inventec not very profitable?

Inventec moved almost all production into China to get lower operating costs. However, since everybody has moved over there, China is no longer a low-cost area, because everyone has the same cost structure.

The competitive industry made the customers from Inventec being squeezed left and right. The foreign companies could compete on price because of their extensive use of Taiwanese ODMs – not even Chinese manufacturers could beat ODM scale efficiency.

2. What are the drivers of the average profitability of the Original Design and Manufacturing industry?

Original Design and Manufacturing (ODM) provides clients with souring, procurement and inventory management. An ODM firm designed, manufactured, and often shipped products directly to clients’ customers. ODMs designed and manufactured about 70% of the world’s PDAs, 65% of MP3 players, 30% of digital cameras and 20% of the nearly 700 million mobile phones sold annually.

3. What are the key factors that a company like Inventec needs to manage to earn above-average profits in this industry?

Inventec may low the costs by finding better suppliers or developing the software. The company may also improve its customer application development and maintenance to create software solutions for business process as well as IT consulting.

4. Why is the Indian software industry, on average, so much more profitable than the Chinese ODM industry?

India has world-class technological education and an abundance of highly-skilled engineers. A few publicly traded companies served the global IT outsourcing market and widespread English skills among India’s educated workforce facilitated the industry’s growth.

5. What strategic advice will you give Inventec to improve its profitability?

Inventec may implement some new strategies to improve its profitability, such as strengthen the brand...