Case Study

1. A. As the intense rivalry and low barriers to entery in original design manufacturers there is severe price competition among different manufacturers. The number of rival is large and the scale is big as well. Volumehi production of Inventec notebooks grows fast but gross margin for this product dropped, the ratio of fixed to variable cost is high. B. Even though Inventec have the first mover advantage it can set some industry standard in producing servers but in 2005 competitors Hon Hai, Quanta and Wistron were encroaching on the server market to grab the market share. C. The threat of substitute products. Relevant substitutes have the same form as the existing products and perform the same function. Switching cost across different brands are relatively low that’s why Apple divided its iPod orders among Invetec and its competitors Hon Hai and Asustek in late 2004, at the same time it caused Invetec’s market share dropped dramatically. D. The power of buyers and suppliers’. Inventec is not powerful because of intense competition among notebook PCs, severs and software. In addition, the clients are more prices sensitive because the product is undifferentiated and there are few swithching costs. E. Inventec has a narrow distribution channel and a narrower client base than most of its competetiors.

2. According to strategy literature an industry’s average profitability is influenced by the ‘five forces’.*Degree of rivalry among existing competitors. Higher degrees of competition among firms push price towards the marginal cost of production. This industry grow rapidly but the number of organization and their relative size and many organization producing actually identical products with less switching cost make the competition fiercely. * Threat of new entrants. The intense rivalry and low barriers to entry in ODM industry bring in severe price competition among different manufacturers further lower the average profitability.*Threat of substitute product. Different manufacturers producing the same or similar products there are few opportunities to differentiate