Case of Study Inventec Corporation

CASE OF STUDY INVENTEC CORPORATION

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

There are several reasons may Inventec is not very profitable: Firstly, this company is operating in a dynamic industry with very short product life cycle. Secondly, the grade of competition is extremely and the clients and suppliers have high bargaining power. Additionally, even though this market is growing these ODMs have low gap between revenues and costs, which give them poor manage margin. Moreover, Inventec had a narrower client base in its principal product Notebook PC (more 80% of sales, years 2004-06) and in 2005 it affronts a war price because its competitors used aggressive pricing strategy. Finally, the underutilization of Inventec's plants in China (ROA 3.2%)

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

The ODM as the name say they designed, manufactured and often shipped products directly to clients' customers. But the drivers which contribute to the average profit margin of the ODM industry are:

• The process of designing and manufacturing goods (low cost and economies of scale)

• The low-cost distribution (competitive advantage)

• The lower labour cost

• The supply chain and logistic system (crucial role)

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

There are numerous factors that Inventec may consider to earn above-average profit in this industry. Firstly, Inventec have to cut its high operating costs, and provide services and products at relatively competitive lower prices. Secondly,