Q1. The essential reason regarding Inventec’s profitability was lower than expectation is due to the high competition between the many ODMS. Therefore, though the field of ODM was once high profitable, with the intensive new entrants entered in this industry, supply for quality goods are rapidly increasing, the profit margin that each competitor could share is simultaneously shrinking.
In other words, despite the fact that Inventec has done quite well in expansion and decision making, strategic direction as well as determination of sustainability in the past, the unavoidable occurrence of competitive environment for it ultimately led it to the result of a shrinking profitability figure. On the other hand, with the more competitive environment for electronic products, such as computers, PDAs, corporations which ask for outsource have to survive by constantly remain competitive by squeezing cost which in turn, squeezing the ODMs.
Thus, from both the direct pressure coming from client and competitors, Inventec could not realize substantial abnormal profit. Q2. Normally speaking, the drivers of the average profitability of the Original Design and Manufacturing industry would be as follows: * The efficiency of the product and software design * The efficiency of the manufacturing process * The effectiveness of the manufacturing process * The availability of the skills required by the design procedure * The availability of the funds The progress or upgrading of the skills Q3. Key factors for companies like Inventec to earn abnormal return should be as follows: * Remain competitive * Being able to differentiate either by quality or lowering cost * Remain open minded with new opportunity * Be active in acquiring the cutting-edge skills * Be curious in getting new information regarding the market * Be active in gaining new client and potential client out there * Be ready to cut cost and keep the balance of cost and quality for the whole time
Q4. The reason is that India has well trained engineers who are familiar with the most advanced technology and also highly-skilled. What’s more, India is taking advantage from the slowing speed of US economy, thus it is said that the wide spread skilled engineers could further come back and facilitate India in progressing the economy. Q5. What I would suggest might be: As the leading company in the industry, it has to resolve the issue of shrinking profit margin.
Therefore, it should use every mean to cut cost, either through cutting labour, or increase efficiency. From the past experience, increasing efficiency would be a wiser choice as it in one hand, improves the ability a firm could realize abnormal return, on the other hand, it also create a positive brand image to the public which shows that the firm’s success is largely due to the wise decision made by the senior management, rather than through rudely laying off labour.