Inventec Case Study

1101 WordsNov 9, 20085 Pages
Inventec’s lackluster performance in the past several years can be attributed to a number of different factors. The (1) dynamic nature of the industry they are in, (2) intense competition, (3) unstable, fluid relationships with clients, (4) plant underutilization, (5) flattening gross margins, (6) lack of brand identity, and (7) the commoditization of the notebook industry all played roles in the company’s performance. Inventec is positioned in an industry in which gross margins have been flattening over recent years, largely due to the downward price pressure applied by increasingly intense competition and by clients who hold bargaining power over their suppliers. The driving force behind Inventec’s business model (84% of net sales…show more content…
Currently the margins Inventec makes on its Notebook PC’s are low and tough competition is pushing the margins even lower. Inventec’s reliance on HP-Compaq puts the company in danger of going out of business should HP-Compaq suddenly decide to take their business elsewhere. It is imperative that Inventec diversify its products and increase its customer base. Inventec’s ability to create sophisticated software is considered to be one of its strengths and something that competitors have found difficult to match. The current market line of low margin Notebook PC’s does not take full advantage of Inventec’s software capabilities. Inventec should try to separate its proprietary software from its hardware products and capitalize on its superiority. The company should analyze whether to model their software outsourcing business after the Indian software firm, Wipro. Many of the customers of Wipro, such as HP, already do business with Inventec and they could capitalize on their existing relationships. Greater software margins would increase their overall profit margins. Inventec could attempt to increase its margins by selling their hardware, including Notebook PC’s, directly to retail stores and customers. This is an option to explore because they could decrease costs by eliminating the middleman. At this point, selling its own products is not a good option, because Inventec is too dependent on business from HP-Compaq to risk

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