Case Study: Eliminate the Middleman?
Market positioning ¡V more features than commodity and lower price than higher-end rivals Ü
Goal ¡V number 3 spot in the global market
Competitors ¡V CaliTech and TexaTech
Produce innovative products and pull down price (20% cost cutting by sourcing directly from China) Ü
Sourcing directly from China
Indirect cost (government bureaucracies and long distance logistics breakdown) and low quality c
Prices were undeniably attractive
Access to Chinese market
World-class research and design and lower manufacturing costs c
Can become USTech¡¦s competitor if it decided to enter China using its own brand Ü
Multi-sourcing ¡V increase operating cost
TaiSource strategic initiatives
Broadening our production base to other Chinese cities
Improve economic of scale (purchasing and manufacturing) Þ
Establish an R&D office in the U.S.
Work closely with USTech on product innovation
Ship products directly to your U.S. warehouse
Cutting logistic cost
Problems of sole-sourcing
The major benefit of sole-sourcing is simple management and the cost of managing multi-sourcing is seen to be higher. Whereas, relying on a sole original design manufacturer (ODM) for both development and production of technology products is risky because USTech may have seen the supply of his business through the supplier prospective, in this case, TaiSource. It also has less control of the quality and cost of production. Given that the vendor may not always disclose everything to USTech, the firm may not have enough knowledge of its vendor capabilities and whether it is competitive. Ü
Facing the demand of information technology products in mainland China, TaiSource has the ability to use its own branded products to capture this opportunity. Nonetheless, the worse scenario will be TaiSource attack the USTech current market by entering US market with its own branded goods...
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