Eliminate the Middleman?

Topics: China, Management, Cost Pages: 3 (1124 words) Published: June 28, 2006
Case Study: Eliminate the Middleman?
US Tech
ƒÜMarket positioning ¡V more features than commodity and lower price than higher-end rivals ƒÜGoal ¡V number 3 spot in the global market
ƒÜCompetitors ¡V CaliTech and TexaTech
„cProduce innovative products and pull down price (20% cost cutting by sourcing directly from China) ƒÜSourcing directly from China
„cIndirect cost (government bureaucracies and long distance logistics breakdown) and low quality „cPrices were undeniably attractive
„cAccess to Chinese market
„cWorld-class research and design and lower manufacturing costs „cCan become USTech¡¦s competitor if it decided to enter China using its own brand ƒÜMulti-sourcing ¡V increase operating cost
ĆTaiSource strategic initiatives
„cBroadening our production base to other Chinese cities
ƒÞImprove economic of scale (purchasing and manufacturing) ƒÞCost saving
„cEstablish an R&D office in the U.S.
ƒÞWork closely with USTech on product innovation
„cShip products directly to your U.S. warehouse
ƒÞCutting logistic cost

Problems of sole-sourcing
ĆThe 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. ĆFacing 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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