| dc.description.abstract | The information technology (IT) industry has gone through many major changes since it first started to develop in the 1970’s. The concepts of “manpower cost reduction”, “core business concentration”, “specialization”, and “resources maximization” has led to businesses to focus more on outsourcing and providing specialized professional services. The outsourcing industry developed due to businesses concentrating on developing their core competencies and subcontracting their non-core business. The IT industry in Taiwan got its start in the 1960’s by taking advantage of the cheap labor, developed into a major exporter of household appliances in the 70’s, and changed its focus on personal computers in the 80’s. The personal computer industry started by contract manufacture model, and it led to the growth of the electronics component manufacture industry in Taiwan, and the peak of Taiwan’s hardware industry. In the 1990’s, it has developed into a giant manufacture industry across computers, communications, and consumer electronics for customers in the USA, Europe, and Japan. Eventually, the focus shifted to product design and process management, with emphasis on original equipment manufacturing (OEM), and own design/development and manufacturing (ODM) to increase the competitiveness and profitability.
Without a doubt, Taiwan has a competitive advantage and influence among the industry. But in a maturing market with fierce competition and rapidly declining price, Taiwanese companies focusing on contract manufacturing face the inevitable squeeze on their profit margin. This has led to the razor-thin profit margin of the manufacturing industry. Furthermore, in addition to the dwindling profit margin, branded customers have methodically and strategically reclaimed some components’ procurement powers (buy-sell model). Would this be the last straw that pushes the contract manufacturers to the brink of extinction? What is the effect of buy-sell model to the ODM/OEM industry? How should ODM and OEM manufacturers face this challenge and come up with a counter measure?
This study focuses on a case study, concentrating on a leading OEM/ODM manufacturer in the computer server industry. Based on the company, the study further looks at other related computer server manufacturers and the industry to look at the competitive strategies and developments. Using qualitative analysis and structured descriptive study, along with “SWOT analysis” and “Five Power Analysis” to discuss the company’s strategy when faced with competition, changes in procurement strategies from its branded customers, and changes in the trends of the industry.
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