1. Despite its growth and size, why is Inventec not very profitable? Intensity of rivalry against existing firms: There are some firms which provide similar or identical products as Inventec to the market. i.e Compal, Quanta, Mitac etc. As a consequence, there is a small degree of differentiation of products. Firms compete each other by its competitive prices and consumers have low switching costs between these brands because of their similarity in functions and designs. Thus, lowering the profit margin. Threat of new entrants: Due to Taiwan's low government restrictions on firms entering this ODM industry, new entrants are able to enter the industry and will present a challenge to the existing firms in the market. Therefore, the increase of supplies and substitutes impose a challenge to existing firms. Bargaining Power of Buyers Inventec's sales are mainly from HP and Toshiba and Inventec is afraid to lose these two major buyers. Consequently, these major clients has higher bargaining power on the pricing which often lowers Inventec's profit margins. Inventec has to accept the aggressive pricing from buyer because of its limited client list. ODM industry is a very competitive market where Inventec has to face both internal and external factors. Despite its growth and size, Inventec only could get low margins due to the heavy pressure from the customers and competitive firms. 2. What are the drivers of the average profitability of the Original Design and Manufacturing industry? Cost Leadership Method By achieving economies of scale during production process, this could saves and reduces costs effectively and gain higher margin. Bargaining Power of Suppliers Suppliers need to be alert on market prices to bargain with customers in order to retain above average profit margin and yet keeping them as long term customers. Competitive Pricing Competitive firms will lower their prices to gain more sales volume. With all the firms competin