"I think another problem with outsourcing is both partners have to "win" in the relationship"
I agree. Vertical integration has it's own merits where there are lesser formalities involved compared to a relationship between two companies. This can make it faster to roll out new products in the market.
I think an important decision that vertically integrated companies have to take is whether to sell a raw component as it is or us it to make it's own finished products. For instance, if there's a limited number of OLED screens that Samsung can manufacture, would be more profitable to sell them as it is to other manufacturers, or would a better option be to use them in Samsung's own smartphones and tablets. Many a times it may be a very difficult decision to make.
As Ken points out, Samsung is an example of cautious vertical integration. Right now Samsung is struggling, but the model has worked pretty well. Samsung's LCD business was its biggest asset until LCDs became just another commodity product. The spinoff should help offset that and retain Samsung Display as a supplier. And, if competitors start clamoring for OLEDs, Samsung is in the drivers'seat--it can either supply OLED to itself or charge top dollar to its competitors.
You have to have a superior, in-demand technology for vertical integration to work, but there are a number of examples to show that it does.
In my opinion , to be a successful vertically integrated product company , you need to have a long time vision, commitment, deep pockets and some say in the government to keep the policies and taxation in your favour. So a company's aim should be to become a national icon or an object of pride - the way AT&T ( Ma Bell) or GM or Ford were once upon a time.
Generally that's true, but inasmuch as a component adds value to a product, the component manufacturer can negotiate a better deal for itself. Look at the tablet designs driven by Intel's processor architecture.
I think another problem with outsourcing is both partners have to "win" in the relationship. I think this makes companies risk-averse. A vertically integrated compnay may be more willing to spend money on something that will pay off in the long run, rather than attaching a value to it at the outset.
When you are embedded, you need the end product guys to create your product's demand, and you are vulnerable to being swapped out during the next design cycle.
Yes, and you are also dependent on the marketing and competitive acumen of your customer to maintain your demand (unless you are also embedded in the competitors technology as well).
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This
