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Management article
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Reference no. R0603X
Published by: Harvard Business Publishing
Originally published in: "Harvard Business Review", 2006
Revision date: 20-Feb-2013

Abstract

For teaching purposes, this is the case-only version of the HBR case study. Greg Jamison, the head of global sourcing at USTech, has a complicated situation on his hands. The US consumer electronics giant has long outsourced much of the design and production of its branded offerings to TaiSource, an original design manufacturer, or ODM, in Taiwan. TaiSource, in turn, has moved most of its manufacturing to Beijing, giving USTech many of the cost benefits - and none of the hassles - of sourcing in China. But commodity producers are squeezing USTech's margins, and higher end rivals are gaining market share, forcing the company to rethink its sales strategy in China and its relationship with TaiSource. Greg values the close bond his firm has forged with the ODM, but he knows the sole-source model has become an anomaly in the industry. And other USTech executives want to explore direct sourcing in China and learn about other Taiwanese ODMs, known for their high quality. When Greg hires a longtime TaiSource employee to get a feel for the fast-growing China market and scout out other suppliers in China and Taiwan, relations between the two companies start to fray. Moreover, there are signs that TaiSource plans to market its own branded goods in China. Will TaiSource and USTech end up as competitors? How can USTech protect its relationship with TaiSource while it explores sourcing and sales opportunities in Asia?

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Abstract

For teaching purposes, this is the case-only version of the HBR case study. Greg Jamison, the head of global sourcing at USTech, has a complicated situation on his hands. The US consumer electronics giant has long outsourced much of the design and production of its branded offerings to TaiSource, an original design manufacturer, or ODM, in Taiwan. TaiSource, in turn, has moved most of its manufacturing to Beijing, giving USTech many of the cost benefits - and none of the hassles - of sourcing in China. But commodity producers are squeezing USTech's margins, and higher end rivals are gaining market share, forcing the company to rethink its sales strategy in China and its relationship with TaiSource. Greg values the close bond his firm has forged with the ODM, but he knows the sole-source model has become an anomaly in the industry. And other USTech executives want to explore direct sourcing in China and learn about other Taiwanese ODMs, known for their high quality. When Greg hires a longtime TaiSource employee to get a feel for the fast-growing China market and scout out other suppliers in China and Taiwan, relations between the two companies start to fray. Moreover, there are signs that TaiSource plans to market its own branded goods in China. Will TaiSource and USTech end up as competitors? How can USTech protect its relationship with TaiSource while it explores sourcing and sales opportunities in Asia?

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