The market for notebook computers is a fast-evolving and competitive
one. Brands such as Dell, Sony, Fujitsu and Apple as well as many smaller brands vie for customers' attention. Yet few who buy these products know that the majority of the world's notebooks, including most of those sold by the big names, are made by a small number of Taiwanese and Korean manufacturers. Taiwanese firms alone make around 60 per cent of all notebooks in the world, including most of Dell, Compaq and Apple machines. And this group of Taiwanese manufacturers is dominated by Hon Hai, Quanta and Compal. In a market with unremitting technological innovation and fierce price competition, it makes sense to outsource production to companies that can achieve the economies that come with high-volume manufacture as well develop the expertise which enables new designs to be put into production without the cost overruns and delays which could ruin a new product launch. However, the big brand names are keen to defend their products' performance. Dell, for example, admits that a major driver of its outsourcing policy is the requirement to keep costs at a competitive level, but says that it can ensure product quality and performance through its relationship with its suppliers. 'The production lines are set up by Dell and managed by Dell', says Tony Bonadero, Director of Product Marketing for Dell's laptop range. Dell also imposes strict quality control and manages the overall design of the product.
a) What do you learn from this case?
b) How Dell's decision to in-house supply or outsourced supply may affect its operation's performance objectives?
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