Is the rationale for outsourcing electronics manufacturing different from outsourcing of

design? If yes, how are they different?

The rationale behind outsourcing electronics manufacturing is slightly different from

outsourcing the design. Both can be done individually or together and apart from saving of
costs, the below reasons are the benefits of taking up outsourcing as an option:

1. The two main points of differentiation for any electronic products are the feature designs
and the cost. Outsourcing of only manufacturing will help OEMs differentiation on product
design and features offered while reducing the cost of manufacturing.
2. There can be a better control over the Intellectual Property rights when only outsourcing
manufacturing but on the other hand outsourcing of design will also help reduce the
headache of the licensing processes.
3. Outsourcing of both design and manufacturing can free up the OEM’s resources and focus
better on the technological developments
4. Outsourcing design will also help be up to date about the changes happening in the market
and give access to a wide network of experts whereas outsourcing of manufacturing will
mainly lead to economies of scale which will help reduce overall costs
5. Global expansion can be attained by outsourcing of manufacturing which gives access to
cheaper labour which can be a viable option even when the customer base is in one
geographical location. But outsourcing of design can be helpful while catering to multiple
markets that are moving at different paces and have different design preferences.

Q3. Is moving into ODM market a good idea for Flextronics? What could be the operational
issues for them?

The advantages of moving into the ODM Market are:

1. The ODM market has huge potential and will give a competitive advantage in addition to the
CM and CDM expertise that Flextroincs have. The overall profit margins will increase from 11
to 13% (Exhibit 9). They can be outsourced by other OEMs when they are short on capacity
or need to react to markets quickly.
2. OEMs can look for outsourcing to Felxtroincs when they want to focus on their core
competencies such as sales and marketing and also achieve lower costs through economies
of scale and access to design experts
3. The existing expertise in manufacturing can be leveraged by the in-house design executives
to better create designs that can be manufactured by Flextronics