Distribution of High Tech Products

Product Market Leader: Taiwan Silicon Island

Notebook computers 72%

Chip foundry services 70%
LCD monitors 68%
Computer Servers 33%
Digital Cameras 34%
Personal Digital Assistants 79%

More stress on R&D

Distribution issues costs, time etc. are neglected
tiny portion of profit margins
Low value added
Low quality personnel

Product Markets of High Tech Products

Distribution

Supply

Vendors sold both

types of products

Parts/Components
(Eg. Memory chips)

Demand

System Products
(Eg. Motherboards)

Computer
Peripherals

Consumer
Electronics

Customers:
Individual Users,
Corporates, R&D
org

Demand Side of Distribution chain

Distributors:

Channel Operators: Vary in size of operation and type of product

Retails outlets Individual customers
Value-added distributors: Hardware + Service Packages
Business clients, Govt. sponsored institutions

Vendors

Manufacturers of consumer electronics, computer peripherals

Startups with innovative solutions,
consistent performers/one time wonders

Identifying product with real market potential was challenge

Key functions:

Warehousing, Advertising, Promotion, Transportation, Pre & Post Sale services

Porters 5 forces Analysis

Low Entry Barrier: Ltd. Capital commitment, Requirements being
Office
Salespersons
Phone Lines
Trucks
Securing distribution rights rudimentary process

Competitors:

Family-owned businesses, no secure distribution rights

International companies delegation to smaller/weak local distribution firms
Importance to business buyers than small clients
No value addition

Customers: High bargaining power

Vendors: Makers of final products like Desktops, Notebooks, Digital Cameras

Business Clients, Individual customers
Reimbursement for losses of unsold stock

Vendor distributor relationship: Vendor

power
Suppliers/Vendors carried high bargaining power
Giant manufacturers like MS, Intel
Banned from carrying products of rivals
Rudimentary operation

Reliance on Local
Distributors

Branch Offices for

tech support

Sales Teams take

over high volume
business from
distributors

Substitutes Threat - Macro Environment

Changes impacting Channel Structures
Exodus of manufacturers to China owing to lower labor costs
Lower market size of computer parts and components
Growth of chain stores direct appeal to end-users
Shortening lifecycles of new products
Intense competition lower retail prices
Taxing of upstream vendors to compensate losses from downstream
clients (unsold stocks)

Synnex Distribution Presence