Transforming Distribution of High-Tech Products

1. Why do foreign manufacturers of electronic products use external distributors in Taiwan rather than establishing their own internal sales offices?

The foreign manufacturers are not familiar with the local market and they can get a distributor easily without paying too many efforts. They can only deal with one customer and don't have to bother to tailor for customers' needs.

The start of distribution business is easy in Taiwan. Lot's of distributors are small in size and weak in capability, which have little bargaining power. So the expenses of using external distributors can be not that expensive. It's easy to control the price of goods and deliver terms although they are dealing with distributor for the little bargaining power.

2. How do you make sense of the three conventional practices (i.e. catering to big clients, pushing for volume sales and reimbursing price drops for unsold stock) observed in electronic products distribution in Taiwan?

In Taiwan, the retail industry is very fragmented. Therefore catering small stores and outlets has a large market. Because those small customers have small needs, discouraging push for large order can avoid retailors to promote goods desperately and also can reduce the inventory risk and lower the bad debt.

In return, little retailor won't have much inventory cause they order little. So they have the control of their inventory and therefore can sell their goods in their plan. In other words, the reimbursements for unsold stock are useless in this situation.

3. Why did Synnex break away from these traditional practices? What is the company's economic rationale for adopting its unconventional practices?

Synnex is a newcomer in consumer electronic distribution. The market is already has a lot of distributors. To penetrate into the market successfully, Synnex has to differentiate itself and find the niche market. By doing those three practices, Synnex can gain more small customers, because there are many small stores along streets in Taiwan, and also other distributors who are seeking for larger order to lower their delivering cost can often ignore those small stores' needs.

Also, using those three practices, Synnex don't have to face to the reimbursement for unsold stock therefore lower the bad debt for those short life cycle goods.

At last, delivering goods when customers need gives Synnex a better look of the sales and therefore give a batter data to forecasting about inventory.

4. Can the operational model of Synnex be extended to foreign markets? Or, if it works only in Taiwan, what modifications must be made in foreign countries?

I don't think this model can be extended to foreign markets. This model is based on the familiarity of the situation in Taiwan, which has large number of small customers and convenient