Businessmodel of Flextronics

Customer Segments

Flextronics International provides services primarily to regional and multinational original equipment manufacturers operating within the electronics manufacturing services market.

The Company has traditionally served electronics manufacturers, but in recent years has seen an increase in demand from companies within other industries, particularly the technology sector. It notes in its annual report that diversification among companies that identify as software providers, internet service providers, or e-commerce retailers are increasingly entering the hardware markets, with products such as mobile devices, home entertainment products, and wearable devices.

Flextronics ten largest companies comprise technology and computing groups, mobile phone manufacturers, wearable technology manufacturers, automotive manufacturers, software developers, and hardware producers. These customers are Apple, Cisco, Ericsson Radio, Fitbit, Ford Motor Company, Hewlett Packard, Huawei Technologies, Lenovo/Motorola and Nokia/Alcatel Lucent. The Company also serves customers across the medical, and aerospace and defense sectors.

Flextronics principally serves customers across Asia and the Americas, with its largest markets being in China, Mexico, the US, Malaysia, and Brazil.

Value Propositions

Flextronics International provides value to its clients in the following ways:

• The speed and efficiency of its services, with the Company’s state-of-the-art supply chain management tools allowing it to provide customers with access to real-time information that increases visibility throughout design and production process, and increasing its rate of execution;
• Its provision of end-to-end design and production services, following the process of designing and manufacturing product from start to finish, functioning as a one-stop shop for original equipment manufacturers;
• The breadth of its geographic operational reach, with a network of facilities across 30 countries on four continents, making its services accessible on a global scale;
• Its commitment to innovation, with the Company devoting a substantial portion of its revenue to the development of new and innovative solutions; and
• Its in-house expertise, with the Company employing specialist personnel across its four operating segments in order to provide customers with the best possible services. ### Channels

Flextronics International operates a website at www.flextronics.com, through which customers are able to find information on the Company’s various products, services and solutions. The nature of the Company’s services, however, does not allow for an online sales channel.

Flextronics International principally deals with its customers through its own direct sales force, spread across Asia, the Americas and Europe. The Company operates three sales and marketing subsidiaries – Flextronics Sales & Marketing (A-P) Ltd, Flextronics Sales & Marketing North Asia (L) Ltd, and Flextronics Sales and Marketing Consumer Digital Ltd – and serves clients through more than 100 design and manufacturing facilities located in around 30 countries worldwide.

Customer Relationships

While Flextronics International has an online presence, it does not provide any products or services and a self-service basis. The nature of the Company’s core services requires a period of direct consultation with members of the Flextronics International sales team, with customer able to provide a specific design and production brief fits their individual needs.

This approach, which encourages interaction with the customer, has enabled Flextronics International to establish long-term relationships with many of its customers, that provide the Company with opportunities to incorporate offer additional product lines and services to its major clients. The Company delivers its services in two ways: contract design services, where customers purchase engineering and development services on a time and materials basis; or joint development manufacturing services, where the Company’s engineering and development teams work jointly with clients throughout the project.

Flextronics International provides a range of after-sale and technical support services to its clients, adding to its personalised service. Customers are able to make enquiries directly with the Company through an online contact form, and can contact specific members of staff via email information provided on the Company’s website.

Flextronics International operates a news and media section on its website, where the Company publishes press releases and news articles for public consumption. It is also able to interact directly with clients through its social media accounts with Facebook, Twitter, Instagram, YouTube and LinkedIn.

Key Activities

Flextronics International provides a suite of end-to-end design, engineering, manufacturing, and supply chain services and solutions. The Company primarily designs, builds, ships and services packaged consumer electronics and industrial products for original equipment manufacturers across the electronics, technology, software and automotive sectors.

It operates through four business segments: High Reliability Solutions, comprising its medical business, automotive business, and defense and aerospace businesses; Consumer Technologies Group, comprising its mobile devices business, consumer electronics business and high-volume computing business; Industrial and Emerging Industries, comprising its semiconductor and capital equipment, office solutions, household industrial and lifestyle, industrial automation, energy, and lighting solutions; and Communications and Enterprise Compute, comprising its production of radio access base stations, remote radio heads, and small cells for wireless infrastructure.

Key Partners

Flextronics International collaborates with a variety of partners operating in a range of industries. These partners primarily comprise:

• Supplier Partners, comprising service providers, resource suppliers, and consumables suppliers that assist the Company in its manufacturing process, and share tools and resources with the Company;
• Distribution and Logistics Partners, which assist the Company in the storage and delivery of its products; and
• Alliance Partners, primarily comprising technology companies that collaborate with the Company on joint-venture projects and share resources and technologies. Flextronics International has recently launched partnerships with Green Charge Networks to deploy effective energy storage solutions, with SunEdison on the production of solar modules, with Nuheara to produce a range of earbuds, and with Ichor Medical Systems to provide supply chain solutions.

Key Resources

Flextronics International’s key resources are its intellectual properties and technologies, its network of design and manufacturing facilities, its logistics and distribution channels, its partnerships and its personnel.

Flextronics International owns and licenses a number of US and foreign patents in the provision of its services. Searches of records published by the US Patent and Trademark Office identified four patent applications filed in the name of Flextronics International, including applications entitled ‘Resistance measurement for battery cells’, ‘Capacitive switches’, ‘System and method for high resolution, high throughput processing of conductive patterns of flexible substrates’ and ‘System and method for design, procurement and manufacturing collaboration’.

Cost Structure

Flextronics International incurs costs in relation to the research and development of its technologies and solutions, the operation of its design and manufacturing facilities, the management of its partnerships, the operation of its logistics and distribution channel, and the retention of its personnel.

As of 31st March 2016 Flextronics International’s global workforce totaled approximately 200,000 employees, representing significant costs in the form of salaries and benefits. It also accrues cost in the form of rental and utility fees across its network of offices. For the year ending 31st March 2016, Flextronics International recorded research and development costs in the amount of $75.5 million.

Revenue Streams

Flextronics International generates revenue through the provision of design and engineering services, including a range of value-added manufacturing solutions and after-sale support services. This comprises:

• Systems Assembly and Manufacturing, including revenue derived from its printed circuit board assembly and assembly of systems and subsystems that incorporate printed circuit boards and complex electromechanical components;
• Component Businesses, comprising revenue derived from the production of rigid and flexible printed circuit boards and fabrication and power supplies;
• Logistics, including revenue derived from after-market supply chain logistics services; and
• Reverse Logistics and Repair Services, including revenue derived from returns management, exchange programs, complex repair, asset recovery, recycling and e-waste management solutions. For the year ended 31st March 2016, Flextronics International recorded total net sales of $24.42 billion, down on the $26.15 billion generated the previous year. The Company’s Communications and Enterprise Compute segment is its largest revenue generator, recording annual net sales of $8.84 billion, representing around 36% of Flextronics International’s total net sales for the year. The Consumer Technologies Group accounted for 29%, Industrial and Emerging Industries accounted for 19%, and High Reliability Solutions accounted for 16%.