Flextronics and Contract Manufacturing

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to absorb the loss, because in the grand scheme of operations it wouldn’t hurt them too bad. If the CEO did give in and write the check to Jensen, this could lead to more problems in the future that will result in Jensen believing they can get more and more money in the future from Flextronics for “warranty” expenses.

A few years later, an all too familiar situation was brought to Flextronics. Devcorp, one of, if not, the largest customer of Flextronics, brought an issue forth to the company. Devcrop stumbled upon an R&D company that was very important to Devcorp, because they did not want this company to be purchased by one of their competitors. Flextronics was asked to acquire the R&D company, which was in the United States, not where Flextronics was mainly located. Flextronics needed to decide just how costly this purchase would be and if it could be justified by staying on good business terms with their largest customer. Flextronics decided to make the R&D resources available to a competitor of Devcorp, which naturally did not go over well. Devcorp told the CEO of Flextronics that if the company did not cut off the work to the competitor, Devcorp would seek other clients to work with. In this case, Flextronics probably should use their resources and stay in the good graces of one of their largest customers. It is much more difficult to find and sign new clients than it is to nurture and sustain existing, profitable relationships.