Advantages and disadvantages of OEM

Relative to the buyer, the supply side is in a relatively passive position, however, the use of OEM is still profitable.

1, enter the international market, participate in international competition

In recent years, domestic home appliances and other industries are becoming increasingly competitive, the market tends to be saturated, certain domestic manufacturing enterprises in order to be able to open up the market, and do OEM for foreign brands. Enhanced the global awareness of enterprises.

2, scale production, reduce costs

Modernization of production in the prevalence of economies of scale, that is, with the expansion of the scale of output and the trend of unit costs down. This may come from the deepening of specialization and division of labor, fixed cost sharing. If the enterprise itself has this excess production capacity, the effect of cost reduction will be more obvious. Participation in OEM supply implies an increase in the scale of output, which not only increases the marketability of the product, but also reduces the cost.

3, learning experience, perfect management

Provide OEM companies often play an important role in the OEM buyer's product supply chain, OEM buyers can have a strong strength in production management, marketing, product development, etc., in the process of cooperation, the OEM supply side can be in the product quality control, control of success, operational efficiency control, etc., according to the management of the buyer's requirements to organize the production to Purchaser's requirements of the organization of production, with advanced organizational control, from the "dry learning" experience accumulation, improve the management level of enterprises.

4, product innovation, enhance the ability

If the OEM product is an innovative product, the supplying company in addition to meet the buyer's needs, but also in their own brand in the domestic and international markets. Or increase the length of the product line, the introduction of new products; or deepen the depth of the product line, increase the variety of existing products, in either case, increase the competitiveness of the enterprise.

OEM method for both buyers and sellers, in addition to *** enjoy the overall competitive advantage of the product, but also has one of the most distinctive advantages, that is, the buyer and seller in and out of the market flexibility. As long as either buyer or seller finds a more profitable way, they can terminate the contract at any time. From this perspective, the OEM market is highly efficient.

5, saving sales investment

When the enterprise faces the foreign market, because of the wide geographical area, the countries have different business habits, it is difficult to establish a completely independent distribution network. But if you borrow the sales force of foreign companies, it is much more convenient. Such as Fuji, Ricoh and other manufacturers and brokers in Europe and the United States to take the OEM way, which reduces the friction between the operation of the enterprise, eliminating the enterprise should be invested in a large number of sales capital, so that enterprises can adapt to operate overseas.

Drawbacks

Most of China's enterprises engaged in processing, production and exporting were developed against the backdrop of industrial shifts in developed countries, so the vast majority of their markets are overseas.

Now with the decline of labor cost advantage, the expansion of the industry's production scale, such enterprises are generally faced with declining profit margins, slowing down the pace of development and other issues, many enterprises are making attempts at secondary development. However, such enterprises in thinking and trying to strategic development, lurking in the three urgent need to pay great attention to the adverse symptoms.

1, scale expansion - the weakness behind the growth

Part of the processing and export-oriented enterprises to recognize the pitfalls of diversification, clearly put forward at this stage is still in the original industry to continue to seek development, do not engage in diversification. On the question of how to seek development in the original industry, the top managers of these enterprises almost always answer "to expand the scale of production".

But with the rise of domestic labor costs, the production profits of processing and export-oriented enterprises tend to decline, the competitive position of the production chain in the industry chain also tends to decline at the same time; on the contrary, the profitability of the market segment and the competitive position of the relative rise --- all the development of the industry to a certain stage, this will occur. After a certain stage, this phenomenon will occur.

For example, the home appliance industry has already encountered this situation in the past few years, forcing home appliance manufacturers to finally have to implement the market integration strategy to realize the penetration and control of the market segment.

Expanded production scale, although it can improve the competitive position of the enterprise in the industry, but because it does not improve the position in the industry chain, and will cause further dependence on the market segment, the position may be more passive.

Processing and export-oriented enterprises to consider the development of the original industry, the expansion of the production scale of the problem can not be dealt with in a simple way, in considering the expansion of the production scale of the way, in particular, need to be careful, otherwise, not only can not improve the competitiveness of the enterprise, but also to increase the cost of the enterprise transformation or exit.

2, the cost advantage - the lack of power behind the success

The key to the successful development of China's processing and export-oriented enterprises lies in its significant cost advantage. Among the factors that have shaped the cost advantage, China's comparative advantage in labor prices has been a major formative factor. However, with the development of the industry in China, the cost advantage of processing and export-oriented enterprises is being offset by a number of countervailing factors:

First of all, the labor price advantage is not sustainable for a specific enterprise, and the comparative advantage of the labor price is definitely diminishing as China's economy develops. Many companies are already suffering from falling profit margins due to rising labor prices.

Secondly, because the cost advantage derived from the price of labor is the advantage of China's processing and export-oriented enterprises relative to similar producers in other countries, rather than the unique advantage of a specific enterprise in China, so within the scope of domestic competitors, this overall advantage does not constitute a competitive advantage for specific enterprises.

Now, with the intensification of competition in the industry, the development of specific enterprises has begun to be constrained by the lack of unique competitive advantages. Obviously, for specific enterprises, must through other ways to form their own unique, not easy to imitate the competitive advantage.

As far as cost is concerned, the cost advantage gained through efficient production organization, logistics system improvement and technological innovation, etc., can sustainably support the development of the enterprise. Processing-exporting enterprises have long relied on the labor price advantage, and do not pay attention to the cultivation of this kind of ability, therefore, for this kind of processing-exporting enterprises, this brings the success of the elements, but also in turn become a hidden danger for the further development of the enterprise.

3, agent export --- heavy behind the easy

According to the survey of Fusi Management Consulting Company, the dependence of processing and exporting enterprises on foreign markets is very high, and some of them rely on export for more than 90% of their products. However, what accompanies the excellent export performance is the fragile, even crippled market function of such enterprises.

The reason is that these processing and export-oriented enterprises, product sales is not through the enterprise itself in foreign countries to establish a sales network to achieve, but the general use of export agents, and only a few foreign agents to deal with the first level, the real market for these enterprises, completely a "black box", how to grasp the market The real market is a "black box" for these enterprises, how to grasp the ultimate market demand, the establishment of an efficient sales network, the flexible use of different sales methods and other capabilities, has been abandoned for a long time.

Now the profit zone has begun to shift to the market segment, the requirements of these enterprises must have a strong market ability, otherwise, in overseas markets, their fate is more and more controlled by others, the survival and development of the risk of getting bigger and bigger. In addition, many processing export-oriented enterprises have also been ready to open up the domestic market, which is more need to have sufficient market capacity, just through the first-class agent is not possible.

However, export-oriented enterprises have been using export agents for a long time, and have neglected their market function, which takes a long time to form. Therefore, for the processing of export-oriented enterprises, the agent brings benefits, but also caused by the enterprise market function of the crippled, it will become the next step in the enterprise to seek greater autonomy of the development of heavy "debt".

4, anti-dumping troubles

Since the cost of export products of OEM production is cheaper than the world's famous brands, sales in developed countries, often subject to anti-dumping, because the local government to protect its industry so that Chinese enterprises suffered huge losses.

5, the lack of brand

When the Chinese enterprises for others OEM component is more and more, own brand is less and less, which is facing a serious test for Chinese enterprises.