Research On Development Strategy Of China's OEM Enterprise

OEM is the result of the division of economic globalization; it is an effective way of optimizing allocation of resources and it is an inevitable result of market segmentation. According to Michael Porter's value chain theory, many enterprises both in domestic and foreign market have earned great profits through making use of OEM advantages. They focus on manufacturing sector with abundant labor resources, low-cost raw materials, and strong manufacturing capacity. In addition, OEM can effectively reduce the costs and risks on technology research, marketing and brand development. At present, more and more OEM enterprises have appeared in China. And more and more world-renowned manufacturers have shifted their production to China. According to statistics, almost all the home appliances branded products have been produced in China. The China mainland has been becoming a global OEM production base, for one third of the world OEM businesses gathering here.In recent years, relying on OEM strengths, Chinese OEM enterprises have developed tremendously. OEM has helped Chinese enterprises to quickly enter the market, upgrade its technology, digest excess production capacity and avoid market risks. However, there are also many unfavorable factors for OEM itself, such as enterprises who engage in OEM often earn low profit, neglect the research and development and are always in passive position. In addition, without its own brand and only focusing on production, along with uncontrolled market and technology, it has posed great challenges for the future development of our OEM enterprises. In recent years, with the decreasing benefits of economy of scale, high cost of production and low content of technology, the profits of our OEM enterprises have declined rapidly Continuing focusing on OEM seems to be unreasonable for the future development of domestic OEM enterprises. Brand is a manifestation of a series of tangible or intangible assets, which represents the enterprise's objectives and content. In recent 20 years, with the advancement of technology, the physical differences among the products are getting smaller and smaller and the superiority of brand assets has become more and more obvious. Implementing brand strategy will greatly benefit the future development of our OEM enterprises.However, there are still many disadvantages for Chinese OEM enterprise to establish brand. For example, it needs huge investment for initial development and an excellent brand management team who should well understand the market, management and brand operation. Currently, small scale and weak strength have become the main obstacles for Chinese OEM enterprises to create their own brands. Besides, creating an international brand is a long and gradual process. In addition to continuing investment and huge budgets, it also needs a mature market. However, they are not available in most of Chinese OEM enterprises.How could our OEM businesses get out of their predicament? This thesis has systematically analyzed OEM's advantages, development in China and its opportunities and challenges. In addition, through a typical case analysis—OEM strategy help Galanz to create miracle, this paper has discussed the successful development strategy of Galanz. That is "continuing OEM "and "creating its own brand". Finally, this dissertation points out the developing direction of Chinese OEM enterprises through three different stages. That is building enterprise's core competitive power of at an early stage, then transferring OEM to ODM, and finally creating its own brand. It has also pointed out that branding is the final way of our OEM enterprises.