The advantages to being an OEM are that considerably less resources
must be devoted to sales and marketing/brand building activities. The
number of prospective customers is much lower, and there is no need to
make oneself known to the mass market. Distribution channels, product
support and warranty services, and marketing are all much simpler and
less costly to manage than when one is trying to develop a brand image
and distribution along with dealing directly with the user.
The disadvantages to being an OEM are that margins are smaller than
original brand manufacturers. OEMs are also vulnerable to extreme
cost pressures and competition as customers seek to squeeze their
suppliers for lower costs.
While moving from an OEM to a branded firm can be very profitable, it
can also be risky. Acer, a leading PC OEM, invested almost $1 billion
to enter the United States computer market and was so unsuccessful it
ultimately withdrew. However, this is not stopped other companies
from trying. A recent notable effort to further itself as a branded
firm occurred when Lenovo purchased IBM's PC business.
Source:
"OEM No More" China International Business (April 28, 2005)
http://www.cityweekend.com.cn/en/beijing/cib/2005_05/S1114676989 |
