The characteristics of OEM are: technology is outside, capital is outside, market is outside, and only production is included.
Why is OEM popular all over the world?
This is due to the socialized division of labor in production. In the industrial society, well-known brand enterprises are generally willing to find other enterprises for OEM or ODM for the sake of manufacturing cost, convenient transportation and saving development time. Those manufacturers with low brand awareness, limited knowledge of sales channels and strong production capacity are more willing to accept orders for entrusted products with less risk.
In the fierce competition situation of surplus economy, why do production enterprises tend to give up free brands and choose OEM-OEM production? It is an indisputable fact that profit disputes between middlemen-commercial enterprises and production enterprises exist objectively. When the distribution pattern of sellers in the market is deep enough and wide enough, naturally, sellers will squeeze the profit space into production enterprises, especially those small and medium-sized production enterprises, and they will face a very serious fact, either sticking to their own brands and doing nothing, or choosing middleman brands to survive.
From the perspective of the whole world, only a few production enterprises have survived on the road of adhering to the development of independent brands, and more enterprises have tasted the sweetness after docking with the brands of dealers.
Benefits of OEM
1, for well-known brand enterprises. This approach can be regarded as a strategy to maximize profits. The earliest OEM in the world came from the clothing industry. In order to reduce costs and improve product competitiveness, many famous clothing enterprises in developed countries gradually expand their production bases overseas, entrust local production and manufacture, and then sell them in their own names in the market.
Because it reduces the occupation of the production funds of the entrusted enterprises and reduces the risk of expanding the market. Compared with self-shop, merger, joint venture and merger, OEM has the least capital for brand enterprises. Improve the speed of new products of brand enterprises entering the market. "OEM" is a good choice to quickly occupy the market in the short term. It is a good choice to effectively reduce risks without losing the market.
Many world-class home appliance manufacturers have changed their business model from mass production to mass customization. Through OEM, we can not only quickly complete the global coverage of the brand, but also reduce the investment cost and risk.
OEM is also an important means for foreign brands to explore the China market. The specific method is what we usually call "three supplements": incoming materials, samples, equipment and compensation trade. With the increasing trend of global economic integration, foreign brands will also enter the China market on a large scale. The popularity and recognition of these brands in China market are not very high, and self-built factories are facing the problems of long cycle and high cost. Therefore, it is a shortcut to cut into the China market by using the relative excess capacity of existing production lines in China.
2. For the entrusted enterprise, "OEM" makes the idle production capacity fully play, realizes the depreciation of equipment, reduces the production cost of unit products (including the products of the enterprise), and guarantees the income of employees. "OEM" has promoted the technological progress of the enterprise, accelerated the upgrading of equipment and trained a group of technical experts and technicians. "OEM" helps to improve the management level of enterprises and the management ability of entrepreneurs. It is helpful to give full play to your specialty in specialized production and improve your competitiveness in specialized production in the industry.
Doing OEM can not only earn money that you can't earn before, but also learn the management methods and experiences of many well-known enterprises.
OEM is also risky.
legal risk
The OEM contract between our domestic enterprises is too simple. The authorization agreement of famous foreign brands often has a thick book, from equipment to technology, from standard to quality, from accessories to whole machine, from price to market, from service to maintenance, from delivery cycle to service life of accessories, from payment to delivery, from inspection to acceptance, all of which have made perfect requirements to prevent delays. However, domestic enterprises often do it overnight, which easily leads to an increase in disputes and difficulties in mediation. Therefore, in business, we should guard against breaking the contract to seize the market and shoddy.
Economic risk
Insufficient market forecasting ability. Due to Party A's underestimation of the market and its own distribution capacity, Party A reduced the order quantity. However, due to the inertia of Party A's plan, it was difficult for Party B to turn around after the great changes in the market, resulting in a large backlog of spare parts and raw materials for Party B and a large amount of funds being occupied. The stability of Party B's production is poor, it is difficult to control its own destiny independently, and it lacks the stamina for development. More importantly, it is meager profit. For example, American Barbie toys enter the China market at a price of 329 RMB, while a factory in China only needs to pay RMB for each piece in 4 yuan.
(C) brand risk
Brand enterprises should be especially careful when choosing manufacturers, and choose those partners who are powerful and trustworthy, so as to ensure the quality of products and enhance the competitiveness of products in the market.
In this case, the main engine factory can make the enterprise full, but it may not be able to make the enterprise eat well. Because in the research and development, production and sales of products, the profit of production is the lowest. When some companies place orders, they will push the price down to a very low level. Although such an order is large, the profit is thin and there is no room for improvement. Moreover, when an enterprise receives a big order from a certain brand, the production capacity of the factory will be bought out within a certain period of time. In this way, its own products will not be produced, and its brand's influence in the market will be weakened or even disappeared.