Quanta Research an OEM Strategy Allows the

Quanta Research An OEM strategy allows the company to focus on production capabilities, and leverage the power of marketing-oriented companies and their established brands. By using other people's brands, the OEM company can grow its production capabilities rapidly. The major downside is that the pricing power for OEM companies is poor. They find themselves squeezed and for all their capacity do not control their own fates because their brands are unknown. Companies that have their own brands have more control over their brand, and this gives them control over pricing.

The brand is the most valuable thing in the computer business, so the OEM also has the pricing and volume advantage. It is a significant challenge to develop an own-brand in addition to remaining as an OEM, for a couple of reasons. The first is the response from customers, who may opt to switch to companies that are not competing directly with them.

This could be avoided, say by doing low-end netbooks, a space where customers like Apple do not compete, but finding such a space that is profitable could be difficult. In addition, the ODM strategy requires developing entirely new competencies in design and marketing, and would put Quanta in direct competition with strong, well-financed and experienced consumers in this regard. Quanta would be at competitive disadvantage in own brand, however, by taking more control over its own fate, it could succeed.

If the own-brand generates free cash flow that is superior to what OEMs make, then the company will have more money to plug into R&D, such that it is a more innovative manufacturer. That would give it a competitive advantage as an OEM supplier. If Acer has successful operated as both, that is not outlined in the case. Without any information on what Acer does, it is difficult to point out what Quanta can learn from their experience. 3.

OEM is common among Taiwanese companies for a couple of reasons. The first is that it fills a recognized business need. The major computer marketers are in the U.S. And Japan, and those were traditionally the largest markets. As such, those are the brands that developed first, and became established. For Taiwanese firms, it was easier to enter the market and grow quickly as an OEM than as a branded manufacturer.

Additionally, firms able to market in the West or Japan tended to be from those countries -- they had a competitive advantage, whereas Taiwan was able to combine comparative advantage in engineering with access to low-cost Chinese labor markets. 4. There are a few country characteristics that account for OEM being more common among Taiwanese firms than firms in Japan or Korea. Taiwan is a smaller market, so Korean and Japanese producers developed their markets first, building size and brand recognition (especially true of Japanese companies).

With brands and marketing competency, these companies were able to be own-branded marketers, whereas Taiwan's companies were starting from scratch, and saw OEM as a shortcut to rapid growth. Many Korean and Japanese.