The manufacturing contract continues to be China’s export backbone, but a growing number of suppliers are now taking more serious steps toward a change in OEM. China’s efforts to boost design capacity and international brand building are gaining momentum.
Most people find it difficult to understand the meaning and difference between OEM and ODM. The transition from a contract manufacturing business model to one that emphasizes the ODM and OEM has become a popular strategy in the last two years. Suppliers have realized how the focus on OEM can depreciate its results and overall development. These companies are not only at a disadvantage in price negotiations, but many of their products also receive anti-dumping and anti-subsidy rights from importing countries.
As with most developments in China’s export manufacturing industry, it is the large companies that have taken the first step in reducing the involvement of OEMs in their business. But even they can not fail to receive contract manufacturing orders, as this can be disastrous.
On the one hand, Chinese brands should not gain wide acceptance in traditional markets in a short time. Suppliers are instead facilitating OEM transactions in emerging economies such as South America, Southeast Asia, and Africa. They believe it is easier to promote the OEM lines because consumers in these markets are more price conscious than the established brands.
While refusing OEM orders can affect long-term customer relationships and reduce market share, product choice is key. Since the company can offer a range of innovative products at competitive prices, the brand can gain gradual acceptance in the market.