The research of transformation from offshore manufacturing to brand business--The anaiysis of transformation and globalization for Acer

Abstract
With the trend of vertical division on value chain induced by effects of globalization, Taiwan’s information-technology offshore factories have had the opportunity to become a vital participant in the global offshore manufacturing industry. However, because this industry is price-competition intensive, offshore manufacturing firms must adopt strategic thinking for transformation into the next stages. Transforming from OEM manufacturing to brand business is the next strategic step that many offshore manufacturing firms currently look forward to; many companies use resources from offshore manufacturing to support brand management. The case study on Acer’s experience shows that brand business under OEM can bring many dilemmas, and is not the best management strategy for a global brand. Management of a global brand must adopt a strategic thinking for the competition model of a global brand; using offshore manufacturing resources to support a brand is only a short-term strategy. Unless the brand is limited to a regional business, or its own product line is of a characteristic that does not conflict with its OEM products in the market, this short-term strategy will not only affect the rights of its existing OEM clients, it will moreover limit the growth potential of the brand.

Transforming from OEM to OBM is the next strategic direction that information companies must consider. The biggest difference between offshore manufacturing and a brand creation through OBM lies in the key which the two approaches must prioritize in their pursuits of success. OEM companies care the most about maintaining the product quality at an acceptable level while lowering costs as much as possible. On the contrary, OBM brand creation prioritizes raising the product’s value, in order to bring growth and profits for the company.

For OEM companies that are interested in transforming into a global brand business, case studies research suggest considering the following few strategic directions:

1. Separating its manufacturing brand and its consumption brand, in order that it will not affect the rights of existing OEM clients, or the growth potential of its own brand
2. Brand business should consider taking advantage of outsourcing. Outsourcing in the manufacturing divisions can gain more resources for the product, thereby gaining a competitive edge for the brand
3. For Taiwanese brand business which are not as familiar with the Western market, a distribution channel with improved operation procedure is a better choice for these brand businesses
4. Considering the brand’s position and the problems with extending the product line, it is better to adopt the product line’s branding strategy with care to prevent the traps and extra costs that come with brand extension