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Journal of Business Research
Cause mapping of simple and complex marketing strategies
Shieh-Liang Chen ⁎, Hao-An Liang
Asia University, No. 500, Lioufeng Rd., Wufeng, Taichung County 41354, Taiwan
a r t i c l e
i n f o
a b s t r a c t
Business-to-business relationships between original equipment manufacturing (OEM) suppliers and customers (brand name buyers) are an often studied issue; however, theoretical and empirical studies seldom focus solely on the suppliers' perspective. This paper examines OEM suppliers' perspectives and reports on the phenomenon of some suppliers choosing single customers while others focus on multiple customers to achieve the adaptive selling as their proﬁt making that cause the parsimonious and complex customer strategies through the empirical studies. The study also uses mental models to analyze two speciﬁc cases of OEM suppliers within Taiwan's shoe industry in relation to what kinds of environmental changes that successful managers apply to their parsimonious and complex customer strategies. Mental models are used to map the evolution of these two OEM suppliers' customer strategies, along with their culture, competitive advantages, cooperation relationships, and environment. The study explores these ﬁve core propositions to show suppliers to employ different approach to customer strategies, and map the evolution of strategic development of Taiwan shoes companies from the 1970s through to the present day. Crown Copyright © 2012 Published by Elsevier Inc. All rights reserved.
Article history: Accepted 1 April 2012 Available online 27 June 2013 Keywords: OEM Cognitive maps Competitive advantage Cause-mapping Strategy
1. Introduction Weitz, Sujan, and Sujan (1986) stress the contingency nature of the relationship between adaptive selling and effectiveness. The concept of adaptive selling describes the relationship between suppliers and buyers' interactions and how such interactions help to explain the phenomena of the cooperation strategies among the original equipment manufacturing (OEM) suppliers and foreign customers (brand name buyers). The empirical phenomena of the cooperation strategies which this paper examines are how and why some OEM suppliers choose single customer (one or two buyers) while others choose multiple customers (above two buyers) as their most proﬁtmaking that causes OEM suppliers' parsimonious and complex customer strategies. This paper uses the two cases of shoe manufacturing companies in Taiwan to describe each of the parsimonious and complex ﬁrm marketing strategies with their customers. In the 1960s, Taiwan quickly became one of manufacturing countries within East Asia, and these manufacturers were authorized by ﬁrms from developed countries to help produce the required product because of the suffering from high production cost (Zhang, 2011). At the early age of cooperation among OEM suppliers and buyers, buyers were much larger and assisted suppliers to acquire various advantages in avoiding high R&D cost and sales costs, reducing the risk of product development failure, achieving economies of scale, utilizing
⁎ Corresponding author. E-mail address: email@example.com (S.-L. Chen).
idle production capacity, and generating short-term revenue (Chen, 1989). Buyers take leading roles in commanding the suppliers to achieve their demands and beneﬁts (Woodside & Ferris-Costa, 2008), and OEM suppliers access the key information to ﬁt the customers' expectations and requirements (Narver & Slater, 1990). Within market–buyer relationship, customer hoping to achieve price reductions and marketer hoping to acquire maximum proﬁt price are seldom to occur at the same time (Woodside & Wilson, 2000). OEM suppliers make the trade-offs between customers and competitors' monitoring according to the executives and managers' expected beneﬁts and costs (Slater & Narver, 1994). Meanwhile, creating buyers' proﬁts are always concerned by suppliers as their competitive advantages which are about the issue of the product, especially in price and quality. There are two ways for a seller to create value for a buyer: one is by increasing beneﬁts to the buyer in relation to the buyer's costs and the other is by decreasing the buyer's cost in relation to the buyer's beneﬁts (Narver & Slater, 1990). Although OEM suppliers are usually much smaller and with limited resources—and lead to disadvantageous bargaining positions at the beginning of development (Lin, 2004); however, as time goes by suppliers grow up and become stronger to improve the status of the further cooperation among the buyers. For example: in Taiwan OEM suppliers have been successful in the formidable global B2B market and have transformed themselves from manufacturing mainly low-value and labor-intensive goods to producing many high value-added products that require advanced technology, equipment, and signiﬁcant business expertise (Chen, Su, & Lin, 2011). On the other hand, Taiwan OEM suppliers have also been setting up the factories oversees to expand the capabilities of
0148-2963/$ – see front matter. Crown Copyright © 2012 Published by Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2012.06.009
land. . and marketing related to the decisions and the behaviors by individuals and groups within and between organizations (Woodside. Liang / Journal of Business Research 67 (2014) 2867–2876 production in consideration of cost factors like labor. how it works. 1987). animal. and these strategies describe OEM suppliers' competitive advantages which are about the external environment and the internal characteristics in company organization (Walker & Ruekert.2868 S-L. 1999. The reliability concept describes the mental models with the reliable performance from capturing accurately the dimensions of system coupling and system complexity that shows clear cause–effect relationships among what is to be done. Source: Campbell (1985). Fingleton. 39. Heide. & Webster. Michael. 1999. trust Supplier’s Interaction strategy • Competitive • Cooperative • Command Fig. Mental models for case study Yin (1994. but these studies are on the buyer's perspective. Theoretical studies have examined issues involving manufacturers. This study focuses on the suppliers' perspective and compares the OEM suppliers' parsimonious or complex strategies in relation to single or multiple customers. Morris. On the other hand. and distributors (e. And human reliability is for researcher to acquire the accurate data and to achieve the perfect research that represents “a person (1) correctly performs some system-required activity in a required time period (if time is a limiting factor) and (2) performs no extraneous activity that can degrade the system” (Miller & Swain. 1. especially when the boundaries between phenomenon and context are not clearly evident. 1983. and command (Campbell. Chen.g. Mentzer. 1990. Literature review 2. The relationships among suppliers and buyers have three major interactions – competitive. & Ozsomer. Matsuno. Chiang. and proactiveness which are the three underlying dimensions of the organizational predisposition to entrepreneurial management processes (Barringer & Bluedorn. Stimpert. 2000). Buyer–seller interaction model. commitment . The paper uses mental models to analyze each case of the parsimonious and complex customers' strategies. 13) deﬁnes a case study as “an empirical inquiry that investigates a contemporary phenomenon within its real life context. risk taking. and outcomes relevant in the case (Woodside.” Broadly expanding the deﬁnition. 2. Farley. p. corporate (organization) culture stresses competitiveness and entrepreneurship guided by internal cohesiveness or rules as the intermediate factor (Deshpande. Covin & Dennis. 2010). & Anthony. and empirical studies that use the supplier as the unit of analysis are lacking (Rossetti & Choi. 1992). 2. household. if a buyer is larger than a supplier. culture. transaction cost. 1995). however the product characteristics will moderate the relationship between them. Khandwalla. and then involve more detail about the company's organization development and marketing strategies. 1982. Miller & Peter. retailers. 2003.” Case studies are useful for substantial research of psychological. management. Caruana. Senge. Miller. Product characteristics • Frequency of purchase • Switching costs due to physical and human investments • Product complexity Buyer’s characteristics Industry • Concentration • Number of competitors • Intensity of competition • Rate of technical change • Traditions and norms Company • Relative size • Preferred interaction style • Relative familiarity • Centralization Individuals • Preferred interaction style • Perceived importance • Relative familiarity • Risk aversion Individuals • Preferred interaction style • Perceived importance • Relative familiarity • Risk aversion Supplier’s characteristics Company • Relative size • Preferred interaction style • Relative familiarity • Centralization Industry • Concentration • Number of competitors • Intensity of competition • Rate of technical change • Traditions and norms Interaction process Buyer’s Interaction strategy • Competitive • Cooperative • Command Interaction mechanism • Information exchange • Conflict resolution • Adaptations • Personal contact patterns • Interaction atmosphere • Closeness . 2008). OEM supplier's external environment concerns itself with customer relationships.1. how it is to be done. Avila. 51) state that a mental model is “a rich and elaborate structure. Jennings & Dean. and why it works that way. group. Mental models are the methods used to deeply understand the research (Huff. p. 1989. Fig. person. Campbell's (1985) buyer–seller interaction model (Fig. or a supplier is larger than a buyer. 1986) that serve as maps which involve cause–effect relationships allowing individuals to perceive environments on a larger scale. p. or nationality. Dutta. 2002. predicting. industry. 1989). Mental models are the concepts and relationships that an individual uses to understand various situations or environments (Weick & Bougon. 1993) that also plays an important key factor in affecting an enterprise's marketing strategies. reﬂecting the user's understanding of what the system contains. 1990) that portray the participants' perceptions with reality of the causes. Carroll and Olson (1988. and interaction process. Rey & Stiglitz. & Huff. Woodside & Wilson.. 1990. 211). For example. the larger buyer or supplier will command the other. and when it is to be done (Weick. 1998. H-A. Woodside (2010. p. cooperative. 1) proposes that case study research “is an inquiry that focuses on describing. It can be conceived as knowledge about the system sufﬁcient that permit the user to mentally try out actions before choosing one to execute”. p. 1997. 1977. logic and tariffs in order to maintain their strengths. and/or controlling the individual like process. & Allen 1993). 1992. & Hess. and market trends. organization. Chhajed. understanding. 1985) – that show the various cooperation models along with each company's status. events. 1) shows the relationship among the product characteristics. Transactions among the buyers and suppliers have different command and cooperative status because of the suppliers' and buyers' power and potential to lead the business. & Bergen. beyond the range of immediate perception (Barr. The internal characteristics among supplier consist of the strategic management and entrepreneurship literature in relation to innovativeness. supplier and buyer's characteristics. 1987.
supplier integration. p692). 6. Miles and Snow (1978) typology posits strategic orientation as a planned pattern of organizational adaptation to the perceived environment (market). For example: Jonson & Jonson and New Balance are two companies that have insisted on their enterprise philosophy in developing their business throughout their entire history. course of action. and workability – is for evaluating strategies to the extent by which they reﬂect mutually consistent goals. For example. 1999). and customer development within the corporate environment. (2) ask the case participants for explanations and interpretations of “operational data” (Van Maanen. Method To better understand the steps of cause mapping within these two cases this research uses Mohr's (1982) variance theory and process theory and Langley's (1999) further explanation of these two theories (see Fig. reliability. The data collection for case study research of mental model follows the triangulation method (see Fig. market. the ﬁrst one of the Rumelt's (1981) four criteria – consistency. 1993. Chen. do A and then B to get C)” (Langley. resulting in product policies remaining unknown to third parties. Liang / Journal of Business Research 67 (2014) 2867–2876 Mental models for managers can facilitate and limit attention to the information about the changes in organizational environments that help individuals cope with an overabundance of available stimuli but also lead managers to over look important environmental changes without appropriate action at the organizational level (Barr et al. 1992). service quality. and policies (Kohli & Jaworski. 1998). competence. However. Five core propositions Based on the introduction and literature review. buyers sometimes experience tremendous changes in boards that can result in the reduction of the number of supplier transactions. managerial effectiveness. In turn. 2009). and this situation cause buyers' value equations to become quite important factors through the competitive developments (Slater & Narver. Schneider and Rentsch (1988) describe culture as the organizational climate related to “why things happen the way they do” and “what happens around here” (Deshpande. The “variance theories provide explanations for phenomena in terms of relationships among dependent and independent variables (e. competitors. Parasuraman and Deshpande (1984) show the attention of organizational culture that explains the structure of managerial effectiveness. 1999). process theories provide explanations in terms of the sequence of events leading to an outcome (e. p.S-L. P5: The information for two cases study depends on the evolution of strategies of two OEM suppliers' in Taiwan's shoe industry. Culture Culture is a key factor that affects the ﬁnal result of strategies through the decision process. P2: OEM suppliers and buyers need to have a good relationship in order to achieve their own beneﬁts and to create inﬁnite business and market opportunities. this paper develops the following core propositions to lead the ﬁeld study on OEM suppliers' strategy processes along with their buyers (customers). 2000). Farley. communication. suppliers still keep improving superior quality products and services to ﬁt the customer needs and expectations (Jaworski & Kohli. Such relationships have become important cooperative strategies since brand name buyers started to provide OEM suppliers with additional capabilities of production. belief. cross-functional teams. 1989). Product price is the direct issue that customers are concerned about. The literature offers considerable insights into perspective that relationships are a major source of competitive advantage (Kannan & Tan. 2) to formulate the mental models through market and environment changes. 4). Deshpande and Webster (1989) deﬁne organizational culture as “the pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them with the norms for behavior in the organization” (p. along with the development of OEM suppliers of all kinds of manufacturing strength. OEM suppliers have to think of other strategies to face these kinds of challenges. These two theories provide the concept of the formulas of strategies within different factors. 1993) and continuously engage in innovation because of the dynamic nature of most markets (Hurley & Hult. 4. 2869 3. The corporate goal for strategy is to use the least amount of capital invested by the owners of the ﬁrm and to acquire the best market value of a ﬁrm (Varadarajan & Jayachandran. Walker and Ruekert (1987) argue that corporate strategy is typically concerned with the issue of what business(es) a ﬁrm should involve into and how to allocate its priorities and resources across those businesses. Culture plays an important factor which moderates the process of a company's strategy and inﬂuences the company. 1999. H-A. objectives.. and a strategy implemented requires to control and monitor its effectiveness in the market (Matsuno & Mentzer. Achieving a value-creating strategy need unique skills and resources. Consistency. This paper proposes the strategic renewals that managers use to adjust the plan of the organization to change the mental models in relation to the environment changes.g. P3: OEM suppliers and buyers have to face changes in the market environment and readjust their business models in kind. 1994). more of X and more of Y produce more of Z).. and cost reduction is the capability of process—or suppliers' strength that buyers can acquire the same quantity and quality (even better) purchasing requirements with less payment in the current year compared to the previous year (Woodside & Wilson. P1: OEM suppliers and buyers have their own needs to consider when making transactions.g. and product-related performance. buyers are often independent of the suppliers' production departments. and individual abilities. 1979). frame. 5. 1990). the key elements of buyer–supplier relationships are following at different levels of transactional process including long-term relationships. The development of customer orientation within organizations is also concerned with the organizational culture of a business (Deshpande & Webster. in turn helping mental models to build up the cause mapping. and process theories help depict the evolution of events when OEM suppliers start to think of the choosing parsimonious or complex customers as one of their strategies. with this paper examining the suppliers' perspectives in formulating their business model from the late 1960s to the present. 2006) that helps maintain long-term cooperation among suppliers and buyers. culture represents the phenomena of value.. and strategy relationship management (Rajagopal. 3) that often includes: (1) directly observe the environments of the case. Meanwhile. customer satisfaction. and this kind of competitive advantage comes along with the proﬁts because competitors cannot implement effectively (Varadarajan & Jayachandran. and go further suppliers also establish the credibility with the buyers through relationship-speciﬁc investments like transaction cost. 2000). With numerous competitors no one ﬁrm has the capacity or resources to affect the balance of power among the sellers (suppliers) in the markets. P4: Some OEM suppliers cooperate with multiple buyers. Combining the concepts from these authors. Now. Culture also reﬂects the relationship among customers and suppliers. Strategy and competitive advantage Suppliers' strategies of doing business with single or multiple customers depend on the policies compared to the cooperation relationship. 5). and (3) analyze the written documents and natural sites of the . Variance theories help delineate the early growth of OEM suppliers' characteristics when they start to cooperate with their customers. & Webster.
15). days weeks. . see Nutt (1993) and Howard and Morgenroth (1968). Transition in CSR. year Transition hours. Source: Langley (1999). 1999). Executives described their experiences and decisions made throughout their companies' histories. 2. they began to search for other foreign manufacturing bases. months. and found in the previous time period”. the key point: the case study researcher often prepares written narratives of his or her interviews. . 1. 2010). Source: Woodside (2010). and how the ﬁnal evolution of OEM suppliers is related to parsimonious or complex customer strategy. 7. Figs. and environment changes (Huff & Schwenk. Two approaches to explaining strategic change. direct observations. H-A. The data collected also documents the history to conﬁrm the events during the OEMs' development and what major strategies changed throughout the process. p. . 2. Fig. p. 4–6 depict big policy changes and decision-making process of the two OEM suppliers. The data collected is also from scholars who had taken part as consultants during the university – industry cooperation. 7 and 8 are especially representative of the phenomena of recent years. and have proven invaluable when discussing the operations of these two OEMs. after Mohr (1982). Chen. 3. xn) Strategy 2 tn case (Woodside.2870 S-L. For examples. When shoe buyers faced OEM suppliers' relatively high production costs. observed. 1992. Y = f (x1. 7. year T1 Interview participants T2 Interview participants T3 Interview participants Observe participants’ actual behavior in real time Document collection and analyses Observe participants’ actual behavior in real time Document collection and analyses Observe participants’ actual behavior in real time Document collection and analyses Fig. these narratives are presented to selected participants in the following time period to verify that the narratives include the details reported. Figs. Transition hours. The shoe industry is no exception. This study includes four one or two-hour interviews from each of the executives of two different kinds of companies formulating parsimonious or complex customers' strategies. 693. then. Figs. Fig. days weeks. p. and document analyses. Most industries have similar characteristics.. . months. . Results Researchers explore “how managers select market domains and develop unique stocks of strategic factors or assets that contribute to competitive advantage” (Barr et al. Liang / Journal of Business Research 67 (2014) 2867–2876 Variance theory Explaining strategic change with a variance model Process theory Explaining strategic change with a process model Attribute of • environment • leadership • decision processes • performance xi Y Extent of strategic change Strategy 1 • events • activities • choices t0 Fig. 4–8 show the results of the two cases and how the development of strategies over the different time frames. Woodside (2010. which are varied by the proﬁtability of the competing business (Varadarajan & Jayachandran.7) describes triangulation method as this “only three time periods is arbitrary. p. 1990) that formulate the different mappings of mental models through the causes and effects.
Box 1 of Fig. buyers also realize that the increasing . Taiwan OEM suppliers start to help buyers produce the basis shoes 7. and mode 8. an organized supply chain system with supporting materials. Creating customers happens when OEM suppliers face the original buyer's bill less than before with threat of the survival. In the mid-1980s to 1990s. internal functions). At this moment (boxes 6 and 7). 5 and 7). “Exchange rate movements is an important major source of macroeconomic uncertainty that inﬂuence the proﬁtability and value of ﬁrms involved in international activities” (Jongen. and lower product and production costs. The supplier also concentrated on good customer relations. money coming in from trade with other countries decreased (box 3). high quality stability. causing them to rethink their business strategy. Buyers consider production cost 2. Appearing in boxes 1 and 2 of Fig. Earn the production benefits 10. and management costs. The main purpose of the strategies implemented in the 1970s was for OEM suppliers to achieve the buyer's (parsimonious customer) inclination to keep costs down and to maintain self-beneﬁts. Maintain the production cost through the organization Fig. help new OEM supplier like: tech. 6 describes both OEM suppliers having difﬁculties in maintaining lower costs and a competitive advantage because of external factors. Drucker (1954) describes that the purpose of business is to create customers because customers determine the ﬁrm's business. The price issue caused buyers to look at the lower production costs of other developing countries (box 4). Muller. At this time (box 3) the original OEM supplier. the active corporate culture (box 6) also lets top managers rethink their customer's strategy and forces them to acquire more transactions from other buyers. Meanwhile. and R&D (boxes 8 to 15) to ﬁt more customer requirements. 4. production. OEM supplies cooperate with the local material supports 9. 148). Parsimonious strategies between OEM supplier and customer. In turn. Kim. & Verschoor. Box 1 of Fig. On the other hand. this change forces OEM suppliers to adjust the customer policies that affect complex ﬁrm marketing strategies. Fig. Liang / Journal of Business Research 67 (2014) 2867–2876 2871 4. H-A. As Han. Chen. materials. cost. giving Taiwanese companies an opportunity to become the OEM suppliers instead of the original countries (box 5). Marketing the shoes all over the world 6. buyers started to consider that the price of production was higher than before. could not avoid keeping costs down because of external factors. OEM supplier still improve a self-competitive advantage in relation to product quality. 5 shows one of the OEM suppliers suffering major changes within the market. At the same time. like its Japanese counterpart. 4 shows how shoe buyers started to cooperate with Taiwan OEM suppliers in the early 1970s and represents similar customer strategy within each of the two companies with only one buyer. management. differences in the parsimonious and complex ﬁrm marketing strategies between these two companies started to develop. 6). From here buyer compensates for the weaker demand by decreasing the OEM supplier's (box 3). both companies started to face changes in the business environment because of Taiwan's ever-changing labor market and an increase in the exchange rate—both of which affected manufacturing costs (Fig. The original OEM’s product cost keeps up 7. The ﬁrst major factor is that labor costs and average salaries in Taiwan were higher than ever before (box 2). Other developing countries with lower production cost 5.S-L. land costs. forcing the OEM supplier into survival mode by coming up with new customer relations strategies and searching for other buyers (boxes 4. Starting from the end of 1970s. like labor costs. operation costs. The other major factor was that as the exchange rate of the New Taiwan Dollar grew. competitors. 4. To maintain the benefits from shoes selling 3. p. 5 represents the buyer's big changes in boards and these changes hurt the company's organizations that result in a decrease in global shoe demand. capacity of production. 2012. Fig. OEM suppliers acquire the bills (box 6) from buyers because the new cheaper labor market can ﬁt the buyers' needs with much lower production costs. Connect the local companies from other developing countries 1. making it hard for them to maintain a satisfactory proﬁt margin. OEM suppliers produce quality products with cheaper prices and buyers help suppliers build organized and technical production factories. and Srivastava describe (1998). corporate culture has its effect on organizational performance among the market orientation that basically represents tenets of organizational behavior about a ﬁrm's constituents (customers.
Self-competitive advantage 11. production cost would cause the OEM suppliers hard to maintain the same sales price as before (box 4) and force the OEM suppliers to rethink their production strategies. OEM suppliers also continued maintaining closer customer relationships beyond cooperation because customers relied more on their complicated designs and innovations. both OEM suppliers have grown into successful enterprises with businesses and partnerships in a variety of different ﬁelds. 2004). 5. Chen. OEM supplier changes customer strategy 3. OEM suppliers also improved the capacities from OEM to ODM (original design manufacturing) to provide more professional production services (box 5) that help build much stronger cooperation relationships. custom and culture (boxes 12 and 13). language. To contact other buyers 6. even trusts. The need of products less than before 5. Make the contracts with other customers 10. These difﬁculties caused the failure cooperation in the end and let buyers rethink the cooperation relationships among Taiwan OEM suppliers. Besides manufacturing. for example. customs (boxes 7. Let product cost lower 15. Maintain the good relationships among these customers 7. The two OEM suppliers still belong to the parsimonious or complex customers' strategies according to the major proﬁts made from their buyers. Fig. and 11). Liang / Journal of Business Research 67 (2014) 2867–2876 9. both OEM suppliers have been setting up factories overseas. and even crossing over into other industries like hotels and buildings. Meanwhile. These two OEM suppliers began to design new shoes from buyers' needs and produced more professional shoes. buyers also tried to cooperate with the local companies within these countries and suffered the difﬁculties of management because of the difference in culture. Keep the closed relationships with materials supporters Fig. H-A. vertically integrating OEM suppliers' material supporters. An important key reason that results in choosing single customer is that their buyer maintains the highest global market share so that the OEM supplier can easily acquire sufﬁcient transactions. OEM suppliers still make most of their proﬁts from single customer even though they still have minor transactions with small shoe buyers(box 1). R D and good materials 13. distributing buyers' goods. Buyer decreases OEM supplier’s orders 1. Still improve product quality 12. including: establishing research and development centers. And buyers encouraged and helped the OEM suppliers to move their production bases overseas. summarized in the last two ﬁgures. they began to think of maintaining a competitive price advantage by moving their production bases to other developing countries like China and the countries of Southeast Asia (box 6). and buyers started to focus on selling and distribution only. After the mid-1990s. beginning to cooperate with more buyers. Both of the suppliers have cultivated professional teams and use transaction cost for their particular buyers. they also began engaging in a number of operations.2872 S-L. 8. And both the supplier and the buyer also make the . Strategies with the environment changes cause the multiple customers. On the other hand. Active culture force the top managers to think of other policy 2. 7 here shows more complicated map from the OEM supplier's decision-making. manufacturer-dedicated assets (Wathne & Heide. OEM supplier has to face the rest of capacity 4. because Taiwan had the potential to cooperate with those developing countries because of their similar language. the two OEM suppliers entered a new age in developing diversiﬁed strategies. Buyers have some changes in Organization members 8. Gradually. In this time. Up the production tech 14. As the two OEM suppliers faced these similar challenges.
OEM suppliers are good at production 10. 8 also represents a more complicated map. OEM suppliers expand production bases to developing countries 1. they start to estimate the designs and production cost through a cost breakdown system (a system for calculating costs from design to production) (box 9). When the OEM supplier receives the concepts of new shoes. Hope Taiwan OEM suppliers set up factories oversee 8. Meanwhile. Cost issues let these two OEM suppliers set up overseas factories. and team management help the supplier build up many professional teams among production bases. Culture. Labor cost increase 3. and management are different 12. this information is crucial for buyers in providing the next new concepts of shoe products—which in turn inﬂuences the OEM suppliers' successive production strategies. The OEM supplier helps design and produce shoes according to the buyer's needs. and each team is responsible for their particular shoe production (box 18).S-L. supply chain system. Cost from currency exchange Fig. OEM suppliers start to loss cost competitive advantage in Taiwan 4. the OEM supplier has been trying to produce other small shoe brands. This map especially shows the process that the other OEM supplier goes through when cooperating with multiple customers through complex strategies as . the buyers estimate the shoes' value and predict the product life cycle to help come up with the next new concepts and strategies for shoes-selling (box 8). Buyers conceive product cost 14. More closed relationships among buyers and suppliers 15. To develop ODM abilities 13. Buyers focus on marketing and distribution 11. or cooperating with material factories to let the company integrate a vertical supply chain system (boxes 4 and 17). The R&D center. Liang / Journal of Business Research 67 (2014) 2867–2876 2873 9. and to invest in other industries for expanding their business (boxes 20 to 22). The cooperation with other developing countries is not good as expectation 7. the professional production team quickly responds and negotiates with the buyers to discuss whether the project can be achieved according to the cost and production skills. Buyers help and assist OEM suppliers 6. setting up. language. During the selling. Buyers cooperate with local companies of other developing countries 5. the OEM supplier also engages in merging. From the 1990s. and at this moment the OEM supplier has grown into a big company better than ever. Chen. With potential strength that successfully set up factories oversees 2. Besides manufacturing. 6. Fig. This contract represents the trusts and good relationships that no one can replace. If both the OEM supplier and the buyer think that the new coming shoes are feasible to produce then the OEM supplier will begin engaging in designs and production. They keep expanding the production line with more production bases in other foreign countries and develop the R&D center including some key techniques like design and mode (boxes 13 to16). H-A. and these needs are developed from market experience (boxes 2 and 3). The buyers use marketing and promotion to educate consumers on the latest products and distributing system (boxes 6 and 7). to think of formulating self-brand. contract to guarantee the least supporting transactions even though any challenges or difﬁculties cause the shoes' selling down in the market.
Meanwhile. More production base in other foreign countries 18. The cooperation model among the professional teams and big buyers is similar to the other OEM supplier who chooses a single customer strategy. mode skills. professional teams focus on forging good relationships with major buyers that operate with high volume trading. By this time. When buyers estimate the selling of shoes in the market. H-A. Liang / Journal of Business Research 67 (2014) 2867–2876 20. and cooperate with shoes’ material factories 13. Using the commercial to marketing the new product 3. The OEM supplier produces shoes for many different brands among buyers (box 1) and each shoe brand may have particular professional teams that depend on the buyer's volume of transactions (boxes 4 to 7). the OEM supplier already has the capacity to operate. Form different organized management teams to produce different kinds of particular shoes for buyer’s catalogs 11. Chen. Still expand production line 17. High quality and low cost along with standard production Fig. Start to think of multiple customers’ strategy and to produce a little bit production from other brand shoes companies 5. the OEM supplier continues to keep these small buyers' information from being known (box 16). 7. The complex strategies from the supplier who choose single customer. Each professional team has the abilities of R&D and speciﬁc equipment and independent production lines for their own customers. However. To develop different strategies for different challenge facing the future 7. and complete the buyer’s concept of new products 15. To integrate vertical supply chain system 9. To merge. set up. ODM OBM 22. To consider self-profit and buyer’s profit 12. These new ideas are analyzed by the professional teams according to the production costs and techniques. Hold some key skills like mode & design 14. Develop the R D center 16. Buyer’s product distributing all over the world 6. Produce some brand shoes companies a little bit production 21. Normally. Quick response and negotiate. Using cost breakdown structure (CBS) along with the enterprise vertical integration and estimate the cost exactly 10. the OEM supplier also tries to . Buyer focus on 1. R&D. To design produce the buyer’s products with new concepts marketing provide new concept of the new product to OEM supplier 4. Cross the different industries for other niches 8. Buyer has to predict the product life cycle provide the new concepts for next new product again 19. For other small buyers. including ODM. shoes are produced on the same production line because their orders are not large enough to open another line (boxes 4 and 15). and professional management teams (boxes 9 to 11). OEM supplier makes the most profit from one buyer (customer) 2. the sources of proﬁts.2874 S-L. and then tested on the market. the information of which is exclusive only to those involved (box 14). they also provide new ideas for the next generation of shoes (boxes 17 and 18).
Liang / Journal of Business Research 67 (2014) 2867–2876 2875 13. the study maps the decisions and development of these companies within an ever-changing market environment. attaining high quality with low cost. Cross other industries 26. design. The two cases provide useful examples for other OEM suppliers to reﬂect on and emulate. This policy is because buyers think that the OEM supplier is with professional management and has similar characteristics in Chinese culture. increase transaction and expand more production bases for making more proﬁts (box 24). 8. New ideas for new shoe 20. 8. The information in this paper can be useful to other OEM suppliers as a model in rethinking their production strategies and further build on their market potential. Supplier’s multiple customers strategies 5. One major step among the OEM supplier and the buyers is that the OEM supplier becomes the buyers' agents and distributes the shoes on the Chinese market (box 27). OEM suppliers’ revenue 7. For the most part. Trust each other deeply 8. and ﬁnancial services (box 25). Professional R&D. the success of these companies hinged on customer relationships. language. H-A. Contribution The study here examines two successful cases of OEM suppliers in Taiwan and how their different business strategies evolve. Professional management 19. The complex strategies from the supplier who choose multiple customers. the OEM supplier also tries to cultivate and invent their individual brand and crosses over to other businesses and industries. Each team’s capacities 4. Integrate supply chain among supporters 22. research. These investments have been relatively successful so far and have resulted in OEM supplier becoming a business group that engages in numerous business opportunities. . New products in the market 9. enterprise culture. Team 4 for others 15. Customers’ shoes 14. buildings. and effective organization. Let supplier be the agent and with more closed relationships 12.Team 1 for company A 2. Become the agent for shoe buyers Fig. Cooperate with multiple buyers customers 6.S-L. production capacity. Develop the brand: ODM to OBM 27. Other strategies for company income 24. Further. decision-making skills. innovation. Materials 10. Expected cost 3. Professional team with R&D and particular equipment for individual company 16. and customs that they can sell well their shoes among Chinese market. Expand the production capacities and orders 25. including hotels. Besides manufacturing. Chen. ODM abilities 11.Team 3 for company C 17. strategy implementation.Team 2 for company B 1. Fail to find other OEM in other developing countries 21. mode 18. Produce for other small brand shoes companies 23.
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