ABC Inc., OEM and ODM businesses were permitted for investing predominantly in their production operations sans being forced to include the overseas distribution networks as well as customer service. As the business model was as OEM/ODM to major brands, the end consumer marketing as redundant as the sales was under customer’s brand. On the other hand they could depute their resources focusing on product design and production as these domains held prominence with respect to OEM/ODM customers. A thriving OBM business to co function with existing OEM/ODM would necessarily possess certain operational challenges like: (Don’t Convert to Paragraph)
• The risk of being perceived as competition to OEM customers
• Challenges related to respective sales and forecasting
• Production lines need to be tuned to handle product variation and low volume batches which may contain low value batches containing high variety.
• Company needed to invest in developing the customer service capabilities
• Nurture novel distribution channels and distributorship networks
• Reduced brand awareness pertaining to overseas markets
ABC Inc.’s market share in domestic market increased to 76% in 2000 and captured a 40% of the world microwave oven market by 2001. The low-end disruptive strategy that was followed by the company using low-cost Chinese labor and land for manufacturing appliances for export also triggered the non-microwave owners pertaining to middle class in China to purchase the product. As the business model garnered market-enabling price points pertaining to domestic Chinese market, it was expanded globally. ABC Inc., debuted from a low-end level, gained an equal status with transnational enterprises in a few years and transformed as one of the major participants in global market rubbing shoulders with the giants.
The competitive strategy adopted by ABC Inc., was cost leadership that aided garnering increased market share in the local market in an aggressive manner by triggering a price war cycle in the Chinese market.
The pertinent operational strategies adopted by the company laid stress on research and development as well as product innovation. This was followed by investing on resources for increasing production capacity by adopting a 24 hours factory day. The strategy of in house production of spare parts coupled with a planned move towards self-sufficiency in a dynamic market helped the company in a large way. A strategic fit operation that has resulted in reduction of manufacturing costs through the operations strategies was the key point.
The operations strategy is interwoven with the competitive strategy which has translate in to low product costs, offering the company a high degree of flexibility.