A Win–Win strategy analysis for an original equipment manufacturer and a contract manufacturer in a competitive market

Chen, Yu‐Wen; Karamemis, Gulver; Zhang, Jiayuan

doi:10.1016/j.ejor.2020.12.016

Cited by 20 publications

(7 citation statements)

References 28 publications

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“…Quality investment has been a hot topic in operations management since the 1990s. Quality investment in the supply chain depends on both the manufacturer's or supplier's own development capability and the degree of cooperation among the members of the supply chain [15][16][17]. Karaer and Erhun [18] investigated how the decision of potential firms to enter a monopoly market is influenced by quality factors.…”

Section: Literature Reviewmentioning

confidence: 99%

A study of production outsourcing strategies of dual oligopoly manufacturers based on quality investments

Wang,

Deng,

Cheng

2024

Front. Phys.

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Introduction: Self-production and outsourcing are two important production strategies for manufacturers, and the production capacity and investment capacity of manufacturers and suppliers play a decisive role in the quality of products. This study aims to analyze the manufacturer’s best production strategy and the drivers of outsourcing in the context of quality.Methods: This study constructs production outsourcing game models for duopoly manufacturers, examines the trade-offs between self-production and outsourcing when suppliers have the ability to invest in quality, explores the requirements and implications of outsourcing and compares the differences between “one-to-one” and “one-to-many” outsourcing structures.Results: First, outsourcing can reduce the level of product quality and that a necessary condition for manufacturers’ outsourcing is a strong advantage in the supplier’s production costs. Second, duopoly manufacturers may face a prisoner’s dilemma as a result of outsourcing. Finally, compared to two independent suppliers, outsourcing to a common supplier can increase the level of product quality by exploiting the centralization effect and increase the firm’s profits when the market’s competition intensity is low.Conclusion: First, the production strategy balance of duopoly manufacturers is closely related to the outsourcing structure, production efficiency and investment efficiency. Second, duopoly manufacturers choose outsourcing may fall into the prisoner’s dilemma, and outsourcing has the risk of quality reduction.

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Section: Literature Reviewmentioning

confidence: 99%

A study of production outsourcing strategies of dual oligopoly manufacturers based on quality investments

Wang,

Deng,

Cheng

2024

Front. Phys.

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“…For the practice of strategy, the Foligin Music Park follows the logic of strategy analysis. Designing the analysis according to the real purpose and investing appropriately in technical quality are the two principles [37]. Firstly, the purpose and goals to implementing this project is to create a music-centric tourism industry in China's third-tier cities, creating a self-sustaining loop that would give Virgin and Foliday a stronger foothold in the Chinese market.…”

Section: The Practice Of Strategy Analysismentioning

confidence: 99%

Research on the Organizational Strategy Management of the Potential Cooperation between Virgin Group and Fosun Group

2024

acccm

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This research is going to analyze the current situation of Virgin Group and Fosun Group, as well as the direction in which the two companies can cooperate. Fosun Group might have further cooperation with Virgin Group, and is committed to building a musicthemed tourism industrial park, forming its own ecology and completing a self-sufficient closed loop. The project will help Virgin enter and expand in the Chinese mainland market, establish its own business in China, and also enable Fosun to have a greater degree of visibility and market share. This essay will use entrepreneurship and innovation, history and culture, leadership, resources and capabilities analysis, corporate strategy, international strategy, mergers, acquisitions, and alliances, stakeholders and governance, organizing and strategy, the practice of strategy and other methods to analyze the advantages and disadvantages, feasibility and innovation points of the project in all aspects, so as to maximize the benefits of the two companies.

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“…The former work suggested that contract manufacturers could still benefit even if they did not lead the procurement, while the latter found that the outsourcing strategy of multinational companies was affected by local competitors and international tax rules. Chen et al [ 20 ] studied the outsourcing relationship between OEMs and CMs in the same product market and explored the win-win conditions under which OEMs and CMs support outsourcing in all cases.…”

Section: Literature Reviewmentioning

confidence: 99%

Strategic interaction of original equipment manufacturers between outsourcing and purchasing in a quality-differentiated market

et al. 2022

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Economic globalization has swept the whole world. To focus on their main business, enterprises that are referred to as original equipment manufacturers (OEMs) outsource non-core production activities to contract manufacturers (CMs). By constructing a two-level supply chain consisting of two competing OEMs and one upstream CM, the strategic interaction of the OEMs between outsourcing and purchasing is studied. Specifically, the CM can offer custom- and predefined modes of original equipment manufacturing (namely, CO mode and PO mode, respectively). The former mode enables OEMs to determine product quality, while the latter only allows them to purchase from several quality configurations. The results show that, first, since the CO mode allows the adopter to lead the product design, whether to choose this mode depends on the required R&D cost. Interestingly, however, a lower R&D cost does not necessarily result in the adoption of the CO mode if the product quality difference is small under the PO mode. Second, the optimal purchasing strategy of an OEM is indifferent to the outsourcing mode (CO and PO) of its rival but significantly affected by the quality cost. However, compared to the PO mode, choosing the CO mode would cause the competitor to suffer more profit losses. Third, differing from the prior literature, this paper finds that when the downstream OEM can make quality decisions, although this may lead to profit loss of the contract manufacturer in some channels, it could benefit the CM overall.

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A Win–Win strategy analysis for an original equipment manufacturer and a contract manufacturer in a competitive market

Cited by 20 publications

References 28 publications

A study of production outsourcing strategies of dual oligopoly manufacturers based on quality investments

A study of production outsourcing strategies of dual oligopoly manufacturers based on quality investments

Research on the Organizational Strategy Management of the Potential Cooperation between Virgin Group and Fosun Group

Strategic interaction of original equipment manufacturers between outsourcing and purchasing in a quality-differentiated market

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