臺大管理論叢 NTU Management Review VOL.29 NO.1

Exploring Dual Business Model Choice of Brand and OEM Businesses 54 Stettner, and Tushman, 2010). Overall, we add new insights to the choice of dual BM, which was previously treated as paradoxical (Markides and Charitou, 2004; Smith, Binns, and Tushman, 2010). 2. Literature Background As we mentioned, our research explores why and how suppliers choose dual BMs, which combine own-brand and OEM business to expand market coverage and enhance growth. In this section we illuminate the differences between own-brand and OEM business and review the extant research on BM choice and emphasize the choice of dual BMs. 2.1 Brand versus OEM Business Model Choices Product suppliers can choose from two distinctive approaches for developing business: introducing products to target markets through channel resellers under their own brand name, or providing design and manufacturing services to existing brand companies that are seeking outsourcing services for strategic reasons. The former is called a brand BM and the latter an OEM BM (Lee and Chen, 2000). These options reflect different resource configurations, required competencies, organization types, and value propositions (Demil and Lecocq, 2010). Based on the BM chosen, suppliers must establish a system of value-added activities with complementary partners within a business ecosystem (Zott and Amit, 2013). Suppliers must choose brand or OEM BMs based on their pros and cons. Brand BMs offer greater autonomy for developing product market strategy; however, they require significant investment in sales, marketing and technical teams to support channel promotion and enhance product visibility in the target market. In addition, brand ownership means that the focal firm will be accountable for the end-to-end liability of the specific product, including inventory and after-sale services. Therefore, compared with providing contractual manufacturing services, brand BMs involve greater difficulty and uncertainty. With their larger resource investments and risks, brand BMs usually require a much higher margin than contractual manufacturing. In addition, sales volume for brand BMs is relatively low compared to OEM BMs with prominent OEM buyers, who have strong marketing power. In comparison, OEM BMs require product suppliers to provide customized design and manufacturing services to buyers, with products shipped under buyers’ brand names.