The competence and constraints of brand building for contract manufacturers

Abstract

What we try to put forth in this paper is that own-brand building on the part of contract manufacturers is infl uenced by the interplay of two sets of forces derived from the initial decision mode of the selected original equipment manufacturing business. The fi rst set of forces relates to competence, with competence in terms of product design and development. It infl uences the ability of contract manufacturers to develop their own-design products. The second set of forces has to do with the constraints, by which we mean the concentrated customer structure that limits the extent to which contract manufacturers develop their design and development competence for own-brand product. In regard to this, we suggest that while the design and development competence of contract manufacturers will positively trigger their own-brand building, the concentrated customer structure will have moderating effects on the relationship between design and development competence and own-brand building. Furthermore, while brand building may provide contract manufacturers with another growth opportunity, it may also give rise to a confl ict of interests with existing customers because of the potential threat of competition. We argue that contract manufacturers with own-brand can effectively minimise the threat of confl ict with their customers and create value through various means, which include leveraging existing competence into related product lines, selecting geographic target markets cautiously and entering such markets at the growth stage of the product life cycle.

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