When the export economy of a country faces competitive pressures, what is the solution? As reported in the Taipei Times, according to a leading economic think tank in Chinese Taipei, the answer is branding:
Taiwan must shift its focus from contract manufacturing to branding to keep up its export competitiveness, Chen Tien-jy, president of the Chung-Hua Institution for Economic Research, said yesterday.
“Taiwan has to be alert to the fact that it needs to change its business model now, or it will inevitably suffer trade deficits [in the future],” Chen said.
The nation’s economy depends mainly on contract manufacturing, which is especially common in the electronics sector, Chen said.
But according to the latest government data, more than 37 percent of Taiwanese contract manufacturers…moved their production bases abroad, particularly to China, in pursuit of cheaper labor and lower production costs, he added…
In comparison, South Korea chose to build an own-brand business model in the mid-90s and has now started reaping the rewards, with brands like Samsung gaining popularity worldwide, especially in the emerging markets like India…
In any industry, effective branding is an example of how the best defense against competitive market pressures remains a good offense. Branding confers a market premium to what might otherwise be viewed as a commodity. Starbucks is one example.
Contract manufacturers often differentiate themselves by functional capabilities, claiming to offer more and to be better than competitors. We previously discussed the pitfalls of the More/Better approach.
When a More/Better strategy is employed, rather than brand strategy, most any OEM (original equipment manufacturer/customizer) seeking a contract manufacturing option will focus on price first in their decision-making. Serving as an outsourced expense and without a discernable brand, a contract manufacturer remains at the mercy of OEMs viewing manufacturing partners as a commodity.
For a contract manufacturer viewed as interchangeable with any number of competitors, and thus highly sensitive to supply chain price pressure, the OEM will chase the lowest price available.
To fight back, not only to maintain market share but also to grow it, the answer is the use of the powerful thinking behind an effective brand strategy. Only then is one fully armed with the world’s most commanding business tool.
A potent weapon, for any export economy.
Branding for Nation Export Competitiveness - To learn more about this author, visit Steve Cranford's Website.
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Steve Cranford
(Visit Steve's Website)
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