Industrial Upgrade In China Essay

4138 words - 17 pages

BiMBA Final PaperIndustrial Upgrade in ChinaBiMBA Part-time 2007 Class2Group 13AbstractAs the development of industry and improvement of individual income in china, the labor cost became more expensive. And our commercial environment is changing rapidly, especially the appreciation of RMB. These factors all increase the crisis of traditional industry in china. So the industrial upgrade in China is an imminent issue recently. The direction of industrial upgrade for manufacturing should be from OEM to ODM and OBM. Meanwhile, Service outsourcing seems great potential with industrial upgrade. The most exciting thing is that the industrial upgrade not only contributes to coastal cities, but also benefits inland cities.Industrial upgrade for manufacturing in chinaCurrent status of china's manufacturing industryIn spite of the immense trade surplus gained in recent years, China'smanufacturing still remains at the low end of the international division of labor spectrum and derives much of its international competitiveness from its advantages in low production costs. Chinese manufacturing enterprises are also characterized by low profit margins. How should China's manufacturing industry pursue industrial upgrade?Introduction of optimum path to realize upgradeThe optimum path for an enterprise in emerging market economies to realize upgrade and innovation is to evolve from simple contract manufacturing, through R&D design engineering, to eventually building its own brand. For almost three decades, since China initiated reform and opening up to the outside world, OEM (original equipment manufacturer), as an effective cooperative model, has become an important way for Chinese manufacturing enterprises to enter the international value chain system and participate in international market competition. To upgrade from OEM to ODM (original design manufacturer) and OBM (original brand name manufacturer), the former provides capital accumulation and technological accumulation for the latter, while laying the groundwork for future brand promotion. A large number of internationally known enterprises went through this road. For example, the Korean Samsung was mainly engaged in manufacturing non-branded products in the 1970s before it began shifting to this path. Similarly, the Taiwanese electronic company BenQ has gradually gained its own manufacturing expertise by producing spare parts or products for famous enterprises such as Dell and Nokia. The role of OEM success in the context of East Asia's economic rise has received attention from many scholars. OEM played an important role in the industrial development of East Asia. More importantly, some enterprises in Taiwan, Singapore, Korea and Hong Kong were transformed from the OEM model to ODM model, and then to OBM. In 1989, Amsden identified another scenario for enterprises in emerging market economies where they owned certain competitive advantages and possessed their own production design capabilities and...

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