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Abstract
This article analyzes how entrepreneurs create wealth and capabilities in the early stages by practicing original equipment manufacturing (OEM) and later on transcend to original brand manufacturing (OBM). The author deliberately selects three cases of Taiwan's firms (Johnson Health Technology Corporation, CVC Technology Corporation, and HTC Corporation) to study firm growth and firm transformation by incorporating concepts from research fields of entrepreneurship, strategic management, and leadership. How Taiwan's firms thrive from transforming to create own brands and how they deal with ensuing issues of branding dilemma offer a useful lesson for latecomer economies.
Notes
1. ODM is usually more advanced than OEM with its capability of design, but its developmental process overlapped with OEM. Therefore, we do not specifically discuss the difference between them here.
2. Noticing the importance of Taiwan's firm transformation, beginning in 2003, the Bureau of Foreign Trade commissioned Taiwan External Trade Development Council (TAIRTRA) to work with brand appraisal consultancy, Interbrand, to develop the ranking for Top Taiwan Global Brands. The purpose is to assist branded companies in expanding their markets overseas and help promote their products abroad. Started from 2003, each year, TAIRTRA awards the top 10 brands (20 brands since 2007) and publishes the estimated market worth of the brand names.
3. A Taiwanese boss' wife plays a crucial role for many small and medium size enterprises. As CitationYu (2009) argued that the boss' wife does almost everything ranging from daily general management of the firm to taking care of the boss' health, babysitting, worshipping during religious and festive days, and all miscellaneous works. An old saying indicates fittingly, “the boss supervises everything of the company, and the boss' wife supervises the boss.”
4. For the corporate profile of JHT, see the website at http://www.johnsonfitness.com/tw/.
5. Taiwan Stock Exchange (TWSE) currently has about 700 listed corporations. TWSE trading is in the centralized marketplace and was carried out on a fully automated securities trading (FAST) system. To be able to be listed, except for the normal accounting standards, the minimum capital requirement is NT$ 500 million.
6. JHT has won 3-year (1998–2000) Taiwan's Master Piece Award, and between 1997 and 2000, it won four continuous years “Best Buy” by the USA consumer magazine survey. The distribution company in the United States was awarded as the “1999 Best Customer Service” by consumer magazine survey.
7. In 1995, while Johnson was thinking to transfer to OBM, Trek Fitness was on the verge of bankruptcy. Due to the 30% of the products of Trek Fitness were supplied by JHT, Peter Lo purchased Trek Fitness with US$100,000.
8. Kapfere (2004) argued that there are four advantages from multibrand strategy: (a) obtaining greater shelf space and leaving little for competitors' products, (b) saturating a market by filling all price and quality gaps, (c) catering to brand-switching users who like to experiment with different brands, and (d) keeping the firm's managers on their toes by generating internal competition.
9. JHT's American and Asian R&D teams have passed ISO-9001 and ISO-9002 in 1995 and 1996, and ISO-14001 certificate as well as Japan's SG, America's UL/ETL, Canada's CSA, Germany's GS, and the EU's CE international product safety standards. JHT has also been certified by the U.S. Food and Drug Administration and has won the Taiwan Excellence Award and Japan's Good Design Award.
10. The corporate profile of CVC can be found at the website: http://www.cvc-tech.com/. This case was based on the article of the keynote speech by Sheng-Hui CitationYang on April 26, 2008, at the 5th Interdisciplinary Management Research Conference, held in Tung-Hai University, Taichung, Taiwan.
11. The case study of CVC is based on CitationYang (2008). The profile of CVC Technologies can be found at the website: http://www.cvc-tech.com/.
12. In 1994, the over-the-counter market, Gre Tai Securities Market (the GTSM), was founded. To be listed in the GTSM, the minimal capital requited is NT$ 50 million, which is far less than to be listed in TWSE (see Note 5). The GTSM serves for small and potential SMEs to easily raise funds before upgrading to be listed in the TWSE.
13. To remove scruples and win confidence from the alliance participants, Sheng-Hui Yang first moved to a new factory and had a well-organized warehouse and demonstration area; second, established sale services (with 25 franchised companies) for the alliance; third, negotiated a credit union to loan to alliance partners and CVC would take the 20% responsibility of if default in order to offer a lower rate.
14. Sheng-Hui Yang recalled that although CVC is a good and worthwhile machine, if in the first place, the CVC machine was priced as US$17,500 directly, it will not differentiate from other competitors, and it will confront an uphill battle.
15. Crèmer Speciaalmachines B.V. (website: http://www.cremer.com/) is a Dutch company that specializes in developing and manufacturing product counting and packaging systems. Since its foundation in 1949 Crèmer has become the leading manufacturer of counting machines and packaging systems for the pharmaceutical, flower bulb, food, and nonfood industries all over the world.
16. Crèmer imposed two conditions for CVC to sell Crèmer's machine. One was that to allow selling the Crèmer's machine but using CVC brand. The other was that the price should be the same as what Crèmer authorized to its U.S. representative. Crèmer's purpose was to ensure that CVC did not ally with its 65 strategic partners to cooperate with Crèmer's competitors. Crèmer figured that given the same price with Crèmer, CVC should not be able to compete and dissolve by itself soon.
17. HTC corporate profile can be found at http://www.htc.com.
18. The other key founder of HTC is Ho-Tu Cho, a low-profiled person although played as an influential role for the growth of HTC. Ho-Tu Cho was the president of HTC Corporation while Peter Chou was the vice president.
19. Cher Wang, today one of the island's richest women, is the daughter of the late Taiwanese plastics mogul, Y. C. Wang, whose Formosa Plastics Group, started in 1954, is now the largest private enterprise in Taiwan. See the website: http://www.fpg.com.tw/index_eng.asp.
20. Smart phone is a phone embedded with open-end operation system. Except the Windows operation system, the majority of the operation system is the Symbia, led by Nokia, others include Linux, which was used by Motorola and Palm, and BlackBerry OS, which was developed by Research in Motion (RIM).
21. Prior to the advent of the smart phone, the market of mobile phones started losing the momentum. In Europe, the average phone bill (average revenue per user, ARPU) was around 25 Euros. Since 2002, cooperating with the communication giants, such as Britain O2 (XDA) and French Orange (SPV) to increase ARPU, HTC's mobile, which could receive and send e-mail, increased the average communication fess that the telecommunication corporations received to jump to 76 Euros.
22. Qualcomm is the pioneer and world leader of Code Division Multiple Access (CDMA) digital wireless technology. With the license for the Qualcomm's essential CDMA patent portfolio, HTC is allowed to develop and manufacture advanced third-generation CDMA voice and data wireless communications solutions for the mobile market.
23. There is different strategy between iPhone and HTC Diamond. The former is a typical model of Business to Customer, whereas the later focuses on the Business to Business to Customer. As a result, HTC cares more on their relationship with the managing level business in the private sector.
24. Exploitation refers to how to organize and act on opportunities (CitationRonstadt, 1988; CitationShane & Venkataraman, 2000), and exploration is akin to overcoming traditional obstacles when organizing and managing new ventures (CitationShepherd, Douglas, & Shanley, 2000; CitationStarr & Bygrave, 1992). It bears noting that juxtaposing this dichotomy is for the purpose of clear exposition, as both behaviors can occur simultaneously, overlap, and intertwine over different contexts and decisions during a firm's growth path.
25. CitationVecchio (2003) and CitationCogliser and Brigham (2004) argued that entrepreneurship and leadership has a common thread of thought and that the experiences of both can be symbiotic. We purposively hoist the leadership quality of entrepreneurs to highlight its role for firm transformation.
26. CitationRowe (2001) incorporates strategic management with leadership and provides three types of managerial leadership. First, visionary leadership is future oriented and concerned with risk taking, and visionary leaders are not dependent on their organizations for their sense of who they are. Second, managerial leadership involves stability and order, as well as the preservation of the existing order. Managerial leaders are more comfortable handling day-to-day activities and are short-term oriented. The third type is the ideal one, strategic leadership, which contains capabilities of effective managerial skill and visionary thinking.