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What Does OEM Stand For in Marketing? OEM vs ODM Explained
What Is an Original Equipment Manufacturer (OEM)?
Traditionally, an original equipment manufacturer (OEM) is a company whose goods are utilized as components in the products of another company, which then sells the final thing to users.
The second company is known as a value-added reseller (VAR) because it adds value to the original goods by supplementing or adding features or services. The VAR collaborates closely with the OEM, which frequently customizes designs based on the demands and specifications of the VAR organization.
KEY TAKE AWAYS
- A value-added reseller buys parts from an original equipment manufacturer (OEM) and puts them into the finished products of another company (VAR).
- OEM can be used to describe a company in the computer industry that buys products and then puts them into a new product under its own name.
- Usually, OEMs sell to other businesses, while VARs sell to the general public or other end users.
- OEMs are the original equipment manufacturers. Aftermarket products, on the other hand, are generic replacement parts that are cheaper than OEM parts.
- OEM is also not the same as an original design manufacturer (ODM), which is a company that changes its own products so that the client can sell them again.
Understanding an Original Equipment Manufacturer (OEM)
OEMs and VARs cooperate. OEMs sell VARs subassemblies. Some OEMs manufacture entire things for VARs to market, but they don’t usually determine the ultimate product.
An OEM of electronic components might work with Sony or Samsung to construct HDTVs. Or a button maker who sells Ralph Lauren monogrammed buttons.
No OEM part plays a substantial role in the end product sold under the VAR’s brand name.
OEMs focus on business-to-business sales, while VARs target consumers. By 2021, more OEMs will sell directly to customers (which, in a way, makes them a VAR).
People who construct their own computers can buy graphics cards and processors from Nvidia, Intel, and other companies. If someone wants to handle their own auto repairs, they can acquire OEM components from the manufacturer or a retailer who carries them.
An OEM is the partnership between an automaker and a parts maker. OEMs make exhaust systems and brake cylinders. An automaker assembles the OEM parts into an automobile. The finished car is sold to consumers through auto dealers.
Second, computer-related definition of OEM. OEM is a company that buys products and rebrands them under its own name.
Microsoft supplies Windows software to Dell Technologies, which combines it into PCs and sells them to the public. Microsoft is the OEM while Dell is the VAR. The computer’s consumer product guide may list Dell as the OEM.
Original Equipment Manufacturer (OEM) vs. Aftermarket
OEMs are the opposite of aftermarket-parts manufacturers. OEM refers to something created for the original product, while aftermarket is replacement equipment made by another manufacturer.
ABC Thermostats made a Ford Taurus thermostat for ABC Thermostats. They may buy an OEM part, a copy of their original ABC thermostat utilized in vehicle manufacturing. Or they may buy an aftermarket part. If the replacement comes from ABC, it’s OEM; otherwise, it’s aftermarket.
Aftermarket equipment may be cheaper than OEM but lower in quality or lifespan.
Aftermarket manufacturers sometimes make a part so excellent that people seek it out.
Hurst Performance of Warminster Township, Penn., makes gear shifters for cars. Car purchasers favored Hurst shifters for their excellent performance.
Hurst shifters became so trusted that major manufacturers installed them in their factory designs, making Hurst an OEM.
Original Equipment Manufacturer (OEM) vs. Original Design Manufacturer (ODM)
OEM is different from ODM, a sort of private labeling for produced products. An ODM company can build and manufacture a product according to their demands, but they may change the design to match client criteria. The client can then rebrand these products.
Since the client is altering an existing design, an ODM setup lacks flexibility. Original design manufacturing has cheaper R&D costs, lowering consumer pricing. ODM products offer a lower minimum order quantity, attracting smaller clients.
ODMs are cheaper than OEMs. They may accept smaller orders.
Special Considerations
In casual usage, OEM can be an adjective (“OEM parts”) or a verb (“OEM a new product”). This conflicting evolution is attributed to computer hardware.
Dell, IBM, and Hewlett Packard started using branded parts from outside sources. OEM began to mean companies who rename or sell other manufacturers’ products.
This mostly involved warranty, customer support, and other services, but it also reflected a shift in industrial dynamics. Dell went from unidentified chipmakers to Intel for its computer processors.
Intel’s brand name boosted Dell’s computers’ worth. Dell’s marketing materials stated Intel and Dell were equal partners in the processor and computer design.
Dell previously told Intel how to create chips, unlike now. All of this made Dell the OEM in the eyes of suppliers and the public (after all, people think of the finished hardware and software package they buy as “a Dell computer”).
What Does Original Equipment Manufacturer (OEM) Mean in Cars?
OEM refers to an automobile manufacturer’s original equipment. These are different from aftermarket parts, which are made by a third-party manufacturer. OEM components are preferable to aftermarket parts because they’re built for your vehicle and may be of superior quality. Aftermarket parts are cheaper but may wear out faster.
What Does Original Equipment Manufacturer (OEM) Mean in Software?
OEM refers to pre-installed computer or electronics software or hardware. Retailers can bundle software at wholesale pricing, making it cheaper than licensing or buying individually.
Is It Worth Paying for OEM Parts?
OEM parts are typically more expensive than third-party manufacturer parts, but they are also manufactured to a higher standard. However, some third-party goods are as reliable as OEM components, while others may be much less expensive. When looking for replacements, it’s recommended examining the various brands to see which manufacturer gives the most value for money.
