How exactly does one define Original Equipment Manufacturer?
The simplest definition of what an original equipment manufacturer is that this is a company that creates certain parts of products or goods being made by other companies. In the corporate world, there is such a thing as value-added reseller wherein any company that makes use of an original equipment manufacturer can increase the selling price of their final product because of the fact that they are not the sole producer of all its parts and they would still have to order some of it from other companies. Original equipment manufacturers create custom made parts for their clients and the effect of this kind of service would be an increase in selling price of the final product because nothing custom made ever comes cheap.
If you would take your car and break it down into pieces, you would most likely see parts that are stamped with a different company name. The sole role of OEM is to produce components because other tasks such as assembly or incorporation of these components to the final product would be the job of the company they are working with.. Once the product has been completed, it will then be sent to the car company sellers to be sold to whoever wants a new car.
The computer industry is one of the industries these days that is booming faster than the rest and they have made a new definition for original equipment manufacturers. The OEM is the one that would create a product, another company would buy the product, rebrand it by incorporating it into their product, and then sell it off under their company name. If we are talking about the computer industry, the most common occurance would be once computer company creating a certain software and then selling it off to another computer company for then to incorporate in their final product, a product that they brand with their name only. Because the buyer of the software is the one that does the rebranding, they would be the company that is considered to be the OEM.
How does an OEM operate?
When you run a business, there will always be a need for support from other companies especially if you are producing goods or products that have various parts in them and you are not the expert manufacturer of all parts. You need to keep in mind that a product cannot be sold if it lack certain parts and this is the very reason why OEMs are very valuable. The two companies may be working hand in hand to create the final product they can sell but in reality, the OEM just handles the making of the components and it would be solely up to the VAR to handle the finish product.