Egypt as the land of OEM opportunities

I can say that now Egypt may be the land of OEM business opportunities for global firms. But first we have to answer the question of what is OEM?

As defined in Wikipedia, An?original equipment manufacturer?(OEM) is a company that makes a part or subsystem that is used in another company's end product.

It is simple concept in which a firm owns a knowledge and knowhow of part of the system that is very important to build the complete system. So instead of selling license for that part to local manufacturer, the firm make deal with local firm in which that has the knowhow of that part manufacture, assemble and sell that part to the local firm to integrate it in its final system.

So how that concept contribute to both firms? There are many benefits for both firms in that approach but my concern in this article is mainly about increasing the local value added. In Egypt the government now is trying to start the industrial era of Egypt. But to do that many of the work is being done in the field of infrastructure and improvement of the process of doing business in Egypt. So are we going to wait till having the proper infrastructure to be able to invest in innovation and have the knowhow?????!!!!!! No entrepreneur is going to accept that. But entrepreneur is going to figure out his way to gain the best of the new economic conditions.

Missing the high advanced technology will be the obstacle from one side and having availability of labor with low cost relative to the global economics from the other side, OEM will be the good approach.

As an example if we considered the appliance industry, parts of the system can be classified into 2 groups. First group is that parts of high technological items represents the know-how. The second group is that parts which can be localized. For the first group, the entrepreneur will search for the owner of that technology to sell him that part. Then he will integrate that part to the local product that he will deliver to the market. By that a high portion of the cost will be calculated based on local currency and the only part that will be cost sensitive to the exchange rate is the high technology part. Such action is going not only to secure the same customer perceived value on low prices for local market, but also is long term it will allow the entrepreneur to go to export business and start to have competitive advantage from the exchange rates and lowering the value of local currency. In addition to that, in construction projects, EPCs will gain from that is their overseas projects but supplying it from local manufacturer.

It is just my thoughts if I will think as an entrepreneur

Mostafa Khater, MBA