Definition
OEM stands for Original Equipment Manufacturer. In finance, it refers to companies that produce parts and equipment that may be marketed by another manufacturer. Essentially, it’s a firm that makes components used in the final product of another company.
Key Takeaways
- OEM stands for Original Equipment Manufacturer. This refers to a company that produces and sells products or parts of a product that their buyer, another company, uses in their end product.
- The term OEM is primarily used in several sectors including technology, automotive, and finance. In the context of finance, it can refer to a negotiation or plan between two firms to acquire a product or service.
- There are two typical types of OEMs. One type of OEM is when a company sells a complete product to another company to be rebranded and sold. The other type is a company that sells a part of a product, which then gets incorporated into another company’s finished product.
Importance
OEM, or Original Equipment Manufacturer, is an important term in finance due to its significant role in supply chain and production networks.
Entities classified as OEMs are companies that produce components or systems that are used in the final products of other companies.
A strong relationship with credible OEMs can deliver financial benefits such as cost-efficiencies, reliable supply chains, innovation, and quality assurance.
Considering the role of OEMs can also assist in market analysis and forecast, as OEM performance can often reflect trends within the larger industry.
The profitability and viability of OEMs can directly impact the final product manufacturers’ financial stability, thus making an understanding of OEM a crucial aspect of comprehensive financial analysis.
Explanation
The term OEM, or Original Equipment Manufacturer, primarily refers to companies that manufacture products which are used as components in the products of another company, which are then sold to end users. Although it seems to indicate a company that originally manufactures a product, in fact, it is utilized in various sectors including software, automotive parts, and even hardware.
The main purpose of an OEM is to carry out custom designs and manufacture them for other companies, basically allowing the latter to save on the costs and time of producing the components themselves. OEMs play a significant role in industries such as computer hardware, automobiles, and electronics, where components required can be complex and costly to manufacture.
For instance, in the auto industry, a car company may outsource the production of parts like the stereo system or brake assembly to an OEM that specializes in these components, while focusing its own efforts on the overall assembly and marketing of the car. In the computer industry, the term is also commonly used to denote a company that purchases a product or component from a third-party to incorporate into its own product, then sells the finished item to users under its own brand name.
Thus, OEMs essentially focus on creating high-quality components that are an essential part of finished products, contributing to the overall value and functioning of these products.
Examples of OEM
Dell Computers – Dell Computers is a good example of an Original Equipment Manufacturer (OEM). They manufacture, assemble, and sell their own brand of computers. They source various components like processors, hard drives, and memory from other manufacturers, but the final product is sold under the Dell brand. They also provide customer service and product guarantees.
Ford Motor Company – Ford is another example of an OEM. They design and manufacture their own cars which are sold under the Ford brand. The various car parts like engines, steering systems, and tires are produced either in-house or procured from other suppliers, but the final product – the car – is assembled and sold by Ford.
Apple Inc. – Apple Inc. is an OEM as they design, manufacture, market, and sell their own products such as the iPhone, iPad, and Mac computers. In order to create its product, Apple sources components from around the world – for example, a processor from a supplier like Intel or an OLED screen from Samsung. However, all the design and assembly work is undertaken by Apple, and the final product is sold under the Apple brand.
OEM Finance FAQ
What is OEM Finance?
OEM, or Original Equipment Manufacturer, finance refers to the process of financing the purchase of equipment directly from the manufacturer. This often involves special financing programs or offers made available by the manufacturer.
What are the benefits of OEM Finance?
The benefits of OEM finance often include lower interest rates, flexible payment terms, and the convenience of obtaining financing and equipment from the same source. Some OEMs may also offer special programs or incentives for financing through them.
Is OEM Finance only available for new equipment?
No, OEM Finance is not only available for new equipment. You can also finance used or refurbished equipment through many manufacturers.
Can I qualify for OEM Finance with bad credit?
Qualification criteria differ among manufacturers and it primarily depends on the OEM’s finance policies. Some OEMs may take into consideration factors like business history and cash flow, in addition to credit history.
Does OEM Finance cover only the equipment cost?
Financing packages may vary from one OEM to another. Some packages might include costs related to delivery, installation, maintenance, and even training. However, you should confirm these details with the individual OEM.
Related Entrepreneurship Terms
- Production Line
- Original Equipment
- Manufacturing Process
- Supply Chain
- Aftermarket Parts
Sources for More Information
- Investopedia: An extensive resource of financial information and education, with a comprehensive dictionary of financial terms including OEM.
- Bloomberg: A global business and financial news outlet offering insightful articles, features, and the ability to search a vast database of financial terms.
- Reuters: A reputed international news organization that offers detailed financial news coverage and features a glossary of financial terms which may provide insight on OEM.
- Forbes: A leading source for reliable news and financial information, featuring articles on a wide range of financial topics including OEM.
