For a company to strengthen competitive advantage, they had to put in whatever method they can from time to time, for example, from product innovation, strategic innovation to seek for differentiation. There is also no exceptional for Taiwanese manufacturer. Due to the fact that most Taiwanese manufacturers are small and medium scales company, in addition they are OEM supplier, therefore at initial stage, it is very difficult to pursue differentiation from marketing and product research and development innovation. Under limited resources situation, how to aims at their own strength to select the strategy for differentiation is an issue for Taiwanese manufacturer to consider very thoroughly. This article took small electrical appliances industry as an example and from the business model application standpoint, we discovered that most Taiwanese manufacturers has taken Tapered vertical integration as the main business model to sustain its competitive advantage. Especially when they started on mainland investment, due to the land obtains easily and the cheaper labor force...etc, this vertical integration model application can further be implemented. Taking Value Chain theory and the Smile Curve as a basis for this study, and obtains the most effective vertical integration model is focus on "The Production Vertical Integration". This business model has led a few manufacturers obtain cost advantage in different level. As a case study we take Tsann Kuen Enterprise Co., Ltd as an example, to learn how this company has taken this vertical integration as an approach and developed to become the first Taiwanese manufacturer listed in China stock market. In addition, to learn how it became the top three of the largest small electrical appliances supplier. Finally, from the case study, we will propose a future development approach and suggestion for the Taiwanese small electrical appliances industry. Key Word: Vertical Integration, Smile Curve, Value Chain

Along with more and more intense competition of OEM as well as ODM low margin strategy, Taiwanese' small appliance manufacturers have inevitably encountered the sharp profit decline and could no longer benefit from the original good earnings that derive from Vertical Integration Strategy commonly applied. In order to sustain the competitiveness and pursue higher returns, it's indispensable for those Taiwanese small appliance manufacturers to further consider moving towards value chains that generate better added-value such as R&D and marketing; R&D here includes innovation, patent and marketing consists of brand as well as channel. By fully adopting Vertical Integration Strategy in the preliminary, Airmate has fruitfully grown to a well profit-earning company and then moved towards design innovation as well as brand that were extremely stressed in Smile Curve Theory. Once again, Airmate has succeeded in the branding and considerably benefited from its brand equity. Based on China market's small appliance background, trend and affiliated with a liner regression analysis on home appliance manufacturers as well as channels, a research was conducted through in-depth interview and secondary data gathering to discuss how Airmate should further utilize channel to manifest its brand equity so that it could accordingly generate more profits as well as stabilize its cash flow. In summary, this very study has revealed and concluded a number of suggestions as followings. 1.New Product Development Strategy Owing to the inferiority of its product mix, Airmate has to further develop new product with eminent complexity and more varieties so that it could enhance its core competence as well as keep the new competitors from involving in the original competition. 2. Branding Strategy Airmate is highly suggested to keep investing in the branding as a way to better strengthen Airmate's high-end brand image. At the same time, a new branding project should be planned in order to extend Airmate's brand recognition to those secondary and thirdly cities as well as farmers market. It's not advised to additionally rebuild the middle or low end brands for thirdly cities or farmers market as it will muddle its brand positioning and diminish its high-end brand image. In light of brand theory, a product with higher added-value could correspondingly secure higher market price and generate better profit. Thus, since Airmate has been doing OEM as well as ODM for those celebrated appliance companies worldwide, it's extremely recommended that Airmate should appeal to media such as newspaper or magazine to publish articles to associate its brand with those high-end appliance companies. 3.The Channel Selection Strategy It's highly advised that Airmate should concentrate on primary and focused channels such as Home Appliance Chain Stores and Supermarket. A review and scheme should be conducted as a way to raise its brand exposure and at the same time increase the sales amount. 4.The Selection of Domestic or Foreign Channels Strategy With the advantages of advanced channel operations as well as management know-how and its large scale new stores opening plan, foreign channels have obviously surpassed the performance of channel efficiency and benefit than that of domestic channels. It's highly recommended that Airmate should actively build further close cooperation with foreign channels. 5.Channel Relationship Management A review on various channels and consumers' behaviors is suggested in order to better position the price and product separately to match up each channel. 6.The Measure to Cope With the Competition Resulted from WTO Innovation and setting up new appliance standard are key to sustain the core competence, Airmate is thus advised to focus on these two aspects.