Abstract

Competition from Foreign Companies

Positivo has benefited significantly from the government's high tariff policies for cultivating and protecting local industries. However, as the emerging markets began to draw the attention of international brands, which have advantages in enormous economies of scale and strong R&D capabilities, the international brands are gaining market share in emerging markets and gradually coming to neck-to-neck with regional giants.

For example, in 2007 the gap in the market shares of HCL (15.9%) and HP (15.0%) in India has reduced to less than 1%, and HP is evenly likely to surpass HCL in the future. Although in emerging markets such as Eastern Europe, international brands have secured the first or the second ranking, Positivo is combining its advantages in distribution channels and local origins to enlarge the gap with large international brands.

Looking to the future, foreign companies are raising operating investment in the Brazilian PC market. For example, HP announced the addition of 300 retail location to speed up exposure. Dell in October 2007 opened up a stall for the first time in Wal-Mart to enter Brazil's PC retail market. Positivo has relied on the rapid growth in the Brazilian PC market for its tremendous development. However, with intense competition from foreign companies, Positivo's future will become more challenging.

Differentiated Product Portfolio

Unlike international brands that provide identical product portfolios to attain economies of scale, Positivo is distinguishing itself with a differentiated product line-up, so as to carve out new markets and provide customized services. In addition, Positivo has spared no efforts in raising product quality and restructuring product strategies to successfully maintain its existing customer base with replacement demand.

The reason Positivo speeds ahead of other local brands that adopt low-price strategies is attributed to its steadily increasing profits along with ongoing product R&D and customization. Besides, new product distribution channels are planned based on customer behavior. This shows Positivo's commitment to lowering overall non-essential costs and increasing shipment volume of high value-added products. In the future while facing competition from international companies with large financial resources and low-price products, Positivo's success will lie in its ability to achieve vertical integration of its supply chain to effectively lower costs and to maintain competitive prices.

Increasing Importance of Distribution Channels

In line with the traditional peak-season effect in the second half of 2007, competition between international brands for distribution networks was fierce for a time. In order to stymie Lenovo from getting into international markets, Acer accelerated the acquisition of Gateway and later merged Packard Bell to slow Lenovo's expanding in North America and Europe. The acquisition gained Acer access to market distributors. In addition to maintaining its direct sales model to maintain profits, Dell in 2007 also expanded its product exposure via partnerships with various large international wholesale chains, hoping to regain the throne.

Although Positivo claimed that its move of expanding northward was to bring services closer to consumers, the strategy has also delivered a knockout blow to the other local Brazilian company CCE.

CCE is a late comer Brazil's PC market. Its mode of operations was the same as Positivo's earlier model when first starting out, using low-price strategies and regional retailers to access markets. CCE's main market, which is located in Manaus, primarily includes the north and northwest regions. Positivo is planning to build factories there, which will accelerate the formation of partnerships and alliances with local distributors. Positivo not only effectively uses this maneuver to block CCE's dominance in the local market, it also prevents local distributors from becoming monopolistic by CCE.

In 2008, consumer PCs are still expected to be the main driver of growth in the global PC market. The Brazilian consumer PC market is also brisk. Competition for distribution channels and partnerships will thus become more intense, and control over distribution channels will be a key factor when developing emerging markets.

Repackaging Brand Image

Positivo's expenditures on packaging its brand image in the form of advertisements is increasing on an annual basis and the expenditure share of its total revenue is also rising. Through professional training of employees, TV commercials, and print ads, Posotivo is ingraining its brand image into the minds of consumers, hoping to avert sliding PC prices, and thinning net profits, and obtain more bargaining chips when striving for more product exposure.

Dell has recently been spending enormous amounts of money to enlist the world's second largest advertising company WPP to re-plan Dell's product marketing strategy. Dell has authorized product package design to regional partners to help redefine Dell's brand image. Lenovo has been trying to be rid of the association with IBM Thinkpad by repackaging the Lenovo brand image, in a bid to gain media exposure in the 2008 Summer Olympics.

In the age of low-priced PCs, regular mainstream PC specifications have become more comprehensive. Therefore in regular consumer markets, price will not be the only consideration before consumers make a purchase. The brand image will also appeal to consumers. Through advertising and repackaging brand image to enhance the meaning of products and spur consumers' purchase intention, the persuasiveness from brand image will be stronger than that from low price. Comparing regional brands to international companies, appealing to people and local culture will be advantages that local companies will optimize.

Appendix

List of Companies