Abstract

Acer: Combination of Low Costs and Strong Brand

Operational Strategy: Cost Leadership

Acer has used principles of comparative economics to pare away operations which were not its core strengths, and completely outsourced manufacturing and distribution. This has reduced profit sources and reduced the company's control over innovation and market response, but it has also greatly reduced costs and allowed Acer to concentrate on brand building and marketing.

Brand Strategy: Maintaining Brand Image

Acer has made use of cross-industry alliances and partnered with companies well-known in their respective fields. It has formed a partnership with Ferrari, gained Dolby certification, and formed a distribution partnership with Ingram Micro. It has also partnered with various leading distributors in different regions that balance and complement one another to help build its brand.

Product Strategy: Flexible and Fast

The 'No Touch' manufacturing and distribution strategy has increased the need for mastery of logistics and information. Local ODMs ship directly to local distributors, which reduces inventory problems and also accelerates product release. This direct contact between ODM manufacturer and sales agent only allows Acer to indirectly grasp market response. Products target general demand in most market segments and Acer responds to market trends with quick releases. The company also conducts rapid strategic innovation to increase its corporate image.

Distribution Strategy: Profit Sharing with Channel Partners

Returning a large portion of profits to distributors and promising profit sharing makes distributors more trustful of and loyal to Acer, and hence increases product sales. Using a high-volume low-profit model allows the company to expand its economy of scale and eventually raise its overall profits.

Asus: Ambition to Develop Brand

Operational Strategy: Focused Differentiation

Asus divides the market into small segments, and produces highly individualized and unique notebook PCs which fill the gaps left by its competitors. In addition to focusing on satisfying niche markets, it also releases certain non-differentiated products and is gradually becoming entangled in direct competition with other leading brands.

Brand Strategy: Displaying Ambition

Engaging in contract manufacturing helps a company manage costs and regulate production, but is ineffective in stimulating innovation. Separating branded and ODM operations allows Asus to concentrate on brand building and meet competitors head on.

Product Strategy: Superior Products to Stimulate Sales

Asus' products have a good reputation and unlike other companies Asus focuses on R&D and innovation and makes bold use of new technology to draw attract consumer attention. In addition, to counteract the company's image as a frigid motherboard manufacturer Asus has focused on product design and teamed with Lamborghini to produce the VX series, while it has also released a leather model and specialized gaming model, injecting new life into its product line.

Channel Strategy: Continue Developing Existing Motherboard Channels

Asus' position as a leading motherboard manufacturer and its existing distribution channels in Europe and China has allowed it to continue growth in these markets. Asus also focuses on maintenance services and consumer experience and is trying hard to enhance the image of its sales and maintenance operations. Asus keeps products ready to ship and ships quickly to ameliorate friction caused by its payment-before-shipment policy in China.

Appendix

Research Scope

This report analyzes the product strategies, pricing strategies, and distribution systems used by Acer and Asus, as well as their R&D and marketing operations.

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