Brand Advantages and Product Differentiation Key in Next-Generation Product Competition
First-tier Vendors Benefit from Brand Advantages
Since the low-price mini notebook PC appeared on the market in the second half of 2007, Asus has had the leading position in the market for more than half a year. However, during this year's Computex and thereafter PC vendors are rushing to roll out their own products. Differences between these products in terms of specifications, external appearance or price are not large. The keys to success in the low-price mini notebook PC market will be brands and prices. Not only are PC vendors aggressively entering this market, relevant component markers are also benefiting from these market developments.
Brand advantages can not only be found in consumer recognition and trust, it also has a significant impact on the ability to acquire key components. According to industry sources, orders for the Intel Atom processor have exceeded expectations, creating tight supply in the initial period after market launch. Major vendors' purchasing power will come into play, and these vendors are less likely to suffer from shortages. The impact on second-tier vendors, however, could be more significant.
Second-tier Vendors' Involvement Stimulates Product Differentiation
High-level executives of nVIDIA helped promote VIA Technologies' new generation of Nano processors, symbolizing a forming alliance between VIA Technologies and nVIDIA. The companies are teaming up to fight against Intel's dominance in low-price mini notebook PC processor specifications, while at the same time also opening up another battleground for second-tier branded vendors. This allows these vendors to not be limited by Intel's specifications, to offer differentiated products and designs, and avoid impact on shipment schedules due to Atom processor shortages.
As the Atom processor comes bundled with a chipset, it is not possible to externally add a graphics chip. Due to this limitation along with several others, it is relatively difficult to create product differentiation when using the Atom processor. Vendors are also restricted by Intel's supply order. For second-tier vendors wanting to compete with first-tier vendors which have key component advantages, using non-Intel processors and developing differentiated products could be a solution.
Striking a Balance between Product Prices and Specifications a Challenge for Vendors
A key factor in the initial enthusiastic response to low-price mini notebook PCs was their low sales price. Furthermore, the minimalist design principle emphasizing only basic functionality also met consumers' main usage demand for PCs.
However, in order to segment products and conduct differentiation, many of the new second wave of low-price mini notebook PCs have enlarged screens and keyboards, added storage equipment and strengthened computing performance, in order to improve product qualities and specifications. But this has also caused prices to increase, exceeding US$500, while the weight of many products also exceeds 1kg. These new products are therefore approaching entry-level models of regular notebook PCs, while they also contradict the minimalist design principle used previously.
For users, the difference between a 10-inch screen and a 12-inch is not that big. Furthermore, 12-inch notebook PCs feature full-size keyboards and complete computing performance. If prices and weight are becoming more similar, it is difficult to convince consumers to buy low-price notebook PCs and not select a regular notebook PC. A key factor will therefore be how vendors strike a balance between price and specifications, and avoid entering the regular notebook PC segment due to excessive strengthening of product specifications. If vendors are unable to create special characteristics for low-price mini notebook PCs, it will be difficult to stay competitive in the market.
First-tier vendors have been using their brand and price advantages to build up a steady presence in the low-price mini notebook PC market. For second-tier vendors, an important matter for consideration is how to avoid direct competition with first-tier vendors in the consumer market and sacrificing profit margins by engaging in price wars. Second-tier vendors can open up new possibilities through cross-industry collaboration, including collaboration with telecom operators. An example could be using methods similar to large-scale procurement and mobile phone subsidies, avoiding price wars which would affect profit, but improving shipment performance.