Notebook PC Industry in Taiwan: Brand Perception and Evaluation of HP

Abstract

This management project is exploratory research to examine the Hewlett-Packard (HP) brand and the Taiwan notebook PC market. HP is one of major players in this market with a brand identity of ‘personalisation, innovation and technology leadership’. This objective of this research is to measure the perception of Taiwan consumers about their brand preferences as well as evaluate the effectiveness of HP’s brand communication.

By setting up focus group interviewing with wholesaler sales representatives and potential consumers, this research developed a structured questionnaire to test and analyse consumers’ attitudes. The self-administrated questionnaire was conducted online, getting 152 valid samples. It surveyed 20 different attributes of notebook products and brand images to discover consumers’ attitudes toward the 4 leading brands in the market- HP, Asus, Acer and Lenovo.

The results of this research indicate that HP was not able to deliver the brand identity with much success and was ranked in a weaker position then Asus and Acer in terms of all attributes expect reliability in the Taiwan notebook market. It also shows that price is not the most important factor for consumers when they choose a notebook.

Instead, much more emphasis is given to quality and function. In chapter 5 of this dissertation, there are some recommendations about HP’s future development based on the survey findings. As low price is no longer the most important factor influencing consumers purchasing behaviour, HP should put much more effort on its brand image to create its competitive advantage and expand market share.

Keywords

Brand Association; Brand Image; Brand Positioning; Brand Preference; Consumer Behaviour; Consumer Perception; Decision Making Process; Hewlett Packard; Loyalty; Marketing Communication

Preface

I worked for Hewlett Packard Taiwan from 2002 to 2006 as a partner business manager. In that period, I acquired a lot of knowledge in channel management, both from HP itself as well as its partners. However, as a sales representative from the original vendor, I felt that sometimes I made decisions just following past experiences and the suggestions and advices of others without sufficient insight into consumers. Therefore, to prepare for my next career plan, I view this research on consumer perceptions and the position of HP in the Taiwanese notebook market as important preparation for my ambition to become a product manager.

In helping me accomplish this management project, I would like to extend my thanks to many people for their confidence in me and for their professionalism. Firstly, I want to thank my supervisor, Dr. Steve Henderson for his patient guidance throughout the course of the research. Without him, it would have been difficult to finish this project. Secondly, I want to say thank you to all the friends who were willing to spare their time in helping me conduct the focus group and questionnaire survey.

Their generous help made my research proceed without too many difficulties. Last but not least, I would like to thank my family, for their love, patience and understanding of my prolonged absence from home while pursuing my academic career. With their full support, I have been able to fully focus on finishing this dissertation.

Introduction

Background

Branding has been discussed for several decades as a way to distinguish the products of one producer from others. In increasingly competitive markets, powerful brands become essential to achieve the sustainable development of business. There are a number of views related to brands that are dominant in the literature and in the way that brands have been approached. Traditionally, brands were seen as symbols, and that was reflected even in the definition of brands expressed by the American Marketing Association (2008).

In other words, brands were mainly regarded as transaction facilitators, far away from the relationship marketing perspective. Brands were also considered as the producer’s property. It was implied that the producer is mostly responsible for the communication of the brand, brand related activities, and brand reputation over the long run (Veloutsou 2008).

Today, brands are compound entities and their expression includes the perception of the product characteristics, personality and values. It is acknowledged that they could be perceived differently by various corporate stakeholders. Accordingly, terms “brand identity” (the intended perception brand developers would like the brand to have) and “brand image/ brand reputation” (how it is perceived by the target audiences) have been developed.

Therefore, brands can be the relationship builders (Veloutsou 2008). Actually relationship marketing for fast moving consumer goods relies to a great extent on brands to help in the development of the consumer-firm relationship (Kapferer 2004a; Selame 1993). According to Selame (1993), the function and predominance of brands in the fast-moving consumer goods market is uncontested. Most marketing executives in such industries would not even think to question the importance of brands.

As well as the fast-moving consumer goods market, the high-tech industry sees a use of branding (Kapferer 2004). As Zajas & Crowley (1995) point out, until the end of the 20th century, the use of brands in marketing high-technology products was minimal. All too often, marketing executives who oversee computers and other high-technology products manage their product lines or marketing mix activities with little consideration for the development of long-term brand recognition. This brings a problem when greater emphasis is given to a product’s features than to the positioning of its brand-name (Zajas & Crowley 1995; Kapferer 2004).

Taiwan’s Notebook Personal Computer Industry

As a result of the increasing transition of consumers from desktop PCs to notebook PCs, Taiwan’s Notebook PC market showed considerable growth in terms of shipment volume. In 2007, 90,165 thousand units were shipped with annual market growth rate reaching 42.1%. MIC (2008) projects that Taiwan’s notebook PC market will maintain double digit growth until 2011.

There is manufacturing competitiveness of Taiwanese notebook personal computer industry during its developing stages of the original equipment manufacturers (OEMs), original design manufacturers (ODMs), and original brand manufacturers (OBMs). A number of trends are affecting the cost of components and materials used to manufacture PCs. The rising cost of oil, China’s newly enacted labour law (which has increased the cost of assembly labour), reduced tax incentives and the appreciation of the Renminbi (RMB) against the U.S. dollar are challenging the PC manufacturing ecosystem’s ability to maintain profit margins. Currently, profits run at about 5%. The top ODMs of notebook PCs have stated that they are unable to absorb the increased costs and plan to pass them on to clients (Tsai 2008).

On 21 May 2008, Simon Lin, chairman of Wistron, told Taiwan’s Digitimes that Wistron would raise contract manufacturing prices. This follows similar statements in recent weeks from Compal and Quanta. Gartner (2008) has confirmed the disclosures with all three companies which controlled more than 69% of worldwide notebook PC production in 2007 (refer to Table 1-1). It is the first time these three have attempted, almost simultaneously, to raise prices, even at the risk of losing orders. However, the group carries some weight, which will likely strengthen their position in negotiations with vendors such as HP and Dell.

Due to challenges to their competitive advantages, Taiwanese hi-tech enterprises have to consider whether to stay in the OEM field or develop their own brand marketing strategies. Some corporations choose to specialise in the OEM such as Hong Hai Precision Industry Co. Ltd. (Foxconn) and Taiwan Semiconductor Manufacturing Company Limited (TSMC). On the other hand, several firms, including Acer, Asus, and BenQ, recognised the importance of their own brands and have switched their investments and endeavours towards high value-added activities such as research and development, product innovation, and brand building (Chen et al 2007).

The goal of all these development strategies is to strengthen competitiveness under the increasing pressure of the changing world environment (Tsai & Hung 2007). “At most Taiwanese companies, profit margins on sales of branded computers are roughly five times higher than on sales of computers and parts to resellers like HP and Dell”, said Jerry Shen, Asustek’s chief executive officer (2008). Taiwanese contract manufacturers such as Micro-Star Internal, Clevo, and Asustek (Asus) have started to market their own notebook PC brands through leveraging their manufacturing strengths, a trend that has increased competition across the industry (Simons 2008).

Based on the information mentioned above, worldwide brands such as HP and Dell are facing keen competition in the notebook PC market, especially in Taiwan. The IDC report, as summarised by Chinatimes (2007), showed that the notebook market share of local brands Asus and Acer accounted for 33 percent and 32 percent respectively, followed by HP with 12 percent and Lenovo with 7 percent in the 2007 third quarter. In 2008Q1 Asus and Acer, gained over 69% of Taiwan’s notebook PC market share, including new product line ‘Ultra Low-Cost PC’ such as Asus’s Eee PC products whereas HP and Lenovo remained in the 3^rdand 4^thplace (Apple news 2008)

Overview of HP

HP is a leading PC manufacturer, with an approximately 5.6% share in the global hardware market in 2006. It is a provider of personal computing and other access devices, imaging and printing related products and services, and enterprise information technology infrastructure, including enterprise storage. It operates its hardware business through three business units: Enterprise Storage and Servers (ESS), Personal Systems Group (PSG) and Imaging and Printing Group (IPG) and services individual consumers, small- and medium-sized businesses and large enterprises, including the public and education sectors (Hewlett-Packard 2008a).

During the three-year period, 2005-2007, its revenues grewat a Compound Annual Growth Rate (CAGR) of 10%, mainly due to increases in sales volume of personal systems in consumer and commercial markets. The PSG segment showed significant top line growth of 24.8% to $36,409m, and accounted for 43.5% of total hardware revenues in the fiscal year 2007. Increased sales volume of notebook PCs, particularly in emerging markets, contributed to higher revenue growth during the year (Business Insights 2008).

HP remained the leader in the notebook PC market for the seventh consecutive quarter, maintaining an almost 2 million-unit lead over second placed Dell. In the seasonally slow first quarter of 2008, HP also managed to increase their market share Q/Q in five of six regions. Dell was less successful in Q1’08, increasing share Q/Q in only two regions. Like HP, third placed Acer posted Q/Q shared gains in five of six regions. HP was market leader in three of six regions, and in the fast-growing APAC market, closed to within a few thousand units of Acer.

From a brand value perspective, The Interbrand’s (2007a) annual ranking of the Best Global Brands, in co-operation with BusinessWeek magazine ranked HP is number twelve of the world’s 100 top brands and number five of the technology brands (Table 1-3). HP has gained 9% in brand value since 2006, following a 10% slide from 2004 to 2005 (Kiley 2007). Kiley (2007) pointed out credit should go to CEO Mark Hurd, who told his subordinates that Hewlett-Packard Co. had to stop building and marketing the PC as if they were a commodity. Designing PCs that consumers actually want was the starting point.

The marketing team then went about pitching HP PCs as a personal reflection of consumers’ desires and needs. Hence the slogan: “The computer is personal again.” was created (Appendix C). Last summer the company rolled out ads showing hip-hop mogul Shawn “Jay-Z” Carter mixing music and planning tours using an HP notebook PC (Interbrand 2007c) and using self-made ads by celebrities such as Serena Williams, Petra Nemcova and Jean-Michel Gondry even though HP did not pay these people for these ads (BusinessToday 2008).

The objective of the campaign was to grow a more profitable worldwide business through the introduction, support, and marketing of innovative products, services, and solutions that will deliver the absolute best customer experience in personal technology. The campaign was targeted at users aged between 18 and 34 and small to medium-sized companies.

Besides, HP delivered images related to innovation and technology leadership via both press and the Internet. The company first employed the innovative imprint technique for notebook PCs, which is a casing design created by advanced moulding techniques that integrate a hard-coat surface using a film transfer process. According to Hewlett-Packard’s (2008b) publicity, not only does the HP Imprint look fabulous, it is also more durable than traditional paint. HP intended to convey the message about personalisation, innovation and technology leadership to communicate with the public. Rising sales and market share show that customers seem to have had a favourable for reaction for HP notebook PCs.

However it is difficult to know how consumers choose between the top four notebook PCs brands, namely Asus, Acer, HP and Lenovo. Consequently, this research aims to take a fresh look at consumer preferences, with a particular focus on HP because it is one of the most successful brands facing particular competition in Taiwan. Of particular interest is to understand how the HP brand image can help to promote it position in the market place, and what influence this has on consumers’ preferences.

Research Purpose

This research examines consumers’ perception and evaluation of the HP brand and makes a comparison with other three major brands in order to get a better understanding of brand strength and preference. There are three objectives in this research to help achieve the overall aim.

Firstly, to understand key research issues by a literature review. The literature search will establish the main issues in this field to set the right direction for the study

Secondly, to find out consumers’ brand preference among the four main players in Taiwan’s notebook PC market by carrying out questionnaire.

Finally, to identify and evaluate consumer perceptions of HP’s existing brand identity and communication methods.

Research Question

This study aims to provide significant data to support the selected topic. As DisplaySearch (2008) analysis indicates the increasing transition of consumers from desktop PCs to notebook PCs is having a direct impact on brands’ growth and market share, and as such the competition in the Taiwan notebook PC market is becoming increasingly intense. HP, one of the most successful and global notebook PC brands, currently operating in over 170 countries (Hewlett-Packard 2008a), needs to expand its market and succeed in Taiwan’s notebook PC market. Brands with established enterprise and retail presences have had the most success in growing market share in the past several quarters.

HP promotes its brand with the slogan “the computer is personal again”, trying to emphasise personalised, advanced technology, together with an image of innovation image in order to gain worldwide market share. However, it seems these efforts are not working in Taiwan as effectively as in other regions. Therefore, HP struggling in the Taiwan market and facing increasingly strong international and local competitors in this market, does the brand identity which demonstrates ‘personalisation, technology leadership and innovation’ really helps HP win the fierce competition in Taiwan market? And how HP can influence consumers’ attitude to improve HP’s competitiveness in Taiwan?

To this end some of the following questions will be part of the survey:

1. What are most important factors when consumers choose notebook brands?
2. How do consumers respond to HP brand identity?
3. What do consumers think about HP brand communication methods?
4. How do consumers position HP compare with three other brands?

Dissertation Outline

The dissertation is structured as follows:

The introduction chapter is the overview of topic, industry status and research case objectives and goes in detail about the research work towards revealing consumer perceptions of brands.

Chapter two is a literature review focusing on theories from concepts in branding discipline, consumer behaviour and marketing communication related to the notebook PC industry.

Chapter three describes research methodology including research philosophy, research approach and strategy, the questionnaire design, and data collection.

The fourth chapter consists of the research findings, where the empirical date is interpreted and discussed.

The final part gives general conclusion as well as recommendations to HP, limitations of this study and directions for future research will also be presented.