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Group 7 Case Study: BenQ
Company and Product Background
In 2001, Acer Computers spun off its contract manufacturing subsidiary, Acer
Communications & Multimedia to provide a separate branded channel with Acer retaining
only 20% stake. As a contract manufacturer company, Acer CM manufactures components
and peripherals to some of the world’s leading providers of consumer electronics and
communications companies including Philips, Motorola, and its own parent company, Acer
Computers.
In 2002, the company decided to adopt a new corporate and brand name, BenQ, an acronym
suggested by the company’s new slogan: “Bringing Enjoyment aNd Quality to Life”. Initially,
a label “Inspired by Acer” was carried along with the BenQ Corporation to help customers
distinguish between the brands. BenQ sells and markets digital life devices such as mobile
phones, LCD and CRT monitors, digital projectors, plasma displays, optical storage, and
imaging products. By end of 2002, it had achieved annual sales of NT93.2 billion (US$3
billion), a third of which came from own-brand sales (Exhibit 1), while about 70% of 2002
revenue came from its contract manufacturing business. BenQ’s current business services
(Exhibit 2) include manufacturing, R&D, and the sale of computer peripherals,
communications and consumer electronics products. In addition, BenQ provides consulting
and technical services.
The pan Acer groups’ decision to launch BenQ as a separate brand aims to enhance the
visibility of the Acer brand and generally, to create a stronger overall brand image to
impress potential customers. Acer and BenQ wield individual brand personalities in their
own markets. Acer repositioned its brand as an e-Enabler through its IT products and Mega
Mirco services to break the barriers between people and technology. The brand leans
towards the corporate market. On the other hand, the BenQ brand focuses on cross-media
digital devices and leans toward individual consumers. BenQ brands are characterized by its
capability to couple technology with enjoyment and fun to the user. BenQ focus on
individual consumers enables it companies to become the number brand in term of
“innovativeness in responding to customer needs” for the years 2002 and 2003 (Exhibit 3)
and was number 4 in the 2005 survey of Top Ten Most Valuable Taiwanese Brand (Exhibit
4).
The establishment of BenQ as a separate brand offers several challenges for the company.
By supporting its brand building business with contract manufacturing business, BenQ is
Group 7 Case Study: BenQ
risking incurring the ire of its contract manufacturing customers as they may view the
company as a competitor in their own market. BenQ’s own cell phone brand competes with
Motorola, sales to which account for about a fifth of BenQ’s 2002 total sales. BenQ is also
competing with Acer in the notebook computer business through its Joybook, BenQ’s first
notebook computer. Acer on the other hand, announced its re-entry into the domestic LCD
projector market, competing directly with BenQ in that market category. While BenQ have
successfully established its company as a contract manufacturer, its brand building business
still depends on Acer’s continued support for BenQ.
Executive Summary
This paper proceeds through an examination and discussion of strategies adopted by BenQ
when establishing brand names.
BenQ have decided to leverage their most valuable asset by introducing a host of new
products under their strongest brand names, Acer brand. They position the two brands as
with different representation as Acer: Technology and service while BenQ: Technology and
enjoyment. But in recent years, Acer spun off the contract manufacturing of BenQ due to
conflicts and competition issues.
BenQ’ is very eager to create its own brand strategy even at the inception years of the brand
by conducting its own survey, positioning its brand to Asia Pacific and Greater China. The
company also took advantage on China’s low production cost and concentrate on marketing
as much as it is on engineering and pricing. Central to BenQ’s success is China, which aims to
become leading player in certain areas. BenQ’s partnership with Acers also benefits the
company by witnessing some of Acer’s weaknesses.
BenQ also strengthen its Research and Development in new products by increasing its R&D
expenses. BenQ is also developing high-quality niche products that add more value to the
company. BenQ also recognizes the need for aggressive channel management to capitalize
on opportunities in China and Asia Pacific.
BenQ’s Strategy, From Taiwan to China, because by in the biggest market, you can achieve
economies of scales and it can bring down prices, and be very price competitive in the
market.
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Group 7 Case Study: BenQ
One of the major problems of BenQ is its dilemma on whether they will keep the business as
contract manufacturing or building its own brand names related to their ODM customers
and become their own competitors (Case of Acer with BenQ).
Another major problem of BenQ is the risks of building and acquiring new major brands that
might not add value to the company (Eagerness to expand brand recognition).
Discussed in detail are the recommended plans of action for the dilemma of BenQ are: 1.)
Development of product lines 2.) Build up solid marketing and distribution strategy 3.) To
spin-off contract manufacturing business.
For risks of building and acquiring brands, BenQ should be selective and practical in
choosing the new brands and continuously improve R&D and much in depth analysis on the
market they wanted to penetrate.
We conclude the paper with implications for further research for those companies who may
be looking into transitioning from being engineering and manufacturing specialists/
Original Design Manufacturing (ODM) to name brand owners.
Problem statement
Proposed Statement of the Problem: How can K.Y. Lee successfully build BenQ as a
brand while sustaining their contract-manufacturing partners?
Current: How can K.Y. Lee successfully build BenQ as a brand name?
As K.Y. Lee ventures into building BenQ as a brand there is a threat of losing its contract-
manufacturing partners:
BenQ directly competes with their contract-manufacturing customers.
Fear of contract-manufacturing customers on the issue of having the “Conflict of
Interest”- sharing of proprietary information regarding their product design and
specifications, which BenQ can use to its advantage.
BenQ clients discontinued its outsourcing business with them which also affected ACER.
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Group 7 Case Study: BenQ
Causes of the Problem
With China entering the WTO, more and more customers began to shift their production in
China. The low production cost couple with relaxed tariffs on most consumer electronic
products made China a favourable manufacturing destination over Taiwan. Moreover, the
branded electronic firms in China were emerging as a major competition for the Taiwanese
contract manufacturers. They manufactured most of their products in-house instead of
outsourcing and were building up their business. As the margin from the contract
manufacturing business began to shrink in Taiwan, profits for the contract manufacturers
are falling drastically. At the same time, as the number of contract manufacturers in Taiwan
increased, competition intensified, making the contract manufacturing business less
favourable.
To face cutthroat competition from global brands and OEM customers reducing margins,
BenQ needs to shed its product anonymity and successfully establish its brand as a provider
of fun and innovative solutions to customers. BenQ has full of potential to bring its quality
products to the world with its own name if proper branding and marketing strategies were
in place.
The existence of the BenQ brand provides threat of revenue losses from contract
manufacturing clients as they view the brand as a competitor in their own market.
Contract manufacturers want to increase profitability by leveraging on their manufacturing
capability and to gain access to the market directly. On the other, contract manufacturers
must maintain good relations with their major buyers.
Key Decision Criteria
In determining the best course of action, the following areas were given consideration:
Time of implementation. OBM business requires a minimum of three years to grow.
Cost of implementation. High marketing cost because product is relatively unknown.
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Group 7 Case Study: BenQ
Competition - Sony and Canon in the digital camera market; Nokia, Samsung and
Motorola in the mobile phones market; and Dell and Hewlett-Packard in the PC industry.
Manpower and technology resources availability.
Maintaining profitability and customer satisfaction.
ALTERNATIVE 1
To make up for the possible losses on the unstable OEM business, BenQ should develop its
product lines through:
1.) Building up new products that are still on the development stage of the product life
cycle.
2.) Targeting geographic markets at the growing stage of the product life cycle.
(Acquisition of global brands to increase market penetration).
Advantage Disadvantage
BenQ’s extensive R&D experience will make it easy for the company to design and develop new products.
Will create more competitors among the contract manufacturing customers.
Higher cost of R&D, Marketing Distribution
Loss of focus on core business
Implementation would take a longer time
Increased market penetration, and or creating market niches.
Focused selling of core business in the set target market.
High cost of investment.
ALTERNATIVE 2
BenQ should develop a solid marketing and distribution strategy.
Further develop China market.
Target new sets of customers, and develop alliances with other major technology
companies. (Co-branding efforts).
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Group 7 Case Study: BenQ
Advantage Disadvantage
China is a growing market.
Can achieve economies of scales. Low cost of production.
Potential to increase revenues.
Competitive market in terms of pricing. “(Price war)”
Quality of product may sacrifice.
Intellectual property may also be infringed.
BenQ’s product association with Acer will provide ease in its acceptability in the China market
Threat of cannibalisation with Acer products.
Co-branding can generate greater sales from existing target market and potential consumers and channels.
Lack of focus on existing brands.
Risk on dilution of brand equity.
Higher cost of investment.
ALTERNATIVE 3
BenQ should separate its brand-building efforts from its contract-manufacturing operations.
Advantage Disadvantage
Avoids any conflict of interest between its brand and the OEM business.
Risk of the OEM business.
Assurance to the customers that they will be prioritized over its own brand.
Higher cost of Marketing and Distribution.
Recommendations and Justifications
Alternative 3. BenQ should separate its brand-building efforts from its contract-
manufacturing operations.
Eliminating head-on competition with the contract manufacturing customers including Acer.
Conflict of Interest is perceived to be eliminated.
Contract manufacturers will be retained.
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Group 7 Case Study: BenQ
Action and Implementation:
Building strong and sustainable brands requires developing a well-conceived brand strategy.
To be successful, all aspects of the brand strategy must deliver a consistent message that is in
tune with the overall goals of the business.
Step1: Analyze competition and environment to identify branding opportunities
Analyzing competition involves mapping the competitors’ brand culture as done in Step 2.
This step must be carried out because achieving competitive superiority in brand value
requires benchmarking against competitors’ brands. Carrying out mapping of competitors’
brand culture will enable a marketer to improve the firm’s brand culture over those of its key
competitors, and at the same time, identify and work on any possible weak-points that may
enable the competitors to make inroads into the future.
The other, and perhaps the more important aspect to be taken into consideration while
branding is the shift in environment. Identifying opportunities in the environment –
consumers, technology, infrastructure, etc. – that competitors have failed to identify or react
to, is the way to create the most significant brand value.
Step 4: Design the strategy
The final step involves creating a blueprint of the path that a firm should take to make a
transition to the desired brand culture. This design must chart out the firm’s existing brand
culture, outline the opportunities identified in Step 3 and then, finally detail the desired brand
culture (Exhibit II).
The brand strategy should specify which marketing mix elements will be used and how they
will be integrated into the overall plan to produce a consistent branding effort. This part of the
brand strategy deals with implementation or engineering the desired brand culture across all
the relevant aspects of a marketing mix and allocation of the requisite resources for achieving
the desired end.
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Group 7 Case Study: BenQ
Once a brand strategy has been created and implemented, it must be evaluated to assess
whether it is working or not. Brand managers can use any one or a combination of the
following to evaluate the effectiveness of their branding effort:
Behaviours: Behavioural loyalty is one way of measuring the strength of a brand. That is,
all other factors being constant, when a brand’s value increases, a customer will purchase
the brand more frequently and will be less likely to switch over to other brands.
Attitudes: This measurement recognises the fact that strong brands share certain consumer
attitudes. For instance, the brand may be associated with influential users. Traditional market
research and informal feedback methods like websites can be used to gather information and
identify attitudinal measures – to make comparisons and deduce attitudinal strength.
Relationships: Another measure is determining the relationship strength. This works on the
principle that when brand value is high, customers will depend more heavily on the brand,
and hence develop a deeper relationship with it.
Equity: This is the ultimate or the most widely used technique of measuring the brand value.
Among several techniques for measuring brand equity, a common one is to determine the
selling price of the brand in the current market.3
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Group 7 Case Study: BenQ
External Sources
Plunkett, Jack (2007). Plunkett's Advertising & Branding Industry Almanac 2007:
Advertising.
Dan Nystedt, 2006 http://www.infoworld.com/t/hardware/acer-leaves-benq-board-avoid-
conflict-880 Acer leaves BenQ board to avoid conflict
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Group 7 Case Study: BenQ
EXHIBIT 1. BENQ’S OPERATING REVENUES, 2002
In NT$’000
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Group 7 Case Study: BenQ
Exhibit 2 BenQ Global Market Share by Products, 2002
Global Market Share (%)
LCD Monitor 8.2CRT Monitor 4.1Scanner 10.0Digital Still Camera 1.0CRD-ROM 8.0Projector 3.0Cell Phone 4.0
Source: BenQ Annual Report 2002
EXHIBIT 3. 2003 ATTRIBUTE RANKING
11
Ten Most Valuable Taiwanese Brands, 2005
Sr. No. Company
1 Trend Micro2 Asus3 Acer4 BenQ5 Synnex6 ZyXel7 D-Link8 Master Kong instant noodles9 Maxxis tires
10 Giant bicycles
Source: Norris, Graham "Manufacturers under pressure to create famous brand names
http://www.taiwan.com.au,
November 11, 2005
Group 7 Case Study: BenQ
Source: Far Eastern Economic Review
Issue: Dec 25, 2003 – Jan 1, 2004
EXHIBIT 4. TEN MOST VALUABLE TAIWANESE BRANDS, 2005
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Group 7 Case Study: BenQ
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