Every year the world looks to the largest mobile event on the planet, MWC Barcelona (formerly known as the Mobile World Congress). This event convenes the industry to share innovation, explore trends and hear from today’s leaders and influencers.
It attracts thousands of visitors that expect new and better products year after year. This is the reason I have chosen this topic. I want to talk about leadership, competitiveness, and failure in one of the most competitive sectors in the world.
Do you know Taiwan?
Taiwan is a beautiful island of the size of Belgium located in East Asia and with a population of a little over 23 million. This is also the place where I live.
Do you know Asus, Acer or HTC?
These brands come from Taiwan and not so very long ago occupied the top five spots among the tech world’s most valuable brands. Powerful brands capable to compete with big players like Apple or Samsung.
Unfortunately, these Taiwan’s once-glorious tech brands are a mere shadow of what they once were. Nowadays, Asus and HTC hold a global share of less than 1% and Acer’s market share is around 6%.
This article will analyze four causes of this decline and it will try to prevent other companies to follow the same path offering some useful advices.
1.Market Size Matters
Yukihito Sato is a researcher at the Institute of Developing Economies, a Japanese think tank (a think tank is a body of experts providing advice and ideas on specific political or economic problems). He pointed out a cause that may influence the fall of these leading brands.
According to him, building homegrown brands requires a market of a scale that allows companies to compete and grow.
Other executives working in the tech industry confirm this statement. There’s no will to compete on brand if the supporting market is small.
For sure, the market size matters, but I don’t think it is a definitive factor.
Let’s see the following example:
Taiwan is home to a population of 23.5 million. Far smaller than Japan’s 127 million, and less than half of South Korea.
But Switzerland has a population of less than 10 million inhabitants and is the home of the most well-known brands around the world: Nescafe, Nestle, Rolex, Omega, Lindt, Zurich, Schindler…
2. Building consumer brand preference
At home, Asus and HTC mobile share is around 15%, but it is smaller compared with Chinese competitors Oppo, Huawei Technologies and Xiaomi, which control a combined share topping 18%.
Nowadays Taiwanese consumers prefer Chinese, American and Korean products rather than domestic brands. Local companies have fallen significantly behind in establishing consumer brands.
Why do Taiwanese dislike their local brands?
Surprisingly, it is not the truth.
Interbrand is a global brand consultancy that identifies the most valuable brands around the world. They examine three key aspects that contribute to a brand’s value:
-The financial performance of the branded products or service
-The role the brand plays in influencing consumer choice
-The strength the brand has to command a premium price, or secure earnings for the company
According to Interbrand, Asus is the top 1 brand in Taiwan. In fact, the company has maintained the first spot for six consecutive years. Acer holds the ninth spot and HTC comes in at fourteenth.
More than half of the Best Taiwan Global Brands came from two sectors: Consumer Electronics and Components (27%), and Technology (27%), showcasing that these two industries represent the 54% of the total value in the Top 20 ranking.
It seems that Taiwanese people still love their brands although they are not willing to buy them.
The tech industry turned into a red ocean, and what is the problem with red oceans?
The products become commoditized, no more differentiation of brands, profit margins declined and there is a price war.
The Taiwanese sector was Asia’s pioneer when it comes to brand establishment. These tech companies differentiated themselves by balancing high functionality and sleek designs with affordable price tags.
Unfortunately, the entry of new competitors, especially, the subsidized Korean and Chinese companies, offering really competitive prices affected the market share of these pioneering companies. They simply were pushed out by cheaper Chinese rivals.
4.Contract-Manufacturing business model
The Taiwanese tech sector origins in the contract manufacturing business, OEMs (original equipment manufacturers) and ODMs (original design manufacturers) companies that supply the high demand for quality products of the global industry.
This business model doesn’t help to create original products because it creates a conflict of interest in the consumer market with corporate clients.
At the same time, this contract-manufacturing business is threatened by new entrants like India or Vietnam with lower labor costs and a skilled and well-trained labor force.
In short, there are many causes that affect the life of a company and this article mentioned some of them: the market size, price wars, the importance of the brand value and the need to update the business model.
But, how can companies overcome these challenges?
With a good marketing strategy.
Businesses need to innovate and marketing can help to reduce the risks of innovation and create disruptive products.
Let’s see some ways marketing can help:
1. Identify unknown customer needs.
Marketing can uncover the holes in people’s lives that new products can fill.
Think about the business-model transformation from Walkman to iPod.
Oftentimes, people don’t know they need a new-to-the-world innovation — and sometimes they have been settling for a workaround or poor substitute for so long that they don’t realize an alternative is possible.
2.Understand the drivers of perceptions and behavior that are relevant to a product’s appeal.
For example, one of the main problems of smart glasses or VR headsets is that the design is not appealing. People don’t fancy walking on the street with these big and clunky devices on their heads.
Marketers can help to identify new uses, the most valuable ones and how to match these uses and benefits to the customers.
4.Develop the entire customer experience ecosystem.
Marketing can address the customer experience orientation and ensure a well-developed and well-designed ecosystem around the product.
For example, Kindle offers seamless integration of hardware, software, service, and content.
5.Go-to-market strategy appropriate for the innovation and its customer.
Develop strategies that help get innovative products in front of the right customers at the right time.
Marketing is the bridge between early adopters to the wider group of people who will make a viable customer base.
Unfortunately, good marketing is difficult
Creating a good marketing strategy still seems far from being achieved in most of the companies.
For example, a study by WPP insights agency Kantar found marketers in Asia Pacific are the least confident in the world about integrating data and extracting insights, with one in 10 claiming they are happy with their ability to do so.
60% say gaps in their data prevent them from making more informed decisions.
In other words, Asia Pacific marketers are too focused on short term sales and struggle to integrate customers insights and this situation will not help to create a successful marketing strategy.
Finally, I would like to finish this article giving some hope to the Taiwanese tech industry. The good news is that Acer’s consolidated operating profit has drastically increased from a year earlier.
The stepped into a blue ocean and now the company specialized in gaming computers and it is working!
Well, this is the end of the article. Now, I would like to know your opinion.
Can you provide other reasons
Thanks for sharing your thoughts!
POST WRITTEN BY
A Madrid Polytechnic University International MBA has worked as global marketing director in B2B and B2C international leading companies implementing global marketing and communication strategies to ensure business objectives and to optimize brands reputation and visibility on a global level.