First, to compare Asus with other brands from the same category products, we tried to draw a perceptual map. The map was drawn based on price comparison and technology/design comparison between brands. We divide the map into 9 clusters and name it based on customer purchasing habit.
1. First cluster is Power Buyer. In this cluster we categorized them as the buyer focus heavily on the computer performance such as gamer and designer.
For example, MSi who produce computer solely for gaming purpose.
2. Fashion Forward Buyer. In this cluster we categorized them as the buyer who likes to buy expensive but more fashionable item.
3. Lux User. Lux user is the user who likes to purchase stylist item no matter what the price is. Belong to this category is Apple Inc. Apple seems to focus more on the appearance but is expensive.
4. Feature Oriented User. This type of user is the buyer who purchase notebook just for some performance purpose (i.e. academic purpose), so
Figure 9. ASUS Perceptual Map
they don’t have the urge to buy fashionable products. According to the data, Dell and Lenovo belong to this category.
5. Balance Buyer. When purchasing a notebook/handphone, this type of user always considers price and performance and design. In example, Samsung and HP.
6. Fashion Integrated Buyer. This type of user always considers trying to buy the best design item but not too pricy. For example, Sony Vaio belong to this category.
7. Price oriented means buyer who buy products solely on based on the price and the performance. Acer belong into this category as Acer strategy only focusing on low-price and the quality keeps dropping.
8. Mass Consumer. This buyer buys the cheapest products but a little trendy.
They focus more on the feature.
9. Affordable Fashion. This kind of buyer wants to buy fashion products but can’t afford to buy expensive item.
Asus positioned itself as the low-price products but recently, the new types of ASUS products started to become pricier as the feature become better. Asus started to focus on innovation (ASUS Design) as they recruited more expertise in that area and collaborate with other company.
As we can see from the above graph, there is a high mobility barrier in the lux cluster, because Apple already absorbed the majority of consumer there as Apple has high switching cost. Therefore it is hard for competitor to enter the cluster. However in the below part of the graph, it shows that there is only small effect of mobility barrier. Asus, Acer, Samsung, Dell, Lenovo, and Hp can freely move to different clusters depend on their strategy.
There is a competition inside each clusters, for example Dell and Lenovo.
However the competition is not significant since they targeted different area market.
Dell targeted US region, while Lenovo majority shares are in China region. It is the same with Samsung and Hp. The real competition we can actually see is Asus and Acer. However, Asus strive to move into different cluster with their latest innovation toward performance and style. Meanwhile, Acer strategy is still focusing on low budget netbook.
Chapter VI
Resources and Capabilities VRIS Analysis
The key elements of Business Strategies are understanding resources, capabilities and competencies of the company. Business Strategies should be selected based on the valuable resources and distinctive competencies (ie. Competitive advantages). Both resources and capabilities must be ensured that they are fully employed and exploited.
However, by exploiting it the company has to make sure that they are not depleting it.
Building and regenerating valuable resources and distinctive competencies is necessary.
Table 3. ASUS Strength and Weakness
Superfluous Strength
bargaining power, and also blocks away current or new competitors.- High Performance Products: ASUS used their own component for the production and ASUS also controlling the suppliers and they also formed with other company to perfecting their product besides that ASUS has a good control for the management of the production because of the headquarters in many country.
- International Expansion: Selling the same products everywhere enables Asus toacquired a local company to enter China market and Asus built its own subsidiary in US, Europe and China to cut lead time. Asus formed a joint venture to acquire technology for developing its products.
- R&D: Strives for product innovation. Asus every years release its new product which is different in uniqueness. They focuses on R&D expenditures and has its own design center focusing on designing its own manufacture products.
Asus collaborated with several company to perfect its own products. Nvidia (3D graphic system), Silicon Image Inc.(system), Disney, Mercedes Benz (marketing).
- After Sales Service: By having many subsidiaries in many countries, Asus are able to give a satisfactory services for their customers. Asus service centers Apple to attract fashion forward buyer or lux user, limiting their market.
- Marketing: Asus puts little effort on marketing to keep the cost of their products low. And they only advertise their products online/
Inconsequential Weakness
- Brand Image: ASUS are often considered a cheap brand by some costumer.
Owning ASUS products did not give a sense of pride to their owners because due to their low price, anyone can own ASUS products.
VRIS ANALYSIS
R&D Competitive Parity Average Returns
After Sales
Service Competitive Parity Average Returns
International
Loyalty Competitive Parity Average Returns
Brand Competitive Parity Average Returns
International
Partnership Competitive Parity Average Returns
Chapter VII Value Chain Analysis
Value Chain Analysis
Value Chain is a set of activities that performed by specific firms in order to produce product and service as well as to deliver it to the market. Value chain analysis is based on perspective of organizations as a system, made up of subsystems each with input, process and output (Porter, 1985). The whole process involves acquisitions and resource consumptions including money, labor, material, equipment, building, land, administration, and management. Those factors and the process itself determine cost and therefore it will affect the company profitability (Porter, 1985).
In Porter’s value chain, there are two categories of activities which are primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and services) and supporting activities (procurement, Human Resource Management (HRM), technology, and infrastructure).
Figure 10. Porter's Value Chain
Asus Value Chain Analysis
1. Support activities Firm Infrastructure
As per 2008, Asus had three independent companies which focused on different strategy but complementing with each other. First one is Asus which focused on applied first-party branded computer and electronics. Second one is Pegatron, an every 4 of the regions. Asus main headquarter (HQ) is based in Taipei, Taiwan, ROC.
Asus first headquarter is also located in Taiwan, which cover Asia-Pacific region (Taiwan, ASEAN, Australia, Africa, Middle East exclude China). Next, the second headquarter located in USA and cover all America continent region. The third headquarter located in Suzhou, China and only cover China region. Last one is located in Germany and cover European region. China regional headquarter main focus is to compete in competitor located in China, namely Lenovo.
Asus has 8 manufacturing facilities, 1 located in Mexico (to cut producing and delivery lead time to its US counterparts), 1 located in Czech Republic (to cover the demand from Europe), 4 in Taiwan (Taipei, Luzhu, Nangan, Guishan) and 2 in China (Suzhou, Chongqing). This strategy is successes in cutting the delivery cost and time.
HRM
Asus has around 20000 employees all over the world, and most of them are assigned in R&D department. Asus has good welfare for its employee. Asus developed Asus Healthcare program and its free for its employees.
Asus put emphasis on Total Quality Management (TQM) on its employee training. Asus training is focusing on combination of quality thinking and design thinking as its value core and lean thinking, innovation and aesthetic as it pillar. Asus 5 virtues (Humility, Integrity, Diligence, Agility and Courage) act as its foundation.
Figure 8. ASUS Healthcare
Figure 12. ASUS DNA
Technology
Asus acquired or joint partnership with several companies to gain knowledge, technology and advantage in producing its products. Before, Asus R&D only focus on how to create laptop with cost as low as possible. However, recently, the concept changed. Asus started to put more focus on its R&D and technology development department. The R&D grew bigger and has play crucial part in Asus development and recent innovation called “Republic of Gamer”. Asus even open its own design centre which is different from the trend of PC industry. Asus recent innovation is different from its competitor, means Asus started to differentiate its product.
Asus is the first company in PC industry to apply green technology on its value chain started from design, manufacturing, procurement and also marketing and services. This process makes Asus different with its competitor. Asus also has big brand portfolio means Asus have the ability to produce a lot of types of products which its competitor do not even have the capability. Asus even create cloud service to compete with ios.
Procurement
Asus has its technology from previous activities as OEM manufacturing firms then developed toward first-party applied PC manufacturing. Several foreign manufacturing facilities get the facility by acquiring other company (for example, Asus acquired Maintek Corp, and turn it into its manufacturing site in China). Asus leave the procurement into SRM department to handle it. Now Asus manufacturing site is developing toward green manufacturing site which is less energy consumption and not damaging the surrounding environment.
2. Primary activities
Inbound Logistic
What makes Asus different from its competitor is Asus main activity in inbound logistic which consists in three parts. First of all, it focuses on vertical integration which Asus can produce its own component that it needs. For example it’s motherboard, Chip, Ram and others. Thus Asus has low dependency toward it supplier (low bargain power of supplier). Asus then depends on its partner (in group supply chain) to provide program and graphic as the exchange of raw material to its partner companies such as Nvidia and Intel. Then the rest of material, Asus purchase it from outside supplier. This system is different with acer and dell (outsourcing) and apple (full vertical integration).
Operation
As per 2008, Asus has capacity to produce around 2 millions of motherboards and 150000 notebooks per month in a single facility. Asus has its own motherboard and component manufacturing site, PC manufacturing site, OEM / ODM site and even non-PC manufacturing site. Due to increasing demand of Asus high quality products, Asus open its R&D and Design Centre. This is main value of this value chain.
Outbound Logistic
Asus has two types of delivery methods. Direct delivery method which covers the delivery of OEM / ODM products to its clients, delivery in Taiwan, delivery over online purchasing in order to reduce lead time. Then the next one is using Asus partner distribution channel as Asus is not strong enough in foreign market, especially US and Europe. This partner also helps Asus to deliver product from its manufacturing site in US and Europe to cut lead time.
Marketing and Sales
Asus is not strong on its promotion as Asus originally only conduct online marketing through its website and partnership. However, the trend changed when Asus promoting its new product “Republic of Gamer”. Asus promote in other category such as games (make games that only compatible with Asus laptop) and hold several game competitions.
Service
Asus has around 200 service provider with the help from its partner or retailer who want to work together with Asus. What makes its different from its competitor is that Asus provide 2 years warranty while on average in IT industry only provide a year warranty. Asus also has online service on its website.
Finally, where is Asus main strength in this value chain analysis? Asus is strong on emphasis its R&D (technology), inbound logistic, manufacturing and assembling but weak in marketing, sales, distribution and services. From its strategy explained above, we conclude that Asus emphasis both cost-advantage and differentiation strategy. Cost advantage is from its vertical integration, in-house SC, manufacturing innovation and technology and location advantage. Differentiation is because of R&D expenses, design focus, product differentiation, quality of products and type of service.
Figure 14. ASUS Cost Advantage or Differentiation?
Chapter VIII BCG Analysis
Motherboard:
Figure 16. Leading Motherboard vendor Figure 15. BCG Analysis
Asus’s motherboard is still dominating the market with market share of around 19% in 2012. Although the market growth is slowing but ASUS’s motherboard can still be considered as the start product. Furthermore since ASUS start as a motherboard company thus they have lots of experience in the motherboard market.
Notebook:
In 2016 ASUS control about 10.7% of market share on the Notebook global notebook sales putting ASUS as the 4th largest notebook manufacturer in the world.
Although the market grow is still quite slow but ASUS has firm position in the market thus ASUS’s notebook can be considered as their cash cow.
PC:
Figure 9. Worldwide Notebook Market
Table 5. Worldwide PC Market
By the year 2015, ASUS is still considered as the fourth largest PC manufacturer in the world with 7.9% of market share, but since the market is slowing for the PC market as evident from their market growth of -3.2%, ASUS’s PC product is considered in “Cash Cow” zone.
Tablet:
Quite similar to their PC product, ASUS still considered as the 4th largest tablet producer but since the growth is -30.6% thus ASUS’s tablet is in for the “Cash Cow”
zone.
Table 6. Worldwide Tablet Market
Smartphone:
As we can see from the pie chart above, ASUS’s smartphone market share is very small that it’s covered, thus ASUS’s smartphone is considered as “dog”
Monitor:
Figure 10. Global Smartphone Market
Figure 19. Worldwide Monitor Market
Chapter IX Vertical Integration
Vertical integration is an arrangement in which the supply chain of a company is
owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need.Backward vertical integration occurs when Asus is involved on producing its own
input, for example motherboard, graphic cards, sound cards, LCD monitors, etc.Forward vertical integration take place when Asus performs its function for
customer (distribution, customer services).Value Chain
- Raw Materials
Asus value chains begin when they procure the raw materials to produce computer hardware. They have a steady supplier supporting them, the 2 main components used to make the hardware are copper and gold. Copper is used to line the printed circuit board (PCB). Copper comes from Australia, where it is mined by the BHP Billion company (BHP Billiton, 2012). The gold which is an excellent conductor of electricity as well as being corrosion resistant and very light is very ideal for circuitry. Asus biggest suppliers of gold is PT Aneka Tambang, which extracts gold from the West Java region in Indonesia (PT ANTAM, 2012).
- Hardware
Asus hardware is acknowledged throughout the world. In the beginning Asus approached Intel to request a processor to test it, Intel itself had a problem with their motherboard. Asus solved Intel's problem and it turned out that Asus' own motherboard worked correctly without the need for further modification. Since then, Asus was receiving Intel engineering samples ahead of its competitors. However, Asus focused on applied first-party branded computers and electronics, while their child company Pegatron focused on OEM manufacturing of motherboards and components.
- Computers & Gadgets
Asus final products which are the PC, laptop, and gadgets are all made by themselves.
No outsourcing or rebranding. However they do have some alliances to help them manufacture several delicate hardware such as Nvidia, Intel, AMD, T-mobile, etc.
This is where the backwards vertical integration happens in Asus.
- Software Integration
As we all know computers and gadgets needs software and operating system to operate. Asus then depends on its partner (in group supply chain) to provide software and graphic programs as the exchange of raw material to its partner companies such as Nvidia and Intel.
- Distribution & Services
Asus has around 200 service provider with the help from its partner or retailer who want to work together with Asus. What makes its different from its competitor is that Asus provide 2 years warranty while on average in IT industry only provide a year warranty. Asus also has online service on its website.
Why Asus uses Vertical Integration:
- More control in the value chain
As a large complex manufacturing company, Asus has to produce many parts so it may not be possible for the manufacturer to make all the various parts in-house. But when they depend on contractors, should a part fail in its function, the manufacturer cannot point a finger at the supplier and absolve itself from blame.
- Cost control throughout distribution
In the traditional distribution process, every step in product movement involves mark-ups so the reseller can earn profit. By selling directly to end buyers,
Asus increases their advantages over competition and block competitors from gaining access to resources and important markets. For example, the company Dell being unable to produce their own Hardware chooses to outsource them from Asus. This gives Asus cost advantage against Dell.
Diversification Strategy
Diversification strategy is the strategy that used by one company to expand the
market venture by open several business units or new subsidiary in the same business that already exist. Diversified can be a good option for the company when the company facing a tight competition in the market.Related diversification strategy is a process that takes place when a business
expands its activities into product lines that are similar to those it currently offers.This strategy used by one company to produce the similar product but the company adding some new technology and how the company markets their product is still the same.
Unrelated diversification strategy is the strategy used by one company to produce
the new product and used another technology. The unrelated diversification strategy is still using produce their product under the company name but with different product and also how the company markets their product is not the same.ASUS Related Diversification
The main product of ASUS is the Laptop or computer; in this case ASUS used the related diversification strategy to produce the new product. ASUS Company formed with NVIDIA to perfecting their computer. ASUS Company has been considered as the Laptop producer by many people but if only producing computer, there is also so many competitor in producing the laptop or computer. In make their product work better with the other competitor, ASUS Company formed with NVIDIA to perfecting their product but still with lowest cost because their produce the motherboard by them self and also ASUS acquired Maintek Computers in order to enter China market.
ASUS Unrelated Diversification
To compete with other competitors with only producing the laptop is not enough;
ASUS tend to produce another product such as ZenPhone and Tablet but still using the ASUS brand. In this case, unrelated Diversification has some risk, which is the decreasing of the sales and profit. ASUS unrelated diversification is not work very well in this company because most of the people know that ASUS computer is a good quality computer with the lowest cost but not with their other product.
Asus Inspiring Innovation and persistent Perfection has already success got the
market around the world and customers also enjoyed variety product produced by ASUS. ASUS has develop the Related diversification strategy and also unrelated diversification strategy by producing the Laptop until they make another product such as smartphone and tablet with they own brand. Some companies have to make the new product to attract the customers. In this case ASUS company doing well in the related diversification strategy because ASUS formed with other company to perfecting their product and also ASUS acquired Maintek Computers in order to enter
market around the world and customers also enjoyed variety product produced by ASUS. ASUS has develop the Related diversification strategy and also unrelated diversification strategy by producing the Laptop until they make another product such as smartphone and tablet with they own brand. Some companies have to make the new product to attract the customers. In this case ASUS company doing well in the related diversification strategy because ASUS formed with other company to perfecting their product and also ASUS acquired Maintek Computers in order to enter