You are on page 1of 14

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
Group 7 Case Study: BenQ

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 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

Group 7 Case Study: BenQ

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.

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

Group 7 Case Study: BenQ

Proposed Statement of the Problem: How can K.Y. Lee successfully

build BenQ as a brand while sustaining their contract-manufacturing

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.

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

Group 7 Case Study: BenQ

world with its own name if proper branding and marketing strategies were in

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

Key Decision Criteria

In determining the best course of action, the following areas were given

• Time of implementation. OBM business requires a minimum of three years

to grow.

• Cost of implementation. High marketing cost because product is relatively


• 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.


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.

Group 7 Case Study: BenQ

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 • Will create more competitors

experience will make it easy for among the contract
the company to design and manufacturing customers.
develop new products.
• Higher cost of R&D, Marketing
• Loss of focus on core business
• Implementation would take a
longer time
• Increased market penetration, • High cost of investment.
and or creating market niches.
• Focused selling of core business
in the set target market.


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).

Advantage Disadvantage
China is a growing market. • Competitive market in terms of
pricing. “(Price war)”
• Can achieve economies of
scales. Low cost of • Quality of product may
production. sacrifice.
• Potential to increase • Intellectual property may also
revenues. be infringed.
• BenQ’s product association • Threat of cannibalisation with
with Acer will provide ease in Acer products.
its acceptability in the China
• Co-branding can generate • Lack of focus on existing
greater sales from existing brands.
target market and potential
consumers and channels. • Risk on dilution of brand

Group 7 Case Study: BenQ

• Higher cost of investment.


BenQ should separate its brand-building efforts from its contract-

manufacturing operations.

Advantage Disadvantage
• Avoids any conflict of interest • Risk of the OEM business.
between its brand and the OEM

• Assurance to the customers • Higher cost of Marketing and

that they will be prioritized over its Distribution.
own brand.

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.

Action and Implementation:

Group 7 Case Study: BenQ

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.

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

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

Group 7 Case Study: BenQ

External Sources

Plunkett, Jack (2007). Plunkett's Advertising & Branding Industry Almanac

2007: Advertising.

Dan Nystedt, 2006

board-avoid-conflict-880 Acer leaves BenQ board to avoid conflict

Group 7 Case Study: BenQ


Group 7 Case Study: BenQ

In NT$’000

Exhibit 2 BenQ Global Market Share by Products, 2002

Global Market Share (%)

LCD Monitor 8.2
CRT Monitor 4.1
Scanner 10.0
Digital Still Camera 1.0
Projector 3.0
Cell Phone 4.0

Source: BenQ Annual Report 2002

Group 7 Case Study: BenQ


Group 7 Case Study: BenQ

Source: Far Eastern Economic Review

Issue: Dec 25, 2003 – Jan 1, 2004


Ten Most Valua

Sr. No.

1 T
2 14