How the ASUS Company Can Continue To Be an Industry Leader and a Cash Cow - Research Paper Example

Introduction ASUSTEK Computer Inc is a company operating in Computer and Peripheral Equipment industry. The company was incorporated in 1990 in Taipei and is currently headquartered in Taiwan[ASU111]. It is engaged in providing computing, communications and well as 3C solutions for its customers. The products of ASUS include “Laptops, Motherboards, and Personal Computers, broadband products, graphics cards, 3D cards, LCD monitors, telephones, pocket PCs, server systems, computer accessories and peripherals”[ASU10]. The company with its range of products exhibits significant presence on the computing industry. With revenues of over NTD248.2 billion in 2009, ASUS received more than 3000 awards from different rating institutes and agencies. It is the world’s number one brand in countries Asia, US and Europe working with over 300 agents and 20,000 distributors globally. The company aspires to become the most admired brand globally[ASU10]. SWOT Analysis Strengths The primary strength of ASUS is its strong presence in the market. It could be realized from the fact that it is the world’s number one brand in Asia, US and Europe. It has outperformed technology giants like Intel, IBS and Microsoft in many segments. Its strong presence in the market has helped it to aggressively acquire market share compared to many other companies that only have strong presence in their local markets. The company has the largest market share in MB and motherboard segments selling approximately 22 million pieces in FY09. ASUS is one of the rear technology companies that had made operating profits even though global economy was undergoing a recession[ASU10]. Another Strength of ASUS is its advanced and excellent Research & Development capability, efficient and effective supply chain, and mass production at a competitive production cost. These competitive strategies of ASUS have helped it to become a market leader in many products. In 2009, the company came up with first of its kind notebook and motherboard that was compatible with USB 3.0 securing a leading position in the segment[ASU11]. This was a shear display of Research initiatives of the company. With the use of technologies like e-commerce, the company had created an efficient supply chain which helps it with seamless flow of information and products among resources. Mass production done by ASUS helps it achieve economies of scale thereby increasing operating profits of the company. Weakness The primary weakness of the company is that it is investing a lot of amount in restructure activities involving spin-off of certain subsidiaries and disposal of assets. It could be realized from the fact that it spin-off OEM and 2008 and has disposed of several assets since then[ASU10]. In the same year company also recognized impairment charges from such transactions. These activities may be beneficial for the long wrong if executed correctly but they reduce profit making capability of the company. The company should concentrate more on the activities involving expansion and research for innovative technologies. Another Weakness of ASUS is its low market share in emerging economies. To be a cash cow for the future every technology company should be in search for opportunities in the emerging markets as they give the advantage of escalated growth compared to developed markets where growth stagnates after a point of time. It should be noted that ASUS has a low presence in emerging economies e.g. India whilst many other companies like Microsoft and IBM are aggressively gaining market share in these countries. To retain market capitalization ASUS needs to expand its operations aggressively to emerging countries. Opportunities Primary opportunity for ASUS is expanding into markets with the help of joint ventures, tie-up and agreement with other companies. This would give ASUS the advantage of achieving economies of scale and also act as a risk hedging activity while entering new markets. It could be realized from the fact that in 2009, ASUS entered into patent cross license agreement with IBM[ASU11]. ASUS has also partnered with INTEL wherein ASUS is the direct customer of the company. Another opportunity for ASUS is expansion of its products in cloud compound related products and service related to mobile computing and other services. The company being a leading brand in cloud computing should expand its range of products in the segment[ASU10]. This will help the company to serve its customers better thereby gaining more market share. The developed markets of US and Europe and even the emerging markets of India and China pose an opportunity in these segments. Threats Sudden changes in technology pose a major threat to a technology company like ASUS. The industry is driven with innovations, wherein marketers provide value for innovations and a technology becomes outdated in a very short period of time. The companies like Intel, Microsoft, Apple and Google have always resorted to find innovative technologies to sustain the market share. ASUS though has an effective R&D wing continuously striving for innovation, but a new technology from another company can significantly impact the market share of the company. As discussed above, ASUS should look forward towards collaborating to use resources. Another external threat to the company is increased global warming. As the global warming is increasing at an alarming range the governments of many countries are announcing strict regulations related to electronic products and the products that use specific components like lead cadmium. Though ASUS has always tried to global citizen restraining from the usage of harmful components, but certain impositions can have significant impact in the revenues of the company. Conclusion The paper analyzed strengths, weaknesses, opportunities and threats of ASUS thereby analyzing how the company can continue to be an industry leader and a cash cow. Whilst the company should keep working on enhancing its strengths by expanding global presence and investing in research and technologies it would have to re-think about the weaknesses and threats that it is encountering. Expansion in emerging economies of India and China seems to be the most attractive opportunity of the company in short run. The company has generated profits even when many of its counterparts were bleeding as a result of global meltdown. This seems to be a good reason for the investors to invest in the company. References ASU111: , (ASUS Profile, 2011), ASU10: , (ASUSTeK Annual Report, 2010), ASU11: , (ASUSTeK Announcements, 2011), Read More