Compaq yesterday unveiled its strategy to compete head to head with local brands in the home PC market in Germany by working with local assemblers and buying components on the spot market to produce cheaper machines.
Compaq, which is currently in 10th place in the German consumer PC market, plans to catapult itself into the top five consumer retailers by shifting strategy to shorten product life cycles and lower prices, according to Toon Bouten, Compaq's vice president, consumer products group in Europe and the Middle East.
"We plan to move from number 10 with 2 per cent market share to the number five position within six months," Bouten said.
Central to the new strategy is a partnership between Compaq and assembler Schaeffer-IT-Logistics GmbH, which will purchase components for Compaq and assemble Compaq-branded PCs in its Dresden manufacturing plant.
The first model to be produced by Schaeffer for Compaq is the Presario 5501 Minitower, with a Pentium II 333MHz processor, which will retail for $US1178. The price is 25 per cent below comparable Compaq models that have been offered in Germany and exactly in line with the cheapest models, said Bouten.
"Local brands have 68 per cent of the market in Europe. It's very clear we have to develop local strategies because of the local brands' strength," said Bouten.
In order to compete with the local assemblers and local brands, Compaq is using Schaeffer to assemble the products, which Compaq will then sell in retail stores at the same price as the local brands.
"By using the smaller, more agile operations, which can do spot purchasing, they can pick up components that are being offered at reduced prices. They can be on the spot -- closer to the market itself," a Compaq officials said.
Compaq has had difficulty competing in the German market, said Bouten, because German consumers are extremely cost conscious and are choosing less expensive local products over international brands. Consumers in Germany are interested in very fast machines with a lot of hard-drive capacity, and they are not willing to pay for extras such as built-in modems or on-site services, he said.