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Consumer Perception and Evaluation of Hewlett-Packard

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Published: Wed, 07 Mar 2018

The Notebook PC Industry in Taiwan: An Examination Of Consumer Perception and Evaluation of Hewlett-Packard

Abstract

This management project is exploratory research to examine the Hewlett-Packard (HP) brand and the Taiwan notebook PC market. HP is one of major players in this market with a brand identity of ‘personalisation, innovation and technology leadership’. This objective of this research is to measure the perception of Taiwan consumers about their brand preferences as well as evaluate the effectiveness of HP’s brand communication.

By setting up focus group interviewing with wholesaler sales representatives and potential consumers, this research developed a structured questionnaire to test and analyse consumers’ attitudes. The self-administrated questionnaire was conducted online, getting 152 valid samples. It surveyed 20 different attributes of notebook products and brand images to discover consumers’ attitudes toward the 4 leading brands in the market- HP, Asus, Acer and Lenovo.

The results of this research indicate that HP was not able to deliver the brand identity with much success and was ranked in a weaker position then Asus and Acer in terms of all attributes expect reliability in the Taiwan notebook market. It also shows that price is not the most important factor for consumers when they choose a notebook.

Instead, much more emphasis is given to quality and function. In chapter 5 of this dissertation, there are some recommendations about HP’s future development based on the survey findings. As low price is no longer the most important factor influencing consumers purchasing behaviour, HP should put much more effort on its brand image to create its competitive advantage and expand market share.

Keywords

Brand Association; Brand Image; Brand Positioning; Brand Preference; Consumer Behaviour; Consumer Perception; Decision Making Process; Hewlett Packard; Loyalty; Marketing Communication

Preface

I worked for Hewlett Packard Taiwan from 2002 to 2006 as a partner business manager. In that period, I acquired a lot of knowledge in channel management, both from HP itself as well as its partners. However, as a sales representative from the original vendor, I felt that sometimes I made decisions just following past experiences and the suggestions and advices of others without sufficient insight into consumers. Therefore, to prepare for my next career plan, I view this research on consumer perceptions and the position of HP in the Taiwanese notebook market as important preparation for my ambition to become a product manager.

In helping me accomplish this management project, I would like to extend my thanks to many people for their confidence in me and for their professionalism. Firstly, I want to thank my supervisor, Dr. Steve Henderson for his patient guidance throughout the course of the research. Without him, it would have been difficult to finish this project. Secondly, I want to say thank you to all the friends who were willing to spare their time in helping me conduct the focus group and questionnaire survey.

Their generous help made my research proceed without too many difficulties. Last but not least, I would like to thank my family, for their love, patience and understanding of my prolonged absence from home while pursuing my academic career. With their full support, I have been able to fully focus on finishing this dissertation.

Introduction

Background

Overview

Branding has been discussed for several decades as a way to distinguish the products of one producer from others. In increasingly competitive markets, powerful brands become essential to achieve the sustainable development of business. There are a number of views related to brands that are dominant in the literature and in the way that brands have been approached. Traditionally, brands were seen as symbols, and that was reflected even in the definition of brands expressed by the American Marketing Association (2008).

In other words, brands were mainly regarded as transaction facilitators, far away from the relationship marketing perspective. Brands were also considered as the producer’s property. It was implied that the producer is mostly responsible for the communication of the brand, brand related activities, and brand reputation over the long run (Veloutsou 2008).

Today, brands are compound entities and their expression includes the perception of the product characteristics, personality and values. It is acknowledged that they could be perceived differently by various corporate stakeholders. Accordingly, terms “brand identity” (the intended perception brand developers would like the brand to have) and “brand image/ brand reputation” (how it is perceived by the target audiences) have been developed.

Therefore, brands can be the relationship builders (Veloutsou 2008). Actually relationship marketing for fast moving consumer goods relies to a great extent on brands to help in the development of the consumer-firm relationship (Kapferer 2004a; Selame 1993). According to Selame (1993), the function and predominance of brands in the fast-moving consumer goods market is uncontested. Most marketing executives in such industries would not even think to question the importance of brands.

As well as the fast-moving consumer goods market, the high-tech industry sees a use of branding (Kapferer 2004). As Zajas & Crowley (1995) point out, until the end of the 20th century, the use of brands in marketing high-technology products was minimal. All too often, marketing executives who oversee computers and other high-technology products manage their product lines or marketing mix activities with little consideration for the development of long-term brand recognition. This brings a problem when greater emphasis is given to a product’s features than to the positioning of its brand-name (Zajas & Crowley 1995; Kapferer 2004).

Taiwan’s Notebook Personal Computer Industry

As a result of the increasing transition of consumers from desktop PCs to notebook PCs, Taiwan’s Notebook PC market showed considerable growth in terms of shipment volume. In 2007, 90,165 thousand units were shipped with annual market growth rate reaching 42.1%. MIC (2008) projects that Taiwan’s notebook PC market will maintain double digit growth until 2011.

There is manufacturing competitiveness of Taiwanese notebook personal computer industry during its developing stages of the original equipment manufacturers (OEMs), original design manufacturers (ODMs), and original brand manufacturers (OBMs). A number of trends are affecting the cost of components and materials used to manufacture PCs. The rising cost of oil, China’s newly enacted labour law (which has increased the cost of assembly labour), reduced tax incentives and the appreciation of the Renminbi (RMB) against the U.S. dollar are challenging the PC manufacturing ecosystem’s ability to maintain profit margins. Currently, profits run at about 5%. The top ODMs of notebook PCs have stated that they are unable to absorb the increased costs and plan to pass them on to clients (Tsai 2008).

On 21 May 2008, Simon Lin, chairman of Wistron, told Taiwan’s Digitimes that Wistron would raise contract manufacturing prices. This follows similar statements in recent weeks from Compal and Quanta. Gartner (2008) has confirmed the disclosures with all three companies which controlled more than 69% of worldwide notebook PC production in 2007 (refer to Table 1-1). It is the first time these three have attempted, almost simultaneously, to raise prices, even at the risk of losing orders. However, the group carries some weight, which will likely strengthen their position in negotiations with vendors such as HP and Dell.

Due to challenges to their competitive advantages, Taiwanese hi-tech enterprises have to consider whether to stay in the OEM field or develop their own brand marketing strategies. Some corporations choose to specialise in the OEM such as Hong Hai Precision Industry Co. Ltd. (Foxconn) and Taiwan Semiconductor Manufacturing Company Limited (TSMC). On the other hand, several firms, including Acer, Asus, and BenQ, recognised the importance of their own brands and have switched their investments and endeavours towards high value-added activities such as research and development, product innovation, and brand building (Chen et al 2007).

The goal of all these development strategies is to strengthen competitiveness under the increasing pressure of the changing world environment (Tsai & Hung 2007). “At most Taiwanese companies, profit margins on sales of branded computers are roughly five times higher than on sales of computers and parts to resellers like HP and Dell”, said Jerry Shen, Asustek’s chief executive officer (2008). Taiwanese contract manufacturers such as Micro-Star Internal, Clevo, and Asustek (Asus) have started to market their own notebook PC brands through leveraging their manufacturing strengths, a trend that has increased competition across the industry (Simons 2008).

Based on the information mentioned above, worldwide brands such as HP and Dell are facing keen competition in the notebook PC market, especially in Taiwan. The IDC report, as summarised by Chinatimes (2007), showed that the notebook market share of local brands Asus and Acer accounted for 33 percent and 32 percent respectively, followed by HP with 12 percent and Lenovo with 7 percent in the 2007 third quarter. In 2008Q1 Asus and Acer, gained over 69% of Taiwan’s notebook PC market share, including new product line ‘Ultra Low-Cost PC’ such as Asus’s Eee PC products whereas HP and Lenovo remained in the 3rdand 4thplace (Apple news 2008)

Overview of HP

HP is a leading PC manufacturer, with an approximately 5.6% share in the global hardware market in 2006. It is a provider of personal computing and other access devices, imaging and printing related products and services, and enterprise information technology infrastructure, including enterprise storage. It operates its hardware business through three business units: Enterprise Storage and Servers (ESS), Personal Systems Group (PSG) and Imaging and Printing Group (IPG) and services individual consumers, small- and medium-sized businesses and large enterprises, including the public and education sectors (Hewlett-Packard 2008a).

During the three-year period, 2005-2007, its revenues grewat a Compound Annual Growth Rate (CAGR) of 10%, mainly due to increases in sales volume of personal systems in consumer and commercial markets. The PSG segment showed significant top line growth of 24.8% to $36,409m, and accounted for 43.5% of total hardware revenues in the fiscal year 2007. Increased sales volume of notebook PCs, particularly in emerging markets, contributed to higher revenue growth during the year (Business Insights 2008).

HP remained the leader in the notebook PC market for the seventh consecutive quarter, maintaining an almost 2 million-unit lead over second placed Dell. In the seasonally slow first quarter of 2008, HP also managed to increase their market share Q/Q in five of six regions. Dell was less successful in Q1’08, increasing share Q/Q in only two regions. Like HP, third placed Acer posted Q/Q shared gains in five of six regions. HP was market leader in three of six regions, and in the fast-growing APAC market, closed to within a few thousand units of Acer.

From a brand value perspective, The Interbrand’s (2007a) annual ranking of the Best Global Brands, in co-operation with BusinessWeek magazine ranked HP is number twelve of the world’s 100 top brands and number five of the technology brands (Table 1-3). HP has gained 9% in brand value since 2006, following a 10% slide from 2004 to 2005 (Kiley 2007). Kiley (2007) pointed out credit should go to CEO Mark Hurd, who told his subordinates that Hewlett-Packard Co. had to stop building and marketing the PC as if they were a commodity. Designing PCs that consumers actually want was the starting point.

The marketing team then went about pitching HP PCs as a personal reflection of consumers’ desires and needs. Hence the slogan: “The computer is personal again.” was created (Appendix C). Last summer the company rolled out ads showing hip-hop mogul Shawn “Jay-Z” Carter mixing music and planning tours using an HP notebook PC (Interbrand 2007c) and using self-made ads by celebrities such as Serena Williams, Petra Nemcova and Jean-Michel Gondry even though HP did not pay these people for these ads (BusinessToday 2008).

The objective of the campaign was to grow a more profitable worldwide business through the introduction, support, and marketing of innovative products, services, and solutions that will deliver the absolute best customer experience in personal technology. The campaign was targeted at users aged between 18 and 34 and small to medium-sized companies.

Besides, HP delivered images related to innovation and technology leadership via both press and the Internet. The company first employed the innovative imprint technique for notebook PCs, which is a casing design created by advanced moulding techniques that integrate a hard-coat surface using a film transfer process. According to Hewlett-Packard’s (2008b) publicity, not only does the HP Imprint look fabulous, it is also more durable than traditional paint. HP intended to convey the message about personalisation, innovation and technology leadership to communicate with the public. Rising sales and market share show that customers seem to have had a favourable for reaction for HP notebook PCs.

However it is difficult to know how consumers choose between the top four notebook PCs brands, namely Asus, Acer, HP and Lenovo. Consequently, this research aims to take a fresh look at consumer preferences, with a particular focus on HP because it is one of the most successful brands facing particular competition in Taiwan. Of particular interest is to understand how the HP brand image can help to promote it position in the market place, and what influence this has on consumers’ preferences.

Research Purpose

This research examines consumers’ perception and evaluation of the HP brand and makes a comparison with other three major brands in order to get a better understanding of brand strength and preference. There are three objectives in this research to help achieve the overall aim.

Firstly, to understand key research issues by a literature review. The literature search will establish the main issues in this field to set the right direction for the study

Secondly, to find out consumers’ brand preference among the four main players in Taiwan’s notebook PC market by carrying out questionnaire.

Finally, to identify and evaluate consumer perceptions of HP’s existing brand identity and communication methods.

Research Question

This study aims to provide significant data to support the selected topic. As DisplaySearch (2008) analysis indicates the increasing transition of consumers from desktop PCs to notebook PCs is having a direct impact on brands’ growth and market share, and as such the competition in the Taiwan notebook PC market is becoming increasingly intense. HP, one of the most successful and global notebook PC brands, currently operating in over 170 countries (Hewlett-Packard 2008a), needs to expand its market and succeed in Taiwan’s notebook PC market. Brands with established enterprise and retail presences have had the most success in growing market share in the past several quarters.

HP promotes its brand with the slogan “the computer is personal again”, trying to emphasise personalised, advanced technology, together with an image of innovation image in order to gain worldwide market share. However, it seems these efforts are not working in Taiwan as effectively as in other regions. Therefore, HP struggling in the Taiwan market and facing increasingly strong international and local competitors in this market, does the brand identity which demonstrates ‘personalisation, technology leadership and innovation’ really helps HP win the fierce competition in Taiwan market? And how HP can influence consumers’ attitude to improve HP’s competitiveness in Taiwan?

To this end some of the following questions will be part of the survey:

  1. What are most important factors when consumers choose notebook brands?
  2. How do consumers respond to HP brand identity?
  3. What do consumers think about HP brand communication methods?
  4. How do consumers position HP compare with three other brands?

Dissertation Outline

The dissertation is structured as follows. The introduction chapter is the overview of topic, industry status and research case objectives and goes in detail about the research work towards revealing consumer perceptions of brands. Chapter two is a literature review focusing on theories from concepts in branding discipline, consumer behaviour and marketing communication related to the notebook PC industry. Chapter three describes research methodology including research philosophy, research approach and strategy, the questionnaire design, and data collection. The fourth chapter consists of the research findings, where the empirical date is interpreted and discussed. The final part gives general conclusion as well as recommendations to HP, limitations of this study and directions for future research will also be presented.

Literature Review

Consumer Behaviour

Consumer Behaviour Definition

Arnould et al (2005) define consumer behaviour as the psychological and social processes that individuals or groups undergo in the acquisition, use and disposal of products (for example, notebook PCs), services (for example, professional software installation), ideas (for example, spiritual beliefs) or experiences (for example, travelling) and suggest that concept of the circle of consumption results in the marketing opportunities (see Figure 2-1).

Understanding acquisition is very important to marketers and requires an understanding of the other phases where these links influence consumer beliefs, value and attitudes (Arnould et al 2005). Consumer behaviour is examined from market perspective that focuses on a particular brand and how to induce people to buy that brand whereas other academic researchers study consumer behaviour from behavioural and social sciences perspectives that emphasise an understanding and explanation of why, what and how people buy (Bagozzi et al 2002).

Moreover, consumer behaviour is a division of human behaviour (Bagozzi 2002). Human behaviour refers to the process in which the individual interacts with his/her environment. This perspective tends to emphasise consumer behaviours and practices that help to organise our understanding of phenomena such as consumption rituals, myths and symbols as well as contribute a concern with the meaning and significance of consumption. Walters (1974) suggests that consumer behaviour concerns specific types of human actions that have a direct relation to the purchase of goods and services from organisations.

The Use of High Technology

It is necessary to know how people use high technology and what they intend to use it for by reflecting on the development of the high technology industry (Hamann et al 2007). Inventions such as the motor car provided products and were created to satisfy the real needs of people during the industrial age (Tomkins 2005). However, as life becomes busier and more stressful, people are forced to adapt the newest features offered by high technology continuously in all areas of their lives, even though they might not fully understood what it can do to help them (Kallaman & Grillo 1996).

This adaptation process is based on the evaluation of meaningful attributes that support a consumer’s beliefs, resulting shifts in a consumer’s frame of reference and evaluation criteria derived from the constantly changing environment, which makes it impossible to define a general pattern of purchasing behaviour (Hill 2003; Jiang 2004). Nowadays consumers expect convenience, quality and service in a product which is made available at anytime and at any place (Yelkur 2000; Winkler 1999; Silverhart 2004). Furthermore, people may adopt high-technology in order to remain in a particular social group or to join one they want to belong to (Kim et al 2001; Haughey 2004).

Hamann et al (2007) define ‘consumer electronics’ as electronic equipment intended for everyday use, which usually finds its application in entertainment, communications and office productivity technology such as mobile phones, digital cameras and notebook PCs. As the high-technology industry increased the speed of its development and started to increasingly focus on particular consumer segments and individual needs, people become more ready to accept technological innovations (McDaniel & Gates 2002). For example, radio attracted 50 million listeners within 38 years of its invention and television required thirteen years to reach 50 million viewers, yet it only took the Internet four years to gain 50 million users (Temporal & Lee 2001).

The connection with brands and the problem of providing a unique selling point (USP) in current markets becomes a critical issue in this context, resulting in a shorter product life cycle (PLC), which has been reduced to a matter of weeks from what used to be years (Zajas & Crowley 1995; Winkler 1999; Temporal & Lee 2001). However, the most important change can be seen in the increasing adaptation of a mass-customisation strategy (Jiang 2004). The new toys produced by high-technology companies, such as the iPod and the Sony Playstation Portable (PSP), deliver apparently unique benefits to consumers, based on their image and preference match (Tomkins 2005; Klein 2000; Temporal & Lee 2001). In order to build an effective branding strategy for current markets, it is therefore necessary to investigate consumers’ reasons behind buying high technology.

The Consumer Decision Making Process

‘Decision making’ is defined as a balanced combination of emotional and rational elements used to keep on looking for alternatives, to make a purchasing decision, or to get off the idea to buy entirely (Schiffman & Kanuk 1994; Witt & Meyer 2004; Hill 2003). Furthermore, the decision making process (refer to Figure 2-2) is a series of steps a consumer or an organisation may go through before choosing a brand or a product (Blackwell & Engel 2005; Jobber & Fahy 2003; Solomon M. et al 2002; Jobber 2007).

This decision making process will be definitely influenced by consumer characteristics (Phillips & Sternthal 1977; Wang et al 2008). Solomon et al (2002) suggest that consumer characteristics can be divided into two factors: demographic and life-style. In this research, some of the important elements of each factor appear in the questionnaire. Table 2-1 maps out the contents of each factor.

A key determinant of the extent to which consumers evaluate a brand is their level of involvement which means the degree of perceived relevance and personal importance accompanying the brand choice (Blackwell & Engel 2005). Jobber (2007) demonstrates that computer purchases are an example of high involvement decision making in Ajzen & Fishbein’s (1980) model (refer to Figure 2-3), which suggests that an attitude towards a brand is based on set of beliefs about the brand. High-involvement purchase models have proven more robust in predicting purchase behaviour than low-involvement purchases (Budd & Spencer 1984; Farley et al 1981; Shimp & Kavas 1984). Thus, investigating consumer attitude can be helpful in understanding consumers’ purchasing intensions.

Effect of Consumer Attitude/Preference

As we have stepped into the 21st century, the role of attitude has become increasingly important in influencing all aspects of consumer behaviour (Malhotra 2005). During the consumer decision process repeated, consumers have a kind of attitude to purchasing, such as beliefs, opinions, inclinations or biases, called consumer attitude that affects their decision making. More important these attitudes can be influenced and changed if the organisation adopts an effective communication strategy (Goldsmith et al 2000; Haugtvedt et al 1994; Brown & Stayman 1992).

Many studies identify the construct of attitude towards a brand as one of the most important determinants of consumers’ behavioural intentions (Fishbein & Ajzen, 1975; Laroche et al 1996). Belk (1988) and Sirgy (1982) conclude the self-congruence theory explaining how consumers evaluate products to match their self-image. Ekinci & Riley (2003), Graeff (1996) and Hong & Zinkhan (1995) further suggest that a higher congruence between self-image and product image would positively prompt consumers’ attitudes or behaviour regarding brand attitude, brand preference, repurchasing intentions, product purchase decisions, and consumer satisfaction.

Ahluwalia et al’s (2000) research shows that customers who have a positive attitude towards a brand (high commitment) would counter-argue negative information related to the brand and support the positive information. High commitment customers relate brand loyalty and advocacy with positive information about their favoured brand. Accordingly, low commitment customers give more weight to negative information than positive information because they perceive it to be more diagnostic.

There are a number of factors which result in a consumer’s attitude to change including the nature of product change, strength of attitude towards the product, stored information about the product, product importance and communication. Based on these factors and research findings, discussion and recommendation will be introduced in the chapter five, mainly directed at possible changes in communication and perceptions in order to make the HP notebook brand more competitive in the Taiwanese market.

Otherwise, the current research will provide some initial and exploratory insights into how notebook consumers perceive the different notebook brands in the Taiwanese notebook market. The survey questionnaire that examines consumer perceptions can be found in appendix B, and discussion on the main research findings are introduced in chapter four.

Brand

A brand is a distinguishing name or symbol (such as logo, trademark or package design) aimed to identify the goods or services of either one seller or a group of sellers, and to differentiate goods or services from those of competitors (Ghodeswar & Luang 2008). Thus a brand signals to the consumer the source of the product and protects both the customer and the producer from competitors who would attempt to provide products or services that seem to be identical (Aaker 1991).

Weilbacher (1995) argues that brands provide the main upon which consumers can identify and associate with a product or service or a group of products or services. From the consumer’s point of view, a brand can be defined as the total accumulation of all his/her experience. In other words, the brand is built up from all points of contact with the consumer (Kapferer 2004). A successful brand is an identifiable product, service, person or place, extended in such a way that the buyer or user perceives relevant, unique added values which match their needs most closely (Chernatony & McDonald 1998).

Branding in high-tech markets is also gaining increasing attention, since there is general consensus that branding becomes more important when high-tech products become accessible to mass consumers (Schoenfelder & Harris 2004; Pettis 1995; Reddy 1997; Ward et al 1999). Successful brand building can not only strengthen a producer’s competitive position to withstand the increasing power of retailers (Park & Srinivasan, 1994) but also bring advantages such as defending against competitors and building market share (Adams 1995). When the term “brand equity” is used in marketing functions it means brand description or brand strength, which is sometimes referred to as ‘consumer brand equity’ to distinguish it from the accounting asset valuation meaning (Wood 2000). A better understanding of brand equity measurement is essential for an enriched operation of brand management (Pappu et al 2005).

Pappu et al (2005) established a multi-dimensionality of consumer-based brand equity, consistent which is the conceptualisation of Aaker (1991). The overall results of the confirmatory factor analysis confirmed that consumer-based brand equity was a four-dimensional construct including brand awareness, brand associations, perceived quality and brand loyalty (Pappu et al 2005; Cobb-Walgren et al 1995; Zajas & Crowley 1995). Washburn & Plank’s (2002), Yoo & Donthu (2001, 2002) and Yoo et al. (2000) developed a consumer based brand equity measure based on Aaker’s (1991) and Keller’s (1993) conceptualisation but combined the dimensions of brand awareness and brand associations into one.

Nevertheless, Wright et al (2007) discussed research issues concerning data collection, timing and measures of brand performance for the PC market and emphasised that it is important that the term “brand equity” is clearly defined and enjoys organisational consensus and perceived validity given the objectives and strategy for PC brands and the dynamics of the marketplace. There is no agreed measure of brand equity just as there are different measures of the various aspects of a brand. An important issue is how management finds it useful to define and use the term “brand equity”.

Brand Awareness

Brand awareness is regarded as an important notion in consumer behaviour, especially in terms of its implication to brand equity, which can be referred to as the value a brand name adds to a product. Keller (1993) declares that brand awareness is reflected upon consumers’ ability to recognise the brand under different circumstances. He suggests two basic approaches to measuring brand awareness. One is brand recall that relates to consumers’ ability to retrieve the brand when given the product category, the needs fulfilled by the category, or some other type of hint. Another is brand recognition that relates to consumers’ ability to confirm previous exposure to the brand when given the brand.

Laurent et al (1995) also propose three classical measures of brand awareness in a given product category: (1) Spontaneous awareness: consumers are asked to name the brands they know without any cue, even if only by name, in the product category. The spontaneous awareness of brand X is the percentage of interviewees indicating they know the brand; (2) Top-of-mind awareness: using the same question, the top-of-mind awareness of brand X is the percentage of interviewees who name brand X first; (3) Aided awareness: brand names are showed to interviewees; the aided awareness of brand X is the percentage of interviewees who mention they know the brand.

Laurent et al (1995) point out that for a leading brand, its aided awareness score may be extremely high, not allowing for detections of temporary changes; such changes may be more visible in a spontaneous awareness question. Conversely, if one is interested in a minor or start-up brand, one can be sure that its spontaneous score will be very low, maybe a few percent, not allowing for a very sensitive measure of evolution; its aided awareness will be more sensitive, and therefore more able to detect progresses in brand awareness. In this research, we are going to brand awareness for the four top laptop manufactures with both spontaneous and top-of-mind techniques to explore HP notebook’s brand awareness in comparison with three other brands.

Brand awareness plays an important role in understanding the consumer decision-making process. Many researchers assert that brand awareness has a significant effect on brand attitude and encourages consumers to consider products and services of that brand when purchasing (Brown & Stayman 1992; K


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