ACER and the launch of the Aspire:

« global brand, local touch »

ADAM BenoîtDE SALINS Arthur

KAZIHISE Nina LysetteLOU Liandi

MORIN ClémentSQUALI Rhita

From a centralized global strategy

Strategic Business Unit TAIWAN

Product Development

Assembly Marketing Sales

5 Regional Business Units

(Acer America )

Late 1980s: ACER’s Chain-value restructured because of price drops and tougher competition

Manufacturing

Upstream activities Downstream activities

The New organizational structure in 1992

ACER group SBU (Taiwan)

Acer AmericaRBU 1 RBU 2 RBU 3 RBU 4

Assembly center 2 (Malaysia)

Assembly center 1 (Singapore)

Assembly center 3

Supplier S3

S2

• Independence of RBUs • More autonomy in decision making and product development • Decentralization of activitiesGOAL: flexibility and responsiveness« Client-server Model »

• Outsource low-value activities (assembly) to external contractersGOAL: Gain efficiency and economies of scale

Product

• Global Integration axis: Capacity to coordinate the firm’s value chain activities accross

the world to gain economies of scale and efficiency

• Local Responsiveness axis: Capacity to create products and processes which meet local

markets needs

The global integration and local responsiveness Framework

Global integration

HIGH

LOWLocal

responsivenessHIGH

ACERPC INDUSTRY

• Global competition• Uniform technology• Standardized products• Value-chain activities spread around the world

• « Global brand »:• assembly centers• standardized

processes• « Local touch »:• Autonomy of RBUs• Local needs

A mix between global integration strategy and ability to meet local needs

Make Acer a global brand with Aspire

Shih’s vision: develop a product with global aspiration:“ To offer products with distinguished brand characteristics that target

different customer needs in the global PC market” (acer.com)

Shih agreed to give Culver entire autonomy on this Aspire Project

1994: Michael Culver AAC Product manager uses the opportunities offered by the “client-server model” to launch the Aspire Home multimedia PC (first time product development outside SBU)

After good results, return rate increases (15%), market shares go down, profit is negative

Problems with Aspire in the USA and globally

Aspire based on market analysis for one particular country (USA)

AAC had no competencies in designing and developing products

No fit between global brand strategy and local mix marketing• No global pricing strategy: premium (Europe) to low cost

(Taiwan)• No global product position: fashion (Singapore), basic

entry level computer (Taiwan), multimedia PC (USA)• Localized and inefficient promotion

STRATEGIC ISSUES

Lack of communication between employees

• No knowledge sharing and communicaton between AAC and SBU (US launch). Expertise on the product = AAC

• No communication and trust between the RBUs for the global launch.

• « Not invented here » syndrom: SBU engineers frustrated because have no idea of how to design the product. They feel they have only become components suppliers

• Too many people to deal with for Culver (70 contacts) Difficult to oversee the project

MANAGERIAL ISSUES

An organizational structure with multiple boundaries

Too much independence for AAC and lack of transparency with SBU.

No reports or cooperation between SBU and AAC on the project (no control from Acer HQ)

Lack of coordination tools to prevent easily solvable technical problems (Sub-assemblies components incompatibility)

AAC’s product would have to be modified to suit RBU’s local markets (Ex: Hong Kong Chinese version, phone software…)

Each RBU must work on specific solution for the product (costs time and money)

ORGANIZATIONAL ISSUES

Rethinking Acer’s global strategy

New segmentation: Seeing the hard implementation of a global marketing strategy for Aspire, Shih decided to segment the market differently according to single appliances:

Games FamilyBusiness Internet

Electronic stores Office stores

The market position is universal and marketing mix easily global. Avoids confusion for the consumer.

Malls

New pricing strategy: low entry-level price range to compete with price cuts by competitor Compaq

Reorganizing management roles and responsibilities

Autonomy to the RBUs: Lack of control over activities and coordination between HQ and subsidiaries!

Taiwanese engineers sent to AAC so that they feel responsible of the product design during the Aspire launch in USA

Taiwanese managers were sent to AAC and created 3 teams:

Customer Services program

Manufacturing Improvement

Strengthen US market

GOOD RESULTS with AAC turning profitable again

Go back to more centralization and coordination from Taiwan?

Promoting coordination between AAC and Taiwanese SBU managers is the top priority

Go back to Taiwanese-based efficient organizational culture

More centralization without cutting entrepreneurial initiative

Global integration and coordination brings efficiency. Local empowerement brings flexibility and creativity

Necessary to balance both aspects

Strategic Recommendations

Can Acer be at the same time a global brand and a major supplier?

The faillure of Aspire shows:• The inability of Acer to mix both businesses • The highly-ressources consuming aspect of the computer

market

We suggest:• Either a spin-off of one of the two activities to focus on a

core business• Either a complete restructuring to enhance the product

division within the company

To conclude, we « guess » Shih should follow its idea of becoming a global brand

Strategic recommendations

Furthermore he should try to go further from a global strategy to a transnational strategy with high global integration and high local responsiveness:The only way to take advantage of economies of scale and be adapted to every local market

Keep marketing Aspire locally, but define a global positionning of the brand (middle-price computers)

Looking at opportunities for creating XCs• It would allow Acer to position itself both on the middle-

price and low-price computer market

Acer today? Was Shih right to remain stubborn on his positions?

Acer’s motto on its website: « empowering people » Kept this client-server model with autonomy and freedom of initiatives.

Currently (2009) the world’s No. 2 total PC and notebook player SUCCESS in setting up a global brand

THANK YOU!

ANY QUESTIONS?