acer case study solution
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ACER INCORPORATION
THE RAMPAGING DRAGON
CONTENTS
INDUSTRY OVERVIEW
BRIEF INTRODUCTION
COURSE CORRELATION WITH THE CASE
PRE-LIU AND POST-LIU PERIOD
STRATEGICAL AND CULTURAL DIFFERENCE
CURRENT SITUATION 2011-12
1
2
5
4
3
6
INDUSTRY OVERVIEW
HIGH GROWTH AND FAST CHANGING ENVIRONMENT
SHORT PRODUCT LIFECYCLE
OVERNIGHT TECHNOLOGICAL ADVANCEMENT
CONSUMER NEEDS KEEP CHANGING AND THEY REQUIRE MORE AND MORE ADDITIONAL AND ADVANCED FUNCTIONS.
LOCALIZATION IS IMPORTANT ACCORDING TO DIFFERENT GEOGRAPHIC LOCATIONS.
COURSE CORRELATION
Global Strategy
SWOT Analysis
Porter’s Five Forces
UK Governance Model
Organization Culture
CRUX OF THE CASE
EXPORTING ABROAD
MOTIVATION
MEANS &MENTALITIE
S
BRIEF OVERVIEW
Founded as Multitech in
Taiwan in 1976.
Started with$25,000 of capital by Shih,
his wife and three friends.
Grabbed every window of
opportunity available
Build the foundations of Taiwan’s great entrepreneurial success story
Rebirth as Acer from Multitech
MULTITECH MISSION
“To promote the application of emerging microprocessor
technology.”
TAIWANESE CULTURE
Patriarch Dominated
Family-run company
model
BACKGROUND & HISTORY
1976 – 1986
Building The Foundation
1987 – 1995
Establish A Leading Brand And Go Global
Phase 2
Phase 1
PHASE - 1
1978
Begin JV’s for expanding sales in central and southern Taiwan.
Targeted niche neighbors markets
Expansion Abroad-Asia, Middle East and Latin America.
1981
Number of new products introduced
Micro-Professor: The first main stream commercial product produced
SALES, NET INCOME, EMPLOYESS TURNOVER
1976
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94-1000
0
1000
2000
3000
4000
5000
6000
7000
8000SALES ($M)
NET INCOME ($M)
EMPLOYEES
PHASE – 1……. CONT.
1983
Begin to manufacture IBM compatible PC’s under OEM
1984
Sevenfold increase in sales reached to $51 million
1984
Going to capture the European market
1986
Tenth Anniversary-1986
BIRTH OF DRAGON DREAM - Ten year future plan
Projected Sales $5bn
Soon Achieved half of the forecasted sales
Rampaging Dragon Goes International
Capture 25% market share of Singapore market
Become 2nd company in the world to develop and launch 32 bit pc
Grab attention of Unisys, ICL and ITT
PHASE – 1……. CONT.
INITIAL PUBLIC OFFERINGS (IPO’s)
Conducted IPO for Gernal Public
Acer raised capital NT$2.2Bn(U.S $88Mn)
Shih original 50% equity reduced to 35%.
Stock Issued at NT$ 27.5, and traded at NT$47. Soon rose to NT$100
After IPO, 65% equity including Shih’s & employees shares reduced to 25%.
Recruit dozen of top level executives and 100 middle level manager
Ground troops and Para-troops
Lack of International experience & cultural awareness
PHASE - 2
Acquired Counterpoint- Manufacturer Low End Mini Computer
Acquired and expand the operations of Service Intelligence
Concer-Dismal Disappointment
Competitive prices by Dell & Packered reduces the Profit margin from 35% to 25%
1987
1989
Earning per share fall from NT$ 5 to NT$ 1.42
Share Price reduced to NT$ 20 from NT$ 150
Shih decided to hired experienced top level Executives.
Leonard Liu signed as CEO and Chairman of AAC
Shih stepped down as President
PHASE – 2….. CONT.
1990
Acer acquired Altos Brand through $94 Million.
Provides alternative means of Multi-user networking
AAC’s faced losses and Altos loose $20 million
300(30%) Taiwanese employees were
terminated
1992
4 core SBU’s and 5 RBU’s had been established
AAC responsible for North America
ACI headquarter in Singapore & responsible for Asia, Africa & Latin
America
Profitability was plummeting
Payroll ballooned to 5700 employees
PHASE – 2….. CONT.
DIAGRAM OF RBU’S & SBU’S
ACER AMERICA CORPORATION
AAC
ACER GROUP (HEAD QUARTER)
INFO. PRODUCTS GROUP
ACER PERIPHERALS TI-ACER ACER THIRD
WAVE PUBL.ACER
LABORATORIESACER PROPERTY
DEVPT.
ACER EUROPEACER SERTEK (TAIWAN AND
CHINA)
ACER COMPUTER INTERNATIONAL
(ACI)
FOR A INC.(TRADING)
1992
Shih offered his resignation
Board rejected the Offer & suggested Shih
to resume as CEO
Liu resigned
PHASE – 2….. CONT.
REVENUE BY PRODUCTS
1988 89 90 91 92 93 940
10
20
30
40
50
60
70
PortablesDesktops & Moth-erboardsMinicomputersPeripherals & Other
REVENUE BY BUSINESS
1988 89 90 91 92 93 940
20
40
60
80
100
120
BRANDOEMTRADING
FINANCIAL OVERLOOK
1988 89 90 91 92 93 940
500
1000
1500
2000
2500
Total Assets, Total Liabilities &
Owners Equity
Total Assets, Total Liabili-ties & Owners Equity
MUHAMMAD FAROOQ
AFTER 1992
“21 in 21”
“Global Brand, Local Touch”
Acquired 19% shares of Computec
Shih considered Acer’s Core SBU’s to Public
Continue to pay tuition because long-term profits exceed the cost of education
Considered learning from losses as Investment rather than a waste
Rethink Acer’s Management policies
Reappoint Shih as CEO
PHASE – 2….. CONT.
CLIENT SERVER MODEL
1993
Key-Principles of Client Server Model“Every man is the lord of his castle” Roles & relationships between SBU’s and RBU’s
Nuclear Option-Strategy of Last resort
‘’If it doesn't hurt, Help!’’
Client Server model considered Acer to develop speed & flexibility as competitive weapons
Ideas generated & implemented independently in RBU’s & SBU’s
Taiwan’s headquarter as Server whereas Others RBU’s & SBU’s as Client
THE FAST-FOOD BUSINESS CONCEPT
1993
Redesign the organization production structure
‘’Uniload’’ production concept-
Screw less assembling
‘’2-3-1’’ Concept for efficient
product development
50%-80% of total cost expensive components air shipped from
SBU’s to RBU’s
Less volatile items shipped
by sea
Savings in logistics,
inventories and import duties
Shih developed
Value Added Chart
STAN SHIH SMILING CURVE
ACER AMERICA & THE ASPIRE
1992
Ronald Chang to head AAC, after Liu’s
President of Acer/Altos business unit
Make AAC Palo Alto plant
Raw to finished process cycle reduced from 80 to 45 days and inventory level
reduced by 45%
In 1994, AAC was at break even point
1990 1991 1992 1993 1994
-50
0
50
100
150
200
250
300
NET INCOME/LOSST.A AND T.L & OW. EQ.
AAC FINANCIALS 1990-94
BIRTH OF ASPIRE
1994
Mike Culver promoted to AAC Director of Product Management
Brought idea, “the first Wintel-based PC”
Conduct Market research
Come-up with “Aspire Pc” having Frog Design
Quality innovative product at a less premium price
Projected U.S sales of $570 Mn and profit $17 Mn in 1995
STRATEGICAL DIFFERNECES
STAN SHIH
• First targeted niche markets
• Aggressive International Expansion Strategy
• Austerity Campaign• Acer 1-2-3• “Global Brand, Local
Touch” • “21 in 21”• ‘’If it doesn't hurt,
Help!’’
LEONARD LIU
• Focuses on networking market
• Strategy thrust• Autocratic Leadership
style• Introduce Regional
Business Units (RBU’s) & Strategy Business Units (SBU’s)
• Tight Control & Lay-offs• Iron-Fisted management
style• “By-the-numbers”
management model
CULTURAL DIFFERENCE’S
STAN SHIH • Institute the strong norm of Frugality
• Delegation of authorities • Employees Education- ‘’think and learn”
• Rely on people, win trust & build business around them
• 4 Values-Statement of shared Belief by managers
• Family-run company model
• “Tutors conceal nothing from their pupils”
LEONARD LIU • Reduced management layers to increase accountability
• Established standards for Intra company Communication
• Productivity & Performance Evaluation
• Lavish style adopted by the top personnels
• Biased behaviors for the managers
QUESTIONS
Q # 1
Should Aspire project change it, or put it on hold?
Q # 2
What implications would his decisions have for the new corporate model, he had been
building?
Q # 3
What are the changes needed in AAC to meet the challenge?
S.W.O.T ANALYSIS
STRENGTHS•Strong corporate
culture•Employee
empowerment•Global expansion
and diversity•Strong financial
position•Strategic alliance for
further expansion
WEAKNESS• Paratrooper managers who were not adapted
with Acer’s culture• Low cost, low end product manufacturing image• Acer’s limited capital resources• Existing coordination problem
OPPORTUNITIES• Growing industry• Increasing trend to working at home in U.S market• Emerging growing multimedia Notebooks, Netbook• Improved brand name• Rapid growing interest in internet
THREATS•Newest Technology•New marketing and
distribution channels conceived by the competitors
•Periods of shrinking demand
•Loss of complete control
•Fierce Pc business competition
SWOT
Degree of Rivalry-High
Threat of Substitute- Low
Buyer Power- High
Supply Power- High
Threat of new Entrants- Low
POTER’S FIVE FORCES MODEL
ACER’S GLOBAL EXPENSION STRATEGY
ACER’S TRANSNATIONAL STRATEGY
Benefits of Global integration
Strong cost control is critical to maintain with
ongoing price competition (economies of scale/scope)
Investment in the state-of-the-art
manufacturing for the unit cost
Benefits of National
responsiveness
Aggressive pricing for maintaining a
market share
Adaptation to market changes
Inventory and Manufacturing
capacity management
RECOMMENDATIONS
Established Network Integrated Organization
Structure
Continue on client server model
Promote coordination between BU’s
Initiate Aspire on Regional rollout starting with the
launch in the U.S
AAC ownership of the Aspire project
From Cross-BU project management teams
Share resources and transfer knowledge between
BU’s
INTEGRATED NETWORK FITS
CONCLUSION
Integrated network organization structure is critical to Acer both for market responsiveness and Global efficiency
Network Coordination between BU’s is essential for Acer as a truly Global company
Acer corporate culture is the key to success to such a global company
Stan Shih’s leadership is required for the transition period
UPDATE IN 1995-AFTER ASPIRE
Aspire becomes the world’s most multemedia PC
Acer computer international limited launched IPO in
Singapore
Total revenue jumped to U.S $5 Billion
CURRENT SITUATION 2010-11
CURRENT MISSION-’’Empowering people, empowering
technology’’
On 2011, Acer acquired U.S based rival Gateway Inc, for
U.S $ 710 Million
Acer Inc. 2011 primarily financial results consolidated revenues U.S $16.18 Billion
with 25% growth
#1• EMEA (Europe, Middle East and Africa) in
mobile computing solutions
#1 • LCD’s in western Europe
#1 • Taiwan in desktop computing solutions
#2 • Taiwan in mobile computing solutions
#3 • U.S overall LCD’s shipments
#3 • Taiwan in server solutions
#3 • Latin America mobile computing solution
#2 • World wide mobile computing solution
#3 • World wide desktop computing shipments
#4 • World wide overall PC’s shipments
#6 • World wide server solutions
#4 • Canada overall PC’s Shipments
ACER RANKING IN 2007
ORGANIZATIONAL STRUCTURE
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