Building an Asian Multinational

IntroductionAcer’s beginnings

Company created in 1976Capital stock: 25, 000 USDWorkforce: 11 employeesActivity: IT products distributor

IntroductionAcer: 30 years later...!

3 more brands belong to Acer Group : Gateway (2007), E-machines (2007) & Packard Bell (2008)

Capital stock: 805 million USD Workforce: 6, 000

Introduction

Introduction

IntroductionProblematic

How can we explain such a growth?

What is this Asian company’s business model?

SWOT Acer early 80’Strengths: Leader on the national market Low cost structure Visionary and charismatic boss Innovative and dynamic company

Weaknesses: No international focus (patriotic values) Lack of international expertise Low levels of brand recognition worldwide Lack of diversification (PC business) No component manufacturing

Opportunities: Business friendly home market (state incentives and skilled engineers) Emergence of the global market place High growth potential worlwide for PC’s and emergence of NICT

Threats: Highly competitive market with competitors having strong brand power Capital intensive industry due to high tech and short product cycles « Made in Taiwan »

Going International„Local touch, global brand“

Positionning/Product Strategy:

Acer has long positionned it-self as a follower (first assembling for OEM)

High quality but affordable products (innovative but seldom pioneer)

Progressive product diversification: focusing on value-added segments

Building a global brand

Going International„Local touch, global brand“

Production Strategy: Decentralisation

Centralized R&D and (large scale) manufacturing of value-adding components in low cost countries (economies of scale, low cost structure)

Decentralised assembling process, together with local marketing and distribution operations (low inventory cost, „just-in-time“)

Local politic of joint ventures and partnerships (good knowledge of local markets)

Going International„Local touch, global brand“

Management/Ownership strategy:

Decentralized and highly independant management (flexibility to demand)

Locally highered operationnal and managerial workforce (local expertise)

Participation of local shareholders: „21 in 21“

The client-server organisation

Going International„Local touch, global brand“

Going International„Local touch, global brand“

Brand-recognition problemTwo sub-problems:_The notoriety of well-established company_The bad reputation of Asian productsSOLUTION:Creation of an organization to promote

Taiwanese products and firmsAdvertisements campaigns to first destroy

the clichée of bad reputation and then make the Acer brand known.

Lack of international experienceManagers that had no experience at the

international and that do not speak EnglishA real problem for establishing offices overseasSOLUTION:Send just one manager and hire locallyBenefit from the local expertise, knowledge of

the market, of the environment, of the legislation, of the structures…

Encourage local investments to boost motivation and save on equity.

Price war and costs efficiencyEconomies of scale from the competitorsAttruition war with pricesSOLUTION:Fast Food Business ModelJoint ventures to compete more efficiently

with costs savings on components and distribution network.

Decentralize everything, give autonomy to the RBUs and SBUs

SWOT ACER 2009Strengths: Leader on the national market Leader on several markets and about to become N°2 worldwide in PC market. Efficient distribution network Innovative and dynamic company (R&D)Affordable high quality products

Weaknesses: Bad after-sales services The autonomy given to the RBUs and SBUs could eventually end up in a partial lost of control

Opportunities: Diversification in other segments or niches of the multimedia marketHigh growth market

Threats: Highly competitive market with competitors having strong brand power Capital intensive industry due to very short product cycles Fast changing environment

RecommendationsIT technology improves rapidlyPC industry requires offering the consumers

the latest technology in the shortest times

Relocate ACER’s factories closer to the markets in order to:

- Save logistic costs- Save time in production cycles- Possible adaptation of the products to the

markets

RecommendationsShareholders are key actors to finance

ACER’s projects. They need to be secured.

Pure Player strategy with focus on IT technologies

- PCs- Laptop- Smartphone

RecommendationsVertical integration strategy

ACER should establish ACER Stores in strategic

locations on each markets

- Master its brand image- Increase its margins

RecommendationsChina invests massively in Africa

Therefore ACER should benefit from this opportunity to clinch new deals there.Focus on public tender & equipment contracts