LOGOArab Academy

For Science and TechnologyGraduate School of Business

DBA Program

Acer, Inc: Taiwan’s Rampaging Dragon- Case Analysis -

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Mohamed El AnwarAbir:Presented by

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ContentsContents

Acer, Inc History and BackgroundAcer, Inc History and Background1

Competitive EnvironmentCompetitive Environment2

3 Case QuestionsCase Questions

Acer, Inc Internal EnvironmentAcer, Inc Internal Environment-- SWOTSWOT

3

4

RecommendationsRecommendations5

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Acer’s Current SituationAcer’s Current Situation6

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Phase Phase 11

Phase Phase 22

1976 1976 –– 19861986

1987 1987 –– 19951995

Background & HistoryBackground & History

Building The Building The FoundationFoundation

Establish a Establish a leading brand leading brand and go globaland go global

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19811981

First commercial product: First commercial product: the the ““MicroprofessorMicroprofessor” ” computercomputer

19861986Tenth AnniversaryTenth Anniversary

Birth of the “Dragon Dream”Birth of the “Dragon Dream”Huge expansion abroad & doubling Huge expansion abroad & doubling salessales

Phase Phase 11: : Building the FoundationBuilding the Foundation

19761976Mission: Mission: “to promote the application of the “to promote the application of the

emerging microprocessor technology.”emerging microprocessor technology.”MultitechMultitech founded with founded with 5 5 people and $ people and $ 2525..000 000 & & Stan Shih Stan Shih as CEOas CEO

19781978

Targeting smaller neighboring marketsTargeting smaller neighboring markets(Asia, Middle East and Latin America)(Asia, Middle East and Latin America)

the the ““MicroprofessorMicroprofessor” ” computercomputer

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1987

1990

1992

�� First Crisis (losses)First Crisis (losses)

�� Stan Shih Stan Shih

Phase Phase 22::

Establish a leading Brand & go GlobalEstablish a leading Brand & go Global

1989

1990

�� Leonard Liu CEOLeonard Liu CEO

��Joint venture with Joint venture with Texas InstrumentsTexas Instruments

�� 88% layoffs% layoffs

�� Altos Acquisition Altos Acquisition for $for $9494MM

�� Stan Shih Stan Shih reclaimed CEOreclaimed CEO

�� First reengineering First reengineering

�� MultitechMultitech became became ““Acer”Acer”

�� Acer went PublicAcer went Public

�� 88thth largest PC largest PC brand in the worldbrand in the world

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PC Industry DynamicsPC Industry Dynamics

PC IndustryPC Industry

19761976 Apple and Altos are founded

�� Increased frequency of the consumer Increased frequency of the consumer upgradesupgrades

�� Technological advances Technological advances in inputsin inputs

�� Productivity Productivity accelerationacceleration in manufacturingin manufacturing

�� Powerful computers become Powerful computers become cheapercheaper

�� Growing penetration of Growing penetration of personal computers personal computers in consumer and in consumer and business marketsbusiness markets

�� Growing interest in the Growing interest in the InternetInternet

Concentration Concentration rate in U.S. rate in U.S. 3434%%

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19761976 Apple and Altos are founded

19811981 IBM launches PC with MS-DOS

19821982Compaq establishedIntel 80286 microprocessor

19851985 Intel 80386 microprocessor

19861986 Compaq's first 32-bit PC

19871987 Microsoft Windows 2.0

19881988 Intel 80386SX microprocessor

19901990 Microsoft Windows 3.0

19941994 Apple PowerMacs launched

Short product life cycle, Short product life cycle, high growth and fast high growth and fast changing environmentchanging environment

Requirement of local Requirement of local responsiveness in different responsiveness in different marketsmarkets

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Case QuestionsCase Questions

1.1. What action would Shih decide about the Aspire What action would Shih decide about the Aspire product? Would he give the Aspire project the green product? Would he give the Aspire project the green light?light?

2.2. What are the pros and cons of allowing Acer What are the pros and cons of allowing Acer

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2.2. What are the pros and cons of allowing Acer What are the pros and cons of allowing Acer America AAC to design and market the Aspire? Is America AAC to design and market the Aspire? Is the organizational structure appropriate for this the organizational structure appropriate for this action?action?

3.3. What are the changes needed in AAC to meet the What are the changes needed in AAC to meet the challenge and enhance the challenge and enhance the transnationalizationtransnationalization of of Acer?Acer?

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Acer’s Internal EnvironmentAcer’s Internal Environment

•• ““Global Brand, Local Touch”Global Brand, Local Touch”-- The The 44thth WayWay

•• ““21 21 in in 2121””

•• Specific Advantage: Specific Advantage: High quality product at a High quality product at a “less“less--thanthan--premium” pricepremium” price

•• ““UniloadUniload” ” Concept Concept –– easier assemblyeasier assembly

•• ““Fast Food”Fast Food” Business ModelBusiness Model

Outsourcing Assembly “Smiling Curve”Outsourcing Assembly “Smiling Curve”

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Stan Shih’s Smiling CurveStan Shih’s Smiling Curve

SBUs:Speed

RBUs: Flexibility

9

Speed Scale

Flexibility

Foundation of Client-Server Model

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Acer’s SWOT AnalysisAcer’s SWOT Analysis

Opportunities:Opportunities:�� Growing IndustryGrowing Industry

�� Increasing trend to working at home in Increasing trend to working at home in

US marketUS market

�� Rapidly growing interest in the InternetRapidly growing interest in the Internet

�� Emerging global multimedia desktop Emerging global multimedia desktop

marketmarket

�� Enlargement of retail businessEnlargement of retail business

Strengths:Strengths:�� Strong Corporate CultureStrong Corporate Culture

�� Strategic alliances for further expansionStrategic alliances for further expansion

�� Building Brand name business. Building Brand name business.

�� Employee empowermentEmployee empowerment

�� Employee ownership,Employee ownership, delegated accountabilitydelegated accountability

�� Encouraging employees ideasEncouraging employees ideas

�� Taking corrective actions (reengineering)Taking corrective actions (reengineering)

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�� Enlargement of retail businessEnlargement of retail business�� Taking corrective actions (reengineering)Taking corrective actions (reengineering)

�� Strong financial position (except for Strong financial position (except for 19901990--19921992))

Threats:Threats:�� Periods of shrinking Demand Periods of shrinking Demand

�� New marketing and distribution New marketing and distribution

channels conceived by the competitorschannels conceived by the competitors

�� Fierce PC business competitionFierce PC business competition

Weaknesses:Weaknesses:�� Paratrooper managers who were not adapted Paratrooper managers who were not adapted

with Acer's culturewith Acer's culture

�� Acer's limited capital resourcesAcer's limited capital resources

�� Growing too fast while ignoring the evolution Growing too fast while ignoring the evolution

of the PC industryof the PC industry

�� Existing coordination problemsExisting coordination problems

�� Corporate cultural difference with merged Corporate cultural difference with merged

firmsfirms

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Acer’s Financial Position (Acer’s Financial Position (19761976--19941994))

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AcerAcer

a well-positioned global company that overcame . company that overcame crisis rapidly with Stan Shih’s visionary leadership.

Shih's leadership added to Acer success through the new business models and management especially after crisis.

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•• Establish Network Integrated organizational Establish Network Integrated organizational structure structure

•• Continue on ClientContinue on Client--Server ModelServer Model

•• Promote coordination between BusPromote coordination between Bus

RecommendationRecommendation

•• Initiate Aspire on regional rollout starting Initiate Aspire on regional rollout starting with the launch in the US with the launch in the US

•• AAC’s ownership of the Aspire projectAAC’s ownership of the Aspire project

•• Form crossForm cross--BU project management teamBU project management team

•• Share resources and transfer knowledge between Share resources and transfer knowledge between BUs.BUs.

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BU

BU

Integrated Network fits Acer StructureIntegrated Network fits Acer Structure

GlobalGlobalEfficiencyEfficiency

LocalLocalResponsivenessResponsiveness

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Acer CEO

BU BU

BUBU

Worldwide Worldwide InnovationInnovation& & LearningLearning

Knowledge Knowledge TransferTransfer

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Acer’s Global StrategyAcer’s Global Strategy

Benefit of National ResponsivenessBenefit of National Responsiveness

LowLow HighHigh

global Integration

global Integration 1 3

LowLow

HighHigh

Benefit of

Benefit of

global Integration

global Integration 1

2

3

4

Initial StageInitial Stage

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Benefits of Economic Benefits of Economic IntegrationIntegration

•• Strong cost control is Strong cost control is critical to maintain critical to maintain

Benefits of National Benefits of National ResponsivenessResponsiveness

•• Aggressive pricing for Aggressive pricing for maintaining a market maintaining a market

Acer’s Global Strategy (Acer’s Global Strategy (condcond’)’)

keys to Acer’s successkeys to Acer’s success

critical to maintain critical to maintain profitability with onprofitability with on--going going price competition (Economy price competition (Economy of Scale / Scope)of Scale / Scope)

•• Investments in the stateInvestments in the state--ofof--thethe--art manufacturing art manufacturing facilities for unit cost facilities for unit cost reduction reduction

maintaining a market maintaining a market share share

•• Adaptation to market Adaptation to market changes changes

•• Inventory and Inventory and manufacturing capacity manufacturing capacity managementmanagement

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•• IntegratedIntegrated NetworkNetwork organizationalorganizational structurestructure isiscriticalcritical toto AcerAcer bothboth forfor marketmarket responsivenessresponsivenessandand globalglobal efficiencyefficiency..

•• NetworkNetwork coordinationcoordination betweenbetween BUsBUs isis essentialessential forforAcerAcer asas aa trulytruly globalglobal companycompany..

ConclusionConclusion

AcerAcer asas aa trulytruly globalglobal companycompany..

•• Acer’sAcer’s corporatecorporate cultureculture isis thethe keykey toto thethe successsuccessofof suchsuch aa globalglobal companycompany..

•• StanStan Shih’sShih’s leadershipleadership isis requiredrequired forfor thethetransitiontransition periodperiod..

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Update in Update in 1995 1995 –– After Aspire LaunchAfter Aspire Launch

•• Aspire became the world's most popular Aspire became the world's most popular multimedia PC.multimedia PC.

•• Acer Computer International Ltd. launched Acer Computer International Ltd. launched •• Acer Computer International Ltd. launched Acer Computer International Ltd. launched IPO in Singapore.IPO in Singapore.

•• Total revenues jumped to US$Total revenues jumped to US$5 5 billionbillion

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Current Situation Current Situation 20072007--20082008

�� CurrentCurrent missionmission:: "Empowering"Empowering People,People, EmpoweringEmpoweringTechnology“Technology“

�� OnOn AugustAugust 2727,, 20072007,, AcerAcer announcedannounced plansplans toto acquireacquireUU..SS.. basedbased rivalrival GatewayGateway IncInc.. forfor USUS$$710710 millionmillion..

�� AcerAcer IncInc.. 20072007 preliminarypreliminary financialfinancial resultsresults:: ConsolidatedConsolidatedrevenuerevenue USUS$$1414..0606 BillionBillion withwith 2525%% growthgrowth

Acer is ranked in Acer is ranked in 20072007::##1 1 -- EMEA (Europe, Middle East and Africa) in mobile computing solutionsEMEA (Europe, Middle East and Africa) in mobile computing solutions

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##1 1 -- EMEA (Europe, Middle East and Africa) in mobile computing solutionsEMEA (Europe, Middle East and Africa) in mobile computing solutions##1 1 -- LCD’s in Western EuropeLCD’s in Western Europe##1 1 -- Taiwan in desktop computing solutionsTaiwan in desktop computing solutions##2 2 -- Taiwan in mobile computing solutionsTaiwan in mobile computing solutions##3 3 -- U.S. overall LCD shipmentsU.S. overall LCD shipments##3 3 -- Taiwan in server solutionsTaiwan in server solutions##3 3 -- Latin America mobile computing solutionsLatin America mobile computing solutions##2 2 -- WorldwideWorldwide mobile computing solutionsmobile computing solutions##4 4 -- Worldwide desktop computing shipmentsWorldwide desktop computing shipments##3 3 -- Worldwide overall PC shipmentsWorldwide overall PC shipments##6 6 -- Worldwide server solutionsWorldwide server solutions##4 4 -- Canada overall PC shipmentsCanada overall PC shipments##4 4 -- Canada mobile computing solutionsCanada mobile computing solutions##6 6 -- U.S. desktop computing solutionsU.S. desktop computing solutions

Acer estimates to Acer estimates to achieve #achieve #3 3 worldwide in worldwide in 2008 2008

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Acer's Current Organizational structureAcer's Current Organizational structure

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