The Acer Group Case Study

Introduction: The Acer Group founded in 1976 by Stan Shih is headquartered in Taiwan and is world’s largest PC and computer component manufacturer. To accomplish the global mission of “Fresh technology enjoyed by everyone, everywhere” and achieve the long-term goal of transforming the company into global high-tech corporation, Stan Shih reorganized the company structure and incorporated the fast food model. Shih gave the local touch to Acer through product adaptation to suit local market conditions and technological innovation.  The ‘Fast Food’ model  involved moving the assembly of PC’s to local sites, setting up central factories to areas closer to fastest growing markets. The strategy was designed to achieve short lead times and efficient inventory management. It also made the distribution logistics more manageable and highly flexible and was company’s core competency for manufacturing. There were primary considerations in choosing Mainland China for manufacturing. Firstly China has the largest growing economies and huge size of the market. China is the second largest user base of PC’s. This allows Acer to leverage economies of scale and become a greater player in the PC world. Secondly, in China it was possible to have large volume production at cheap labor costs. Finally, China allowed Acer group to launch new innovative products with tax cuts as low as 15%. The added advantage for Acer was that it could use Chinese base  for international operations since Taiwan being small.  Apart from the several advantages, it was also important to weigh the political, economical, social and technical environment for using China as successful base for manufacturing  and maintain long term goal of the company.

With the new decentralized organization structure, the senior management faced difficulties in harnessing the strengths of a central $8B multinational Acer group. The heads of SBU’s interpreted Acer’s principles in their own way and we're trying to achieve their own organizational goals.

Politically Taiwan and China’s relations are in a bad state. Taiwanese businesses are subject to many restrictions when it comes to huge Investments in China, also they were restrictions on transporting routes and goods between both the countries. Tough there is hope that these restrictions would be eased in the future but right now there are many hurdles for the Taiwanese to do business in China.

Acer needs a highly disciplined workforce for the new unit, but due to the strong SOE policies in China, it is difficult to create a motivated workforce who could work overtime in peak demand seasons. Also due to security issues and lower standards of living Taiwanese people are not so willing to relocate to China.the the murder of a city council women form Taiwan in china received much media attention. This single episode wraps up the safety of Taiwanese people in China. Given these situations It would be a daunting task for the senior management to convince skilled managers from Taiwan to relocate to China for the purpose of training the new employees.

Opportunity: Though there are numerous risks to Investing in the Chinese market and also serious doubts about the ROI. Not Investing in a market like China with 1.3B Population, $1029B GDP, high growth rate would be a serious opportunity cost.

 Case Analysis: Acer has to make a decision to pursue China or not? If not China the other option would be India. A large democracy with similar population and purchasing power, a country well connected to other developing Asian nations.

Having compared both China and India with respect to Acer’s growth it would still be recommended to establish and retain a strong base in China because of the following few reasons: 1.In 1998 many foreign Investments came into china and as yuan was non exchangeable it was insulated from neighboring currencies. All the new MNC’s needed PC’s and they had the buying power. Also Chinese government was keen on developing strong IT base.

Tech giants like Wipro, Microsoft, IBM, Motorola entered India but the consumers buying power was less compared to china. Also India’s GDP is almost half of China, looking from a cultural point of view Acer was more familiar with Chinese market and culture than that of India.

Analysing the fact they have  a strong,well managed and long-term  vendor relationship Acer can also consider either a Joint venture(which will also enable them to retain their identities) or Acquisition of other major tech giants we have mentioned above. This will help acer to acquire a strong position in the market

Qualitative analysis: We will use SWOT analysis for a structured planning method as a qualitative analysis for ACER.

Recommendations:  Acer needs to consider two fronts when formulating a plan that would help them finalize a decision regarding manufacturing plants in China.

Strategic Recommendations:

1. Explore and evaluate new areas and markets which would be difficult for their competing companies to penetrate.

In 1998 many foreign Investments came into china and as yuan was non exchangeable it was insulated from neighboring currencies. All the new MNC’s needed PC’s and they had the buying power. Also Chinese government was keen on developing strong IT base.Tech giants like Wipro, Microsoft, IBM, Motorola entered India but the consumers buying power was less compared to china. Also India’s GDP is almost half of China, looking from a cultural point of view Acer was more familiar with Chinese market and culture than that of India.