MULTINATIONAL BUSINESS STRATEGY (INT700) ACER, INC: TAIWANS RAMPAGING DRAGON CASE ANALYSIS

Cevdet KIZIL (Graduate MBA)

Southern New Hampshire University Multinational Business Strategy (INT700) Prof. Aysun Ficici

October 5, 2004 Manchester, New Hampshire

Table Of Contents

Title Page Table of Contents I. II. III. IV. Organizational Strategy International Strategy Analysis of International Expansion Recommendations

i ii 1 3 4 5

ACER, INC: TAIWANS RAMPAGING DRAGON (CASE ANALYSIS)

I. Organizational Strategy Acer has a special organizational strategy which helped them in the past and is still helping them to excel in the global business arena. This unique organizational strategy is composed of several factors. First of all, the company tries to take advantage of every opportunity. That strategy lets Acer to be a very creative and innovative firm. For example, since the beginning of its life, the business developed by following various ways like providing engineering and product design advice to local companies, importing electronic components, offering technological training courses, publishing trade journals and producing new products like the mini-computers. Secondly, Acer instituted a strong norm of frugality. By implementing that

strategy, the company saved a lot of money having fewer offices just enough for the needs, decreasing inventory costs, reducing the assembly time and lowering the labor costs. Thirdly, the employees were highly valued in Acer. They were able to provide suggestions and ideas as well as having ownership in company. Additionally, Acer had a decentralized management style giving employees a lot of freedom without implementing tight controls. The employees were also trusted and had decision making responsibility. Another strategy was to price the high-tech products with a low margin to ensure turnover. Related to this issue, Acer gave a lot of importance to receive cash payment quickly and avoid the use of debt.

Also, Acer had the strategy of gaining customers by giving them a great value. In the company, customers always came first. They were followed by the employees and the shareholders in the second and third places. This principle was later referred to as Acer 1-2-3. Following that, Acer experimented with joint ventures as a way of expanding sales. Implementing the mentioned strategy helped Acer to capture the knowledge of those regional markets and increasing sales without the risk of hiring more people or raising more capital. Next, the company had a family-like atmosphere where the relationship between the managers and the employees was very nice. This strategy also encouraged the employees to learn, think and develop. One other strategy of Acer was to always keep good relations with suppliers, distributors, dealers, partners and investors. Using this strategy, Acer was able to compete against big companies when it had a small scale. Finally, before producing a PC, Acer representatives and the project teams talked to consumers, visited computer retail stores and held discussions to brainstorm the new products form. In other words, they did market research. This was again a very beneficial strategy, because Acer had an exact knowledge and idea about the customers tastes and preferences. For example, before planning to produce the Aspire model, Acer was able to learn that customers wanted a choice of colors, so the team decided to offer this model in grey and emerald green.

II. International Strategy One of Acers leading international strategies was that, in the times when the company was weak compared to the global giants, the firm targeted smaller neighboring markets that were of lesser interest to these big firms. This strategy was ideal since the combination of these smaller markets was huge and enabled Acer to improve when they had fewer resources. Likewise, the client server organizational model was another unorthodox strategy implemented by Acer. According to this strategy, Taiwan headquarters was the server that used its resources to support client business units. The advantage of this strategy was that Acers business units could leverage their own ideas or initiatives directly through other RBUs or SBUs without having to go through the corporate center. Thus, headquarters provided help and did mediate, it didnt dictate or control. Third, Acer always chose the aggressive method for international markets. The company produced new products, purchased properties and acquired new companies rapidly and by taking risks to go further in the overseas markets. Finally, the firm also implemented the joint venture partnerships strategy in international markets like they had in their domestic regional markets. For instance, Acer had a joint venture partnership agreement with its Mexican distributor, Computec.

III. Analysis of International Expansion The first international attempt of Acer (at that time named Multitech) started by targeting smaller neighboring markets that were of lesser interest to the global giants. Unfortunately, in the beginning, the response to the companys promotional letters was poor. But Acer never gave up and continued to try and at the end, it was able to establish partnerships with dealers and distributors in Indonesia, Malaysia, Singapore and Thailand. Later, Acer expanded to new international markets in Middle East and Latin America with the help of a growing number of new products. Finally in 1986, the company took a place in Europe for the first time. Acer established a marketing office in Dusseldorf and a warehouse in Amsterdam. Besides, the firm also supplemented the commission-based purchasing unit it had previously opened in the United States with a fully-fledged sales office.

IV. Recommendations In my opinion, its best for Acer to defend its recovery rather than going too aggressive at the moment. Because the bad scenario has just been getting positive and such a move can really make things complex. From my point of view, the company is developing too fast without adequate control. We should also take it into consideration that the overall cost of the Aspire project will be really high, yet still the return of this investment is very uncertain. There exists a great risk. Thats the second reason why I think Acer should not go for this investment. My third reason is that, the competition is high in the market and Acers rivals are also about to launch their own multimedia home PCs with a high probability, before Acer. Fourth, because all the companys engineering and production expertise is located in Taiwan, it will be very hard to coordinate the development and delivery of the Aspire model. In addition to this factor, the development resources are limited which increases the risk to a maximum. Thats also another great weakness of Acer which affects my decision. Finally, another painful problem will be that each international market will want to redesign the product and marketing strategy for its local markets, thus avoiding any potential scale economies. So, the cost will higher in great quantities. This was the last frightening factor leading me to the mentioned conclusion.