Acer Computers: Company Analysis

Stan Shih along with others founded a company named Multitech International in 1976 with $25,000 and 11 employees (Acer group, 2009). The intention was to contribute to the society through sharing of knowledge and they played a significant role in popularising the role of computers in Taiwan. During the same year they established a manufacturing facility in Taiwan. Multitech was formally renamed Acer in 1987 and became a public company in 1988.

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Shih was instrumental in guiding the company through many restructurings and retired in 2005. Acer is now led by J.T. Wang (CEO and Chairman) and Gianfranco Lanci (President) and is a family of four brands, namely Acer, Packard Bell, Gateway, and eMachines. Acer is also among the top 3 companies for total PC shipments and second in notebooks. In 2008, Acer had 6000 employees working for them in over 100 countries worldwide and consolidated revenue of USD 16.65 Billion which represents an 18% annual growth (Acer Group).

Over the years Acer Inc. has grown from a local manufacturing company in Taiwan to a global marketing company with a multi brand strategy. Although Acer started out as a manufacturing company in 1997 and had production facilities in several countries, it is now focused more on brand marketing, as it sees little value in manufacturing. Within the computer market, Acer has executed a well-developed diversification strategy which has helped it grow in related markets from a small company into international organization in a relatively short time.

Acer has moved towards achieving its corporate objectives through a series of well executed strategic acquisitions. In 2007 and 2008 Acer completed the merger of Gateway Inc., Packard Bell Inc., and E-Ten InfoSystems Co. Ltd. To further stimulate growth, in 2009 Acer moved into a related mobile phone market and introduced its Tempo line of smart phones running Windows Mobile (Whitney, 2009).

Acer vertically disintegrated, outsourced its lucrative contract manufacturing and focussed mainly on brand marketing. In doing so, Acer moved up the value chain but still relied extensively on its partners and suppliers to deliver quality products. The success of Acers strategy was due to the implementation of Channel Business Model, initiated and executed by Wang and his management team. According to this model partners and suppliers were encouraged to participate with Acer is creating an efficient and lean supply chain. This has propelled Acer into a successful international organization and provided customers with competitive pricing, fresh technologies, and quality service (Acer Group).

In the PC industry, the value chain typically involves research, design, manufacturing, sales/marketing, and after sale service. Acer’s focus is now purely on sales and marketing part of the value chain. An oligopoly market structure is characterized by a fewer number of organizations competing in a common market that is mature and where growth in sales in slow. Other typical characteristics of this market structure are high entry barriers, differentiation, and ability to set price.

At best, based on the above, the market structure in which Acer operates can be termed as oligopoly, because a relatively small number of sellers dominate the market. HP, Dell, and Acer are sensitive to the pricing of their products relative to each other and use marketing strategies to differentiate themselves from each other. While developing marketing strategies Acer takes into account possible responses from HP and Dell.

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For example, when Acer entered the netbook market segment faster than Dell and HP, it seized large chunks of the market share by introducing simple computing devices for as low as $300 (Einhorn, 2009). Moreover Acer used its lean supply chain to its advantage by introducing laptops that are cheaper than competition, which created new challenges to its competitors who were unable to match these prices.

References

Acer Group, 2009. Employee Relations. Web.

Einhorn, B., 2009. How Acer Is Burning Its PC Rivals. Web.

Whitney, L., 2009. Acer aims to overtake HP in notebook sales. Web.

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