Acer Company: Overview and Analysis

1.0 Acer company profile
Acer Incorporated is a Taiwan-based multinational electronics manufacturer. Its product includes laptops, desktops as well as servers and storage, personal digital assistance (PDA), peripherals, peripherals and e-business services for government, business, education, and home users. Acer is the third largest computer manufacturer in the world behind HP and Dell. The company also owns the largest franchised computer retail chain in Taipei, Taiwan. Acer was founded by Stan Shih, his wife Carolyn Yeh, and a group of five others as Multitech in 1976. The company was renamed Acer in 1987. It began with eleven employees and US$25,000 in capital. Initially, it was primarily a distributor of electronic parts and a consultant in the use of microprocessor technologies, but over time it began to develop as a PC manufacturer. The global headquarters is located in Hsinchu City, Taiwan. Acer began its foray into laptops with the purchase of Texas Instruments’ mobile PC division in 1997. In 2000, Acer spun off its manufacturing operations as Wistron Corporation, to focus on sales and marketing of their core brand. Acer grew worldwide while simultaneously minimizing its labour force by identifying and using marketing strategies that best utilized their existing distribution channels. By 2005, Acer employed a scant 7,800 people worldwide. Revenues rose from US$4.9 billion in 2003 to US$11.31 billion in 2006. Acer’s North American market share has slipped over the past few years, while in contrast, European market share has risen. On August 27, 2007, Acer announced plans to acquire its US-based rival Gateway Inc. for US$710 million. Acer’s chairman, J.T. Wang, stated that the acquisition “completes Acer’s global footprint, by strengthening our US presence.” In January 2008, Acer announced that it had acquired a controlling interest of 75% of Packard Bell. The Acer 4Group is a family of four brands Acer, Gateway, Packard Bell and eMachines. This unique multi-brand strategy allows each brand to offer a unique set of brand characteristics that targets different customer needs in the global PC market.

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Today, the Acer Group still strives to break the barriers between people and technology. It’s one of the world’s top 3 companies for total PC shipments, is No. 2 for notebooks. 4The successful mergers of Gateway Inc. (October 2007) and Packard Bell Inc. (March 2008) by parent company, Acer Inc., completes the group’s global footprint by further strengthening its presence in the U.S. and Europe. Gateway was founded by Ted Waitt in 1985 in an Iowa farmhouse with a US7$10,000 loan guaranteed by his grandmother, a rented computer and a three- page business plan. Today, Gateway has grown into one of America’s best- known PC brands. The brand 7received national acclaim in 1991 when it introduced its distinctive cow-spotted boxes, a tribute to its farming heritage. In early 2004, Gateway acquired eMachines, and later 7moved its headquarters to Irvine, California. In October 2007, Gateway was acquired by Taiwan-based Acer, and the combined entities now comprise the third-largest PC Company in the world. EMachines, one of the 14world’s fastest growing PC brands, was acquired by Gateway Inc. in March 2004. Marketed to families seeking reliable machines for everyday use, eMachines brings the PC to any and every home in need. 14It remains a stand-alone brand sold through leading retailers, “e-tailers” and channel partners in the U.S. and selects international markets. 5Packard Bell is one of the rare ones. The brand was born in 1926. In the 1920s and 1930s when radio was all the rage, Packard Bell emerged as a popular brand of console radios with a reputation for elegant design. The first Packard Bell television sets were launched in 1948, just as the TV revolution was sweeping the world. Fast forward to the end of the 1980s, Packard Bell entered the personal computer market in 1987. It 5pioneered the use of the PC in the home, transforming an unfriendly but useful office tool into a friendly, indispensable feature of today’s modern home.
The Acer Group CEO and Acer Inc. Chairman, J.T. Wang is tasked with overseeing the group’s global competitiveness. Since he assumed chairmanship in 2005, Acer Inc.’s consolidated revenues grew from US$9.7 billion to US$14.1 billion in 2007. As the world’s No. 3 vendor for total PCs and No. 2 for notebooks, Acer has set its next goal on becoming the world’s No. 1 notebook vendor. Wang’s promotion to Acer Group CEO in June 2008 will ensure smooth integration following the successful mergers of Gateway and Packard Bell and future growth of the group. Wang 17holds a bachelor’s degree in electrical engineering from National Taiwan University and an Executive MBA from Taiwan’s National Cheng-Chi University. He and his wife have two daughters. 2Gianfranco Lanci, president of Acer Inc. since 2005, assumed duo responsibilities as the company CEO in June 2008 — an acknowledgement of his outstanding management. Under his performance-driven leadership, Lanci’s focus is to enhance the Acer Group’s presence globally under a new multi-brand strategy — following the recent acquisitions of Gateway and Packard Bell. After Lanci’s appointment 12as managing director of Acer Italy in 1997, he 12immediately began consolidating the channel- and partner- relations at all levels. His commitment to brand promotion has made Acer the No. 1 ranking notebook brand in Italy since 1997. 2In 2003 Lanci was appointed president of Acer’s International Operations Business Group, allowing him to be directly involved in the Pan-American market. The designation confirmed Acer’s acknowledgement of his outstanding channel management and marketing activities, as well as the key role he played for Acer’s success in EMEA. 3ISO Management System Acer is an ISO 9001 and 14001 certified company, meaning their quality control and environmental management systems meet international standards. The International Organization for Standardization (ISO) was established in Geneva, Switzerland in February 1947 with the goal to promote standardization of related activities in all countries around the world. ISO9001 is primarily concerned with quality management and fulfilment of customer demands for quality. ISO 14001 is primarily concerned with the voluntary establishment of environmental management systems (EMS) specially suited to each company.
Each EMS should work to achieve sustainable management through voluntary and sustained improvement of environmental performance by means of pollution prevention and proper management. Acer’s Quality Policy 18Acer’s quality policy places an emphasis on delivering zero-defect, competitive products and services to customers on time. The motto “proud to serve, proud of Acer” shows our commitment to providing professional services. Acer Environmental, Health and Safety Policy As a global IT company focused on marketing and service, Acer endeavours to achieve balanced development in economy, environment and society. They are devoted to environmental protection. 2007/2008 Environmental Objectives The 5 environmental objectives are EMS, Green Product Development, Product Recycling and Treatment Services, Green Supply Chain and Strengthen Environmental Communication Platform. Social Welfare 8Founded in July 1996, the Acer Foundation was established through donations from personnel of various departments throughout the company. Acer Foundation’s mission is threefold: research and develop technology and management; cultivate talents; and reward and promote service. Strategic Sponsorships Acer has always believed that sports and technology share the same ideals: strength, passion, competitiveness, coherence, skill and the determination to overcome new challenges. Their ability to identify strategically- favourable alliances has also helped make our brands recognized outside the IT industry. Acer has sponsor several events such as the Olympic, Scuderia Ferrari, F.C. International Milano and Yamaha Factory Racing Team.
2.0 Porters Analysis
The Porter’s 5 forces is a simple tool but powerful enough to understand where powers lies in a business situation. Porter have introduce that 5 forces that is 6the bargaining power of customers, the threat of the entry of new competitors, the threat of substitute products, the intensity of competitive rivalry and the bargaining power of suppliers. The bargaining power of customers means the ability of the customers to put the firm under pressure to change the price of the goods and also affects the customer’s sensitivity to price changes. The customer bargaining power will be high when there a large volume of customers buying the product means there’s is concentration of buyers, if these large group of buyer stop buying the product the company will be making a loss of the market share will also making a loss in the profit. The second factor would be the product is undifferentiated and can be replaces by substitutes means the customer can buy the same product from the other manufacturer. Acer substitute would be hp and Dell and Lenovo because they do manufacturer laptop and desktop. But Acer has come out with a very unique line of product that is the Acer Timeline Series, this series offer the screen size from 13.3 inch to 15.6 inch. The threat of the entry of new competitors means the barriers of entering into the industry. There are several things the company needs to be considering before going into any industry that is the high exit costs, interrelated businesses and customer loyalty. There will be high exit cost due to a lot of machinery need to be setups for manufacturing laptop and desktop all this setup need a large amount of money and when the manufacturer tends to leave the business it will lost all of this capital and asset unless he decide to sell those machinery to the other company this well lower down the exit cost. Interrelated businesses means there will be other manufacturer doing the same product as you are manufacturing, means they will be your competitor in the market. Customer loyalty means customer would like to stay with the brand they are using at the moment, this may be the company is doing a really good in after sales service. For example their product like Acer has a 3 year warranty for the laptop, while others rand doesn’t provide this service for their customer. The threat of substitute products means the customer can find the product that almost has the same function with your company product. This may be due to the product you are selling is too expensive or the price is not reasonable thus making the customer to buy the product from other manufacturer. The other factor may be current trends now day’s people like to follow on the latest trend or so called fashion. Acer has come out with the trendiest laptop that is thin and long life time for the battery that can up to 8 hours. That is the Acer Timeline Series it does not only have 8hours of battery life, it also ultra thin that less than 1 inch, that makes convenient for people to bring along anywhere, it also has multi gesture touch pad which can used like a mouse and also has a HD(high definition) which is as high as 16:9. We can see how it looks like in appendix 1 for the Acer Timeline Series. The Acer Timeline Series will cost from RM 2,000.00 to RM 3,250.00. Even though Apple has come out with the Macbook air but it still doesn’t get a lot of attention due to it expensive price its price starts from RM 5,599.00 to RM 6,799.00 and it does not have a long battery life. By referring to appendix 2 we can see how a Macbook Air looks like. Sony has recently launched on 10th November 2009, but it price starts from RM 3,999.00 to RM 5,299.00. We can see how the Sony VAIO X looks like in appendix 3. Overall from the price review Acer Timeline Series still leading ahead of Macbook Air and the Sony VAIO X due to the price. The intensity of competitive rivalry in most industries the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. By sustaining in the market a manufacturer has to make improvement or come out with new products that the other manufacturer does not manufacture or the product can be environmental friendly because now people want things that can reduce rubbish or wastage. Thus this will lead to a high barrier to exit. Acer has been doing this through manufacturing the Acer Timeline Series that allows a long battery life up to 8hours. Acer notebook pc market share in Europe increased in the third quarter of 2004, versus 11.4 percent in the third quarter of 2003. The bargaining power of suppliers is described as the market inputs. Supplier bargaining power will be high when the market is dominated or monopoly by one or a few suppliers. Thus when the supplier refuse to supply goods to the manufacturer the whole manufacturing process will stop. For example Acer main processor supplier will be AMD and Intel. If both of these suppliers simultaneously increase their price and Acer has no choice either to continue to buy the processor from them. This will lead the product of Acer to increase the price due to more expensive on processor if this happens consumer will tend to buy other brand of laptop or desktop thus Acer has loss part of its market share. To mitigate the power of supplier is to build win-win relationships with suppliers or arrange to use multiple suppliers. By making a win-win situation we can pay advance payment or pay the debt on time.
3.0 Limitation of the Porters analysis
In the Porters analysis it has introduce the 5 forces that is the 6bargaining power of customers, the threat of the entry of new competitors, the threat of substitute products, the intensity of competitive rivalry and the bargaining power of suppliers. Michael Porter 5 forces analysis mostly focus on company external competitive environment. Below are the ways that can be used to overcome the limitation of Porters 5 forces. We can use SWOT analysis to overcome the limitation of Porters 5 forces, SWOT analysis is a strategic planning used to estimate the strengths, weakness, opportunities and threats involves in a business operation. It involves specifying the objective of the business operation or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. When the company has identified their strength they will put more effort to manufacturing or the best good. While the company have known or indentify the weakness they will correct it. Thus SWOT analysis will be used in decision making because it can 21provide a good framework for reviewing strategy, position and direction of a company or business proposition, or any other idea. The strength of Acer is the support sales activities by understanding their customers’ businesses better and, able to keep fully up to date on their competitors’ business structure, strategy and prospects and qualify prospective partners and suppliers.
PEST analysis can be used to overcome the limitation of Porters 5 forces. PEST stands for political, economic, social, and technological. PEST is a scan of the external macro-environment in which the firm operates. PEST analysis is a useful tool for the company to understand market growth or decline, and as such the position, potential and direction for a business. PEST analysis is a business measurement tool. Based on Acer strong research capabilities it allows them to determine the needs of their customers and their expectations. PEST analysis and market research findings can segment the market and develop cost effective ways of reaching them. This ultimately translates into strengthening Acer position in the market place and displacing competitors.
The third way to overcome is the product life cycled (PLC) is 25a new product progresses through a sequence of stages from introduction to growth, maturity, and decline. Product life cycled is developed by Raymond Vernon. After a product moves through all these stages, it’s pricing, promotion, packaging, and distribution are re-evaluated and changed if required to prolong its life the life span of the product in the market. We can see how a product life cycle will go in the appendix 4. By preventing his product to fall at decline stage, Acer has a plan that is to upgrade his existing laptop into window 7 or by upgrading its storage volume this allow it to keep in trend with the latest window in the market.
Value chain analysis is a concept from business management that was first described and popularized by Michael Porter in his 1985. Value chain analysis states how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. By referring to appendix 5 will see the process of value chain analysis. Value chain analysis will help the company to specifically analyze and help create to a competitive advantage. Value chain is a very useful way to deliver maximum value to your consumer and to maximize the value of your product in the market. Acer has making a very wise decision that is by providing its product to have a 3 years warranty, thus customer will prefer to buy Acer because it has a longer period of warranty compare to other brand of laptop. Benchmarking will also be another way to provide solution for the Porters 5 forces. Benchmarking is the process of comparing the business processes and performance metrics including cost, cycle time, productivity, or quality to another that is widely considered to be an industry standard benchmark. There are 4 keys steps involving in the application of benchmarking that is understand in detail existing business processes, analyze the business processes of others, compare own business performance with that of others analyzed and implement the steps necessary to close the performance gap. Acer has used the benchmarking for role of key performance such as quality, distribution, supply chain management and pricing. The last way that I can mention to overcome or give solution is the six sigma. Six sigma is a business management strategy originally developed by Motorola. Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and controlling variability in manufacturing and business processes. By using the six sigma theory Acer has give a three year warranty on its laptop, this is to give confident to the customer that their lifespan is longer than other brand laptop.
4.0 Conclusion
Acer is a laptop and computer manufacturer The Company owns the largest franchised computer retail chain in Taipei, Taiwan. Acer is an ISO 9001 and 14001 certified company, meaning their quality control and environmental management systems meet international standards. Porters 5 forces are a tool that helps company to understand the business environment more. The 5 forces are bargaining power of customers, the threat of the entry of new competitors, the threat of substitute products, the intensity of competitive rivalry and the bargaining power of suppliers. Acer has used these 5 forces to gain the competitive advantage, gaining the market share, and how to provide a win-win relationship with the supplier. Since Porters 5 forces does not really cover all the information that a company need, we have to used other analysis such as SWOT analysis, PEST analysis, product life cycled (PLC), Value chain analysis ,Benchmarking and six sigma . By using this analysis we can overcome the limitation of Porters 5 forces.