ACER INCORPORATION

THE RAMPAGING DRAGON

CONTENTS

INDUSTRY OVERVIEW

BRIEF INTRODUCTION

COURSE CORRELATION WITH THE CASE

PRE-LIU AND POST-LIU PERIOD

STRATEGICAL AND CULTURAL DIFFERENCE

CURRENT SITUATION 2011-12

1

2

5

4

3

6

INDUSTRY OVERVIEW

HIGH GROWTH AND FAST CHANGING ENVIRONMENT

SHORT PRODUCT LIFECYCLE

OVERNIGHT TECHNOLOGICAL ADVANCEMENT

CONSUMER NEEDS KEEP CHANGING AND THEY REQUIRE MORE AND MORE ADDITIONAL AND ADVANCED FUNCTIONS.

LOCALIZATION IS IMPORTANT ACCORDING TO DIFFERENT GEOGRAPHIC LOCATIONS.

COURSE CORRELATION

Global Strategy

SWOT Analysis

Porter’s Five Forces

UK Governance Model

Organization Culture

CRUX OF THE CASE

EXPORTING ABROAD

MOTIVATION

MEANS &MENTALITIE

S

BRIEF OVERVIEW

Founded as Multitech in

Taiwan in 1976.

Started with$25,000 of capital by Shih,

his wife and three friends.

Grabbed every window of

opportunity available

Build the foundations of Taiwan’s great entrepreneurial success story

Rebirth as Acer from Multitech

MULTITECH MISSION

“To promote the application of emerging microprocessor

technology.”

TAIWANESE CULTURE

Patriarch Dominated

Family-run company

model

BACKGROUND & HISTORY

1976 – 1986

Building The Foundation

1987 – 1995

Establish A Leading Brand And Go Global

Phase 2

Phase 1

PHASE - 1

1978

Begin JV’s for expanding sales in central and southern Taiwan.

Targeted niche neighbors markets

Expansion Abroad-Asia, Middle East and Latin America.

1981

Number of new products introduced

Micro-Professor: The first main stream commercial product produced

SALES, NET INCOME, EMPLOYESS TURNOVER

1976

77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94-1000

0

1000

2000

3000

4000

5000

6000

7000

8000SALES ($M)

NET INCOME ($M)

EMPLOYEES

PHASE – 1……. CONT.

1983

Begin to manufacture IBM compatible PC’s under OEM

1984

Sevenfold increase in sales reached to $51 million

1984

Going to capture the European market

1986

Tenth Anniversary-1986

BIRTH OF DRAGON DREAM - Ten year future plan

Projected Sales $5bn

Soon Achieved half of the forecasted sales

Rampaging Dragon Goes International

Capture 25% market share of Singapore market

Become 2nd company in the world to develop and launch 32 bit pc

Grab attention of Unisys, ICL and ITT

PHASE – 1……. CONT.

INITIAL PUBLIC OFFERINGS (IPO’s)

Conducted IPO for Gernal Public

Acer raised capital NT$2.2Bn(U.S $88Mn)

Shih original 50% equity reduced to 35%.

Stock Issued at NT$ 27.5, and traded at NT$47. Soon rose to NT$100

After IPO, 65% equity including Shih’s & employees shares reduced to 25%.

Recruit dozen of top level executives and 100 middle level manager

Ground troops and Para-troops

Lack of International experience & cultural awareness

PHASE - 2

Acquired Counterpoint- Manufacturer Low End Mini Computer

Acquired and expand the operations of Service Intelligence

Concer-Dismal Disappointment

Competitive prices by Dell & Packered reduces the Profit margin from 35% to 25%

1987

1989

Earning per share fall from NT$ 5 to NT$ 1.42

Share Price reduced to NT$ 20 from NT$ 150

Shih decided to hired experienced top level Executives.

Leonard Liu signed as CEO and Chairman of AAC

Shih stepped down as President

PHASE – 2….. CONT.

1990

Acer acquired Altos Brand through $94 Million.

Provides alternative means of Multi-user networking

AAC’s faced losses and Altos loose $20 million

300(30%) Taiwanese employees were

terminated

1992

4 core SBU’s and 5 RBU’s had been established

AAC responsible for North America

ACI headquarter in Singapore & responsible for Asia, Africa & Latin

America

Profitability was plummeting

Payroll ballooned to 5700 employees

PHASE – 2….. CONT.

DIAGRAM OF RBU’S & SBU’S

ACER AMERICA CORPORATION

AAC

ACER GROUP (HEAD QUARTER)

INFO. PRODUCTS GROUP

ACER PERIPHERALS TI-ACER ACER THIRD

WAVE PUBL.ACER

LABORATORIESACER PROPERTY

DEVPT.

ACER EUROPEACER SERTEK (TAIWAN AND

CHINA)

ACER COMPUTER INTERNATIONAL

(ACI)

FOR A INC.(TRADING)

1992

Shih offered his resignation

Board rejected the Offer & suggested Shih

to resume as CEO

Liu resigned

PHASE – 2….. CONT.

REVENUE BY PRODUCTS

1988 89 90 91 92 93 940

10

20

30

40

50

60

70

PortablesDesktops & Moth-erboardsMinicomputersPeripherals & Other

REVENUE BY BUSINESS

1988 89 90 91 92 93 940

20

40

60

80

100

120

BRANDOEMTRADING

FINANCIAL OVERLOOK

1988 89 90 91 92 93 940

500

1000

1500

2000

2500

Total Assets, Total Liabilities &

Owners Equity

Total Assets, Total Liabili-ties & Owners Equity

MUHAMMAD FAROOQ

AFTER 1992

“21 in 21”

“Global Brand, Local Touch”

Acquired 19% shares of Computec

Shih considered Acer’s Core SBU’s to Public

Continue to pay tuition because long-term profits exceed the cost of education

Considered learning from losses as Investment rather than a waste

Rethink Acer’s Management policies

Reappoint Shih as CEO

PHASE – 2….. CONT.

CLIENT SERVER MODEL

1993

Key-Principles of Client Server Model“Every man is the lord of his castle” Roles & relationships between SBU’s and RBU’s

Nuclear Option-Strategy of Last resort

‘’If it doesn't hurt, Help!’’

Client Server model considered Acer to develop speed & flexibility as competitive weapons

Ideas generated & implemented independently in RBU’s & SBU’s

Taiwan’s headquarter as Server whereas Others RBU’s & SBU’s as Client

THE FAST-FOOD BUSINESS CONCEPT

1993

Redesign the organization production structure

‘’Uniload’’ production concept-

Screw less assembling

‘’2-3-1’’ Concept for efficient

product development

50%-80% of total cost expensive components air shipped from

SBU’s to RBU’s

Less volatile items shipped

by sea

Savings in logistics,

inventories and import duties

Shih developed

Value Added Chart

STAN SHIH SMILING CURVE

ACER AMERICA & THE ASPIRE

1992

Ronald Chang to head AAC, after Liu’s

President of Acer/Altos business unit

Make AAC Palo Alto plant

Raw to finished process cycle reduced from 80 to 45 days and inventory level

reduced by 45%

In 1994, AAC was at break even point

1990 1991 1992 1993 1994

-50

0

50

100

150

200

250

300

NET INCOME/LOSST.A AND T.L & OW. EQ.

AAC FINANCIALS 1990-94

BIRTH OF ASPIRE

1994

Mike Culver promoted to AAC Director of Product Management

Brought idea, “the first Wintel-based PC”

Conduct Market research

Come-up with “Aspire Pc” having Frog Design

Quality innovative product at a less premium price

Projected U.S sales of $570 Mn and profit $17 Mn in 1995

STRATEGICAL DIFFERNECES

STAN SHIH

• First targeted niche markets

• Aggressive International Expansion Strategy

• Austerity Campaign• Acer 1-2-3• “Global Brand, Local

Touch” • “21 in 21”• ‘’If it doesn't hurt,

Help!’’

LEONARD LIU

• Focuses on networking market

• Strategy thrust• Autocratic Leadership

style• Introduce Regional

Business Units (RBU’s) & Strategy Business Units (SBU’s)

• Tight Control & Lay-offs• Iron-Fisted management

style• “By-the-numbers”

management model

CULTURAL DIFFERENCE’S

STAN SHIH • Institute the strong norm of Frugality

• Delegation of authorities • Employees Education- ‘’think and learn”

• Rely on people, win trust & build business around them

• 4 Values-Statement of shared Belief by managers

• Family-run company model

• “Tutors conceal nothing from their pupils”

LEONARD LIU • Reduced management layers to increase accountability

• Established standards for Intra company Communication

• Productivity & Performance Evaluation

• Lavish style adopted by the top personnels

• Biased behaviors for the managers

QUESTIONS

Q # 1

Should Aspire project change it, or put it on hold?

Q # 2

What implications would his decisions have for the new corporate model, he had been

building?

Q # 3

What are the changes needed in AAC to meet the challenge?

S.W.O.T ANALYSIS

STRENGTHS•Strong corporate

culture•Employee

empowerment•Global expansion

and diversity•Strong financial

position•Strategic alliance for

further expansion

WEAKNESS• Paratrooper managers who were not adapted

with Acer’s culture• Low cost, low end product manufacturing image• Acer’s limited capital resources• Existing coordination problem

OPPORTUNITIES• Growing industry• Increasing trend to working at home in U.S market• Emerging growing multimedia Notebooks, Netbook• Improved brand name• Rapid growing interest in internet

THREATS•Newest Technology•New marketing and

distribution channels conceived by the competitors

•Periods of shrinking demand

•Loss of complete control

•Fierce Pc business competition

SWOT

Degree of Rivalry-High

Threat of Substitute- Low

Buyer Power- High

Supply Power- High

Threat of new Entrants- Low

POTER’S FIVE FORCES MODEL

ACER’S GLOBAL EXPENSION STRATEGY

ACER’S TRANSNATIONAL STRATEGY

Benefits of Global integration

Strong cost control is critical to maintain with

ongoing price competition (economies of scale/scope)

Investment in the state-of-the-art

manufacturing for the unit cost

Benefits of National

responsiveness

Aggressive pricing for maintaining a

market share

Adaptation to market changes

Inventory and Manufacturing

capacity management

RECOMMENDATIONS

Established Network Integrated Organization

Structure

Continue on client server model

Promote coordination between BU’s

Initiate Aspire on Regional rollout starting with the

launch in the U.S

AAC ownership of the Aspire project

From Cross-BU project management teams

Share resources and transfer knowledge between

BU’s

INTEGRATED NETWORK FITS

CONCLUSION

Integrated network organization structure is critical to Acer both for market responsiveness and Global efficiency

Network Coordination between BU’s is essential for Acer as a truly Global company

Acer corporate culture is the key to success to such a global company

Stan Shih’s leadership is required for the transition period

UPDATE IN 1995-AFTER ASPIRE

Aspire becomes the world’s most multemedia PC

Acer computer international limited launched IPO in

Singapore

Total revenue jumped to U.S $5 Billion

CURRENT SITUATION 2010-11

CURRENT MISSION-’’Empowering people, empowering

technology’’

On 2011, Acer acquired U.S based rival Gateway Inc, for

U.S $ 710 Million

Acer Inc. 2011 primarily financial results consolidated revenues U.S $16.18 Billion

with 25% growth

#1• EMEA (Europe, Middle East and Africa) in

mobile computing solutions

#1 • LCD’s in western Europe

#1 • Taiwan in desktop computing solutions

#2 • Taiwan in mobile computing solutions

#3 • U.S overall LCD’s shipments

#3 • Taiwan in server solutions

#3 • Latin America mobile computing solution

#2 • World wide mobile computing solution

#3 • World wide desktop computing shipments

#4 • World wide overall PC’s shipments

#6 • World wide server solutions

#4 • Canada overall PC’s Shipments

ACER RANKING IN 2007

ORGANIZATIONAL STRUCTURE

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