Running head: ACER'S STRATEGY ANALYSIS 1

Introduction

Since the modernization and inevitable commercialization of computers, brand

recognition and market share in the personal computer market has always been very competitive.

In the mid 1990's the personal computer market took off primarily by the boost

the industry received in the business-to-consumer sector. The offering of financing options made

it easier for individuals to acquire computers.

Since the beginning of the PC revolution, the market has been dominated by four

major manufacturers: Dell, HP and Gateway. By the latest part of 2000s, Acer and Lenovo have

gain brand recognition and market share. The latter two companies growing strategy involved the

acquisition of Gateway by Acer and IBM's personal computer division by Lenovo. This paper

will compare these two companies business strategies, as well as their operating differences. .

Acer's Strategy Has Been Described as Divide and Conquer. Compare and Contrast

This to Lenovo Strategy

From its inception, Acer had been a component and equipment manufacturer for

relabeled electronic products marketed and sold by recognized global companies. Along with the

booming of the PC industry came the need to produce PC components faster, cheaper and more

efficiently; this need gave birth to several companies akin to Acer, which in turn contributed to

market saturation.

Strategic management theories have taught us that when a company faces market

saturation, the most effective way to growth is to engaged in expanding its operations, marketing

and selling activities to another market. In this case, Acer determined that they would take the

company into the global electronics and personal computer playfield. "Strategic decisions of a
ACER'S STRATEGY ANALYSIS 2

company are influenced by market conditions, degree of competition, condition of economy,

regulations affecting the industry, its own growth targets and the interactions with its subsidiaries

i.e., business units". (Collis & Montgomery, 2002).

Acer employed initiatives that placed them in a better position than its closer competitor,

Lenovo. Acer's early attempts to enter the global arena was characterized by poorly brand

recognition. Consumers were wary about Acer's products quality and reliability. To battle that

perception, and to help gain territory, in 2007 Acer acquired Gateway for US$710 million. This

acquisition gave Lenovo a method to overcome on of the entry barriers for the U.S. marketplace.

In addition, the company recognized the potential that the Chinesse market represented. By

entering this market, Acer sought to take advantage of the cheap labor, economies of scale and

the availability of highly trained engineers.

In the later part of the 2000s, Acer saw its market share increase by manufacturing and

selling small size laptop computers known as netbooks. This product was sold at a price range

between US$200-US$300. Competitive firms did not implement a notebook initiative until later,

giving Acer a competitive advantage of first-to-market.

The strategies implemented by Acer and Lenovo are basically the same. These companies

relied in acquiring U.S. based companies, or its divisions, in order to expand operations globally,

as well as to enter the U.S. market. In 2004 Lenovo purchased IBM's personal computer division

for US$1.25 billion. In brand recognition, Acer concentrated in producing a more consumer

friendly product with the right features and market price. Lenovo main attempts to brand

recoginiziton was to join the Olimpyc Partner Program which is the International Olympic

Committee worldwide marketing program. It also bought the rights to place the Lenovo name

next to the IBM logo on its PC products after the IBM acquisition.
ACER'S STRATEGY ANALYSIS 3

Explain How the Global Markets-Local Markets Paradox Figures Into Stan Shih's

Strategy for China

Stan Shih figured that Acer could take advantage of the benefits that regionally local

markets have to offer to companies operating in their own turf. Moving to markets that share the

same characteristics is easier than to move to a different region that do not share the same

culture, customer buying behavior and socio-economic trends. China offered these rewards, not

necessary as an advantage against Lenovo, but as and advantage to other competitiors in the PC

business. In the other hand, the global reach Acer had engaged on by shifting from a hardware

component manufacturer to a consumer friendly PC manufacturer, by acquiring Gateway, and

being one of the first companies to produce netbooks laptop computers, placed Acer as a

principal global player over Lenovo.

Determine What Strategies Acer Can Apply to Become the World's Third Largest PC

Company, Behind Dell and Hewlett-Packard

According to the research firm iSuppli (Dell, 2010), Acer and Dell have been taking turns

for the second place as the biggest PC manufacturer in the world since 2009. Some of the

strategies that helped Acer gain this place are the introduction of the netbook product, expansion

by the acquisition of Gateway, entering the U.S. market and focusing its product line and efforts

not so much in the business-to-business model, but emphazising the consumer centricity one.

Althought the build-your-own-PC model used by Dell, HP and Gateway was popular

among consumers, Acer stayed away from that strategy. Acer relied in third party companies to

distribute and sell its products. This gave the company an opportunity to create a lean supply

chain scheme, used to source hardware from different vendors, thus eliminating costly
ACER'S STRATEGY ANALYSIS 4

manufacturing costs and improving profitability. The additional purchase of European PC giant

Packard-Bell company provided Acer with larger footprint and additional market share

worldwide.

Even Before the Current Economic Crisis Deepended, Growth in the U.S. PC market had

Begun to Slow Down. Despite Strong competition From Dell and Hewlett-Packard, Acer's

U.S. Market Share Increased From 1 Percent in 2004 to 3.3 Percent by the End of 2006.

Analyze Acer's prospects for gaining further share in the United States

Acer's different strategies mentioned throughout this paper gave the company the

compettive advantages that it still enjoys today. During the economic turndown of the early and

later 2000s, most of the business PC companies that were being very profitable and that occupied

the first places as the PC leading manufacturers was done in the business-to-business model. As

the economy turned sour, companies decreased computer buying and upgrading functions, this

gave away to lesser revenue to these PC manufacturers. Acer had been concentrating in the

consumer centric business. They offered low prices computers to cash strapped consumers.

Acer has proven in the past that it has the technological foresight and risk taking

capabilities to beat their competition as it demonstrated back in 2008 when it dethroned HP in

the sales of PC products in the European market. "HP has been toppled from the top spot in the

Europe, Middle East and Africa PC-selling league by Acer, partly as a result of Acer's success in

the booming netbook market". (Meyer, 2008).

The company's new strategies include reaching out to school and small business with

customized products. Although Acer's market share in this segment is very limited, it is trying to

increase awareness of its products by educating these customer on the usability and features that

their products carries.

ACER'S STRATEGY ANALYSIS 5

"Last year the company reported revenue of $18 billion, representing 5% growth from the

previous year in a tough economy. Net profit was $354 million. To keep up the pace,

Acer is recruiting new types of customers, including schools. It still has a long way to

go in that area. Its education market share nearly tripled in the last year, but only to

4%." (Woyke, 2010).

ACER'S STRATEGY ANALYSIS 6

References

Clemon, E. K. (2004). Evaluation of Strategic Investments in Information Technology. CACM ,

22-36.

Collis, D. J., & Montgomery, C. A. (2002). Corporate Strategy: Resources and the Scope of the

Firm. Chicago: Irwin.

Dell Retakes Second Rank in Global PC Market as Acer Stumbles . (2010, September 02).

Retrieved October 18, 2010, from www.iSuppli.com: http://www.isuppli.com/Home-and-

Consumer-Electronics/News/Pages/Dell-Retakes-Second-Rank-in-Global-PC-Market-as-

Acer-Stumbles.aspx

Lessard, D. (2001). Framework for Global Competitive Analysis. Technical IT , 12-14.

Meyer, D. (2008, October 16). ACER Tops HP In European Sales. Retrieved Ocotober 18, 2010,

from www.businessweek.com:

http://www.businessweek.com/globalbiz/content/oct2008/gb20081016_577701.htm

Woyke, E. (2010, May 10). Acer's Next Advance. Retrieved October 18, 2010, from

www.Forbes.com: http://www.forbes.com/global/2010/0510/global-2000-10-hewlett-

packard-systemax-dell-acer-next-advance.html