Strategic Analysis of Acer Inc - Case Study Example

Strategic Analysis of Acer Inc Lecturer Table of Contents Executive Summary…………………………………………………………. 3 Introduction…………………………………………………………………..3 Background of the company…………………………………………………..4 Growth and performance the company……………………………………….4 Assessment of key environmental factors……………………………………7 Conclusion and Recommendation…………………………………………….8 Bibliography…………………………………………………………………..10 Strategic analysis of Acer Executive Summary The paper reviews the management summary of Acer through a competitive landscape of the industry of the PC and peripherals by analyzing the company strategy, distribution channel, business model, and competencies in order to provide recommendations to the company. Acer Inc. is the third largest manufacturer of PC in the world that uses transnational strategy in procuring it components for the purpose of maintaining cost leadership. In this respect, we have used PESTLE, Porter’s Five Forces model, and SWOT analysis for a comprehensive analysis of the external and internal Acer environment. From this, we have made a series of recommendation to Acer in order to retain its ranking. It is however recommended that Acer adopts Blue Ocean against its competitors by using product premium branding regardless of whether its with Ferrari or any other luxury brand. It is also recommended that Acer uses balance scorecard together with its alliances to drive innovation so as to increase the market share of Acer. Introduction This paper seeks to review in general terms the growth and performance of Acer over the past decade. The paper will analyze the environment in which Acer functions and identify the opportunities and threats to which it might expect to have to respond, and how are these factors likely to impact on the company in the near future. This will be done through environmental analysis (PESTLE, Porter’s Five Forces, and SWOT). The report will also make analyses of the resources and key capabilities of the company plus the factors that give the company its competitive advantage. This will be done through assessing the Industry Critical Success Factors, analyzing resources and capabilities and link the generic strategy. Background of the company Acer Incorporated is a multinational electronics manufacturer based in Taiwan. Its product includes desktops, laptops, servers and storage, peripherals, personal digital assistance (PDA), peripherals and e-business services for business, government, education, and home users. Acer Inc is the third largest computer manufacturer in the world after HP and Dell (Shaw & Kotler, 2009). Acer Company owns the largest franchised computer retail chain in Taiwan, Taipei. The company was founded by Stan Shih, Carolyn Yeh his wife, and a group of five others in 1976 as a Multitech. Acer has since been the third largest computer manufacturing company in the world holding 9.5% of the market share, with its growth being experienced outside USA mature market, largely in emerging nations. The peripherals and PC industry is very competitive and Acer has maintained growth since 1999 with significant growth in revenues. The key competitors in the market include Dell, HP and Lenovo; however there is a fragmentation of the market with 46% of it owned by brands which have market share of less than 4% each. Acer seeks to increase its market share through release of premium PCs under Ferrari brand and expansion in LCD TVs with BenQ brand (Unruh & Ettenson, 2010). Growth and performance over the past decade Acer has adopted various strategies to ensure that it remains competitive and retains its ranking at number 3. Acer strives to find a Blue Ocean against its competitors by using premium branding of its product from Ferrari or any other premium luxury brand and make determinations if it can be derived from green and sustainable materials. The resources and capabilities of Acer are determined by the use of a balance scorecard with alliances in order to help in driving innovation plus a tested and a tried system of sales in order to increase the market share of Acer. The company derives its competitive advantage from various growth strategies. The competitive strategy of Acer is to be a low cost provider, which undercuts rivals in maintaining cost leadership to a wide and larger range of consumers. However, while this olds as the truth for Acer and Emachines, more offerings of premium like Ferrari and Gateway are the main targets of other competitive strategies. Ferrari has embraced a niche market strategy in differentiation basis while Gateway has emphasized on low cost strategy (Nidumolu Prahalad & Rangaswami, 2009). The competitive advantage of Acer is to find new markets to continually drive growth, build the product on the basis of transnational, build alliances with different brands like Ferrari, McAffee and Microsoft, and cover the market with a wide range of brands suiting the requirements and needs of different customer and market segments. Acer Inc. hence derive its competitive advantage from its ability to build quality PCs and peripherals that are innovative and have quality components and well priced to suit local markets and customer needs and requirements (Matthews, 2010). As seen in Porter’s Five Forces analysis, more information is revealed on resources and capabilities of the company, Acer, about the industry of PC and peripherals. Rivalry is one of the fiercest forces with many competitors vying for the share of the market based on pricing. There are also players that are substitute in the market such as Apple which introduces devices like iPad and iPhone challenging the need for PC. There is also much need for power by suppliers with most laptops, 85%, and produces in Chinese factories by Taiwan manufacturers supplying the entire industry. This analysis indicates that the industry of PC is cluttered with various players in what is a commodity product. This puts down the pricing pressure hence diluting the profits (Lubin & Esty, 2010). Acer Inc. has various capabilities derived from it resources. Acer have various strengths from which it derives its capabilities. Some of these strengths include: 3 tiered pricing structure of medium, low and premium, possession of the emerging nations good enough market, alliances with the Ferrari brand and BenQ, and the demonstrated ability to locate and find new markets. The resources of Acer are however limited by some weaknesses identified from a SWOT analysis (Longhurst, 2010). The market share in establishing markets is declining, and there are also too many brands that can lead to cannibalization. Acer adopted growth strategies by partnering with Wipro so as to gain experience and knowledge about the Indian markets. Initially Acer focused its resources and attention selling to corporate customers and government organizations in order to have a strong consumer chain built. Acer derives its competitive advantage from its marketing strategies as well. It refocuses its efforts to indirect channel driven sales from direct sales. It also builds strong relationships with some of its dealers and provides incentives to its distributing channels for sales promotion. Acer has also focused on retailing in order to increase its horizon. Acer has also adopted slogans like Life is busy which makes it easy to help consumers to better relate with other consumers (Kim & Mauborgne, 2004). The resources and capabilities of Acer are used by the company to gain competitive advantage against it competitors. Acer also derives its competitive advantage through a facilitated growth in the IT segment (Kaplan & Norton, 1996). This competitive advantage is derived from the fact that the company has: an increased consumer demand for notebooks, provision of innovative and new technologies at very competitive prices, the increase in computer use in education, increased people’s wages for helping in increasing sales of PC, and building a strong relationship through having its presence in over 40 customer verticals in various sectors like Education, Banking, Telecom etc. Acer Inc. is however faced by some challenges in deriving its competitive advantage. Some of these challenges include: dealing with ever growing affluence of consumers in Towns and Small cities that provides proper after sale service and sales support in remote countries. Acer Inc. looks forward to increase its growth by 2012 to 20%. Acer also wants to build solutions on education front to tie up with format retail stores such as Metro, Croma and Next in order to reach out to a mass of consumers (Hegarty, 2010). Assessment of key environmental factors Acer is the third largest manufacturer of electronics (PC) in the world using a transnational strategy for procuring its components in order to maintain cost leadership. Through the use of PESTLE, a comprehensive analysis of Acer Inc. Internal and external forces are reviewed. Acer Inc functions in a very competitive market with market giants such as Lenovo, Dell and HP. However, the strategy of Acer is to remain the third largest manufacturer of PC in the globe in this highly competitive and commoditized industry. The strategy includes development of new technology, acquisitions, solidifying strategic alliances with firms like McAffee and Microsoft, and growing the emerging Japanese and EMEA regions (Shaw & Kotler, 2009). Acer Inc. competes in its functional environment within the industry of PC and peripherals offering personal computer solutions for businesses and consumers. In contrary to its competitors, Acer Inc. provides alternative brands for various segments of customers instead of just one brand wit different variables (Burke, van Stel & Thurik, 2010). This enables Acer to maintain a margin for every brand without any form of cannibalization. Majority of brands within the industry of PC offer one brand. However, only Acer offers various brands for different customer segments. Though Acer takes middle ground on the basis of reputation and pricing, as well as covering the low and premium end of market, other brands operate on a higher or lower pricing provides dependent upon their segment of the market. For example, whereas Lenovo and HP take a higher price position, Dell takes a position of price leadership. The main aspect is that Acer compared to its competitors stands alone in providing a range of products targeting different segments of the market and consumers (Taylor & Nichols, 2010). PESTLE Analysis Acer Inc is affected by macro environment factors, factors which operate in its external environment. These factors are not specifically about Acer alone but affect the overall operation of the organization and the industry in general (Orit, Leung & Vesting, 2007). Acer cannot control macro environment factors since they are external factors which are not very particular about Acer. Therefore Acer only needs to manage the impacts of such factors to their sales and branding. Macro environment are described by PESTLE (political factors, economic factors, Social factors, Technological factors, Legislative factors and environmental factors). Acer has managed to tackle these factors through its enabling environment and branding strategies. These factors impact on the market and may limit the share of market held by Acer (Shaw & Kotler, 2009). Conclusions and recommendation In summary, Acer is a computer and a laptop manufacturer owning the largest computer retail chain in Taiwan. The company was founded by Stan Shih, Carolyn Yeh his wife, and a group of five others in 1976 as a Multitech. Acer is the third largest computer manufacturing company in the world holding 9.5% of the market share, with its growth being experienced outside USA mature market, largely in emerging nations (Porter, 2001). The report has detailed the strategic analysis of Acer Inc. through environment analysis of Acer, capabilities and resources of Acer, and the extent to which Acer match its environment. I would therefore recommend that Acer to find Blue Ocean within the industry of PC and peripherals, to use sustainability as the major innovation driver, to adopt balance scorecard with its alliances, and to finally assist the distributors in developing a system of sales in order to support its product. 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