Acer Inc - Strategic Analysis and Strategy Development - Dissertation Example

? Acer Inc. Contents Contents 2 Strategic Analysis 4 1 Industry Analysis 4 2. Profile of the Company 6 3. d Organizational Purpose 6 1.4. External and Internal Analysis 7 2. Strategy Development 11 2.1. Existing Strategies 11 2.2. Strategy Toolbox 12 2.3. Strategic Business Units 13 3. New Strategies 14 3.1. Corporate, Strategic Business Unit and Functional Level 14 3.2 Strategic Direction Matrix 16 3.3. Portfolio Methodologies 16 3.4. Revising SBU Strategies on Basis of Real World Constraint 17 3.5 Difference of the Previous and New Strategies 17 4. Strategy implementation 18 4.1. Weakest Section of Last Year’s Report 18 4.2. Outline Plan for Implementation Strategies 19 4.3. Main Actions to be executed 19 Reference List 20 Appendix 22 1. Strategic Analysis The researcher in the context of the paper will analyze the various types of business strategies adopted by the company and would also frame some future productive business strategies that can be adopted by it in the next five years. 1.1 Industry Analysis In order to execute the industry analysis, the researcher would be using the analysis method of Porters five forces. Bargaining Power of the Buyers (relatively high): The demand of the buyers is relatively elastic because the hardware and the software products are fairly differentiated in nature. Increasing popularity of the online shopping has augmented the bargaining power of the buyers. The cost of switching to a new brand is less for the buyers. Bargaining Power of the Suppliers (low): The industry has a massive global supply chain management process. Thus, the power of a single supplier is insignificant. Many electronic companies start producing the supply parts in their own business warehouses to enjoy scale economies. The supplier does not possess much power to manipulate the prices. Existing Rivalry in the Industry (high): The product life cycle for each component is small. Imitation of technology used in a product is common. High investments to be made by the firms in research and development. Many counterfeit products (Porter, 1998). Threat of New Entrants (low): The existing firms in the industry enjoy lower average cost with the benefits of economies of scale in production. New firms would need to incur huge investments in order to enter in the industry. The government rules and regulations to be sufficed by the new firms are costly as well as elaborate (Anderson and Srinivasan, 2003). The technical knowledge used by the existing firms is patented. So, a new firm needs to introduce a complete new technology for production. The capital requirement for the new entrants is high and the switching cost required is also massive (Papadopoulos, 2011). Threat of Substitutes (low): Computers are indispensible in the modern world. The substitute of computers would mean using the non-technical approaches (manual) for working. 1.2. Profile of the Company Acer Inc. is an electronic and hardware multinational company, based in Taiwan. The headquarters of the company is in Xizhi, New Taipei City (Acer Inc., 2007). The company manufactures personal computers of different types. These include desktops, tablets and laptops of various innovative designs and features. It also sells internet servers, storage devices and different types of smartphones and peripherals. Acer Inc. is also a provider of e-business services and they sell these services to the business, household and government clients. As recorded in 2012, the company had become the fourth largest vendor of personal computers in the market. In 2000, the company had shifted its primary business strategy from manufacturing to marketing, distributing and designing. Since then, the computers sold by Acer Inc. are actually made by the contract manufacturers in the industry. It is also claimed by the market researchers that the company has some of the biggest retail chains for personal computers in Taiwan. The company is a publicly treated company. It was founded long back in 1976 and the present chairman of the organization is Stan Shih. As recorded in 2011, the revenue generated by the company was $16.18 billion (Acer Inc., 2007). The net operating income of the company was $225.1 million in 2011. Operating in almost all the economies in the world, the company generates employment opportunities for almost 7000 individuals worldwide. Before 1976, Acer Inc. was operated under the name, Multitech International (Acer Inc., 2007). 1.3. Stated Organizational Purpose Acer Inc. aims to deliver high quality services and products to its customers. As the primary mission of the company, it desires to enrich the quality of lifestyle of the individuals through its services. It has desired to break the barriers between people and technology. The company aspires to be effective, innovative and fast in providing quality products and services in the long run with sincerity, veracity and trust. It is a profit maximizing company and takes pride in serving the customers worldwide (Acer, 2013). 1.4. External and Internal Analysis External Analysis: PESTEL Political The government of Taiwan has taken active steps to improve the core competences of the multinational companies in its economy. Acer Inc. has benefited from the liberal policies of the government of Taiwan. However, it should be considered that the rising corruption in many countries pose difficulties for Acer Inc. The company outsources some of its product parts from the other nations like, North America. A political conflict between Taiwan and any such country can create severe problem for Acer Inc (Oxford Business Group, 2008). Economical Over the years post globalization, the levels of foreign investments in Taiwan have significantly improved. The Gross Domestic Product and per capita income levels of most of the countries have improved with time. All these factors have helped to augment Acer’s sales in the industry. However, the recessionary trails in the global economy since 2009 have reduced the real value of money incomes, which has largely contributed to the fall in the aggregate revenue for Acer Inc. Since it is a multinational company, its business operations are often subjected to currency risks in the market (Donald and Schindler, 2003). Social The rise in the level of literacy and living standards in both Taiwan and the world economies, has helped to increase the sales of Acer Inc. Individuals in the modern world are more interested to use modern and efficient technological gadgets for both professional and entertainment purposes. However, since the company operates across many countries, it needs to consider the tastes and preferences of all consumers worldwide (Cakir and Pablos, 2011). Technological The huge public investments made in Taiwan for the development of technology have helped Acer Inc. to incorporate modern technical features in its products. Environmental The contemporary individuals are highly interested in the protection of ecological balance. In order to introduce any new technology or manufacturing process, Acer Inc. needs to ensure and prove that the new process is not harmful for the environment. Legal There are a lot of legal restrictions imposed on the electronic goods producing companies, in general. Since Acer Inc. operates in many countries across the world, it needs to abide by the rules and regulations introduced by the governments of these different economies. The degree of restrictions imposed on Acer in the developing countries is lesser than that in the developed nations (Alkhafaji, 2003). Internal Analysis: SWOT Strength The company has a high brand value in the marketplaces of Taiwan, Europe and North America. It is the third largest manufacturer of notebooks and tablets in the global market. The company acquires special technologies which are inbuilt in its machines like, the Ferrari Series, which provides competitive advantage to the organization (Johnson and Scholes, 1993). The employees of the company are highly efficient and technically skilled. The rising revenue of the company is largely dedicated to the excellent productivity of the workers. Weakness The returns on equity of the company are much lower than the aggregate industry average. The return on equity for the company has fallen from about 11.8% (in 2002) to 6.2% (in 2006). It has been found that the company’s business depends on a few potential buyers and supplies in the industry. The profit margin of the company in the last few years is falling significantly (Davis, 2008). Opportunity The worldwide spending on IT industry is growing. From 2002 to 2010, the spending has increased from 1.2 trillion to 1.5 trillion (Hitt, Ireland and Hoskisson, 2009). The demand for the LCD technological gadgets in the industry is also increasing in the marketplaces. With the growth in literacy, the demand for the personal computers has increased (Bryman and Bell, 2007). Threat The global financial crisis in the European economy since 2009 has reduced the velocity of money circulation in the economies all over the world. This has reduced the real value of disposable per person income levels. Thus, the aggregate consumption of electronic goods has fallen in the global market. The level of competition in the electronic hardware and software industry is very high. Thus, the market share of the company might be reduced if it lags behind the extensive global competition (Dibb, 1997). The market for computers in the global industry is highly commoditized. The standardization of the computers has reduced the differences between the branded and the non-branded computers in the industry. It is claimed that the commoditization of the personal computers reduces the brand image of a company. On the whole, after the internal and the external analysis, it can be stated that the Acer Inc. exists in a market where the degree of competition is very high. 2. Strategy Development 2.1. Existing Strategies The organization desires to attain long term growth. Its primary business strategy is profit generation. Acer has realized that a rise in productivity would help it to grow in the long run. As stated in the tagline of the company, to explore beyond limits is the motive. The company has adopted the strategy of improving the productivity and skills of its workers. This is the reason for which the organization has introduced several labour development programs. In order to recruit the most skilful employees, the company uses the special Emotional Intelligence tool (Acerhr, 2013). As a special development strategy, the company maintains good relations with its employees. The organization never discriminates among the employees on the basis of caste, creed, religion or gender. Several rewards and incentives are also given to the hard working employees for boosting their motivation at work. The company constantly upgrades the technology that it uses in its manufacturing process. It realizes that improvement in technology can help the company in reducing its cost, thereby enhancing its profit in the long run. It is a known fact that technological development causes depletion of natural resources in the environment. The company in its official website states that all its business activities are sustainable to the environment. The company promotes the recycling of discarded products as the consciousness of the individuals for the protection and preservation of natural resources is increasing over time. It is believed by Acer that such initiatives would help to enhance the loyalty of the consumers (Crilly, Moultrie and Clarkson, 2008). The company adopts transitional strategy while procuring the components for maintaining the cost leadership. For this purpose, the company sells its products at the lowest price in the global market. The company adopts certain Blue Ocean strategies in order to compete with the rivals in the industry (Agar, 2013). As a part of grand strategy, the company tries to adopt the business policy of merger, acquisition and horizontal integration to enhance its global performance. It has recently tried to merge its business segments with Microsoft and MacAfee. As a generic strategy, the company has adopted the policy of differentiation strategy. By including several value added services, the company attempts to make its products and services different form the rivals in the market. It is true that in the last few years the revenue of the company has fallen. In order to improve its revenue, the company has adopted a good turnaround business expansion program. Figure 1 in the Appendix states that the company has decided to augment its profit in the long run. 2.2. Strategy Toolbox Strategy Purpose Improve business profitability To grab more finance for future growth Enhance the creativity and productivity in business operations Augment profit Improve employee skills For improving business productivity Improve employee relations To motivate employees Technological improvement To reduce cost and increase productivity Initiate more eco-friendly business activities To increase the goodwill and park more potential clients Differentiation strategy (generic) Make the products and services of the firm unique in nature Increasing the number of strategic alliances in business (grand) To expand business and serve better competition to the rivals Increase revenue with turnaround business strategy To improve the overall business Adopt transitional strategy To reduce cost Apply Blue Ocean strategy To serve better competition in the market 2.3. Strategic Business Units There are many strategic business branches of Acer Inc. Acer America Corporation, Gateway, Inc., Escom, Packard Bell and eMachines are the different business subsidiaries of Acer Inc (David, 1986). Gateway Inc. is a computer hardware producing company in U.S.A that is acquired by Acer Inc. The company engages in the production of various personal computers and computer accessories. Packard Bell is another business unit which is under Acer since 1986. It is a small producer of personal computers in the market in Netherlands. Escom is also a business subsidiary of Acer Inc. which is located in Germany. Likewise, eMachines is another company that basically engages in the manufacture of computer monitors. It is the company that had introduced the Korea Data Systems (Coldwell and Laxton, 2004). In terms of products, the company has four strategic business branches: Research and Development Manufacturing Product Management Original Equipment Manufacturing (OEM) sales Figure 2 in the Appendix explains the strategic business units of Acer Inc. 3. New Strategies 3.1. Corporate, Strategic Business Unit and Functional Level Business Strategies In order to target the most potential business clients, the company must utilize demographic form of market segmentation. If it considers age to be an important factor, then its potential customers must be young individuals as they are most interested to use new technological gadgets. The company should try to further expand its business branches in the booming nations in the world. Countries like, China and Russia, are experiencing growing per capita income thresholds. Expanding business in these nations would help Acer to win over a wider base of potential customers for its products (GOV, 2010). The company should try to reduce its business manufacturing cost. This can be done by using technological tools like, Lean and 6 Sigma (to reduce production defects) (Janczak, 2005). Corporate Strategies The decision for internationalization should be adopted by the firm on the basis of economic theories like, transaction cost economics. It should expand its business in those markets where the cost of asset specificity is low (Mallin, 2012). The business operations of the company must be eco-friendly in nature in terms of using renewable sources of energy. Considering the recent recessionary trails in the market and the fall in the real value of money income, the company should try to launch products at lower cost prices (OECD, 2009). In order to enhance the market value of the brand, the company should introduce new brand stretching programs (Anderson and Sullivan, 1993). Operational Strategies The company should appoint an effective human resource management team. This team would protect the interests of the employees in the organization and upkeep their work motivation. New programs and events should be organized by the company to amalgamate its different commerce branches, thereby benefitting from greater resource mobility in future (McCubbrey, 2010). 3.2 Strategic Direction Matrix Where to Compete Global Focus Emerging Economies Selling all Computer Hardware and Software Parts How to Compete Differentiation Cost Efficiency Reducing Business Defects Objective direction Hold improve Brand value Objective measure contribution % Market share Seek market share and focus on widening % margins Resource Level Change of Scope Increase Decrease Augment the Scare Resources in Business 3.3. Portfolio Methodologies BCG Matrix Stars Acer Inc. Question Marks Acer Labs Cash Cow Other Business Subsidiaries Dogs TI-Acer 3.4. Revising SBU Strategies on Basis of Real World Constraint After the recession in the global economy in 2009, supplies of money from the financial institutions (banks) for the purpose of investments have reduced. The commercial banks have reduced the magnitude of lending operations. In order to grab productive finances for business growth, the company, as its corporate strategy, must introduce lucrative and efficient business projects, thereby acquiring loans from the financial lenders. Without the access of finances, the company would not be able to execute the desired tasks in business (The World Bank, 2012). In the course of business operations, the company must try to allocate its resources efficiently, so that it can maximize the productivity subject to given cost. 3.5 Difference of the Previous and New Strategies In the previous strategy, the company had desired to use environmental friendly technologies in its products, but in the new strategy, the firm also wishes to use eco-friendly methods of production and business operations. In the earlier stage, the company had a strategy to improve the relations with its employees, whereas in the new strategy, the company realizes that motivation is crucial for building good employee-business relations (Malhotra, 2010). Profit maximization was the primary strategy of the firm but in the later stage, the firm has realized that lowering asset specificity in business is equally important (Snowdon and Vane, 2002). 4. Strategy implementation 4.1. Weakest Section of Last Year’s Report According to last year’s report, it can be stated that the biggest concern for Acer Inc. is its falling market share in the recent years. High competition in the industry has seemed to lower the popularity of Acer products in the market. In order to improve, the company should not only consider improving product design but should also try to enhance its base of customers worldwide (Wolk and Tearney, 2000). 4.2. Outline Plan for Implementation Strategies Assigning Finance for Research and Development Recruiting a team of Business Analysts Espousing the technique of KPI Recruiting a Market Researchers Team Forecasting future commerce risks and opportunities 4.3. Main Actions to be executed The different types of measures which the firm should introduce in the implementation program are: Assign about 6% of the whole revenue in research and development. Recruit a team of statistical and market research analysts for technically evaluating the unproductive and productive factors of business. Introducing the tool of Key Performance Indicator (KPI) to estimate the triumph of the implementation program. The company can initiate various types of mechanical measures in order to anticipate the upcoming industry risks and opportunities (Tucker, 2010). By conforming to these actions in the implementation program, the company would be able to efficiently apply the estimated business strategies for growth in future. Reference List Acer Inc., 2007. Company Profile. [pdf] Acer Inc. Available at: [Accessed 28 November 2013]. Acer, 2013. Acer. [online] Available at: [Accessed 28 November 2013]. Acer-group, 2013. Acer Group Standards of Business Conduct. [pdf] Acer-group. Available at: [Accessed 28 November 2013]. Acerhr, 2013. Acer Human Resources. [online] Available at: [Accessed 28 November 2013]. Agar, J., 2013. Constant Touch: A Global History of the Mobile Phone. London: Icon Books. Alkhafaji, A. F., 2003. Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. 21st ed. London: Routledge. Anderson, E and Sullivan, M., 1993. The antecedents and consequences of customer satisfaction for firms. Marketing Science, 12(2), pp.125-143. Anderson, R and Srinivasan, S., 2003. 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Papadopoulos, P., 2011. Investment Report - Fundamental Analysis/ Ratio Analysis: Comparative Approach between two FTSE 100 corporations Vodafone plc and British Telecom Group. Munich: GRIN Verlag. Porter, M. E., 1998. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Simon and Schuster. Snowdon, B and Vane, H. R., 2002. An Encyclopedia of Macroeconomics. Massachusetts: Edward Elgar Publishing. The World Bank, 2012. GDP per capita (current US$). [online] Available at: [Accessed 28 November 2013]. Tucker, I. B., 2010. Macroeconomics for Today. Connecticut: Cengage Learning. Wolk, H. I. and Tearney, M. G., 2000. Accounting Theory: A Conceptual and Institutional Approach. 4th ed. Ohio: International Thompson Publishing. Appendix Figure 1: Financials of Acer Inc. (Source: Morning Star, 2013) Figure 2: Strategic Business Units of Acer Inc. (Source: Acer-group, 2013) Read More