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ACER, INC.
Term Paper ID:26857
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Essay Subject:
Examines computer firm's success & its strategy options for operations in Canada.... More...
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6 Pages / 1350 Words
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Paper Abstract:
Examines computer firm's success & its strategy options for operations in Canada.
Paper Introduction:
ACER IN CANADA: CASE ANALYSIS
The essential problem confronting Acer, a personal computer (PC) and components manufacturer and marketer, in this case is a decision on whether to serve the Canadian market through the company’s United States subsidiary, Acer America, or to establish a Canadian subsidiary to serve the Canadian market. Acer America served the Canadian market at the time of this case in 1995. Thus, a continuation of this strategy would be the status quo option for the company in this case.
Acer’s total global revenues in 1995 were US$5.8 billion. In great part, this revenue was generated through the sales worldwide of 59.2 million PC units, of which 23.9 million units were sold in North American (United States and Canada) markets. With a 40.4 share of Acer sales, the North American markets obviously were ver
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A major justification for Lin's approach was a rapid responseability to serve local (Canadian) needs within the "Global Brand-LocalTouch" strategy. In Canada, PC unit sales generated 22 percent of the company'sdistributors' revenues in that market in 1995. acer in canada: case analysis The essential problem confronting Acer, a personal computer (PC) andcomponents manufacturer and marketer, in this case is a decision on whetherto serve the Canadian market through the company's United Statessubsidiary, Acer America, or to establish a Canadian subsidiary to servethe Canadian market. Thus, to grow in worldwidemarket share, Acer needed a strategy that would boost sales. Satisfyingdistributors in Canada, thus, was one way of boosting Acer PC unit sales inCanada. Such stability facilitates the standardization ofproducts, the centralization of decision-making, the routinization of workand rewards, the development and enforcement of standardized rules andprocedures, and the allocation of work on a dedicated basis to specializedtasks. Within the Canadian market, the distributor groups most important forthe sales of the company's PC units were (1) value-added resellers with 28percent of the company's PC unit sales, (2) national systems integratorswith 26 percent, (3) smaller retailers with 25 percent, and (4) massmerchandisers with 2 percent. The value-added resellers and national systems integrators in Canadadepended less on the sales of PC units for their total revenuecontributions, 13 percent and 14 percent respectively, than did smallerretainers and mass merchandisers, 37 percent and 17 percent respectively.Thus, the company needed to make an extra effort to promote their PC unitproducts through the value-added resellers and national systemsintegrators, as they were less dependent on such products as revenuecontributors than were other distributor groups. Thus, a continuation of this strategy would be thestatus quo option for the company in this case. A high level ofcustomer service is analogous to a high level of consumer satisfaction.The concept of consumer satisfaction, in turn, is the basis of the conceptof quality management. By 1998, total PC unit sales for Acer were projected to reach 93.2million units, of which 35.7 million would be sold in North Americanmarkets. While the sales in units of bothportable PCs and PC servers were expected to increase more rapidly thandesktop PCs in the Canadian market than were sales in units of desktop PCsin proportional terms, this statistic is not a good basis for analysisbecause of the great variation in base unit sales of desktop PCs and bothportable PCs and PC servers. Quality is an essentially meaningless term unless aperception of quality is attributed to a product-good or service-by theusers of the product. These market shares placed Acer eighth world wide inthe PC market. In greatpart, this revenue was generated through the sales worldwide of 59.2million PC units, of which 23.9 million units were sold in North American(United States and Canada) markets. Obviously,the greater projected revenue increase in the largest product segment,desktop PCs, needed to play a prominent role in Acer's strategy developmentfor the Canadian market. Worldwide, Acer's market share increased from 3.1 percent in 1995 to3.2 percent in 1996. By1998, this distribution was projected to be 53.5 percent corporate buyersand 46.5 percent consumer buyers. With a 4 .4 share of Acer sales, theNorth American markets obviously were very important to the company in1995. Mass production, by contrast is the production in high volumes ofstandardized products under conditions of design and process changestability. Acer wasninth in the PC market in the United States, but was not among the top 12PC vendors in the Canadian market. This market has a greater variation in needs for PC products thancharacterizes either large corporate customers or consumers. Thus, the North American market was projected to remain very important toAcer. The concept of mass production is based on assumptions ofstability in both product and process change. A customer-driven strategy is what Acer requires to serve the Canadianmarket. The value-added resellers and nationalsystems integrators, with 54 percent of the company's total PC unit salesin Canada, therefore, were central to the company's strategy for growth inthe Canadian market. The transition from mass production to mass customization transformsorganizations into environments within which managers coordinate theactivities of independent individuals and teams in the use of resources andtechnology to provide customers with the exact products they desire atcompetitive levels of price and quality. At the same time, the relative importance of peripheral productsto the company's distributors' revenues were project to decline from 26percent in 1995 to 23 percent in 1997. Acer's basis strategy was defined as "Global Brand-Local Touch." Thisstrategy, thus, essentially was one of mass customization. In terms of absolute revenue generation,desktop PC growth from 1995 to 1997 in the Canadian market was projected atC$44 million, while that for portable PCs was projected at C$1 million,and that for PC servers was projected at C$115 million. In terms ofprojected revenue growth, desktop PC sales were projected to increase 23.2percent, while portable PC sales were projected to increase 17.4 percent,and PC server sales were projected to increase 14.2 percent. In effect, the term mass customizationrefers to a practice of mobilizing technological innovations incommunications, information systems, and production processes to massproduce products that are designed to satisfy the demands of a particularmarket segment as opposed to being designed to satisfy an assumed universaldemand. The delivery of high levels ofcustomer service is becoming more difficult, as the customer base for mostfirms becomes both more diverse and more demanding. A mass customization strategy isa customer-oriented strategy. Mass customization is defined as making products tailor-made foreach individual buyer, but wherein production levels provide economies ofscale. For North American markets, PC unit sales for Acer in 1995 were split59.4 percent to corporate buyers and 4 .6 percent to consumer buyers. By 1997, PC unit sales wereexpected to generate 25 percent of distributor revenues. Acer's total global revenues in 1995 were US$5.8 billion. Mass customization is a concept in business strategy that, whileappearing to be a contradiction in terms, is a rational evolution incompetition and marketing theory. Of those firms above Acer in the market, only Apple, IBM,and Packard Bell were dropping market share. The home-office market for PC units in Canada was growing and wasprojected to continue to become more and more important as a marketsegment. Desktop PC units were dominant in the Canadian market in 1995 and wereprojected to remain dominant in 1997. Thus, toserve this growing segment of the Canadian PC market, Acer needed to beable to respond quickly to the needs of this market segment. Thus, the consumer market was expectedto become more important. While the North American share of Acer PC unit sales would dropto 39.7 percent, the absolute increase in such sales would be 49.4 percent. Anthony Lin,General manager of Acer's Canadian operations, believed that the assembleof PC units in Canada could better serve the company's "Global Brand-LocalTouch" objective in the Canadian market that could the current practice ofserving the Canadian market from assembly in the United States through AcerAmerica. Acer America served the Canadian market at the timeof this case in 1995. Thus, the recommendation is that Acer adopt a strategy thatincludes the establishment of a PC assembly operation in Canada that isunder the control of an Acer Canadian subsidiary. Within the framework of suchassumptions, both product specifications and demand are relatively stableand predictable. It is a strategy wherein customersatisfaction is the paramount objective.
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