Acer

Acer

Acer Inc. (/ˈsər/; Chinese: 宏碁股份有限公司; pinyin: Hóngqi Gǔfèn Yǒuxiàn Gōngsī, lit. Hongji Corporation) is a Taiwanese multinational hardware and electronics corporation headquartered in Xizhi, New Taipei City, Taiwan. Acer's products include inexpensive desktop and laptop PCs, tablet computers, servers, storage devices, displays, smartphones and peripherals. It also provides e-business services to businesses, governments and consumers. In 2012 Acer was the fourth largest personal computer vendor in the world.

In the early 2000s, Acer implemented a new business model, shifting from a manufacturer to a designer, marketer and distributor of products, while performing production processes via contract manufacturers.

In addition to its core business, Acer also owns the largest franchised computer retail chain in Taipei, Taiwan.

Acer was founded by Stan Shih (施振榮), his wife Carolyn Yeh, and a group of five others as Multitech in 1976, headquartered in Hsinchu City, Taiwan.

It began with eleven employees and US$25,000 in capital. Initially, it was primarily a distributor of electronic parts and a consultant in the use of microprocessor technologies. It produced the Micro-Professor MPF-I training kit, then two Apple II clones; the Microprofessor II and III before joining the emerging IBM PC compatible market, and becoming a significant PC manufacturer. The company was renamed Acer in 1989.

In 1989, Shih hired Leonard Liu away from a 20-year career with IBM, making him president of the Acer group and chairman and chief executive officer of Acer America Corp. Liu's managerial style reflected his experience at "Big Blue": in contrast with Shih's traditionally progressive corporate culture, Liu tried to centralize control of Acer. At the same time, the computer industry quickly matured, shifting from a high profit margin business to a low margin commodity practically overnight. Price wars pushed component prices down so rapidly, and a strong New Taiwan dollar made the country's goods so expensive, that it became difficult to make a profit on the finished product.

1990s: creating multinational brand

In the early 1990s Acer experienced a decline in sales and profit. The US operations in particular were at loss due in particular to price war in this market dominated by Compaq, IBM, and HP. The autonomous management of US executives made things worse. Stan Shih undertook a series of immediate restructuring initiatives such as downsizing non-profitable operations, laying-off low performers, and tightening internal cost control. But in addition he redesigned completely the global organizational structure around three major business units and three managerial innovations.

Instead of creating a series of centrally controlled foreign subsidiaries, Acer established a network of virtually autonomous affiliates, much like a fast food franchise system. Each of these affiliates was managed by a group of locals who determined product configurations, pricing strategies, and promotional programs based on national or regional preferences. The affiliate would usually have just one Taiwanese person on staff to facilitate interorganizational communications. Sales & Marketing Management characterized the system as a "revolutionary departure from the traditional hierarchical model of worldwide branches and subsidiaries reporting to a head office". Instead, it was "a commonwealth of independent companies, united only in their commitment to a common brand name and logo".

In 1993, Acer posted record profits of $75 million; 43 percent of that year's net was generated by the DRAM joint venture, considered "the most efficient in the DRAM industry" by some observers. Total sales grew to $3.2 billion in 1994, and net income increased to $205 million, as Acer America turned its first annual profit in the 1990s. From 1994 to 1995, Acer advanced from 14th to ninth among the world's largest computer manufacturers, surpassing Hewlett-Packard, Dell, and Toshiba.

In 1994, Shih unveiled a plan to "deconstruct" Acer into 21 publicly traded business units by the end of the 20th century. Acer Inc. would continue to own anywhere from 19 percent to 40 percent of the firms' stock, but Shih hoped that their independent status would enable the individual units to compete more effectively by facilitating entrepreneurship, inspiring research and development, and allowing for corporate fundraising through stock and bond offerings.

In 1995, the Aspire PC was unveiled. In 1996, Acer expanded into consumer electronics, introducing many new, inexpensive videodisc players, video telephones, and other devices to boost global market share, and in 1997 extended its laptop efforts by buying Texas Instruments' mobile PC division.

Considering two consecutive quarters of net losses in Q2+Q3 2011 and realization they are selling too many products; 101 individual notebook, netbook and chromebook SKUs in the United States alone, Acer will cut product lines by two thirds beginning in 2012.

In 1998, Acer reorganized into five groups: Acer International Service Group, Acer Sertek Service Group, Acer Semiconductor Group, Acer Information Products Group, and Acer Peripherals Group. Two years later that corporate restructuring did not appear to have made a significant impact on the company overall, and stock prices were falling. Shih restructured again. To dispel complaints from clients that Acer competed with its own products and to alleviate the competitive nature of the branded sales vs. contract manufacturing businesses, Shih spun off the contract business, renaming it Wistron Corporation. The restructuring resulted in two primary units: brand name sales and contract manufacturing. The restructuring also resulted in Acer breaking off several of its smaller operations, including semiconductor design, consumer electronics, and liquid-crystal displays.

Already starting in 1999 the Company took a series of cost-cutting measures: workforce was reduced, US Operations were downsized. But J.T Wang initiated a profound re-structuring. He introduced a more centrally integrated approach based on 3 global principles: "One Global Company", "One Global Brand" and "One Global Team".

2000s growth

Early signs indicated that the spinoff strategy had worked well, especially in Europe, where Acer became a popular PC brand. The global business model behind this restructuring was to transform Acer from a high technology, hardware-focused company to a customer-centric service-oriented company. On the strategic front, contrary to others PCs vendors who tried to emulate Dell by adopting the direct-sales model, Acer decided to rely on third party channels. By getting rid of all manufacturing functions Acer was free to source all hardware from multiple suppliers. The supply chain model was to direct the flow of goods directly from suppliers to distributors through a headquarters’ centralised enterprise resource planning system (ERP) fed by information coming from local subsidiaries.

In 2003, company sales increased 48 percent to $4.6 billion, and helped Acer surpass Japan's Toshiba and NEC, making it the world's fifth largest maker of PCs. In 2005, Acer has successfully implemented the Channel Business Model across its worldwide operations. In 2004, Gianfranco Lanci, an Italian, was promoted CEO of Acer Inc. while J.T Wang remained President.

Growth and netbook raise

Acer increased worldwide sales while simultaneously reducing its labor force by identifying and using marketing strategies that best utilized their existing distribution channels. By 2005, Acer employed a scant 7,800 people worldwide. Revenues rose from US$4.9 billion in 2003 to US$11.31 billion in 2006.

Acer's North American market share has slipped over the past few years, while in contrast, the company's European market share has risen.

In the mid-2000s years, consumer notebooks have been almost the sole growth drivers for the PC industry, and Acer's exceptionally low overheads and dedication to the channel had made it one of the main beneficiaries of this trend. Acer grew quickly in Europe in part by embracing the use of more traditional distribution channels targeting retail consumers when some rivals were pursuing online sales and business customers. In 2007 Acer bought Gateway in the USA and Packard Bell in Europe and became the Number 3 world provider of computers and number 2 for notebooks, and achieved significant improvement in profitability. Acer has been striving to become the world`s largest PC vendor, in the belief that the goal can help it achieve economy of scale and garner higher margin. But such a reliance on the high-volume, low-value PC market made Acer exposed when buying habits changed.

2010's sales falling and restructuring

Following the decline in sales, especially of notebooks, the company's president Gianfranco Lanci, the man who was largely responsible for the super-efficient, high-volume channel business model that made Acer the second biggest PC OEM by sales volume was departed due to disagreements with the shareholders. Lanci said that the interests that control Acer were worried that his plan would lead to a de-Taiwanization of the company while he was just trying to make it more global.

On June 2011, Acer re-evaluated its inventory-management strategy in light of worsening economic conditions in Europe, clarifying a large write-down. Acer said the main reason for the disputes was "high inventory" carried by distributors of its products, reflecting an "inappropriate strategy" in its European operations under the current market situation. According to Acer, "Southern Europe's economic situation has been worsening since last year" and the stagnant technology market, particularly in Spain, "influenced Acer's PC sales". Acer discovered the problems through a routine audit, it added.

In efforts to stimulate growth, the company began in strategic restructuring aimed at strengthening Acer as a marketing-oriented company. To energize and strengthen Acer’s global marketing organization, Acer began engaging with Red Peak Group, a global marketing services firm, and appointed Red Peak Chairman Michael Birkin as Acer Chief Marketing Officer. In addition to the marketing organization and personnel changes, Birkin has been assigned to lead a newly established marketing committee as Chairman, responsible for integrating Acer’s global branding and marketing strategy.

In September 2012, chairman Wang declared Acer's top priority as to boost its operating margin. The company plans to sell more ultrabook laptops and touch-enabled Windows 8 devices, and invest more in product research, development and marketing. He said the global economic slowdown and product transition to the new Windows operating system have made business more challenging.