Acer China Manufacturing


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In 1998 Acer is thinking about whether or not go into the chinese market, which is very attactive. Acer has strenghts in manufacturing and is evaluating if the right decision is to build a new facility in China. The final recommendation is to have a partnership (strategic alliance) already established in China.

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Acer China Manufacturing

  1. 1. Acer China Manufacturing Decision “Fresh Technology enjoyed by everyone, everywhere.” everyone, everywhere.” Presented by: Maria Pia Carbonell Sarinporn Jorphochaudom Hortense Mudenge Minerva Nayan Fabian Ochoa Mar 13, 2010
  2. 2. 1. Contextual Analysis 2. Attractiveness 3. Capabilities 4. Strategic Position Analysis 5. Strategic Partnership: Selection Criteria 6. Work Plan 7. Recommendations Case competition
  3. 3. • Acer is deliberating whether or not the company is ready for full operations in Chinese mainland. •The computer industry is becoming highly segmented with companies looking for niches •Need to maintain profit margin, fresh capabilities to counter risk of changing technology/price changes/stock outs/over stocking, and an effective Global attitude (maintain the company goals but through a local approach) Situation •Acer has a niche in PC systems(components and peripherals market) •Sustainable competitive advantage can be achieved in China only when the Acer gains operational efficiency resulting from high volume, low cost and high quality achieved only •If suppliers would agree to join them, political certainty, effective training and motivation of workers through salary, health benefits, have a niche in electronics, and understanding of culture and behaviors • Political and Security Issues • China sees Taiwan as one of its provinces and does not recognize Taiwan’s independence • Taiwan is a democratic form of government, similar to the West • Trading difficult because of transportation links problems: sea and air • Taiwan’s official economic policy restricted direct investment in China, especially large and high-profile Complications investments • Chinese Culture • Relocation of Taiwanese • How to source inputs regionally • Due to low prices, market has become more sensitive to quality technology -> Acer is not yet popular in terms of quality Key Question • Can Acer enter the Chinese market successfully? Case competition
  4. 4. Size/Growth Barriers to entry (Low) Buyer power Supplier power Rivalry Substitutes Market • Low Start-up Costs • Size and • Strong • Legend, IBM, • Many products • China PC • Easy to develop concentration relationship Founder, HP, • Low prices in Industry economies of scale of Buyer with suppliers Great Wall, competitors’ growth in • Lots of • Joint Compaq, Dell, products 1997 by so costs can be suppliers. Ventures to Start, Langshao, • Traditional 40%. lowered • Preferred establish Hirense. typwriters • Enormous • Steep learning product distribution Accounted for • Pen and paper potential of curve in Production (Legend and systems more than 60% • Manual market size. Process Chinese • “Local touch” market share. documentation • Government Brands) owned by • Leadership by process Legislation. • Low switching local Legend costs investors • Lots of players Political Instability • Low (Low) • Logistics: Sea and differentiation air transportation in products constrains COMPANY STRENGTHS: COMPANY WEAKNESSES: • Human Resources: 1. Decentralized Structure 1. No exposure in China yet Regulations on 2. Transferred Knowledge 2. Taiwanese hesitant to relocate to China 3. Technological Competence 3. Issue in getting local suppliers hiring foreign 4. Manufacturing Capabilities workers. 5. Central Kitchens 6. ISO Certified Thought Acer has all the capabilities to go into China, there are also several factors preventing it from Case competition doing so.
  5. 5. 1. Financial • Growing (Strong) 2. Technological • Development in all business areas (Strong) 3. Culture • Family and Western type 4. Human Resources • Organizational structure modified 1998 • Transferred knowledge from R&D to manufacturing • Understanding of Chinese Market • Challenge in training to workforce to achieve standard efficiency Case competition
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  9. 9. Key Considerations: 1. Build on Acer’s current weaknesses (entry barriers, culture, attracting skilled manpower etc) • Considerable presence in China (brand, sales, operations) • Positional advantages (warehouses and manufacturing facilities spread throughout China and in districts with tax and other incentives) • Complementary organizational culture to Acer (family oriented partnerships) Case competition
  10. 10. Key Considerations: 2. Strategic Growth Areas • Market size in semi conductors, consumer electronics etc • Strong supply chain (Vendors, DCs) 3. Acer can add value (help to address their unmet needs) • Training (skills) • Technical expertise • Quality standards • Incentives Case competition
  11. 11. Quarter1 Quarter2 Quarter3 Quarter4 (1) Monitor government rules and regulations (incorporation laws, tax incentives, etc) xxx xxx xxx Xxx (2) Identify companies with presence in China xx (3) Conduct ocular inspections (to determine distribution efficiencies, infrastructure, x x sustainability of supply chain, skilled manpower) (4) Select potential partner, then negotiate terms of partnership xx x (5) Conduct capacity-building trainings; technology transfer xxx (6) Monitor progress and assess sustainability of partnership xxx Case competition
  12. 12. 1. Partner with a Chinese company that will complement Acer’s weaknesses and address the company’s barriers to entry 2. Consider in the future to establish Acer’s “village” in areas outside mainland China (such as Macau which became an autonomous region in 1999) 3. Consider also in the future, once restrictions are lifted, areas within mainland China that have tax incentives, favorable business conditions and sufficient infrastructure (same as in Subic and Juarez) 4. In case the partnership fails, Acer may leverage on their capability of supplying computer components to IT companies in China. They can have production factories outside mainland China and companies can outsource from there (patterned after the GO strategy for manufacturing) Case competition
  13. 13. Thank you. Case competition