Acer is evaluating the feasibility of expanding operations into mainland China amidst a segmented computer industry facing challenges such as low margins and the need for local adaptation. Key considerations for entry include partnering with local companies to navigate cultural and regulatory hurdles, improving operational efficiency, and building a sustainable supply chain. Recommendations emphasize addressing weaknesses, leveraging existing resources, and planning long-term strategic growth in the region.

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. 1. Contextual Analysis
2. Attractiveness
3. Capabilities
4. Strategic Position Analysis
5. Strategic Partnership: Selection Criteria
6. Work Plan
7. Recommendations
Case competition

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. 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. 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

6. Case competition

7. Case competition

8. Case competition

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. 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. 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. 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. Thank you.
Case competition