Acer, Inc: Taiwan’S Rampaging Dragon

Acer, Inc: Taiwan’s Rampaging Dragon

Michelle L

Danielle Humphreys

Lizbeth

Esi

2) Executive summary

Acer, Inc, is a Taiwanese personal computer (pc) company, originally known as Multitech, was founded in Taiwan in 1976, by Stan Shih, his wife and three friends. Under the guidance of the CEO Shih, a strong norm of frugality, nobility, evidenced by his many slogans, employee involvement and ownership, an anti-classic Chinese entrepreneur’s tight personal control, and joint ventures led to early successes for the company and guided early expansion

The case describes the strategic, organizational, and management changes that led Acer from its 1976 startup to become the world's second-largest computer manufacturer. Outlines the birth of the company, the painful "professionalization" of its management, the plunge into losses, and the transformation under founder Stan Shih's radical "fast food" business concept and his "client server" organization model, which are put to the test when a young product manager in Acer America develops a radically new multimedia home PC with global potential. Shih must decide whether to give an inexperienced manager in a loss-generating subsidiary the green light.

3) Introduction of the problem and issues in the case

After just a couple years, Shih started on a globalization process, as he targeted smaller neighboring markets, of lesser interest to the global giants, and established partnerships with dealers and distributors in Indonesia, Malaysia, Singapore, and Thailand. As the company moved into the international stage, primarily through Asia, Middle East and Latin America, multitech introduced its first mainstream, commercial product, the inexpensive “microprocessor” computer. Success with this product led to the realization of developing pc market. Multitech began manufacturing IBM-compatible PCs in 1983 primarily as an original equipment manufacturer for major brands under its own multitech brand, with sales reaching $51 million. With confidence levels escalating by the mid-1980s, the company was ready to expand globally, staking its claim in Europe, with a marketing office in Dusseldorf, a warehouse in Amsterdam, and its American subsidiary AAC.

Growth and success also has its ups and downs. As the competitive dynamics in the PC market changed, Acer had to reckon with is financial picture, as its gross margin of about 35% began to erode ,a resulting effect of other PC competitors actions which led to a dramatic price reduction in PCs. Shih then sought new blood by signing Leonard Liu as Chairman and CEO of AAC in 1989. This new direction focused on high-end products, SBUs and RBUs. With losses and failures looming, another new CEO was named in 1992, as Liu resigned. Ronald Chwang became the new leader of AAC with a new Director of Product Management, Mike Culver, who became the luminescent icon with the new ideas for product differentiation and hence, the birth of the Aspire, Acer’s first conceived, designed, and championed product by a sales-and-marketing oriented regional business unit (RBU) versus a production-and-engineering focused strategic business unit (SBU) in Taiwan. As the company deals with the daily constraints of business strategies, solutions for maintaining their market share, and dealing with the 5 years of losses with the overseas units, Shih was excited, yet, concerned with the impact this new product and its global launch can have on the company.

Acer’s growth and success was largely due to the nobility in Shih’s business structure. Shih grasped every available opportunity- providing engineering and product design advice to local companies, imported electronic components, offering technological training courses, and publishing trade journals- tools that inadvertently contributed to this entrepreneurial success. Further evidence of Shih’s nobility was evidenced by his many slogans, stories, and concepts he constantly communicated to his employees. Beginning with frugality, he emphasized on the “poor man’s philosophy”. This meant paying modest salaries, but offering key employees equity, giving them ownership positions in subsidiary companies, yet encouraging them to supplement their income with moonlighting at other jobs. Building on his frugality concept, he believed high tech products had to be low-priced in order to ensure turnover, avoid the use of debt by receiving cash payment s quickly, and above all, the” Acer 1-2-3” principle (customers come first, employees second, and shareholders third).Shih totally went against the traditional patriarch-dominated, family run Taiwanese business model, by delegating substantial decision-making responsibility to his employees to accentuate his strategic business fit, trusting employees to act in the firm’s best interest. His commitment to employee education was of prime importance, hence the slogan “Tutors conceal nothing from their pupils”, which emphasized the open nature of relationships and reminded managers of their responsibility in the development of strong teaching relationships between themselves and their subordinates. Culturally, this bred a sense of family, but a demanding one, hence, Stan Shih made a concerted effort to combat what he called “the big rice bowl” sense of entitlement- constantly challenging subordinates and allowing managers to freely make decisions, providing they take responsibility for their actions. This whole concept of delegation was extended to organizational units, forcing independent operational entities and competition with outside companies. This further led to the experimentation with joint ventures as a way of expanding sales, partnering with entrepreneurs in central and southern Taiwan-an integrative business strategy- which allowed Multitiech to expand sales without the risk of hiring more people or raising more capital, (a benefit of the joint venture business strategy). These strategies implemented by Shih- employee ownership, delegated accountability, management frugality, and joint ventures- led him to another slogan he called a “commoner’s culture”.