Acquisition strategy

Although Taiwan hardly built a universal status for its products’ design, quality, significance, and service, its PC companies still function mainly as unknown OEMs. This in return led to a difficulty for customers worldwide to know about the tremendous Taiwanese parts that contribute in the making of computers at home and in office. Taiwan is still regarded by many customers as a symbol of low-cost, low-quality Asian producers of merchandise. One of the significant computer companies that succeeded to some extent in changing this image is “Acer”.

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Acer formally known as “Multitech”. It was founded in 1976 in Taiwan by Its CEO now “Stan shih” who had a great impact on the company’s strategies and success of going global. “Acer Inc. (Acer) is the third largest computer company in terms of world-wide personal computer (PC) shipments. With 2. 43 million units shipped, the company enjoyed a market share of 7. 6%. Its growth rate stood at 31% against the 30% of Hewlett-Packard Company (HP) and 21% of Lenovo Group Ltd” [2]

“The company has historically succeeded by competing on low-cost value computers, but with the acquisition of Gateway (August 2007), eMachines (August 2007), and Packard Bell (January 2008), has begun to market these brands toward higher-end segments”[4] From localization to globalization. Acer’s globalization process faced many challenges, which could be summarized into four points: brand image “Made in Taiwan”, inadequate monetary funds for operating globally, global endowment in short supply, and highly fragmented Asian markets that make economies of scale a difficult task. Acer adopted global strategies that were different from U. S. , European, or Japanese approaches. World Executives considered them a “fourth way of globalization”.

These strategies were adopted by shih out of the belief that unlike North American and European companies, challenges facing Asian companies are different. Those strategies are based on least resistance, selection of market segments where there are few competitors and market share could be easily won. ex. Acer started its regional expansion in 1978 targeting smaller neighboring, like Indonesia , Malaysia, Singapore and Thailand; markets that were of less interest to global giants.

It continued expanding in the 80’s this time globally through Middle East, Latin America & Europe by establishing a marketing office in Dusseldorf and a warehouse in Amsterdam. Acquisition strategy ,which is also one of Acer’s well known strategies for Invading globally. This strategy sometimes led to failure and other times led to a huge success to the company. Ex. when Acer decided to enter the US market for the first time, It bought Counterpoints and Altos, mini computer firms.

Although gaining up to 4% of the US market share by achieving 68% of pc sales, this was considered a short term success that was followed by great loss. “The two acquisitions proved to be costly mistakes, draining Acer America’s cash flow for years . Even more disastrous was Acer America’s weak brand awareness”. [1]Obviously that was to happen because US market was powerful with Pc brands labeled “Made in USA” and “Made in Japan” which was considered as more in quality than PC’s branded “Made in Taiwan”. Acer’s targeted low cost strategy didn’t work this time.

It was even a huge mistake entering a new country for market competition without having sufficient knowledge about its market. Entering a new market requires joint ventures with local relations (i. e. sales agent, or a joint venture partner) as an entry strategy, to build experiential knowledge 1st which is a crucial strategic resource for competition in such powerful markets. Also, joint ventures are less costly than acquisition. Learning from mistakes, Acer kept an eye on the US market & this time took a great step that made it gain the third-level in the pc market after Dell & Hp.

This step was by the acquisition of Gateway Ltd,which is one of the well known strongly positioned brand in US mid-priced retail market. In this acquisition Acer market share “rose from 14. 7% to 17. 7% in 2008″[4]. It also benefited from Gateway’s strong brand-name recognition in the US through operating underneath it Rather than repositioning its own brand into the high-end market. This smart movement was welcomed by the US PC market. Three main components that constitutes Acer’s global strategy:” global brand, local touch; innovation in technology and management; and peripheral attack”.

[1] “Global brand, local touch “A vertical integration FDI used through joint venturing with top local partners to access funds, talent, and marketing capabilities in overseas markets. Advanced technology and management encouraged the manufacturing of innovative products, like Aspire, which is a successful line of desktop computers that combine both state-of-the-art technology and creative appearance. These innovations endorse a constructive and progressive figure for the company and help it to minimize any lingering associations with the previous “Made in Taiwan” stereotype.

” A key lesson that was learned from experience in the Japanese and U. S. markets was the need to avoid head-on competition with established brand-name manufacturers that had already earned the trust and loyalty of consumers, particularly consumers in their domestic markets”. [1] this lesson resulted in Acer’s peripheral attack strategy. The strategy of peripheral attack aimed at shifting the company from manufacturing PCs and promoting them under the Acer name towards manufacturing marginal gears and devices. Conclusion: Acer Company went globally using every tool expected to maintain its competitiveness in the market.

Despite facing some fall downs like any businesses, Acer’s “21 in 21” global strategy which relies on Consolidation, mutual interest, investment in R&D and voluntary cooperation of a network of independent companies, secured its global business worldwide.

References: [1] Lyn S. Amine; Mike C. H. Chao and Mark J. Arnold (2005),”Executive Insights: Exploring the Practical Effects of Country of Origin, Animosity, and Price-Quality Issues: Two Case Studies of Taiwan and Acer in China “, Journal of International Marketing,(volume)13:2(pages)114-150