Acer Restructures for Global Growth

Acer Inc. (Acer) was the third largest computer company in terms of world-wide personal

computer (PC shipments in 2007. 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. In the first quarter of 2008, the company sustained its

performance and its market share grew to 9.5%. Its growth rate of 25.2% was higher than that

of Dell Inc. (Dell) and Lenovo. Analysts felt that the company had come a long way since 1994

when it was the number eight player in the global PC market. On April 7, 2009, Business

Week reported that:

Acer can keep the current momentum, it could pass second-place Dell in number of

computers shipped this year (2009)--and close in on HP (Hewlett Packard). Acer has a

strong chance of overtaking HP-3

According to analysts. Acer's rapid growth could be attributed to the restructuring

efforts the company had taken up since the year 2000. In December 2000. Acer split its

PC-system manufacturing business unit into a new division and this was incorporated as a

separate company, Wistron Corporation, in 2002. In 2001, the name of Acer Communications

and Multimedia was changed to BenQ and it started operations as an independent BenQ

brand. Acer focused on providing Acer-brand IT products like desktop PCs, home PCs,

mobile PCs, servers, and Internet appliances. BenQ, on the other hand, offered digital life

devices like mobile phones, LCD and CRT monitors, digital projectors, plasma displays,

optical storage, and imaging products. In 2006, Acer left the board of BenQ in order to avoid

conflicts.

Acer's restructuring enabled the company to realize lower operating expenses which pro-

vided the twin advantages of allowing it to price the PC aggressively and offer higher incentives

to its channel distributors.

Acer's restructuring enabled the company to realiza lower operating expenses which pro-

vided the twin advantages of allowing it to price the PC aggressively and offer higher incentives

to its channel distributors.

Acer also refocused its marketing efforts from direct sales to indirect channel driven sales.

The company opted for achieving growth through building strong relationships with its dealers,

by offering lower prices to the consumers and providing unique product innovations.

As a part of its growth and expansion strategies, Acer acquired Gateway, Inc. (Gateway)

in 2007. This acquisition also resulted in the acquisition of Packard Bell (a major player in

the Western European PC market) by Acer as Gateway had a controlling stake in Packard Bell

The acquisition also established Acer as the third largest computer company.

In India, Acer partnered with Wipro Infotech Ltd. in the initial years. In the year 1999,

Acer opened its own full-fledged Indian subsidiary. It initially concentrated on selling to

government organizations and corporate customers. In 2003, Acer entered the consumer

business by introducing consumer desktops and laptops which were to be sold through chan-

nel partners. The business was divided into the Enterprise Systems Group and the Consumer

Systems Group. However, these groups were disbanded and replaced by a unified marketing

and sales organization.

Acer was a strong player in the government and institutional sales in India. According to

the company, it had strong relationships with 15 large system integrators and this had provided it

with a presence in 40 customer verticals including the banking and financial services industry,

education, telecom, and government.

Acer had been aggressive in building its brand image in India. It signed up Hrithik Roshan,

a popular Hindi film star, as its brand ambassador to promote its products. The advantage of

having a brand ambassador like Hrithik Roshan was that he helped in brand recall and in associ-

ating Acer with high quality.

To have greater brand visibility, Acer began focusing on the retail outlets. As of May 2006.

Acer had 225 retail outlets and 179 retail partners. It intended to establish 350 retail outlets by

2008. Analysts felt that the retail network was a prime channel for the movement of premium

products like notebooks, consumer desktops, and home theater solutions.

Acer's retail strategy was such that each retail outlet was allocated a geographical area in

the city so that the individual retailers could grow their business without infringing on another

Acer partner's customer base. The channel partners were provided training and emphasis was

placed on channel communication and relationship management.

According to the company, in 2008, Acer's focus in India would be on education, youth,

and retail. For the education segment, it was building solutions which fit the needs and budget of

the students. On the retail front, it intended to tie up with large format retail stores such as

Croma, Home Solutions, Next, and Metre Acer's turnover in India in 2007 was Rs. 12 billion,

(HCL), and Lenovo in the overall PC market, but had a significant share (10%) of the fast grow-

ing notebook segment in India, after HP (37%) and Lenovo (16%).

The growth in India was spurred by an increase in the consumer demand for notebooks.

which accounted for 27 percent of PC shipments in 2007. IDC had predicted that the Indian

PC market would grow at a compound annual growth rate of 20 per cent through 2012.12

According to Piyush Pushkal, manager for PC research at IDC India, the growth in the

market would be fueled by an increased demand for PCs by large enterprises, their increased

usage in education, and the Indian government's push toward automation. In addition to

this, the increase in wages in India would also help in driving PC sales in the consumer

market, analysts felt.

However, there were certain challenges that Acer faced in India. In addition to intensifying

competition, the company had to deal with challenges such as how it could take advantage of the

growing affluence of consumers in smaller cities and towns. The growth for Acer in India, the

far, had come from the big cities and it had a low market penetration rate in the small wows

Further, the service infrastructure in the small towns was also a cause for concen.

Case Questions

1. In your opinion, can Acer's growth in the global arena be attributed to the restructuring of its operations? Give reasons to support your answer.

2.suggest a note on the growth path adopted by Acer in India. What should Acer do now to take advantage of the opportunities presented by the Indian market?

3. Do some research on Acer and give an update on the company's situation in India and also globally as of the time of your reading this case.