A paradigm shift has taken place at Acer Inc., changing the core fundamentals of the company. Production has been sloughed off and innovation has been redefined, leaving behind a trim, fast and hungry global competitor in the PC heavyweight division.
The scorecard on the shakeup is conclusive: Acer has quickly ascended up the ranks to become the world’s 4th largest PC vendor, soon to be challenging for number 3, according to company chairman JT Wang.
According to market research firm IDC, Acer experienced global year-on-year shipment growth of 53.7 percent, shipping 2.5 million units during the third quarter of 2005. Acer grabbed a total market share of 4.7 percent globally, according to IDC statistics.
Growth for Acer was primarily driven through the European, Middle Eastern, and African (EMEA) region, which saw shipments grow 7.7 percent quarterly and 47.4 percent yearly. Acer maintains a 9.5 percent market share in the EMEA region — third largest for that area.
IDC indicated that extensive distribution channels, low pricing points, and strong growth in the Asia-Pacific region also helped the company’s rise.
From humble beginnings
The story of Acer starts with Stan Shih, the undisputed godfather of Taiwan’s information technology industry.
Shih started Acer (then Multitech) in his garage in 1976, using innovative techniques to build clone PCs at a fraction of the cost in the US. The “clone PC” business model caught on, driving the growth of Taiwan’s IT industry.
In 1987, Shih changed the company’s name to Acer and went global with the brand. Shih and Acer helped drive a surge in innovation across Taiwan.
This identity has stuck with Taiwan through the years. In 2004, the World Economic Forum declared Taiwan as its fourth most competitive economy in its Global Competitiveness Report 2004-2005, due mainly to being a strong innovator.
Path to PC heavyweight
In the late 1990s, Acer executives refocused their efforts, and redefined the main goal of the company. Acer decided it was time to focus on own brand development.
As a result, almost all of the 100 peripheral companies and business units associated with Acer were spun off, including the OEM/ODM production unit, which became Wistron in 2000; the communications and multimedia unit, which became BenQ in 2001; and the optoelectronics unit, which became Acer Display in 1996, and later AU Optronics in 2001.
“Essentially, we have tried to outsource any unnecessary expenses,” said Wang. “This allows us to keep operating expenses at around 4 percent, nearly half of what our competitors offer.”
Wang explained this provides Acer with double the arsenal to attack its competitors with. First, Wang noted, the company is able to aggressively price its PCs, allowing the company to experience double-digit shipment growth. Additionally, Acer can offer high incentives to its channel distributors, ensuring products reach end market users.
Wang noted that outsourcing production and new product R&D stripped the company of many of its responsibilities. Wang stated that innovation, one of the trademarks of the company, would be a key force driving the company.
“We are now taking a strategic approach to our use of innovation. We will not innovate for innovation’s sake. We will only innovate on commercially successful products.”
Wang explained that Acer would now wait until product markets were at a near saturation point before the company would enter the market. Then, Acer could apply its own unique brand of innovation to drive sales and lowered costs to ensure high profits.
An example of Acer’s latest brand of innovation comes in the form of the new Acer Ferrari 4000 notebook. The notebook is the third and latest in a partnership series between Acer and Scuderia Ferrari.
The Ferrari 4000 notebook prominently features the Ferrari trademark stallion on the cover, yet has the internal hardware to backup the name. The notebook is built upon AMD-64 technology, providing leading power and performance gains.
Wang stated that the company believed the Acer Ferrari 4000 notebook would help make inroads into a traditionally tough market for the brand in the North American market.
However, Wang feels that by building strong relationships with its dealers, offering lower prices to consumers, and providing unique product innovation will translate to success in the market. Growth will push the company into the number 3 spot worldwide by the end of 2008.
By reshaping its corporate culture, cutting away the excess and bolstering its core strengths, Acer Inc. has grown to become the world’s 4th largest PC vendor. With an emphasis on “commercial innovation” and a focus on the North American market, expect the Taiwan giant to soon surpass its competitors.