Acer Inc, the leading marketer of notebook and desktop PCs

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  • Topic: Brand, Mainland China, Taiwan
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Case 1-3
Acer Inc.
Acer Inc. is a leading marketer of notebook and desktop PCs. The company, which posted sales of $11.3 billion in 2006, also produces other products such as flat-screen monitors and personal digital assistants. As Taiwan gained a reputation as the “tech workshop of the world,” Acer was able to become Taiwan’s number

one exporter by manufacturing and marketing computers sold
under its own brand name. Acer also produced equipment on an original equipment manufacturer (OEM) basis for well-known
global companies such as IBM, Dell, and Hitachi. As company
founder, chairman, and CEO, Stan Shih built Acer Inc. into one of Taiwan’s most successful companies.
Despite Acer’s success, the company had trouble breaking into the American market. Between 1995 and 1997, Acer’s U.S. market share dropped from 15 to 5 percent. In the late 1990s, Shih noted, “In the United States and Europe, we are relatively weak. The local players there are very strong. The problem is that we don’t have good experience in marketing in those regions. It’s a people issue, not a product issue.” Shih has discovered that building brands in the business-to-business market is easier than building brands in the business-to-consumer market. “Business-to-consumer brands have more value but also face more challenges. People involved in business-to-business are usually rational, but consumers in business-to-consumer are usually emotional in choosing their brands,” he says.

In 2000, in a major restructuring, Acer spun off its manufacturing operations. The reason: Shih wanted to transform Acer from
a top 10 global PC manufacturer into a “marketing and services powerhouse.” Shih also refocused Acer’s distribution and marketing on the vast, fast-growing China market. Acer and other key

Source: Dan Hartung/Getty Images.
ISBN 0-558-55519-5
Global Marketing, Sixth Edition, by Warren J. Keegan and Mark C. Green. Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc. players in Taiwan’s high-tech industry stand to benefit from closer economic ties with the mainland giant, which joined the WTO in 2001. WTO rules require that both China and Taiwan eliminate limitations on foreign investment. As a result, the Taiwan-based producers from which Acer now sources its products have most of their factories in China.

Shih envisions building a solid market base in greater China (mainland China, Taiwan, and Hong Kong) and expanding from
there to the rest of the world. “The market in China is very critical for Taiwanese companies to become global companies,” Shih
says. “Innovation is not necessarily related to whether you are smart or not. The reality is that if you don’t have a big market it’s not easy to innovate because the return on investment is too low. The potential of China is not just big markets and low-cost labor. Actually, it’s also for highly educated engineers or professionals.” Shih believes that, if greater China becomes the company’s “home” market (as opposed to just Taiwan), Acer will capture critical economies of scale that will allow it to develop innovative new products that will succeed in China as well as the rest of the world.

Shih understands that it is crucial for Acer to develop a strong brand image in China. “The challenge for this region is really the poor image that is often associated with products here,” says Shih. Shih believes that it is necessary for all companies to be stable and secure in the local market before pursuing regional, then global markets. He continues, “Another important feature is also the government and the general public. They have to understand the role of supporting activities for local brands. If they do not support or use the locally made products, there will be no improvement in this area.”

Ronald Chwang, Acer’s chief technology officer, anticipates that Acer’s knowledge of China’s market will help the company achieve its growth and market share objectives; as he puts it, “Now we...
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