ACER CREATING NEW GROWTH
Submitted by: STU09971
Tutor: Colin Price
Course Coordinator:Hannah Moore
Critically evaluate Acer's approach to the creation of new growth platforms as a means of achieving sustainable competitive advantage. What do you conclude?
In the light of increased competition in the PC industry, there is a need to capture and maintain market share, not only be profitable but to be sustainable. The Acer Company has over the years moved from being a little known Taiwanese PC maker to being ranked among the world's top five branded PC vendors.
Porter (2008) notes that strategy is about obtaining and maintaining a competitive advantage.
The Acer organisation realised the need to capitalise on skills, technologies, knowledge and other capabilities which were not a part of their organisation and employed strategies which sought out complementary companies with which to form mergers or acquisitions.
In its initial stages, the Acer Corporation's strategic focus was not on competing in existing markets with the global leading PC manufacturers, but on entering relatively uncompetitive markets like Europe and Asia.
To enter the US market, Acer adopted a strategy of acquisitions and acquired Gateway and Packard Bell.
Porter (2008) is strongly critical of the creation of mergers as strategy. He notes that while a merger is a step which is adopted to move an organisation to obtaining a unique position in the market, it cannot be considered a strategy in itself.
With acquisitions and mergers in the PC industry, it means that there is a reduction of product choice being brought to the market and that this would mean that consumers have reduced choice. For example, in the PC industry if mergers and acquisitions cause manufacturers to produce PCs with the same features, it means that consumers technically may be worse off. So although market share may be increased, your customers are liable to become less loyal and more prone to seek out competitor's products especially if the costs are lower than your.
This school of thought therefore suggests that having a strategy is more socially beneficial to your stakeholders.
Porter (2008) goes on to suggest that strategy is about innovation in the way a company competes to maintain its market share globally.
With the acquisition of Gateway and Packard Bell, the Acer Corporation was engaging in what can be defined as horizontal integration. This meant that they employed a strategy based on growth, which is realised through the acquisition of similar companies in the market. This therefore ensured that some of Acer's main competitors were eliminated while allowing it to gain access to new markets.
In the PC industry the fighting of battles amongst competitors can leave them drained - financially, and also in terms of human resources, skills and knowledge. Today's industry players have learnt that there must be some measure of collaboration in order to maintain and increase their market share.
Acer Corporation's collaboration with Texas Instruments and China Development Corporation is a result of such collaborations and can be defined as a strategic alliance. If pursued correctly strategic alliances can create greater value for customers and other stakeholders simply by the sharing of costs, skills, knowledge and technology.
Even though the PC market can be described as being aggressively competitive, such alliances can be advantageous to both entities. In terms of competition, resources should be concentrated in those areas where an organisation is assured that there are definite advantages.
It should however be noted that for these alliances to work, there must be advantages for both partners.
Acer's management also needed to boost the company's image internationally. Since Taiwan had an image problem (i.e. being...