Acer, Inc. – Taiwan’s Rampaging Dragon.
Synopsis of the situation
Shih Chen Jung was born in 1945. In 1972 he earned his maters degree and started working as an engineer for Qualitron Industrial Corporation. “In 1976, he and several friends founded Multitech International with a $25,000 initial investment. They started by designing hand-held electronic games, and then expanded into the distribution of imported semiconductors. Shih renamed his company Acer Inc. in 1981” (Net Industries, 2007. pg. 1). Acer began making PC clones and components that were sold to larger companies with strong brand names. In 1989 projections indicated the company was overextended. Shih hired Leonard Liu away from the International Business Corporation (IBM) and stepped down as the president of the Acer Group. Liu changed the organization to centralized control and later took the blame for the company’s poor profitability. The industry changed from high profit margins to low profit margins almost overnight. This made it difficult to make a profit from the completed products. Shih expanded and setup Regional Business Units (RBU) which developed global brands in order to turn the company around. Shih’s global expansion included joint ventures “in less hotly contested markets in Latin America, Southeast Asia, and the Middle East. By 1995, it was the top-selling computer brand in Mexico, Bolivia, Chile, Panama, Uruguay, Thailand, and the Philippines, not to mention Taiwan” (Net Industries, 2007. pg. 1). In 1994 Shih revealed a plan for Acer to become 21 publicly traded companies by the end of the 20th century. Acer America Corporation (AAC) developed the Aspire computer to be positioned between the high and low end home computer market. Critics and Shih both had reservations about the Aspire and the organizations client server management style.
Shih’s business model was out of the box; his way of thinking was not the common business style of Taiwan. Stan Shih “delegated substantial decision-making responsibility to his employees to harness the natural entrepreneurial spirit of the Taiwanese” (Bartlett, 2008. p. 41). Not all issues were considered before implementation. Rapid business expansion created issues with the company’s finances, stock and management. Providing stock options to one year employees quickly devoured much of the company’s finances. The company’s managers were not trained to operate in international or global operations. The change in company leadership from Shih to Liu did not help the company. Shih allowed the Regional Business Units (RBU) to develop products though much of the direction came from Taiwan. This brought about the Aspire and new ways of manufacturing and delivery. Define the problem
The key issue is the lack of management having global business experience. The management of Acer was based on employees from Taiwan who had little experience outside of Taiwan. Stan Shih envisioned a global enterprise. Shih had developed a manufacturing and distribution setup in many countries around the world. By 1994 the organization had subsidiaries setup around the globe. The question is who should be in control? Who is actually in charge; the Strategic Business Units (SBU), the RBU’s or the CEO? Who makes the decisions? Alternative solutions
The first alternative solution would be to cultivate the managers just as the managers at Acer were encouraged to groom there staff. Acer should have provided the managers at all levels training in global operations and culture. “Global companies develop cultures, where middle managers from various parts of the organization are put together in working, training or social situations, including staffing multicultural teams, encouraging international mobility to various training courses, conferences and parties” (Kottolli, 2006. p. 1). The pro side of developing a global staff is that the strategies the organization implements will be more tailored to global operations...
References: Bartlett, C., Ghoshal, S., & Beamish, P. (2008). Transnational Management (5th ed.). New York, NY: McGraw-Hill Irwin.
Jeitosa Group International. (2006). Global Mentoring. Retrieved May 09, 2008 from the World Wide Web: http://www.jeitosa.com/resources/karen_beaman/Global_Mentoring.pdf
Kottolli, A. (2006). Developing a Global Mindset. Retrieved May 09, 2008 from the World Wide Web: http://www.geocities.com/akottolli/developing_a_global_mindset.htm
Net Industries. (2007). Acer Inc. - Company Profile, Information, Business Description, History, Background Information on Acer Inc. Retrieved May 08, 2008 from the World Wide Web: http://www.referenceforbusiness.com/history2/28/Acer-Inc.html
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