Enterprise

Analysis Report of AcerGroup: 35EBU6402

Group Members: Zheng Tang 100668681 jp10212786 (leader)Tianyu Cao 100672806 jp10213194Mingyang Chen 100670248 jp10212942Haoxin Zhang 100668131 jp10212733Mingyang Lv 100668290 jp10212748Qingyi Liu 100668304 jp10212749Rujing Li 100668201 jp10212740

Report Word Count: 3,984

2 Introduction

Acer Incorporated is a multinational information technology and electronics corporation in Taiwan. Globally, Acer ranks No. 2 for total PCs and notebooks. The Acer Group employs 8,000 people worldwide. Estimated revenues for 2010 reached US$19.9 billion. The main objectives of this report are to analyze the general performance of Acer in the past professionally, and provide Acer with 5 key suggestions to help it develop better sincerely. In this report, we wrote 3 main areas, external analysis, stakeholder analysis and competitor analysis, of investigation. Each of them contains both theoretical discussion and specific instances.

Group: 35 Analysis Report of Acer

You will see not only the former achievement of this enterprise, but also the difficulties in its way to success. All of these will contribute to our final conclusion.

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3 External Analysis

We applied the knowledge learnt from Topic 4 Business Strategy in this section. A general technique, PESTEL analysis, is extremely helpful in the rational approach of strategic analysis. It is used for identifying what external factors exist that may affect the companies future. What it looks at are political, economic, social, technological, environmental/ecological and legal factors. We analyzed the former 5 ones as below.

3.1 Political Factors

The current political security situation in the world is relatively stable except for the Middle East region. Since the majority of Acer’s clients are in the countries with political security, the political factors do not have strong impact on Acer. However, when new policies appear, Acer will still be affected sometimes. Hence, Acer is required to keep focusing on the change in policies, and immediately adapts itself to the new situation. Some policies are useful for Acer to benefit. For example, the Department of Finance in China issued a gazette notice about the ‘large-quantity concentrative procurement’ on 1st July, 2011. The notice obviously excluded the domestic CPUs from the range of official procurement [1]. Since the commercial cooperation between the two sides of Taiwan Straits has rapidly developed, Acer can use this opportunity to develop CPU area. Hence, it will be caressed by the mainland governments. Under the circumstances of socialist market economy in China, the cooperation with governments will definitely lead to tremendous benefits.

3.2 Economic Factors The economy in current world has maintained the adjustive tendency. Although the global economy involves positive increase, this relies greatly on the large sum of salvage money from the governments. The low investment from common folks has not yet been reinforced. The salvation from governments could hardly sustain the recovery of entire global economy.

Figure 1 Global GDP Growth; Quarter/ Quarter % Annualized (Gray area= IMF Estimates) The figure above shows that the GDP growth in each country remains slow in common in recent years. Especially to the IT corporations, the situation is not optimistic at all. The quarterly financial

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report of Q1 in 2011 reveals that the net profit of Acer was only NT$1.2 billion, and its year-on-year decline had reached to 64%. It was the lowest quarterly net profit during the last six years. The net loss of Acer in the second and third quarter was NT$6.79 billion and NT$1.1 billion respectively [2].

Figure 2 a Comparison of Annual Financial Information over the Last 5 Years

3.3 Social Factors

Acer always thinks highly of the social factors, and makes use of them to improve sales. Acer has begun to explore the European and North American markets years before. They are still the main markets of Acer and have many social similarities such as education, religion, language, values and so on. The successful consolidation of 2 local enterprises, Gateway and Packard Bell, improved Acer’s understanding of the 2 large markets. Hence, it is convenient for Acer to maintain its dominance in PC products. At the meanwhile, Acer continues its expansion in the Chinese market. In 2010, Acer signed a strategic cooperation agreement with Founder, a domestic corporation in mainland. It is beneficial to its realization of the social situation in the entire China. Also, in demographic view, the trend of population senility will be more and more apparent. According to the research by United Nations, the global population aging above 65 in 2010 is 0.523 billion. It will reach to 1.5 billion in 2050 [3].

Figure 3 the Trends in the Growth of the 2 Age Groups for the World To Acer, the sales of products designed for teenagers for relaxation and entertainment such as netbooks will be definitely influenced. Hence, Acer may need to focus more on the adult market.

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3.4 Technological Factors

The technological strategy of Acer was pursuing ‘fresh technology’, but not new technology. The majority of breakthroughs in scientific fields have a high rate of failure, for the limit in external environment. Therefore, Acer does not willing to invest too much in the new techniques lacking absolute possibility towards success. Acer would rather wait till the maturity of the techniques and catch up with the mainstream immediately. Then, Acer will focus on the improvement of the original techniques to keep them fresh. Acer emphasizes the benefit of its customers, who consider that the new technology will cost too much. However, as one of the top 5 PC companies in the world, Acer possesses advanced technology with powerful strengths. For example, Acer has an exceptional merit in LED-backlit high-resolution displays, so that the customers are able to enjoy the vivid colours while saving energy. In addition, the sophisticated design of Acer’s products is also popular among a wide range of customers. Acer also enjoys lots of praise due to the quality of its products.

3.5 Environmental/Ecological Factors

The development of society leaves a series of ecological problems such as rubbish, waste and so on. The general citizens focus more on the environmental issues, but the solutions to these problems among IT corporations still need to be improved to satisfy the ecological requirement from their clients. The ecological problems are accumulating in an amazing speed. Acer takes the long view and considers them as important factors. Acer has noticed the significance of environmental-protection and started technical innovation. They have already decided on a strategy about the integrated energy and climate change to plan for their energy-saving actions since 2007 to 2008. In 2010, Acer overcame the difficulties in manufacture and released 2 types of laptops, Aspire 3811TZ and Aspire 3811TZG. They not only satisfied the RoHS (Restriction of Hazardous Substances) and the international standards, but also refused to use the poisonous materials, PVC (Polyvinyl Chloride) and BFR (Brominated Flame Retardants). Acer was awarded the Greenpeace certificate of notebooks in that year [4].

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4 Stakeholder Analysis

Stakeholders are individuals affected either directly or indirectly by organizations. In this section, using the information gathered and created in the External Analysis, we considered the impact of 5 stakeholders on Acer.

4.1 Suppliers

Many manufacturers are deeply influenced by the environment whose conditions are becoming worse rapidly. Therefore, the large corporations supplied by them are affected indirectly. For instance, the earthquake happening in Japan on 1st April this year has greatly affected the battery supply of Apple, Inc [5]. Acer is also influenced by the suppliers of hard drives in Thailand, which has once been the second largest country producing hard drives in the world and held approximately 40% of the global production. The disastrous flood breaking out on 2nd November, 2011 has caused huge damage to the production of hard drives in Thailand. Due to the shortage, their prices have increased swiftly. Thus, the desktops and laptops that have already been challenged by the tablets are forced to raise prices. It will worsen their situation [6]. Hence, it is appropriate for Acer to diversify the structure of its products. Only by multiproduct development can Acer enrich its resources and reduce the influence from suppliers.

4.2 Customers

Nowadays, whether the traditional desktops or the newborn tablet PCs are warmly welcomed by the general customers. For example, in China, the current popularizing rate of home computers is 40.6% in large cities and 10% in towns, while 62.5% of the families having no computer have planned to buy ones. 22% of the families that have already had computers still want to buy new ones. In other countries, especially developing countries, the popularity of computers also has enormous potential. Even in the developed countries, the popularizing rate of tablets, which is 5% in America and 1.7% in England, is also low, but it is rising in a satisfying speed [7].

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Figure 4 a Report from Nielsen Research among 1.2 thousand American Customers about the Possession of New Electronic Devices

The statistics above show that the global demand for PCs, which are the main products of Acer, will keep on growing and have a brilliant prospect. In addition, the majority of customers have increasing standards in hardware of computers. Thanks to the development in entertaining software, a large number of customers have clear objectives in the conditions of their computers, however, they are limited by the prices of them. Acer is always known for its advantages in prices, so that its products have positive reputation among the folks.

4.3 Media

The media generally agree with the fact that the advantages of Acer’s products involve low prices, stability and reliability. Since 2011, Acer has moved into the new division of tablet PCs. However, according to the analysis and prediction from many critics in newspaper, the sales of notebooks and desktops will decrease in the future, and the tablets following the lead of iPad are not going to earn large sum of profit. The homogeneity of tablets is very serious. Once the market demand begins to drop, the enterprises based on tablet PCs will suffer a hard time. Under the circumstances of negative commentary, Acer is flexible and announces that they will never give up hardware. On 15th April, 2011, Acer released the ICONIA TAB A500 Tablets carrying Android 3.0 System of Google in Beijing. On 16th September, Acer, together with Intel, released the new ultrabooks, Aspire S3 Ethos. Acer does not put down its standards in hardware, and combines the traditional PCs with new operating systems. The decision is praised by the general media.

4.4 Government

One of the most serious challenges faced to all the governments is how to deal with the global financial crisis. The continuous inflation and increasing price of goods have added heavy burdens to each government. Many countries are at the edge, and some of them like Iceland and Greece have already gone bankrupt.

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The government keeps increasing support on the development of new techniques to alter the fate. It is extremely urgent to promote sales and ensure the flow of money. To promote import and export, nearly all the countries have increased the types of preferential tax, especially in the areas of high-tech products. Hence, the support from governments to high-tech development corporations, such as Acer, is sufficient for them to start new research. Acer cherishes this precious opportunity and changes the support into profit, so that it maintains its dominance in the electronic market and goes through the difficult time smoothly.

4.5 Shareholders

The achievement of Acer in years before has satisfied the shareholders of it and made them feel hopeful. The sales of Acer around these years have often been in the top 5 places internationally because of their advantages in prices.

Figure 5 Preliminary Q3 2011 Worldwide Top-5 PC Shipment Ranking [8] However, the recent economic turbulence and the weak PC market in Europe have resulted in fast decline in Acer’s market share. The recent fluctuation in Acer’s performance shows that Acer relies too much on the traditional desktop and laptop market. The temporary lead in technology results in the slow improvement in R&D. The shareholders have not realized their backward in new techniques until their competitors have come to the fore. The shareholders of Acer are willing to change the present situation. Since Acer has no advantage in the popular areas such as tablet PC, they may think of their ascendency in the product research of PC technology and start new development in the original areas. In this way, Acer can complete its transformation during the trough. The shareholders definitely support the plan to gain profit.

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5 Competitor Analysis

We applied the knowledge learnt from Topic 4 Business Strategy again in this section. S.W.O.T. analysis, which focuses on strengths, weaknesses, opportunities and threats, is also popular in the rational approach of strategic analysis. We offered an S.W.O.T. analysis of Apple and Asus, two existing large competitors against Acer, as below.

5.1 S.W.O.T. Analysis of Apple

5.1.1 Strengths

1. Though Apple does not have long history, it is always full of vigour. Apple led a revolution in personal computers through Apple II in the 1970s. The coming up of Macintosh in 1980s thoroughly changed the PCs at that time. The leads of several revolutions in its profession help Apple acquire a good reputation in the world.

2. As the largest IT corporation in the world, Apple possesses a large number of top R&D talents on the earth. They have enormously contributed to the independent development of hardware.

3. Apple is one of the few PC companies in the world manufacturing both hardware and software by themselves. The wide range of products and the perfect combination of hardware and software result in tremendous profit.

4. Apple has a large quantity of customers and its sales rank the first internationally. The digital products like iPods and telecom products like iPhones have all achieved great success immediately once they were released.

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Figure 6 iPhone Sales Chart

5.1.2 Weaknesses

1. Apple’s investment in R&D is relatively less than its competitors and a large part is used for improving appearance of its products. The fact leads to the decline in Apple’s creativity in hardware and software.

2. Many people choose Apple’s PCs mainly for the third-party applications. The popular applications aim at design but lack of practicability. They are not able to sustain the continuous development of Apple essentially.

3. The prices of Apple’s hard drives are set comparatively too high. Thus, they receive low opinions from the customers.

5.1.3 Opportunities

1. Jobs has many unfulfilled goals such as inventing televisions again and changing the industry of textbooks. They are all opportunities for Apple.

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2. Apple has purchased many hardware companies like Thunderbolt [9]. They may push the hardware technology of Apple to a new level.

3. Apple has cooperated with many outstanding enterprises, such as Google, in different industries. The coordination is possible to cause new revolutions in technology.

5.1.4 Threats

1. Apple relies too much on the individual charm of Jobs, but does not have the image of a team. Whether the death of Jobs will have a huge impact on the creativity of Apple worries many people.

2. Apple always remains arrogant in the large electronic market of China, but other large-scale corporations like Microsoft think highly of it. This kind of attitude will affect its future development with no doubt.

3. Apple lacks of the components of networks and games. The online applications of Apple only containing iTunes Music Store and iOS App Store are humdrum. The position of games has remained not clear for a long time.

5.2 S.W.O.T. Analysis of Asus

5.2.1 Strengths

1. Asus is one of the top suppliers of 3C solutions in the world and possesses a professional technical team. It ranks the first internationally in motherboards, graphics cards, ADSL Modem, CABLE Modem and wireless-network products. Asus also has a group of marvellous designers. The products filled with Chinese culture have continually won prizes in the international top-level design competitions.

2. The prices of Asus’ products remain low and the after-sale service of Asus can guarantee global insurance. The performance of Asus in the middle-end market is excellent. In addition, the quality of Asus’ notebooks is well known because of the terrific motherboards produced by themselves .The popular high-end motherboards in the current markets are nearly all manufactured by Asus.

3. Asus has a mature structure of products and wide range of customers. It has products in all levels of prices to satisfy customers in diversity.

5.2.2 Weaknesses

1. The design of Asus’ PCs is not fashionable enough, because of their emphasis on feasibility. Asus focuses too much on the development of technology.

2. The classification of Asus’ notebooks is too sophisticated. The specific applications of each series are not explicit. It leads to confusion in clients’ choice.

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Figure 7 Sophisticated Classifications of Asus’ Notebooks3. Asus has no advantage in the high-end market of PCs. They have met difficulties in

developing techniques.

5.2.3 Opportunities

1. The cooperation with Intel may lead to Asus’ breakthrough in hardware. 2. The multicore processing ability of Asus is advanced. Hence, in the current Digital Age, Asus is

expected to have enormous achievement in tablet PCs. 3. The renovation in Centrino Technology is a precious chance for large powerful electronic

companies like Asus. Asus is suggested to make use of any renovation releasing new products to remain competitive.

5.2.4 Threats

1. Asus’ notebooks need relatively more repairs. It has a huge impact on its reputation. The quality of Asus’ notebooks, compared to its motherboards, is not recognized by the public. The low-end products’ workmanship of Asus is poor. The recent accident of electricity-leakage is an alarm to Asus.

2. Though the quality of Asus’ high-end PCs is fair, but nobody would like to purchase them for the backward in technology.

3. The energy-saving event happening on Asus and Gigabyte, and the overstock of PC products have caused some problems in fund turnover of Asus [10].

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6 Conclusion

The summary of all three main sections mentioned above is as following. Firstly, according to the analysis of 5 macro external factors of Acer, we concluded that Acer was necessary to make use of its advantages in techniques and funds, and enhance R&D to change its recent decline in profit. Secondly, we had a more detailed discussion on the impact of 5 stakeholders. The reputation and popularity of Acer were very impressive. Thirdly, Apple and Asus, 2 great competitors of Acer, were discussed with S.W.O.T. analysis. Acer could learn from their experiences to have a better development. Subsequently, we provided Acer with 5 key suggestions as shown below. 1. Firstly, Acer should cooperate with more corporations with advanced techniques in their professional fields. Acer can use these opportunities to get familiar with new technology and the trend of development. 2. Acer should use takeovers appropriately to hold the advanced techniques. Acer can learn from the case of Apple, which has purchased the high-speed transport technology and use it in practical application of its new notebooks. 3. Acer can start to move into new divisions from some specific aspects at first. For example, Windows 8 is going to be on the market, so that the all-in-one PCs and tablet PCs will be of high demand. Under these circumstances, Acer can develop the CPUs applying for them to seize the chance. 4. Acer should add extra efforts in advertisement through diverse media, and especially focus on the culture of the enterprise. The success of Lenovo Ideapad Notebooks in China resulted greatly from the achievement of their advertisement. 5. The after-sale service of Acer should be improved to ensure the satisfaction of its customers. Acer should think highly of improving quality of their products to maintain their popularity and reputation among the citizens.

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7 References

1. [1] Rui, X., & Jie, Han. (June 2011). The Department of Finance Is Going to Further Promote the Work of Large-quantity Concentrative Procurement among Central Units. Retrieved December 1,2011, from CNTV.comWeb site: http://news.cntv.cn/20110603/113504.shtml

2. [2] Billy, O., (August 2011). Acer Q2 2011 Preliminary Financial Report. Retrieved December 1, 2011, from Industry NewsWeb site: http://thetechjournal.com/tech-news/industry-news/acer-q2-2011-preliminary-financial-report.xhtml

3. [3] Carl, H., (January 2011). World Population Aging: Clocks Illutrate Growth in Population Under Age 5 and Over Age 65. Retrieved December 1,2011, from Population Reference BureauWeb site: http://www.prb.org/Articles/2011/agingpopulationclocks.aspx?p=1

4. [4] Dan, N., (January 2010). Acer Unveils Greenest Laptops Yet in New Aspires. Retrieved December 1,2011, from PCWorldWeb site: http://www.pcworld.com/businesscenter/article/186976/acer_unveils_greenest_laptops_yet_in_new_aspires.html

5. [5] Alex, J., (March 2011).Chemical Reaction: iPod Is Short Key Material. Retrieved December 1,2011, from The Wall Street JournalWeb site: http://online.wsj.com/article/SB10001424052748704471904576228390400576486.html

6. [6] Qiaoyi, L., (October 2011). Thailand floods cause hard drive shortages. Retrieved December 1,2011, from Global TimesWeb site: http://www.globaltimes.cn/NEWS/tabid/99/ID/681794/Thailand-floods-cause-hard-drive-shortages.aspx

7. [7] Ingrid, L., (May 2011). Nielsen: Tablets Are Money Spinners, But Less Than 5% Use Them Today. Retrieved December 1,2011, from mocoNewsWeb site: http://moconews.net/article/419-nielsen-tablets-are-money-spinners-but-less-than-5-use-them-today/

8. [8] Dylan, M., (November 2011). PC sales: New No. 2 Lenovo breathing down HP’s neck. Retrieved December 1,2011, from EE TimesWeb site: http://www.eetimes.com/electronics-news/4231022/PC-sales-rankings--New-No--2-Lenovo-breathing-down-HP-s-neck

9. [9] Anand, S., (September 2011). The Apple Thunderbolt Display Review. Retrieved December 1,2011, from AnandTechWeb site: http://www.anandtech.com/show/4832/the-apple-thunderbolt-display-review

10. [10] Tuan, N., (May 2008). Gigabyte: Asus Lied & Fooled Customers. Retrieved December 1,2011, from Tom’s HardwareWeb site: http://www.tomshardware.com/news/asus-gigabyte-motherboard,5348.html

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