Strategic analysis of Acer Inc. (Research Paper Sample)

Strategic analysis of Acer
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Introduction
Acer Incorporated is a multinational electronics manufacturer based in Taiwan. Its product includes desktops, laptops, servers and storage, peripherals, personal digital assistance (PDA), peripherals and e-business services for business, government, education, and home users. Acer Inc is the third largest computer manufacturer in the world after HP and Dell (Shaw & Kotler, 2009). Acer Company owns the largest franchised computer retail chain in Taiwan, Taipei. The company was founded by Stan Shih, Carolyn Yeh his wife, and a group of five others in 1976 as a Multitech. Acer has since been the third largest computer manufacturing company in the world holding 9.5% of the market share, with its growth being experienced outside USA mature market, largely in emerging nations. The peripherals and PC industry is very competitive and Acer has maintained growth since 1999 with significant growth in revenues. The key competitors in the market include Dell, HP and Lenovo; however there is a fragmentation of the market with 46% of it owned by brands which have market share of less than 4% each. Acer seeks to increase its market share through release of premium PCs under Ferrari brand and expansion in LCD TVs with BenQ brand (Unruh & Ettenson, 2010). This paper seeks to give a detailed report of strategic analysis of Acer Inc. The paper will analyze the environment in which Acer functions and identify the opportunities and threats to which it might expect to have to respond. This will be done through environmental analysis (PESTLE, Porter’s Five Forces, and SWOT). The report will also make analyses of the resources and key capabilities of the company plus the factors that give the company its competitive advantage. This will be done through assessing the Industry Critical Success Factors, analyzing resources and capabilities and link the generic strategy. Finally the paper will assess the extent to which Acer’s existing strategies match its environment and suggest improvements where there is a justification. This will be done through looking at the company’s strategy within its environment and use of the J and S three tests (suitability, acceptability, feasibility and suggested improvements. There will be a final management summary, conclusion and recommendations to the company and sample diagrams of the models of market and environment analysis.
The environment in which Acer functions and the opportunities and threats to which Acer expect to have to respond
Acer is the third largest manufacturer of electronics (PC) in the world using a transnational strategy for procuring its components in order to maintain cost leadership. Through using SWOT analysis, Porter’s Five Forces, PESTLE, Value chain and strategic maps, a comprehensive analysis of Acer Inc. internal and external forces are reviewed. However, we will focus of Porter’s Five Forces and SWOT analysis in environmental analysis of Acer Inc. in this paper. Acer Inc functions in a very competitive market with market giants such as Lenovo, Dell and HP. However, the strategy of Acer is to remain the third largest manufacturer of PC in the globe in this highly competitive and commoditized industry. The strategy includes development of new technology, acquisitions, solidifying strategic alliances with firms like McAffee and Microsoft, and growing the emerging Japanese and EMEA regions (Shaw & Kotler, 2009).
Acer Inc. competes in its functional environment within the industry of PC and peripherals offering personal computer solutions for businesses and consumers. In contrary to its competitors, Acer Inc. provides alternative brands for various segments of customers instead of just one brand wit different variables. This enables Acer to maintain a margin for every brand without any form of cannibalization. Majority of brands within the industry of PC offer one brand. However, only Acer offers various brands for different customer segments. Though Acer takes middle ground on the basis of reputation and pricing, as well as covering the low and premium end of market, other brands operate on a higher or lower pricing provides dependent upon their segment of the market. For example, whereas Lenovo and HP take a higher price position, Dell takes a position of price leadership. The main aspect is that Acer compared to its competitors stands alone in providing a range of products targeting different segments of the market and consumers (Taylor & Nichols, 2010).
SWOT Analysis
In a SWOT analysis of the company, we will detail only the opportunities and threats facing Acer. Some of the opportunities of Acer Inc. may include: leveraging the relationship with other companies in Taiwan in order to find technology and efficiencies for PCs; and to continue finding new markets as well as increase their brands to fit the needs and requirements of their customers. This would possibly increase their market share and profits. On the other hand, Acer is faced by various threats in the industry and environment in which it functions. Some of these threats include: iPhone and iPad creating a new market with no need for PCs; disintermediation in which manufacturers go to the public directly e.g. Dell; it is becoming challenging and hard to keep and maintain awareness of the brands outside cost leadership; and a killer application developed by manufacturers affecting the whole PC and peripherals industry e.g. Apple (Shaw & Kotler, 2009).
Porter’s Five Forces model
In an external environmental analysis, we will focus on Porter’s Five Forces. This is a tool of organizational external analysis used to understand where power lies in the situation of business (Porter, 2001). The forces that we consider for Acer Inc include: the bargaining power of customers, the threat of substitute products, and the threat of new competitors entering the market, the bargaining power of suppliers, and the intensity of competitive rivalry. The customer bargaining power is the ability of such customers to put under pressure the firm to alter the prices and affect the sensitivity of price changes to the customers (Porter, 1987). The substitutes of Acer Inc. are HP, Lenovo and Dell since they manufacture same products, desktop and laptops. However, Acer has come out with a line of unique products, Acer Timeline Series offering screen sizes from 13.3 inch to 15.6 inch. Customer loyalty according to Porter means customers prefer to stay with the brand at the moment mostly because may be a company is offering well after sale services. Acer offers a warranty of 3 years for its brands while its competitors do not offer such service to their products. Acer has the trendiest laptop that is long lifetime for battery of up to 8 hours. The products are also ultra thin, less than 1 inch and portable. Acer also has a multi gesture touch pad used like a mouse, with a high definition 16:9. Acer sustains itself in the market through improving its products and considering environmental measures. This will increase barrier to exit. Acer has done this via the Acer Timeline Series manufacture (Porter, 1979). The bargaining power of supplier is high when the market is monopolized and the supplier refuses to supply goods. For example, the main supplier of processor to Acer is AMD and Intel. If they both increase their prices and Acer has no choice of buying from them the processors, the Acer products will also have their prices increased and the consumers may buy other brands from the market (Orit, Leung & Vesting, 2007).
PESTLE Analysis
Acer Inc is affected by macro environment factors, factors which operate in its external environment. These factors are not specifically about Acer alone but affect the overall operation of the organization and the industry in general. Acer cannot control macro environment factors since they are external factors which are not very particular about Acer. Therefore Acer only needs to manage the impacts of such factors to their sales and branding. Macro environment are described by PESTLE (political factors, economic factors, Social factors, Technological factors, Legislative factors and environmental factors). Acer has managed to tackle these factors through its enabling environment and branding strategies. These factors impact on the market and may limit the share of market held by Acer.
The resources and key capabilities of the company plus the factors that give the company its competitive advantage
On the foundations of analysis, Acer has adopted various strategies to ensure that it remains competitive and retains its ranking at number 3. Acer strives to find a Blue Ocean against its competitors by using premium branding of its product from Ferrari or any other premium luxury brand and make determinations if it can be derived from green and sustainable materials. The resources and capabilities of Acer are determined by the use of a balance scorecard with alliances in order to help in driving innovation plus a tested and a tried system of sales in order to increase the market share of Acer. The company derives its competitive advantage from various growth strategies. The competitive strategy of Acer is to be a low cost provider, which undercuts rivals in maintaining cost leadership to a wide and larger range of consumers. However, while this olds as the truth for Acer and Emachines, more offerings of premium like Ferrari and Gateway are the main targets of other competitive strategies. Ferrari has embraced a niche market strategy in differentiation basis while Gateway has emphasized on low cost strategy (Nidumolu Prahalad & Rangaswami, 2009).
The competitive advantage of Acer is to find new markets to continually drive growth, build the product on the basis of transnational, build alliances with ...