Acer Strategy

Acer is a Taiwanese computer manufacturer that rose to prominence as an OEM provider before striking out with its own brand in the 2000s. The company has since become more global in nature. There are three brands within the Acer Group -- Acer, Gateway and Packard Bell. The company has a global workforce of 8000 employees, and had $14.7 billion in revenues for the 2012 fiscal year (Acer, 2014). Organizational Structure For much of Acer's existence it was an OEM manufacturer and had a limited marketing organization. This has changed significantly in recent years.

The company now works with three brands, Acer, Gateway and Packard Bell. These three companies operate with different marketing arms, but leverage the behind the scenes capabilities of Acer's head office. The organizational chart for Acer today can be found in Appendix A, from the company's website. It clearly shows that the company has a functional structure, with the main functional roles within the company being Finance, Marketing, Technology, Operations, and Sustainability. Acer has a hierarchical structure.

Reportedly, the shareholders are active, and it has been rumored that activist shareholders were one of the reasons for the departure of the company's CEO in 2010 (Fried, 2011). This structure plays an important role in how the company is governed. It gained strength when it decided that it wanted to promote its brand and increase its market share in computers.

The move was initially supported by management, but the move to become a global company was not met with the same enthusiasm, and the founder Stan Shih is now installed as Chairman and President at the top of the organization chart. Financial Performance Acer has struggled recently. The company lost around NT$1.07 per share in the 2012 fiscal year, compared with NT$2.52 loss the prior year. Improved profits have to be considered a good result because the company's revenues declined by 9.6% in the year, in new Taiwanese dollars.

The company has just announced that it also lost money in fiscal 2013, NT$11.4 billion, which is almost double the loss of 2011 and four times the loss of 2012. This decline in performance has been attributed by the company to declines in the PC market overall. The market for low-priced PCs is especially weak, because consumers are substituting tablets and smartphones, and Acer is not strong in either of those products.

While there is still hope for the company's ultrabooks, that niche cannot make up for the fact that Acer's low-priced everyday PCs are unable to compete with tablets (PC World, 2014). The company's balance sheet nevertheless remains healthy. Acer actually lowered its debt last year, paying off a NT$10 billion bond. The result is that the company has a current ratio of 1.2, a debt to equity ratio of 2-to-1, and a relatively low level of long-term debt.

The company shrank in size last year, a natural response to losing money for several consecutive years, and that has allowed it to maintain the book value of its equity (2012 Acer Annual Report). Problem The main problem that Acer faces is that its core business is shrinking. It worked hard to build a large market share in personal computers, but that market is facing downturn. Consumers are substituting tablets, and the shifts in the industry including Windows 8 have not been enough to stabilize PC sales.

Acer does not seem to have a lot of ideas -- the core problem is that it competes in the low end segment of the market that is facing substitution and Acer does not have a plan to get into mobile. Possible Solutions & Analysis There are a few potential solutions. First, Acer can start to produce higher-end computers. Users of those computers cannot substitute tablets, so this market is much more robust.

The problem for Acer is that it specializes in manufacturing processes, not innovation, so it will be at a technological disadvantage in that business. Moreover, that is a slow-growth, highly-competitive business as other PC markets crowd into that segment to try to stabilize their sales. Another option is to get into mobile. With its core business becoming obsolete, Acer needs to diversify into something, so why not mobile? Companies that have made that move already are enjoying some success.

Again, Acer would be playing catch-up, but it could use the same OEM-based strategy that it used to gain entry into the PC market to get its foot in the mobile door. This strategy is risky, but the threat to low-end PCs looks permanent -- the company has to do something. The third alternative is to change the size of the company. Either grow it and expand into previously untouched foreign markets, or shrink it to the current size of the PC market.

The latter is a defensive strategy -- probably not something that can be sold to the Board. The former is an aggressive strategy that, while it has the potential for short-term success, does not solve the problem in the long run. Recommendations & Future Implications Acer is struggling because its core business is struggling, so Acer needs to change its business. With Windows 8, there is convergence between low-end laptops and tablets, which offer similar computing power but a different user experience.

Acer needs to take its knowledge of low-end Windows 8 PCs and apply that to the tablet hardware. The company will need to make investments into manufacturing mobile devices, and may need to buy into the business, but the alternative is to slowly die with the low-end PC market. Mobile is the future, and Acer needs to get into that business. They have already demonstrated that they can enter a business late and still be a.