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ACER Competitive Strategy Review


Executive Summary

This paper reviews the competitive landscape of the PC and peripherals industry through analysis of the company strategy, business model, distribution channels, competencies and value chain to provide a series of recommendations for Acer’s Board of Directors.

Acer is the third largest PC manufacturer in the globe using a transnational strategy to procure components to maintain cost leadership. By using strategic group maps, Porter’s five forces, SWOT analysis, value chain review and the Dranove model a comprehensive analysis of the Acer external and internal forces are reviewed.

On the basis of the analysis a series of recommendations have been made to ensure that Acer remains competitive, retains the number 3 ranking and are sustainable into the future.

It is recommended that Acer find blue ocean against competitors through the use of the premium branding of product, whether this be Ferrari or another premium luxury brand and determine if some of this can be derived from sustainable and green materials. Once these are determined it is recommended to use a balance scorecard with alliances to help drive innovation together with a tried and tested sales system to increase Acer market share.

Background and Context

Acer is the third largest PC Company in the world (9.5% market share) with growth being experienced outside the mature USA market, predominantly in emerging nations.

Although Acer experienced growth in 2007, increasing its sales by 32.9%, the PC and peripherals industry is very competitive and Acer, while being the third player, is well below HP and Dell in terms of market dominance.

Since 1999 Acer’s revenues have grown significantly, however profit has ranged between NT$8-10b. This is partly due to the fierce competition in the industry which has reduced profits for all competitors. One contributor to profits declining as a percentage of revenue is that 80% of all sales are in the competitive Desktop PC segment with just 20% in the higher margin peripherals business.

The key competitors for Acer are HP, Dell and Lenovo. However, the market is fragmented with 46% of the market owned by brands with less than 4% market share each.

In this competitive landscape Acer is seeking to increase market share and therefore profits to shareholders. This has included expansion in LCD TVs with the BenQ brand and the release of premium PCs under the Ferrari brand.

ACER Porters 5 Forces

ACER Porters 5 Forces

Kaplan Model

Kaplan Model

Strategic Group Map - PC Industry

Strategic Group Map - PC Industry

ACER Supply Chain

ACER Supply Chain

Green Architect Strategy Model

Green Architect Strategy Model

Strategic Group Map PC Products

Strategic Group Map PC Products



The Acer strategy is to remain the third largest PC manufacturer in the globe in this highly commoditized and competitive industry. The strategy includes acquisitions, development of new technology, growing the emerging EMEA and Japanese regions and solidifying strategic alliances with firms such as Microsoft and McAffee.

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Acer’s overall competitive strategy is to be a low cost provider; undercutting rivals to maintain cost leadership to a large range of buyers (Taylor & Nichols, 2010, p.27). However, while this is true for the EMachines and Acer brands, more premium offerings, such as Gateway and Ferrari, are targeted at other competitive strategies. Gateway has a focused low-cost strategy while Ferrari has a niche market strategy based on differentiation (Porter, 1980, pp. 35-40).

Acer has also adopted a transnational strategy (Hill, 2009, pp. 439-440), selling their product anywhere in the globe and sourcing the components and production from the least cost source. This is unlike Dell which has taken an international strategy to source from a narrow range of producers and then to manufacture close to the market. While this provides efficiencies to Dell, it also allows Acer a competitive advantage to source product at a lower price. This is especially evident in laptops where the Acer product equivalent is considerably cheaper than Dell.

The Acer business model is to provide low cost, premium PCs that suit the local conditions. This is appealing to the public and is successful due to:

· Clearly defined vision – to have cost leadership (Cappel et al, 2003, p.54), but allow customers to trade up or down according to their needs or requirements. This allows emerging markets consumers to afford a quality and trusted PC while in mature markets the consumers can choose to upgrade (Matthews, 2010, p.57)

· Distribution – using known retailers to grow market share

· Manufacture – sourcing premium product from the globe where a price advantage can be leveraged

· Innovation – pushing the boundaries to find new markets

· Difference – are offering consumers the choice to buy a product that suits their needs based on a 3-tiered model


Acer competes within the PC and peripherals industry providing a personal computing solution for consumers and businesses. Unlike competitors Acer offers alternate brands for different customer segments rather than one brand with many variables. This allows Acer to maintain margin for each brand without cannibalization.

Most brands within the PC industry offer one brand. However, as demonstrated in the strategic group map (see side panel) out of the top 5 brands only Acer offers different brands for different segments. While Acer takes a middle ground in terms of pricing and reputation (but also covering the ‘premium’ and ‘low’ end of market), other brands trade on a lower or higher pricing offers dependent upon their market segment. For example, Dell takes a price leadership position, whereas HP and Lenovo take a higher price position. The key aspect is that Acer stands alone as compared to competitors in offering a range of brands that target various segments.

Porters Five Forces (Porter, 1979, p.6) analysis also reveals more information about the PC and peripherals industry (see side panel). Rivalry is the fiercest force (Porter, 1979, pp.7-8) with a number of competitors vying for market share based upon pricing. There are also substitute players such as Apple introducing devices such as the iPhone and iPad that will challenge the need for a PC for some consumer segments. There is also a lot of power in suppliers with 85% of all laptops being produced by Taiwanese manufacturers in Chinese factories who supply the entire industry. If these suppliers decide to forward integrate into the value chain (Porter, 2001, pp. 74-75), especially by using the internet to sell their products, this could mean a serious competitor to all PC companies.

This analysis shows that the PC industry is cluttered with a number of players in what is largely a commodity product. This is putting downward pressure on pricing thereby diluting profits (Porter, 1979, p.6).

Internal Analysis

In a SWOT analysis the key points for Acer are:


  • Three tiered pricing structure of low, medium and premium
  • Alliances with BenQ and the Ferrari brand
  • Own the ‘good enough’ market in emerging nations (Orit et al, 2007, p.82)
  • Demonstrated ability to find new markets


· Market share is declining in established markets

· Too many brands in a stable can lead to cannibalization


· Continue to find new markets

· Leverage the relationship with other Taiwanese companies to find efficiencies and technology for laptops


· ipad and iphone is creating a new market without the need for a PC

· It is becoming hard to maintain brand awareness outside of cost leadership

· Disintermediation where the manufacturer goes direct to the public (eg Dell)

· A killer app is developed by a manufacturer that affects the entire industry (eg Apple)

This SWOT analysis shows that while Acer can continue to carve a niche role within the PC industry, a new market is required to find competitive advantage outside of cost leadership – a form of blue ocean where other brands cannot compete.

The side panel presents the Acer value chain. The competitive advantage over other brands, especially Dell, is that Acer is prepared to build each PC on a transnational basis (Hill, 2009, pp. 439-440), buying components from the best manufacturers in the globe regardless of location. This allows a competitive advantage over other brands that build their product close to the market. The value chain can also use synergies to produce other goods such as LCD screens and GPS units at a competitive advantage. By also locating sales, marketing and service teams within each market with a brand that is highly regarded, allows Acer to be nimble to market needs, trends and fashion (Hegarty, 2010, pp. 46-48; Shaw & Kotler, 2009, p.23).

Additionally, by reselling through retailers allows Acer to expand their brand reach and to use this channel to forecast and drive demand (Shaw & Kotler, 2009, pp. 21-22). While this does affect margin it has allowed Acer to drive growth. The advantage of the Acer value chain is the ability to develop quality products at a low price to suit local market needs.

The Dranove and Marciano model reveals that the Acer brand has a value that is unique to the company across all segments (financial, physical, human and organizational). However, these values are not rare and have been imitated by other brands, especially in the financial and physical spheres where pricing and features have been copied by all brands. However, the financial viability of Acer is scopable as new products and opportunities allow Acer to continue to grow and with this the human talent within the organization. The analysis shows that while Acer products can be copied, people can be poached by other organizations and prices will always be driven down. The source of enduring advantage is the organization itself and the ability to innovate and grow the business in a very competitive environment.


Acer’s competitive advantage is to:

· Find new markets to continue to drive growth

· Build alliances with other brands such as McAffee, Microsoft and Ferrari

· Build the product on a transnational basis

· Cover the market with a range of brands that suit the needs of various segments

Therefore the distinctive competence is the ability to build PCs and peripherals that are innovative, have quality components and are well priced for local markets.


On the basis of the analysis it is recommended that Acer consider four recommendations to build competitive advantage against rivals.

The first recommendation is to find blue ocean within the PC and peripherals industry. Dell found blue ocean in the way that they constructed PCs as did Apple with their unique software and PC systems (Kim & Mauborgne, 2004). For Acer this could be leveraging the value chain to reduce costs across the business and to use these advantages to develop more premium brand PCs such as the Ferrari and BenQ LCD screens. Both are in industries that are attractive to Acer. This would create new market space that is hard for rivals to imitate and is the basis of blue ocean theory (Kim & Mauborgne, 2004), especially if Acer can use the attractiveness test to find an industry or product that fits neatly into their structure (Porter, 1987, p.6). Recent research by Burke et al (2010) suggests that a blue ocean innovation would give Acer 15 years of space to exploit the innovation prior to competitors catching up. It is therefore imperative that Acer continues to innovate by developing staff within the business that have the capability to find new markets (Anthony, 2009, p.53).

The second recommendation is use sustainability as a key driver of innovation and blue ocean. Acer has the ability to affect the entire PC value chain by only buying from responsible companies (Nidumolu et al, 2009). Once this is achieved the next stage is to take strong leadership in the PC market (Lubin & Esty, 2010) becoming ‘green’ across the entire value chain, known as Architect strategy (Unruh & Etterson, 2010) – refer Appendix 8. Acer can then design a sustainable PC, preferably under the premium brands first, and then followed by the mid and low versions (Nidumolu et al, 2009). Finally this will help Acer to develop a new niche market in ‘green’ products (Longhurst, 2010, p.15) and hence differentiation for some period against rivals (Nidumolu et al, 2009; Lubin & Esty, 2010). Importantly, if Acer only pays lip service to sustainability then consumers will find out and reject the brand (Unruh & Etterson, 2010). Therefore Acer will need to become green in everything they do if this recommendation is supported.

The third recommendation is to adopt a balanced scorecard with alliances such as BenQ, Ferrari, McAffee and the Taiwanese manufacturers. If we agree that developing a blue ocean is the strategy then building a balanced scorecard for all players in the alliance will assist in achieving this outcome. The model is (Kaplan et al, 2010, p.116):

Determining the alliance’s objectives required from the relationship will assist Acer to find a new market for innovative technology (Kaplan et al, 2010, p. 119) and to adapt real time (Kaplan & Norton, 1996, p.3) to market needs.

Finally, it is recommended to assist distributors to develop an appropriate sales system to support the Acer product. With a three tiered strategy of premium, mid and low it is important that the sales force sells to the customer needs in their local market. The preferred method is to sell from the top down, offering the premium product first and if this doesn’t secure the sale to then drop to lower offers (Friedman, 1992, p.14). Another method is to work with the distributor through the alliance balance scorecard (Kaplan et al, 2010, p.116) to institute the Friedman selling process of the 7 steps to success to then drive premium sales and to move the focus from other brands onto the Acer product (Friedman, 1992).



Anthony, SD 2009, ‘Major League Innovation’, Harvard Business Review, October, pp. 51-54

Burke, A, van Stel, A & Thurik, R 2010, ‘Blue Ocean vs. Five Forces’, Harvard Business Review, May, as viewed 29 April

Cappel, S, Pearson, TR & Romero, EJ 2003, ‘Strategic Group Performance in the Commercial Airline Industry’, Journal of Management Research, August, vol. 3, no.2, pp.53-60

Friedman, H. 1992, No Thanks I’m Just Looking: Professional Retail Sales Techniques for Turning Shoppers Into Buyers, Kendall Hunt Publishing, California, USA

Hill, CWL, 2009, International Business: Competing in the Global Marketplace, McGraw-Hill Irwin, New York, USA

Hegarty, Sir J 2010, ‘Brands of the Future and the Importance of Style’, Market Leader, Quarter 2, pp. 46-48

Kaplan, RS & Norton, DP 1996, ‘Using the Balanced Scorecard as a Strategic Management System’, Harvard Business Review, January-February, Product 4126, pp. 1-13

Kaplan, RS, Norton, DP & Rugelsjoen, B 2010, ‘Managing Alliances with the Balanced Scorecard’, Harvard Business Review, January-February, pp. 114-120

Kim, WC & Mauborgne 2004, ‘Blue Ocean Strategy’, Harvard Business Review, May, as viewed 10 May 2010

Longhurst, M 2010, ‘The Future of Sustainable Green Leadership, Market Leader, Quarter 2, pp. 15-17

Lubin, DA & Esty, DC 2010, ‘The Sustainability Imperative’, Harvard Business Review, May, as viewed 29 April 2010

Matthews, J 2010, ‘Constantly Changing Design Required in Asian Markets’, Market Leader, Quarter 1, p.57

Nidumolu, R, Prahalad, CK & Rangaswami, MR 2009, ‘Why Sustainability is Now the Key Driver of Innovation’, Harvard Business Review, September, as viewed 10 May 2010

Orit, G, Leung, P & Vesting, T 2007, ‘The Battle for China’s Good Enough Market’, Harvard Business Review, September, pp. 80-89

Porter, ME 1979, ‘How Competitive Forces Shape Strategy’, Harvard Business Review, March/April, Reprint Number 79208

Porter, ME, 1980, Competitive Strategy, Free Press, New York

Porter, ME 1987, ‘From Competitive Advantage to Corporate Strategy’, Harvard Business Review, May-June, pp. 1-21, Reprint Number 87307

Porter, ME 2001, ‘Strategy and the Internet’, Harvard Business Review, March, pp. 62-78

Shaw, R & Kotler, P 2009, ‘Rethinking the Chain: Leaner, Faster and Better Marketing’, Marketing Magazine, July-August, pp. 18-23

Taylor, D & Nichols, D 2010, ‘Being First: Gaining and Maintaining Leadership’, Market Leader, Quarter 2, pp. 24-28

Unruh, G & Ettenson, R 2010, ‘Growing Green’, Harvard Business Review’, June, viewed 28 May


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