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Assessment on ACER’s New Strategy – The XC Computer
Starting from $25,000 initial investment, Acer has become the world third largest PC manufacturer. In the 21st century, Acer is developing a new product
strategy ‐ the XCs. Should it become the primary thrust? This very much depends on whether Acer’s existing strategies support and continue to create
competitive advantage through the new XC strategy in global perspective (i.e whether the new strategy fit into the existing ones). What decision should
Acer make if conflict (stop new XC or alter the existing strategies)? In this paper, I will use Gupta and Govindarajan1 framework to assess these questions.
1. Acer’s Strategies
Existing:
i. Fast‐food logistic and assembly business model
“Freshness” (i.e. timeliness of providing customer computers they need) is the soul of this model. Components are pre‐prepared in the “central
kitchen” (i.e. large, centralized mass‐manufacturing facilities) and then shipped to assembly sites close to local customers. This makes it possible to
enjoy production economies of scale while also tailoring each individual production to suit the needs of each individual client. The result is
standardized quality, customizable products and low inventory cost.
ii. Client‐server management model
The “client‐server” management model lets each Business Unit, and other Acer‐affiliated business, act independently but also coordinates each
one’s efforts to gain maximum overall benefit from full‐use of Acer’s international resources. At the heart of Acer’s “client‐server” organization is a
closely linked network of mature and experienced managers who are committed to the success of their own “piece of the Acer Group,” as well as
ensuring Acer’s overall long‐term growth.
New plan: the XC computer
Key features of XC computers are:
i. Low cost
ii. Highly personalized to customer’s specific needs (limited tasks)
1 Anil K. Gupta and Vijay Govindarajan, “Converting global presentation into global competitive advantage”
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2. The Framework
According to the framework, firm’s management has five value‐creation opportunities (figure1). Managers should exploit the potential of the five
opportunities and convert them to competitive advantages.
Figure1
3. Using f ive value creation opportunit ies as benchmarks to assess whether exist ing model could help XC succeed globally
Value creation
opportunities
Functional areas for value creation
opportunities
Could the existing model help the new XC strategy
to create competitive advantages in global perspective?
Degree of
support
Increased market share
Yes. Fast‐food model allows Acer to provide "fresh" computers to customers
which is alien with the goal of XC, so market shares will increase.
Improved price realization
Yes. Fast food model also emphasis on timeliness. This is also alien with XC
concept.
1. Adapt to local
market differences
Neutralizing local competitors No, because XC is a blue ocean2 strategy.
8
Spreading fixed costs over large volume
Reducing capital and operating costs per
unit
Pooling global purchasing power over
suppliers
2. Exploit economy of
global scale
Creating requisite critical mass in selected
activities
Yes. Notice that XC is product strategy and the fast‐food model is the
manufacturing strategy. Hence, fast‐food model could provide support to
XC. Benefiting from centralized production (large, centralized mass‐
manufacturing facilities), the apportioned fixed overhead, capital
expenditure and operating cost per unit will be low. And due to aggregated
production, Acer also could realize global purchasing power and critical mass
in activities.
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3. Exploit economy of
global scope
Providing coordinated service to global
customers
Yes. One of the key concepts of XC is high personalization. Centralized mass
manufacturing can add value to XC strategy through greater consistency in
quality, faster and smoother coordination and lower transaction cost.
6
2 As per the case, the market has not yet defined the segment which XC is going to penetrate in, but it is with global potential.
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Value creation
opportunities
Functional areas for value creation
opportunities
Could the existing model help the new XC strategy
to create competitive advantages in global perspective?
Degree of
support
Market power compared with competitors
No. because fast‐food module could not lead to greater understanding on
unique strategic requirements and culture of its customers. But XC requires
in‐depth understanding on customer needs.
Performance enhancement
Yes. By separation of manufacturing and assembly process, XC will be able to
react faster to changes and meet customer needs.
Cost reduction
Yes. It applicable for all products. Localized assembly process reduces the
shipment and manufacturing costs.
4. Tapping optimal
locations for activities
and resources
Risk reduction
Yes. There is no computers are pre‐assembled, so the risk of market change
and produce obsolescence will be low. It is to the advantage of XC.
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Faster product and process innovation No. Because no much innovation but customization involved for XC
Lower cost of innovation No. Fast‐food model did not lower cost of innovation
5. Maximize
knowledge transfer
Reduced risk of competitive preemption No. again, the key to XC is customization instead of innovation.
2
The overall degree of supporting:
Figure 2
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4. Conclusion
i. Generally the XC strategy could fit into the existing global strategies.
Noticed that XC is product strategy, fast‐food model is the manufacturing strategy, and client‐server model is the management strategy.
They are supporting and counter enhance each other. From the analysis above3 (figure 2), XC fit well into the fast‐food strategy which is
currently supported by the client‐server structure (besides innovation. But innovation is not the emphasizing point of XC anyway).
ii. Solely from globalization perspective, XC could become the new thrust.
Again, from the analysis above (the table), XC could possibly be a new supernova because the existing system supports it. However, it is
purely based from globalization perspective. In order to decide whether to push XC as primary thrust, Acer needs to consider much more
than only globalization strategy. For example, XC is to penetrate into an area which has not yet defined by the market. Could it be
considered as a blue ocean? Moving one‐step further, if Acer could obtain advantage from the blue ocean, how long will it last? Therefore,
more specified study should be conducted to explore these questions.
iii. Aspire should remain at least in a certain period of time.
Assuming the Acer pushes XC as its primary thrust, I do not think Aspire should be fully rolled out immediately. In one hand, it has been in
the market for years, and more importantly, consumers are already familiar with it. In the other hand, market takes time to accept new XC.
Hence, a sudden rolling out might cause market panic or even financial difficulties for Acer.
3 Analysis in section 3 is mainly based on fast-food model. The reason is because client-server model is the organizational structure which is supporting the fast-
food model. Hence, it did not directly contribute to exploiting global potential but indirectly through channels such as fast-food model.