The case gives us an insight into global business strategies and operations of Acer

Group, one of the largest PC and computer components manufacturers. The case study

discusses the pros and cons of expanding the business in China and reasons whether

the Acer group is ready to start their business in China.

As part of their global manufacturing strategy, Acer had adopted the ‘fast food’ business

model on inventory management. This model involved shifting assembly sites of

computers to local sites i.e. areas where the computers would be distributed. This

model provided up-to-date products to the customers, reduced inventory, expedited

transportation and developed a highly flexible logistic system. In spite of implementing

the mentioned business model, Acer incurred losses worth $75 million. Few possible

reasons include -

Internal Communication and Co-ordination - Setting up new assembly sites

locally made co-ordination between manufacturing sites difficult and

cumbersome.

Forecast mismatch – Since the computer industry was rapidly changing it was

difficult to predict sales accurately. A slight mismatch in the forecast meant

higher accumulation of inventory in each of its assembly sites.

High operating cost – Increased number of sites meant more number of

components in the existing supply chain and more supervisors which in turn

raised the operating cost.

Inventory pile up - Unclear understanding of customer demands and market

needs resulted in bloated inventories. Old and obsolete products piled up in the

inventory, occupying space in the warehouse. This also led to a delay of launch

of new products.

High inventory levels created cash flow problems

Taiwan’s culture resembled western principles as opposed to those of traditional

Chinese culture.

1. Taiwanese workers had a sense of belonging to the organization as they were

considered as family by the employer and hence were flexible and ready to

adjust their schedule according to the demand in the market. Whereas the

Chinese people were inflexible with their schedule as they were assured pay

irrespective of their individual performance.

2. The Taiwanese government had a very strict and constrained policy regarding

large investments in China and they strongly discouraged the idea of investing on

the mainland which made the Taiwanese less future oriented.

3. Taiwanese market had a very rigid approach toward new profitable opportunities

from different markets as opposed to the Chinese market who grabbed these

opportunities with both hands. Thus the Taiwanese tried to avoid risk.

4. Many amenities in Taiwan were available freely when compared to China, i.e. the

standard of living in China was lower than that in Taiwan. Family ties were strong

in the Taiwanese culture.

5. Good education since the very beginning was an integral part of Taiwanese

culture. The schooling system in Taiwan was of higher caliber as compared to

China. The standard of work in Taiwan was better than China too.

Yes I would recommend the senior management at Acer to put up manufacturing

operations in China due to following reasons –

China has a huge market and ample opportunities which will help Acer have a

very strong foothold in the global market making the brand stronger.

The restrictions imposed on transportation will be relaxed after Taiwan becomes

a member of World Trade Organization.

Considering a location in China will give advantages in terms of tax, favorable

business conditions and other incentives and most importantly safety.

Selecting a place in the industrialized part of China which has plenty of local

workers (cheap labor) will reduce the dependency on people from other regions.

China has a very active market for computers and hence finding vendors or

partners to establish distribution and marketing activities will not be a difficult job.

These contacts will also help to understand the local needs/market which in turn

would increase the overall sales.

Since Acer already had some experience with global expansion, training the work

force to meet efficiency standards would be comparatively easy in China.

Abundant availability of resources would be an added advantage

Since Acer has been more familiar with the Chinese culture and market as compared to

the other Third world countries, entering the growing market in China is a wise decision.