[Homestead] Business Strategy

Tvoivozhd tvoivozd at infionline.net
Mon Sep 6 12:20:57 EDT 2004

In business, like boxing, when you get a bloody nose your reaction can 
determine whether you win or lose.  Taiwan businessmen as a class are 
inordinately resourceful, as the result of a truly fine public education 
system, they have the intellectual resources to solve what appear to be 
intractable problems, like the beating Acer took in its initial entry 
into the U.S. market.

They cut their loses by withdrawing, to buy time to analyze their 
mistakes and evolve a strategy for market re-entry.

While Dell is a formidable opponent and likely to retain market share, 
HP and other companies seeking retailer shelf space  are less capable, 
and I would expect Acer can can give them real heartburn in the 
U.S.market. Penetrating the China mainland market is more difficult 
because of the existence of several fast growing domestic computer 
makers.  However in Chinese against Chinese, Taiwan manufacturers have 
some advantage against Mainland Chinese.  Taiwan manufacturers evolved 
thirty years before those in the Mainland, and quickly learned the 
technology and marketing practices to successfully enter Western 
markets---and of course,they already understand the language and mindset 
of Mainland Chinese consumers.  There they have the option of meeting 
the late-comer Mainland computer manufacturers head-on, or buy into them 
like the General Motors that may be faltering domestically due to 
horrendous healthcare and pension liabilities, but can revive its 
fortunes by manufacturing in China where such liabilities will be vastly 
reduced by being spread across a Universal National Healthcare system.  
The difference in cost to a manufacturer is presently five percent---no 
manufacturer wants and few can stay alive with a five percent cost 

The New York Times

          September 6, 2004

    Taiwanese PC Maker on Verge of Sales Push Into U.S. and China

International Herald Tribune*

Acer, the Taiwanese personal computer maker, received a cold dose of 
reality the last time it tried to conquer the world. But it says it has 
learned its lesson, and it is going after the United States and Chinese 
markets again.

Last week, Acer named as its president Gianfranco Lanci, an Italian who 
led its operations in Europe and the United States. The current 
president, J. T. Wang, will become the chairman and chief executive. The 
management shuffle was caused by the retirement of Stan Shih, the 
company's founder.

The promotion of a Westerner to the No. 2 post is an unusual move for a 
Taiwanese company. But Acer may need Mr. Lanci's understanding of 
cross-cultural issues.

Acer, a longtime name in the personal computer industry, is the 
fifth-largest PC vendor worldwide. But in the second quarter, it 
surpassed Hewlett-Packard 
as the top brand of notebook computer in Europe, with a market share of 
16.7 percent, according to the research group IDC.

Last year Acer shipped 2.5 million notebooks and 2.3 million desktop 
computers. Europe accounted for 70 percent of notebook sales and 32 
percent of desktop sales.

It hopes to repeat that performance in the United States and China, as 
part of its aim to become the No. 3 PC seller worldwide within three 
years. Acer has already said it expects to sell about four million 
notebooks and three million desktops in 2004.

''If Acer wants to be a serious brand business player, it must have a 
significant presence in these two markets,'' said T. Y. Lay, Acer's 
president for international operations. The company was humbled in its 
previous United States foray and exited the American retail market in 1999.

Mr. Lanci, at a news conference in Taipei last week, said that Acer's 
United States sales doubled in the first half of this year. He added 
that he expected to double United States revenue again next year, though 
he did not provide numbers.

Several analysts said the goals were reasonable, largely because Acer 
starts from a low base.

''With minimum operation overheads, and quite limited revenue, we are 
already breaking even in the U.S.,'' Mr. Lay said. ''We foresee in the 
third quarter a profit coming from the U.S. operation.''

Analysts said that competition would be tougher for Acer in the United 
States than in Europe or the Asia-Pacific region. ''A good deal of their 
success in Europe depends on the fact that they are a foreign company 
among foreign competitors,'' said Roger Kay, vice president for client 
computing at IDC in Framingham, Mass.

In this environment, Acer is on an equal footing with American computer 
firms Dell, Hewlett-Packard and I.B.M. 
But in the United States, Mr. Kay said, ''they are fighting on the turf 
of domestic competitors who are well entrenched."

In China, Acer's goal is to become the fifth-largest notebook vendor, 
though it would not give a timetable. In this year's second quarter, it 
was 12th in China with a market share of 2.5 percent, according to IDC. 
I.B.M. was first with 21.1 percent.

Acer's interest in China is prompted by its position as the 
second-largest PC market in the world, behind the United States. But 
international brands are seriously challenged there by local vendors 
like Lenovo, Haier and Beijing Founder Electronics.

The company has signed deals with Carrefour, Europe's largest retailer, 
and Best Buy 
the largest electronics chain in the United States, as well as with 
prominent distributors like Ingram Micro 
and Tech Data 
Acer has no direct sales, unlike other PC vendors who sell through a mix 
of direct and retail channels to customers.

''What Acer has done has been very consistent,'' Mr. Kay said. ''With 
its 'channel only' strategy, it has made the retailers feel comfortable. 
So the retailers are happy to give them shelf space.''

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