THE ACER GROUP’S CHINA MANUFACTURING DECISION
COURSE: GLOBAL SUPPLY CHAIN MANAGEMENT

BACKGROUND
Acer is a Taiwanese company specializing in advanced electronics technology. It is one of the world’s largest PC and computer component manufacturers. Acer started major expansion of its business by entering India, Russia and the U.S. Their mission was “Fresh technology enjoyed by everyone, everywhere.” Their focus now is
Mainland China. They plan to set up its manufacturing sector in China seeking economies of scale, focusing on large markets, which support volume production and, therefore, reduce operating costs. This case study is an analysis with respect to many factors to determine whether China would fit into Acer’s global manufacturing strategy. This report presents an analysis, which will conclude in a judgment of whether they will succeed, or not. ANALYSIS
The advanced electronic industry is characterized by strong competition amongst companies of various national origins. Few among the major competitors for Acer include Compaq, Dell, IBM and etc. (refer to exhibit 1).
Among them Acer has an added advantage since China is a well-understood market for Taiwanese. The major step to develop any business is a complete market analysis of the region to ensure Acer understands the market nature. Acer’s aim was to achieve a “Global vision with a local touch” This ‘local touch’ could be achieved with less effort as Acer has complete knowledge about the Chinese cultural and market. Mandarin being the language spoken by both Chinese and Taiwanese, there will not be any language barrier unlike the other companies where in they need to put in extra efforts. Acer being familiar with both the Chinese culture and the Chinese market is an added advantage which most of the competitive companies do not have. Moreover, according to few market analysts, China is predicted to emerge as leading PC markets in the Asia-Pacific region in the next few years.
Also, they believe that the market will be highly sensitive to availability of low-cost desktops, which is the focus of Acer group.

The analysts say that China has significant growth potential. The growth rate in china alone is estimated around
20% (Refer to exhibit 2 & 3). Major factors in the market include cost, product performance, quality and dependability, customer service and support and distribution channels. Acer could be successful in China if they could manage to advertise their products with strong marketing campaigns. Also, by establishing strong

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distribution channels in China they could improve the market flow to increase the demand. Based on the market demand, they can easily establish around 500 retail stores across major cities in China like Shanghai, Beijing,
Tianjin and Guangzhou.

Transportation logistics in china has been proved to be challenging. Firstly, due to the prohibition of goods being directly shipped between Taiwan and China, it adds several hundred kilometers for travel between the two regions. This is can be solved by reducing the transportation of goods within the two regions. Start of by establishing the manufacturing units in China, which would concentrate on volume production and, therefore, reduced operating costs. Once the manufacturing industries have been set up in China, it is less complicated to transport the products, as the inventories will be located locally. When the inventories are locally located it is sure to have less complexity and more flexibility. The manufacturing facilities should be majorly be distributing to the retail stores within China so as to implement the Acer’s ‘fast food’ model. These restrictions are however predicted to fade of within the next few years making the relationship between the two regions stronger. Acer must also foresee the problems it might encounter, draft appropriate plans for the future making them as realistic as possible by considering the market nature and the customers. Apart from a business plan Acer must focus on the aspects such as Order Management, Warehousing operations, outbound transportation and Inventory management that plays major role in the logistics. A realistic business forecast thereby will decrease the chances of failure and turn the logistics into a competitive advantage.

China is a country with very cheap unskilled labor; it has great number of highly trained labor too. Compared with most other developing countries, the Chinese population has a much higher literacy rate. Due to the population in China, it will for sure not run out of cheap labor any time soon. China might also begin to provide raw materials at a lower cost, as Acer will purchase it in bulk for its volume production. By transferring the
Acer’s production base to low-cost centers like in China, Acer will have attained a Cost-effective solution by saving money, time and also creating value. The human resource management policy for workers at a China manufacturing facility look like the profile of workers at Acer’s factory in Taiwan, therefore, we can predict the nature of resources available for the factories in China. Creating a disciplined workforce in china is an important aspect for Acer. This might be challenging due to the SOE system. Acer should start of by encouraging
Taiwanese workers to work in China by offering a better pay and position. The Taiwanese families will be

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willing to relocate if they are given more incentives and appropriate housing. Housing can be arranged in a locality, which resembles Taiwanese culture making the employees less reluctant to relocate. Acer can provide the children free international standard education, which is valued though out the world hence more valuable than Taiwanese education. A double promotion will catch their interest and realize that this would be wonderful opportunity and will not reduced the manager’s profile. Since we know that the Chinese enjoy living and working with each other, and feel it makes work more pleasant when everyone knows each other, we should create an environment where they mingle with the Taiwanese workers. When the Chinese workers mingle with the Taiwanese workers for a few years, they will start to develop a competitive sprit in order to achieve as many incentives as the Taiwanese. The Chinese workers might think it is weird at first, but they will realize that the company is providing many benefits so they will eventually start to work hard. Many workers will be coming from urban communities in China; hence by providing them housing, meals, transportation, basic medical care and also by motivating them based on the financial rewards we could achieve a large scale of satisfied employees in the manufacturing sectors.

Safety and security for employees is one of the main concerns to be addressed in choosing an appropriate location to the set up the manufacturing industries. China has considerably lower crime rates than most of the western countries among which shanghai can be considered. Shanghai is one of the safest cities in china when compared to large urban areas in other countries. According to the recent stats, The Unites States of America has
3 times more crime rate than china. Apart from crime, shanghai has decent Medical care facilities for elderly as well as improved facilities for children. It continues to improve in many other aspects. Shanghai has several acceptable Western style medical centers. Shanghai also has the highest population in China and it has high economic potential. According to the economists, a rapid re-development in China began in 1990s aiding the return of finance and foreign investment to the city.

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EXHIBITS AND REFERENCES:
Exhibit 1: Shipments and Market Share of Leading PC Vendors Worldwide

Exhibit 2: Sales Breakdown by Geographic Region (US$ in million)

Exhibit 3: Sales Growth Rate in Asia-Pacific Markets

Ref 1: http://en.wikipedia.org/wiki/Acer_Inc.
Ref 2: http://www.marketresearch.com/Vendors/SampleViewer/unlock.ncp?vendorid=1039
Ref 3: http://www.numbeo.com/crime/city_result.jsp?country=China&city=Shanghai
Ref 4: http://en.wikipedia.org/wiki/Shanghai#Economy

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CONCLUSION
Acer’s decision to look at china as a potential region to invest is right. This is the appropriate time to enter china’s market due to its scope for its development. Acer would be successful in establishing the manufacturing units in China, which would concentrate on volume production and, therefore, reduced operating costs.

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