7.Developments in audio, video, telecom and computing technologies wereleading to the generation of a new kind of multimedia PC.8.The global multimedia desktop market was estimated at 10.4 million unitsand was growing more than 20% annually, primarily in Europe and Asia.As seen from Exhibit 3b of the case study, Acer already had a strongpresence in these locations which meant that it could take advantage of the well established distribution network to exploit the opportunities inthese markets.9.Apart from Apple not many companies were developing a multimediahome PC so Acer could gain an early advantage and set the standards inthe home PC category.10.Acros was introduced in the US market around 1994. With the life cycle of computers decreasing, it was nearing the end of its life cycle and Acerneeded a new product to replace Acros.
Challenges involved in the project:
1.US was a very competitive market and there was a possibility that themajor players might launch their multimedia PCs before Acer.2.Keeping the price of the multimedia PC such that it is affordable yet belooked upon as a premium product.3.The success of the Aspire PC depended on the market research doneby AAC which till now was running into losses.4.Radical enhancements and new hardware designs were required inproduct design.5.Co-ordination between the RBU, located in America, and the SBU,located in Taiwan, for the product development and eventual roll outwas critical for the success of the project.
We suggest that Stan Shih should use the option of
implement the project in USA. Acer should use AAC’s Palo Alto plant site forassembling the PCs and also outsource the task of assembling its computers to a13
local manufacturing unit with parts being imported from different SBUs. By usingtheir own facility and transferring key personnel from Taiwan to America for theproject will also reduce the difficulty in coordination between the RBU and SBU. This strategy will give them the following advantages:1.Reduced Financial riskWithout investing in capital intensive production facilities, Acer can takeadvantage of the local production units available in America to assembletheir products. Also by transferring some engineers from their Taiwan SBUthey can maintain control over quality as well. In case of reduction of demand in the future the contract with the local manufacturer can bediscontinued and production reduced accordingly.2.Strategic FlexibilityStan Shih can use the ‘Uniload’ production concept to save costs onlogistics. All the different components can be imported from the SBUs,located in Taiwan, as per the market demand and assembled in US.3.Lower Costs The type and quantity of parts ordered can be varied as per thefluctuations in the consumer demand and inventory costs can be lowered. This would help them to keep their prices in the $1,199 to $2,999 rangeas planned so that the product is looked upon as affordable yet withpremium features.4.Reduction in time from Design phase to MarketAAC’s Palo Alto plant had already reduced delivery time to 45 days. Thiswill help Acer to introduce their products faster than its competitors.
Home computing, provides an opportunity for the first-mover in the market togain advantage. Being a niche market, at that time, it becomes important tobrand it such that it appeals as a user friendly multimedia home PC to thepotential customers. Statistics clearly states that there is a segment of 29 million14
users who show an interest in working at home. AAC also needs to position it asan innovative product for less than premium price (Value Pricing). For such PCs,users usually expect set of tools that help them to finish their tasks at a lessertime if manually or otherwise done (Basic needs). Apart from these basic tools,the users will also expect certain tools which are innovative in nature(Aspirational needs). Being a niche segment and competitors already coming upwith their versions of multimedia PCs, the promotional campaigns should clearlyaddress the following issues,
Differentiation with office PC’s with usage of bright coloured PCs.
Discussing different instances where users can use the PCs (creating newneeds and wants).
Highlighting on the unique feature which is not present in competitive PCs(competitive advantage).
Justify value pricing strategy.
Ease of use of User Interface.AAC should concentrate on capturing and sustaining the market share. For this,they need to include certain complex designs in PCs thereby providing morefeatures for the user at the same value price. Once the users get adapted to aparticular UI (user interface) it would be difficult for them to shift to other PCs.Microsoft’s high market share throughout the world is basically because of thefact that most of the people in the world grow up using Windows OS. Though theconcept of UI is technical in nature, projecting it as an easy to use PC througheffective advertising will help AAC serve its purpose.Alternative Strategies:1.Exporting directly from SBUs in Taiwan.2.Joint Venture with a company in America.3.Acquisition of a PC manufacturing firm in America.4.Greenfield subsidiary.15