The Rise of Acer

Drew Cullen at Channel and Register has an interesting piece on the rise of Acer as a global brand. Cullen writes:

In recent years, sales of PCs have consolidated, big-time. The US and Japan are the only mature economies in which there are many significant ‘local’ PC makers – but they tend to have names like HP and Dell and NEC and Fujitsu.

In the US and in Europe, the national champions of yore have mostly fallen by the wayside. In due course the emerging economies will follow suit – maybe another Chinese PC maker will break out, to join Lenovo.

Acer saw that average selling prices were under price and margin pressure, that without differentiation, things could only get worse, and that raw performance was becoming an inadequate differentiator. The PC market was already becoming the survival of the biggest.

Acer’s prognosis was commonplace. The remarkable bit is that Acer decided to do something radical, over and above outsourcing the tin-bashing.

In brief, the company decided to build a brand business, to major on notebooks, and target small and medium business and consumers in particular. Also, it looked to the developing world – especially the BRIC (Brazil, Russia, India and China) economies as another growth engine.

In the process, Acer has become something of a Global Brand, for which Taiwan is not famous. Remember, the company once was called Multitech, which shows how much it had to learn.

Cullen is absolutely spot on. Taiwan is not known for its brands and the OEM/ODM business is prevalent right through the value chain of Taiwan's hi-tech industry. Acer is unique in that they developed a powerful global brand without anyone really noticing them. ASUS has now followed Acer's lead and spun off their manufacturing into two separate companies (Unihan and Pegatron) and are focusing on building the brand.

Sadly many Taiwanese companies now don't realize that OEM/ODM manufacturing and brand building are in some ways diametrically opposed strategic initiatives and that they cannot do both. ODM/OEM manufacturers are all focused on cost cutting and savings whereas branded products are more interested in creating value added through services and features. Of course they do try to create the value added cheaply but they usually get what they pay for including poor features and bad service which ultimately degrades the value of the brand being created.

At any rate, Cullen's article is a good read and Acer's strategy may be a template or other companies trying to move through to their own brands. Then again, maybe not.

Channel and Register: Acer: We’re comin’ at ya, Dell