The Acer Group’s China Manufacturing Decision Case Solution
In 1998, the vice president of Acer’s group, M.Y. Lin,took the decision to focus on the issue of global manufacturing strategies, which the company made in order to enter China for establishing its business. The main purpose for selecting China to set up its plant was its familiarity with the traditions and marketplace. Moreover, Stan Shih believed that Acer would get more opportunities from China as compared to other countries as the tradition and culture of both the countries are same and that would be considered as the plus point for our organization. Therefore, there were four major problems for Acer group to deal with before making absolute judgment on entering china:
- The decision of establishing Acer in Chinawould be beneficial for the companyor not and if so, then what steps wouldthe company need to follow in order to meet their strategic goals.
- Whether it isa right time for Acer to execute itsmanufacturing project in Chinaor not.
- The issue was how the company managed itshuman resources activities in Chinaeffectively and efficiently.
- Acer was not sure that where it needed to manufacture itsfacilities.
The organization used two methods in order to evaluate the situations which it faced; the two methods were SWOT analysis and PEST analysis. In SWOT analysis, the company identifies the strengths, weaknesses, threats and opportunities, and in PEST analysis the company evaluates the environment in which the company operates.
Major Problem Analysis
1. Examination of State Potentials
Before taking the decision on expandingAcer’s manufacturing project in China, the organization should first compare the market size of the both countries (Chinaand India). In this analysis,the company identifies that which country has the mostpotential for PC business. However, the organization choseIndia as itbelieves that India is the country where electronic industry ismore successful asit could easily distribute itsproduct to the Asian countries. Therefore, the organization initially looked at the market size of both countries and it in 1990s, the Chinese economy was in boom stage asmany of the international companies’ investment in Chinaimproved the Chinese market for PC and their sales hadincreased to 2.1 million in 1996 and earned a total profit of 24.6 billion Yuan.
As compared to Chinawith India, the analysis shows that in 1999 India sold approximately 844000 computersand earned revenue of $954 million which wasless than the ChinesePC market. Therefore, the overall analysis shows that the Chinese market is more suitable than India and the organization should begin itsprocess in Chinarather than India.
The main issue that the organization had measured before establishing its development process in China was the country’s economic condition. In addition to this, the organization went through unstable political, environmental condition of the countries. However, the reasons for evaluating these issues were to analyze that whether to investing on these securities would be profitable for organization or not, and if yes, then what would be the steps that the company need to follow in order to meet the criteria. Moreover, the organization also evaluated that the political situation of China’s economy would improveorstay unchanged in upcoming years. In other words, if the organization expected any change or improvement in the economy, then it would have to wait for the right time to take the full advantage of investment in China.
3. Solving Human Resource Issue
If Acer wants to start its manufacturing plant in China,then it needs to solve its human resource issues. The key factor of success for Acer group is to have the ability to solve its human resource problems. Moreover, if it wants to manage human resource problem in the organization, then it should divide its task in two ways. First, the organization should maintain discipline and create a highly effective workforce in china as it is crucial for success. The second most important thing that Acer needs to do is to convince the Taiwanese managers, executives and other department officers to relocate their families in China for 5 years. Therefore, this would be the most challenging task for Acer to convince the people to shift their families in China where the standard of living is lower than Taiwan………………….
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