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Managing Cultural Diversity in Business

Case study report

Executive summary
Organizations adopt various policies and strategies to expand their operations both nationally and globally. This report analyses a case study Acer restructures for global growth. The report probes whether the restructuring had contributed in the global growth of Acer and finds the proposition as true. After this a note on growth path of Acer is presented and it is stated that if the company can produce low priced products suitable for the Indian customers and improve distribution in small cities it can take advantage of the growth in the Indian markets. The report establishes that Acer is now number two player in the Indian PC markets and enjoys a number one position in notebook sales globally.

Introduction
The organizational restructuring is done to bring certain desired changes in the organizations. This report is based on a case study Acer Restructures for Global Growth which describes the growth of Acer as an organization. The report probes whether the growth of Acer in the global markets can be attributed to its restructuring of operations. The paper also presents the reasons for this. After this a note on the growth path of Acer in India is presented and a discussion on how can Acer take advantage of the opportunities in India is done. At the last the paper presents a current update on the companys situation in India and at the global level. The paper critically analyses all the issues present in the case study.

Acer and its restructuring of operations


The corporate organizations have a big contribution and importance in the economic activities at both national and global level. The large corporate organizations have to develop productive capabilities so that they can generate good revenue on their investments. The organizations need to develop both physical and human capital in order to improve their capabilities and to become productive. As the corporate organizations grow they have to also undergo restructuring which is at times also major. The corporate restructuring is very different from the corporate growth. In the process of restructuring the organizations undertake various steps which are according to the objectives of the restructuring. At times there is a change in the HR policies and practices and at other time the organization may either get centralized or decentralized. Each type of restructuring has its own advantages and disadvantages. The main aim of the process of restructuring is to improve the functioning of the organization and to increase profitability. The restructuring is a tool for growth and is used strategically to improve growth. At times the old mode of functioning may be a cause of low productivity hence the organizations may require restructuring. Acer is a global company which has shown a good growth in the past. In 2007 the company was the third largest in terms of the world wide personal computer (PC) shipment. The company has came a long way from 1994 when it stood at number eight globally in the PC markets. The company in 2007 was very close to its competitors like Dell and HP and analysts expected that the firm may over take both Dell and HP in the future. The growth story of Acer was attributed to the restructuring efforts carried out by the company as per the analysts. On carefully studying the growth story of Acer it can be said that the analysts were not wrong. Acer made many efforts in improving its efficiencies by using restructuring as a tool. The restructuring efforts by the company began in the year 2000. It was in December 2000 when the company took a decision of splitting its PC system manufacturing into a new division which was incorporated as a new company. Now this move was really a courageous and ambitious step which the company took. It separated its PC and the digital solution businesses as both were two different types of works.

The companys digital business was named as BenQ and it offered devices like the mobile phones and the digital projectors etc under the brand name of BenQ. The PC business concentrated on the PC products like desktop PCs and Home PCs etc under the brand name of Acer. This strategy helped the company to grow in many ways. Firstly the separation of two different types of business allowed the new companies to fully focus on the brands which they offered. As a merged entity a concentrated focus would have not been possible for both the product lines. Splitting the two different types of business not only allowed the company to focus on them individually but also helped in to lower the operating expenses. The company used the lower operating expenses to price the PCs aggressively and to offer better incentives to the channel partners. In this way the restructuring of the operations gave it a direct advantage of saving costs which is very important for a companys survival. The company passed this advantage to the customers and the channel partners and this helped it to grow faster. Therefore the restructuring definitely helped it to grow at the global level. If the company would have not restructured then it would have continued to perform as it was doing before the year 2000. Acer not only restructured its organizational setup but it also restructured the distribution system it has followed. The company shifted focus from the direct sales to the indirect channel sales. The company started to build its relationship with the dealers by providing lower priced products having unique product innovations. This also helped it to lower the costs and efforts which were required to build a direct sales channel. The company was saved from investing time and efforts globally to build its direct channel sales. Like in India the company initially tied up with Wipro InfoTech Ltd. This type of restructuring in the distribution channels saved it from investing money and efforts to develop its own distribution channels. Also the use of a pre existing dealer network had helped the company to grow faster and in a number of regions. The restructured distribution policy therefore appears to have contributed towards the growth of the company globally. The company also used acquisition as a strategy to grow at the international level. The company acquired Gateway Inc which automatically led to a major stake in Packard Bell. This made acquisition made the company the third largest computer company. Over all the restructuring had definitely helped Acer to reach a significant position globally. If the company had continued with its original structure then it would have not been possible for it to reach a position of the third largest computer company so fast. Restructuring helps the companies to improve their efficiencies. As seen in the case of Acer that the restructuring in the organizational design and the distribution policy it was able to save costs and built efficiencies. This has helped the company to grow globally. The changes in the systems during restructuring have lowered the costs which the company strategically used to expand. Similarly new distribution strategy enabled the company to grow faster than before. Thus it can be definitely said that restructuring can be attributed to the growth of Acer in the global arena.

Acer in India
Acer entered India through the mode of partnership with Wipro Info tech Ltd. This mode helped it to enter into India with lower entry costs and to get knowledge about the markets from its partner. This is the most suitable mode for an international firm to enter into a new market. This saves the companies from setting up a full setup in an unknown foreign market where a heavy investment may be a risky venture. Many times the multinationals enter into a partnership with a local player and then later establish their own subsidiary. This was the

exact case with Acers entry into the Indian Markets. After the initial partnership with Wipro, Acer started its own full- fledged subsidiary in the year 1999. This indicates that Acer entered the Indian markets because of the potential it saw and when Acer found it profitable it started a subsidiary. This was a smart entry strategy which the company adopted in India. The starting marketing strategy of the company was to focus on the institutional business. This strategy was also a good one as it allowed it establish its base with lesser efforts. The institutional marketing is marketing products to the large customers like corporate houses and government institutions etc who can purchase in large quantities. This type of marketing can help the companies to save advertising costs and other expenses like distribution setup costs which are present in consumer marketing. This is a good initial strategy which allows the companies to sale the products in bulk. Acer first established itself in the institutional marketing and then entered the consumer market. There were two separate divisions initially for institutional and consumer business in Acer which was later merged into one. Acer established itself as a major player in the government and institutional sales in India. In India the company was said to have relationships with 15 large system integrators which helped it to be present in the 40 customer verticals like banking and finance. Thus the marketing strategy of the firm definitely has helped it to establish itself firm in the Indian market. The company not only made efforts in the institutional sales but has also developed its brand image in the consumer markets. Acer used Hritik Roshan as the brand ambassador to build a strong brand image in its promotional campaigns. Hritik Roshan helped the company to develop a strong brand recall and association with quality. Not only this, Acer also took measures to increase the brand visibility by focusing on creating retail outlets and retail partners. Because of these efforts the company was able to establish itself strongly in India. Company also practiced a good distribution strategy in which it used a geographic strategy to avoid conflict of interests with the channel partners. All these measures enabled the company to establish itself in India with success. India offers good opportunities to Acer for growth. In India the company is focusing on education, youth and retail. All these segments offer good opportunities for the company. The company is strong in institutional sales and enjoys good relationships with the government institution. The government is expected to increase the expenditure on education these relationships can help Acer to grow faster. The company can get contracts from the government to supply the products which are useful for education sector. The company can promote its notebooks and other educational products to the government for use in the educational sector. Notebooks are a segment in which the company has a better position. It is a product which is also popular amongst the youths. Therefore creating a focus on the notebook can help Acer to take advantage of the growing market of notebooks. The smaller towns and cities also offer good opportunity for Acer. The company can create a distribution network in the small towns and cities and tap the potential which these markets offer. The growing income, government push on education and automation and increasing trend for use of computers in different field offers big opportunities for Acer. The company therefore has to carefully focus on its marketing mix to take advantage of this situation. If the company can create low priced products suitable to the needs of the Indian customers, develop a strong distribution network and promote products aggressively then it can definitely take advantage of the opportunities in the Indian markets.

Current position of Acer in India and World


Acer now enjoys a good position in the Indian markets. Acer is at number 2 position in India.

The total share of Acer in the total PC market stands at 13.4 percent. Acer became the Indias leading desktop vendor during the April-June quarter of 2012. This position of Acer was mainly because of the strong demand which emerged from the education vertical in India during 2012. Apart from this Acer also succeeded in winning some government orders. This was the main reason why the company managed to retain its strong position in the desktop, TFT and note book category. Acer enjoys a strong position in the consumer section apart from the institutional sales. The company witnessed as strong 2.7 percent growth in the desktop category and 5.35 percent growth in the note book segment on QoQ basis and this has helped the company to gain a number two position in the PC markets in India. Acer achieved this by taking over HP which earlier enjoyed the number two position in the Indian PC markets. The Number one position in India is held by Dell which has around 17 percent of the market share. Thus it appears that the predictions mentioned about Acer in the case study are becoming true. The company is now not very far behind the market leader Dell and may also leave behind Dell if it continues to show this type of performance. The managing director of Acer India Mr. Harish Kohli says that the company aims to grow at the rate of 25 percent in the future with the support of the categories like government, corporate, retail and consumer. In the World the company has become the number one vendor of notebooks. The company enjoys a market share of 15.35 percent in the global market according to the figure of quarter two 2012. The company has managed to re establish its position in many global markets like South East Asia, Europe and many other emerging markets like India. This has helped it to reach to a number one position globally which was again predicted in the case study. This has come after the company suffered a decline in 24.4 percent of revenues on year-on-year basis in the financial year ending 2011. Therefore it can be seen that Acer has improved its position India and also across globe. The growth of Acer was not unexpected but it is in line with the future developments which were predicted in the case study by the analysts. The company has therefore very well managed and implemented the growth strategies which it started from the year 2000. These strategies and policies are really behind the position which the company now enjoys in India as well as at the global level.

Conclusion
Acer enjoys a good position in the computer markets and this is mainly because of the growth strategies it has followed. The global growth of Acer can be said to be an outcome of the restructuring strategies it adopted. The change in the organizational design with separation of PC business from digital has helped the company to focus and grow its PC business. Similarly new policy of distribution has also helped Acer to grow faster. In India the company entered through a partnership with Wipro and this helped it to establish its own subsidiary in 1999. The focus on institutional, retail and consumer business has helped Acer to become number two in India. Globally Acer is now number one in the notebook segment.