On the second floor of the Acer building, a world map shows an increasing number of countries where Acer is marked "No. 1." Looking at this map marking countries including Europe, Indonesia, Malaysia, Russia, Taiwan, and Thailand, it's hard to imagine that Acer, the second-largest notebook PC maker and third-largest desktop maker in the world, nearly went under a mere six years ago.

Last year, Acer grossed NT$462.07 billion, a 31.7 percent increase on the previous year, pushing Taipower out of the top spot in Taiwan's service industry.

"Our growth is just excellent. There's nothing I can do about that," said Acer chairman Wang Jeng-tang when asked about Acer's growth during an interview with CommonWealth Magazine.

Gunning for the Finish Line

Wang is justified in his confidence. Like a racecar driver gunning for the finish line, Acer has maintained the highest growth rate among the world's top five PC makers for the past four years, as highlighted by U.S. magazine BusinessWeek's article "A Racer Called Acer." And Acer continues to grow. In IDC's 2008 Q1 report, Acer led the global PC industry with a quarter-to-quarter annual growth rate of 31 percent, beating main rival Hewlett-Packard, which grew by only 17.4 percent. While HP's growth is slowing, Acer has even upped its sales goal for 2008 to 30 million units. What is Acer banking on?

Wang doesn't have mentor Stan Shih's love of the brand or colleague K. Y. Lee's brazen courage for branding, but he does have a businessman's steady meticulousness and pragmatism.

"A brand that doesn't make money is worthless! Some say building a brand is worth losing money – it's this type of thinking that stunts progress," Wang insists.

And it is this "profits first" mindset and bold disbelief in Shih's teachings that has allowed Wang to devote himself to strategy. "I chose to go with retail channels, I chose to go with notebooks," says Wang, simply.

Focusing on distribution channels gave Acer a competitive advantage.

When the "direct model" became the mainstream modus operandi for sales in the PC market, Acer took the opportunity to build close ties with retail distributors, whose profits were suffering and who were carrying an ever-decreasing number of brands. Placing tight controls on its operating costs, Acer set its net profit-margin goal at half that of Dell's (2 percent for Acer, 4.8 percent for Dell), and split profits with distributors. Acer even pushed prices down to 5-10 percent below that of its competitors to help distributors promote the Acer brand.

"This is the cost leadership strategy," comments Merrill-Lynch vice president Tony Tseng. Acer chose to "sell 100 units at a $10-per-unit profit than to sell 10 at a $100-per-unit profit." This choice brought Acer unprecedented economy of scale and a much-coveted market share.

This channel-oriented business model has allowed Acer to conquer the international market. From small and advanced European nations to emerging countries like India and Brazil, Acer's sales model has been a continuous success.

Concentrating on notebook computers has put Acer on the fast track to global growth.

"Three years ago, notebook sales were only a third that of desktop PCs. At the end of this year, notebook sales are expected to overtake that of desktops,'" says Henry King, director of Asia-Pacific investment research at Goldman Sachs (Asia), who has long been bullish on Acer, and feels it is currently on the ascendance.

Fortune is fickle. Dell's decision to use outside sales channels, reversing its long-time adherence to the direct sales model, and the notebook's overtaking the desktop in popularity have both benefited Acer.

"I never thought that both parts manufacturers and retail outlets would provide subsidies to make Acer notebooks more than US$100 cheaper than Dell's," says Wang, frankly admitting his surprise at the fervent promotion Acer has received from the industry. "The general environment is in our favor. Thank heaven!" Wang says, half jokingly.

Globalization Takes Acer to the Next Level

Two major acquisitions made during the past year have further expanded Acer's global reach.

Last August, Acer became a multi-brand company through the combined US$710 million purchase of Gateway, the fourth largest U.S. PC company, and Packard Bell, Europe's third largest PC company.

When Hewlett-Packard purchased Compaq seven years ago, Sun Microsystems CEO Scott McNealy jokingly described it as "a slow-motion collision of two garbage trucks."

However, the consensus of U.S. analysts on the Acer-Gateway merger last year was that it was a rare perfect match in terms of products and markets. "The positioning of Acer and Gateway is pretty compatible," averred an optimistic Roger Kay, president of U.S. market analysis consultancy Endpoint Technologies Associates.

Compared to many mergers of Eastern and Western companies, Wang believes that "Acer's acquisition has increased its economic scale. This is completely different from a company lacking in core competencies attempting to gather up missing pieces of technology and products."

With the Gateway acquisition, Acer immediately became much more influential in the U.S. market, which it had always found elusive. In the past, Acer had always wanted the U.S. market to "not grow too much." Because Acer was not very well known in the U.S. and thus had a low earning potential, U.S. market growth was constantly dragging Acer's average net profit down from near 3 percent closer to their bottom line of 2 percent.

Acquiring Gateway increased Acer's global market share to 9.9 percent, beating Lenovo's 6.9 percent by a wide margin. More importantly, this heightened brand recognition has put Acer's after-tax profits in the U.S. on the verge of breaking 1 percent, helping Acer to maintain its 2-percent minimum profit margin.

This strategic merger has also made Acer a global enterprise.

Before the merger, the industry considered Acer a "European company," as 70 percent of Acer profits was derived from that region. Indeed, Europe's top-line brand manufacturers have felt compelled to join forces to encircle Acer in Europe.

Following the merger, Acer's global turnover and profits distribution has become more balanced. This year, Europe, the Americas and the Asia-Pacific comprised a respective 50 percent, 30 percent and 20 percent of Acer's global turnover, and U.S. sales are expected to contribute over 20 percent of total profits.

"Strike me in the East and I'll retaliate in the West, strike me in one region and I'll work on another," says Wang, who tells us that the globalized market has created the chance for a "competitive balance." Since the merger, Acer is no longer limited to attack and defense in Europe alone, further decentralizing risk.

While it is now a solid second in global notebook computer sales, Acer sales in China rank a mere fifth, behind even that of Taiwanese rival Asus.

If Acer is to realize its dream of becoming the largest notebook brand by 2011, China will be an indispensable piece in its global deployment puzzle.

Translated from the Chinese by Ellen Wieman

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Chinese Version: 世界級企業︰台灣篇　猛催油門　打一場全球化的仗