Of all Taiwan's corporations, only the Acer Group can be said to have truly taken root throughout Latin America. What has Acer's experience been? With the great political and economic changes taking place in this region, how have Acer's wisdom, vision and way of doing business helped it to achieve success?

Having visited several countries in Latin America, we now return to Taiwan to interview Stan Shih, Chairman and CEO of the Acer Group.

Q: At a time when most Taiwanese entrepreneurs and large international computer firms showed no interest in Latin America, why did Acer make the decision to enter this market? Could you use Latin America as an example in discussing Acer's global operations and international strategy?

A: When we first started business in Taiwan, because we constantly came out with innovative products, we received attention from Latin America early on. For example, retailers in Chile made contacts with us as early as fifteen years ago. Generally speaking, the major international firms don't pay much attention to such small markets; but we look at the whole world on an equal basis, attaching importance to both the US and Latin American markets.

When I was first creating my brand, I raised the idea of the "GO" strategy, in which "the countryside surrounds the city." That was at the same time that I was opening up the Latin American market. Today, our products are also selling well in Southeast Asia, South Africa, and even Scandinavia.

By "the countryside surrounds the city," I mean that, supposing a given region requires ten divisions to conquer, and while we have thirty divisions, a large US firm has a hundred. But even though that firm has a hundred divisions, it looks down on such a small market, and doesn't go. Although we aren't so powerful, our resources allow us to send ten divisions, and so we first conquer that market.

This is still a very important strategy for us today, because we are now reaping its benefits. At the present time, we're still not doing very well in the US market. If it weren't for the fact that we are doing steady business in other regions, our poor performance in the US would cause our entire operation to collapse. But because our business in other regions is stable, if our first assault on the US market is unsuccessful, we can always make a second attempt. We can fall back to a fortified position, because we have already achieved a certain economic scale. This success is not based on profits alone, but also on the foundation which has resulted from my long-term efforts to create a brand name.

From countryside to city

Q: From the "GO" strategy of "the countryside surrounding the city" to "citizen of the world," and on to the present theme "global brand, local touch"-what kind of developmental process has this been?

A: It has been a synthesis of foresight and pragmatism. If you don't first conquer the countryside which surrounds the city, you won't be able to attack the city itself; and so we had to use that strategy. Don't say "Oh, occupying the countryside isn't ambitious." In the end, I'll still surround the city, right?

"Citizen of the world" refers to a state of mind. Taiwan cooperated with Japanese and US firms in the past, hoping that they would transfer technology to us and allow us to participate in the decision-making process-but things did not turn out as we had hoped.

Now that the tables have turned and Taiwanese corporations are seeking to internationalize, we should reflect on the way others have behaved in the past and instead "do unto others as we would have them do unto us." If we go out today and treat others in the manner we were treated, trying to control them, I don't believe that this is a modern method of development. Treating other countries as economic colonies is a concept of the past. If you have what it takes, you should share it with others.

Being a citizen of the world means taking root in the regions you enter. While early emigrants from Taiwan all ran barbershops or restaurants, we are now involved in the high-tech industries. Because these industries are related to local economic and social development, we have to adopt this frame of mind and blend in with the local society if we want to be accepted there.

Finally, in "global brand, local touch," becoming a global brand is the goal, and "local touch"-i.e. making use of local resources-is the strategy.

In Mexico, for example, just when we were about to reach a joint venture agreement, the economy collapsed, and Venezuela, Argentina and Columbia experienced problems even more serious than the current devaluation of the Baht. If we had been managing things from Miami, and did not have an in-depth understanding of the situation, our business would have been cut off. When that type of change occurs, if you don't have a full understanding, you will fear the situation. But because we had people running things us at the local level, they got wind of the situation beforehand, and were able to take precautionary measures.

Less headaches

In Venezuela, because of currency controls, we have used our profits to buy real estate. Although there are constant price fluctuations, the value of real estate has continued to rise, and in the future we will be able to obtain the equivalent amount in US dollars. Also, during a period of severe inflation in Mexico, Acer introduced a bank-guaranteed installment plan based on a fixed interest rate for computer purchases. This not only minimized the shock for us, but even brought us profits.

And so I often joke that the biggest advantage of the "local touch" policy is that it allows me to transfer my headaches to people at the local level. This is because when local problems occur, it's no use for me to get a headache. Many US companies become nervous when looking at foreign environments, and when they want locals to cope with all of the risks and fluctuations, nobody is willing. Although my people at the local level may be "placed in check," they are in a better position to find a way out, and have many resources at their disposal.

My people at the local level make their own decisions-I just provide them with my full support.

Why is it that we can provide full support? I wouldn't say that it is because we are best friends and have a relationship of mutual trust, but rather because it is mutually beneficial. Because if they make policy decisions which turn out to be erroneous, they must take 50% of the responsibility. Because it's a partnership, I can give them the full authority to run things on their own.

If you don't make use of local resources, the battles you face will be very difficult. This is what I call "the big dragon must bow to the local serpents" [a twist on the Chinese saying 'the local serpent must bow to the dragon,' meaning local powers must bow to greater powers from outside]-and so you have to depend on the local bosses. Not only in Latin America, but also in many countries in Southeast Asia, we find ourselves in this situation.

Q: Having already gone through these three stages, do you see any new developments for your global strategy in the future?

A: I don't know, because its necessary to combine your vision with the actual objective environment in a very pragmatic way.

What's important is how to formulate a strategy for all of the many people with different perspectives in a global organization and then use this strategy to focus energy and go all out.

The human factor

Q: What do you believe is the reason for Acer's success in Latin America?

A: We have very good partners at the local level-this is the most important factor. For example, our partner in Mexico, Juan Manuel Rojas, is the biggest player in the Mexican market. I first met Mr. Rojas when I was at my first job. He made a visit to my company, and at that time he was selling calculators. Later, when he was working for a Mexican firm and I had started Acer, his company began buying from us. They put their own name on the products, and became very successful in Mexico. Later, in order to cut costs, their company went to Korea and cut off relations with us.

At that time, Mexico was taking a protectionist stance; the market was closed, and we were pretty much cut off for one or two years. But Mr. Rojas understood our capabilities. When the Mexican market later opened up, he brought together two other retailers to form a partnership which dealt exclusively in Acer products. Within 2 or 3 years, we became the number one brand in Mexico.

The results of my analysis are that, first, he understands and has confidence in Acer, and has done his utmost to cooperate with us; and second, the fact that he and his two partners have a good understanding of the business, and have been single-minded in their efforts, has brought control of the market and quick success.

Because few retailers sell for only one company, we have had to cast our lots together-otherwise, we would fear him, and he would fear us. From a 19% to a 50% joint venture, we have established ACLA, maintaining a happy collaboration.

A second factor is that in coordinating with us, our local partners have positioned our brand at the high end of the market. They have used the innovative, cutting-edge quality of our products, as well as a high percentage of advertising investment, to create an excellent image for Acer. While I'm sure that people in the field know that we are a Taiwanese company, the average consumer is not aware of this.

Ingredients for success

What pleases me most about them is their marketing efforts. They are strong in this area, and willing to invest in it, spending 7-8% of their earnings on advertising. In Taiwan, 2-3% is quite a lot. But when they put in 7-8%, business increases, and in the end the advertising expenditures drop to only 5%. This is killing two birds with one stone-on the one hand, the image of your brand improves and profits increase; on the other hand, brand recognition increases and intangible assets rise.

Another factor in Acer's success is our flexible strategy, which is to say that we formulate a specific strategy for each different region. We have focused on the needs of Latin America, and taken special efforts to look after them.

For example, in the interests of increasing our market share, aside from our regular products, we have provided bottom-end products to meet the needs of the Latin American market. Although the volume is not large, we have designed these products for them to fill this niche. Finally, in order to take our services a step further, we have established a headquarters in Miami and put people in place to serve the region.

In terms of management, we have set up a headquarters to handle our Latin American operations. With such a small market, there could be several levels of management between me and them. If we managed our Latin American operations as a segment of our American operations, we would never have never given them high priority. When our American headquarters is already reeling from its own battles, how could it have the energy to look after Latin America? Although our office in Miami has only one twentieth of the employees in our American headquarters, and the scale can't be compared, we still give it equal footing in our organization.

Success in the midst of enemies

Q: On our trip to Mexico this time, we heard that during Mexico's 1995 economic crisis, you still decided to get together with Mexican retailers to form Acer Latin America. Could you discuss the circumstances and your sense of confidence at that time?

A: We had already signed a contract at that time, but we hadn't made any payments yet; the agreement had not yet gone into effect. Then, in December, it happened. Juan Rojas came to me and asked if we should continue with our plan, and I of course told him that we would keep going according to plan. This was very encouraging to him, because many people would have said "Oh, let's wait a while and see."

This matter is an expression of Acer's corporate culture. Acer's corporate culture has several special characteristics-one is to look at the long-term; another is to persevere in our principles. Examples are our success in establishing a brand and our faith in our employees. An Acer IC was stolen in 1984, and at that critical moment, we were still firm in upholding these principles.

You have to express your principles at critical moments in order for them to be persuasive. When things are going normally, it's easy to make promises. We normally emphasize Acer principles and culture, so at critical moments we should really stick with them.

On the one hand, the principles are sound; and on the other hand, with a long-term plan, you can't just change your policy when sudden situations occur in the short-term. Doing things the way I did was thus the same as giving another explanation of Acer's basic philosophy.

Q: What is the significance to Acer of its success in Latin America?

A: Our performance in Mexico has become a goal for our Southeast Asian operations, which includes Taiwan. This is because in Mexico, we hold a 30% share of the market; and the fact that we can become the top brand and achieve a 30% market share on the border of such a powerful competitor as the US conveys a message-Asia lies on our border, and there is no reason why we should not be able to do even better in Asian countries.

In fact, we only hold 18% of the market in Taiwan, 30% of the market in Malaysia, and possibly 10-15% of the market in other countries in the region. Our success in Latin America has given us confidence in our ability to open up markets in developing countries, and at the same time has become a goal.

Healthy exposure to the market

Q: ACLA's stock has been very successful in the Mexican market. How will this affect Acer's future development in Latin America?

A: The stock market exerts a positive pressure for the sound management of the company. Especially with overseas businesses, which are so far away and difficult to manage, I like to do my best to expose them to the market. This puts them under a form of control, and makes them more financially sound and prosperous.

Second is the policy of using local resources, because our battle there has only just begun. We need a great deal of resources, especially in terms of capital and manpower. Since ACLA's stock went public, we have had more capital to expand from Mexico into other Latin American countries. This has given us the clout, for example, to buy our retailer in Brazil and turn it into a subsidiary. A listed company has a better image, and this improves the chances of finding high-caliber employees.

In the future, after we have established a solid foundation, we can make even larger investments, because the Latin American market is still only in its initial stages.

Q: Acer plans to open a large plant near the US-Mexican border. In the future, will this cause a reorganization of the relations between your Latin American headquarters and operations center in Miami?

A: The priorities of our regional headquarters are to establish the brand, increase name recognition and develop marketing channels. Also, in such a large region, strategy and post-sales service are both part of the regional headquarters' concerted efforts to develop "core competitiveness."

Our assembly plant on the US-Mexican border will make the US market its main focus. As for Latin America, the assembly plant can deliver standard and large-scale orders directly to ACLA customers. But the ACLA assembly lines in the various countries will be kept running to handle smaller and more urgent orders. So there will be appropriate adjustments in the division of labor, but there won't be any big changes in our game plan. These arrangements are for the sake of raising our overall competitiveness.

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Stan Shih's strategies-from "surrounding the cities from the countryside" to "global brand, local touch"-have been highly successful in Latin America.

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"The biggest advantage of the 'local touch' policy is that it allows me to transfer my headaches to people at the local level. . . ."

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The listing of Acer Computec Latin America stock on the Mexican bourse created quite a stir. The man in the beige suit at the left of the picture is the soul of the company, Juan Manuel Rojas. (photo taken from the cover of Acer's in-house magazine Window, courtesy of Acer)

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"If they make policy decisions which turn out to be erroneous, they must take 50% of the responsibility. . . . I give them the full authority to run things on their own."

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Acer's annual employees' games inspire team spirit and build organizational loyalty.

The listing of Acer Computec Latin America stock on the Mexican bourse created quite a stir. The man in the beige suit at the left of the picture is the soul of the company, Juan Manuel Rojas. （photo taken from the cover of Acer's in-house magazine Window, courtesy of Acer）

"If they make policy decisions which turn out to be erroneous, they must take 50% of the responsibility.... I give them the full authority to run things on their own.".

Acer's annual employees' games inspire team spirit and build organizational loyalty.