Global Reach--Acer Makes Its Mark in Latin America

Ten years ago in Taiwan there were a number of entrepreneurs who weren't content with manufacturing on behalf of large international companies, and instead decided to create their own brand names. In doing so, one of these, Acer, offended their customers and almost completely lost their orderbook. Nowadays, however, not only has Acer's name begun to appear on the international stage, in many countries it has become the foremost brand. Of these, the region in which it has the largest market share is Latin America.

In Mexico, which borders the US, where Acer's main rivals lie, Acer has more than 30% of the market, its most impressive performance anywhere in the world.

Just how has Acer defeated the computing world's "Big Blue," IBM, in these countries, and moved from creating its own brand name to becoming the number one brand?

Last summer the highly exciting "Acer effect" emerged in Latin America's financial and economic world; starting on July 19th shares of Acer Computec Latino Am廨ica (ACLA) were floated on the Mexi-can and international markets, and in only two short months the share price shot up 30%.

"In Latin America, Acer is the first such company to receive a look of approval from investors," a review in the Mexican computing magazine PC Semanal said, "this is the first time in the history of the Mexican stock market that investors can have a choice in the area of information technology."

The glory of being a "Stock King" is not easy to attain, but the high share price is a reflection of Acer's operating results.

According to the latest statistics from the US, Acer has the highest market share in Spanish-speaking Latin America, and in the whole of Latin America (including Portuguese-speaking Brazil) at the moment it occupies second place, behind only Compaq. Looking at the situation country by country, Acer is first in market share in Mexico, Chile and Argentina, second in Columbia and Peru, third in Venezuela, and fourth in the recently entered Brazilian market.

Mr. Fernando Portela, president of Acer Argentina S.A., which this year has just taken over the number one spot, brandishing the latest statistics hot from the press, could not conceal his excitement as he said "We feel exceedingly proud to have achieved these results in only the third year of the company's existence."

"IBM and Compaq are our competitors, but I bet they'd also admit that Acer is outstanding," Acer Latin America, Inc. marketing manager Patricia Madueno-Guerra half jokingly said, adding: "Furthermore, they really fear us."

Villages encircling the cities

Acer's initial expansion into Latin America was successful largely by accident.

As the Acer group's CEO Stan Shih reveals, 15 years ago when Acer was just starting operations in Taiwan, where would they have found surplus energy to expand into overseas markets? Latin America's first sales agent from Chile actually came himself to seek them out.

Originally their mentality was one of testing the water by 'sale-or-return' as they never expected the market response would be so extraordinarily good. For Acer computers, entering Chile turned out to be like entering a new territory unopposed.

They very soon realized that Latin America had great potential. Stan Shih energetically drafted the "GO" strategy-based on the idea of the "villages encircling the cities"-in which he abandoned the idea of most manufacturers which sees the European and American markets as all important, and going one step further, set up his strategic base in that gateway to Latin America, Miami, sending specialists to service this market.

At the end of 1981, Acer sent the very young Max Hung alone to his new post. Hung remembers when he went to Latin America to find agents by himself, "naively bold," he couldn't even speak a sentence of Spanish. Luckily he met a young fellow in the airport who could speak English and was using his university summer vacation to earn money driving a taxi, so he employed him for a week, asking him to work as both driver and translator.

"That evening I was in the hotel room giving him some preparatory training, teaching him how to introduce the company, and the next day we worked our way through the telephone book calling one company after another to make appointments," Max Hung, who has recently transferred back to Taiwan to act as Acer's vice president, chuckles as he recalls.

He explains that when Acer was initially entering the Latin American market they considered the instability of the area's economy and fiscal environment, its great distance from Taiwan, and that at that time the head offices were having difficulties raising financial backing. Because of this they adopted a strategy of "selling territories," which is to say that in each country they just sought one agent, and then allowed them make Acer their exclusive undertaking.

"If you join up with Acer to conquer the world, and business takes off, in the fuure I will protect your interests, and Acer will certainly not discard you as no longer useful," Max Hung had told them.

If the mountains contain no tiger....

In due course stabilizing troop morale and making the representative agents pledge allegiance proved effective. In Mexico, where the market share rose to more than thirty percent, they managed to establish the brand name without it costing a penny of Acer's money.

The chairman of the board of directors of Mexico's consignee company Computer de Mexico, Juan Manuel Rojas, was old friends with Stan Shih, and in 1989 he started the Acer computer agency. By 1991 sales volume had tripled, and by '92 they had usurped the throne of the top brand, and by 1994 had a 32% market share. Furthermore they had become Acer's most outstanding sales agency worldwide.

Because their degree of mutual reliance was so high, Acer decided that from January 1st 1995 it would formally merge with the Mexican agent. Each would have half of the stock, and they prepared to organize as ACLA (Acer Computec Latino Am廨ica).

ACLA has 800 employees and branches throughout Mexico, Miami, Argentina, Columbia, Chile, Peru, and Venezuela. The company was to be headed by Rojas, the stock to be floated on the Mexican market. The Mexican City market was to be its base, chiefly responsible for financial and legal services. Miami was to be the operational and transport hub, responsible for sales, technical assistance, product planning, dispersal, warehousing, and so on.

"Opportune timing was a key point in Acer's success," reckons Acer Company Miami International general manager Mario Teuffer, in charge of business activities in Central America and the Caribbean. When Acer entered the Latin American market, IBM, Compaq and other large companies hadn't set their sights on a market with such high foreign debts and political potholes, so Acer stealthily advanced into Central and South America, conquering the territory to gradually become its "superpower."

Acer's performance varies from one Latin American nation to another, but as Teuffer points out, such differences can largely be explained by when Acer entered the given nations' markets.

For instance, in Chile, where Acer is the top brand, they started doing business fifteen years ago. In Mexico they started up early on, in 1990, and Brazil, where Acer is doing relatively poorly, was the last place where they got started. Acer only set up a subsidiary company there in March of this year, and thus began to force its way into this, the biggest market in Central and South America.

Global brand, local touch

Besides having seized such "heaven-sent opportunities," Acer's international operating strategy also harmonized with local advantages to bring about an incomparable efficiency.

"Having pooled resources internationally, Acer's head office just took care of 'national defense' and 'foreign relations.'" Max Hung explains, by national defense he refers to technology, and by foreign relations to the brand name. As for marketing, sales, personnel and other "domestic affairs," these were completely "localized." This, then, is the Acer operational concept of "global brand, local touch" that Stan Shih had come up with.

On the other hand, as Acer Latin America Inc. marketing manager Patricia Madueno-Guerra says, "Integrating with local resources often leads to conflict with the aims of the worldwide brand. Because of this we had to completely devote ourselves to molding the worldwide brand name; but as far as the products were concerned, we could then choose a strategy of localization."

This so-called "local touch" requires focusing directly on the Latin American market, with products especially designed to correspond to its requirements, unlike the large American corporations which sell the newest models and highest priced goods to Latin America.

Acer's method is to allow its subsidiary companies in each country to decide their own grade of central processing unit (CPU) and memory capacity, and to choose which software to load. Even the user manual is printed in three editions: Brazil uses Portuguese, Caribbean countries use English, whilst other Latin American countries use Spanish.

Following product localization, Acer went one step further and even localized production, setting up assembly plants in the same locations as the markets. Acer currently has six assembly plants in Latin America. Because the market is too small in Ecuador, Costa Rica, Panama, and the various Caribbean states however, goods are sent there from the Miami plant. The advantage of operating in this way is not simply to avoid import tarrifs, but it can also reduce stock inventories and lower production costs.

Fresh technology, fresh prices

As Acer Argentina S.A. president Fernando Portela explains, if you choose to buy a complete computer from Taiwan, sending it by sea to Argentina requires at least 40 to 50 days.

"If you're lucky, it'll be on display for 30 days and then sold, so in total we're talking about 70 days. And if you're unlucky, it will be 90 days before it's sold. This means selling to the customer at a three-month-old price," which he considers is very unfair to the consumer because the prices of computer components change every quarter.

Once there were local assembly plants, Acer could procure by sea freight the casings, monitors and other components whose prices don't alter each quarter, and the CPUs, memories, hard discs and so forth could then be procured each week and sent by air.

"If the price of components falls, then the price of our computers falls. IBM and Compaq lower their prices once a year, but Acer can lower them once a quarter," ACLA public relations manager Block stresses. Thus, whenever the consumer buys an Acer computer, the price is always the most advantageous.

"That we can offer the consumer an even better price is not because our products are inferior, but because we can more rapidly reflect the cost of components," notes Fernando Portela, who points out that the components used by the world computer industry have already changed towards universal computability. For CPUs Intel and AMD are used, for software it is Microsoft, and Seagate is the largest supplier of hard discs. The pieces are the same, it's just a matter of how they are combined to make different models.

It's really because the computer industry is just like McDonalds, you can eat exactly the same flavor anywhere in the world. Stan Shih focuses on this kind of 'fast-food industry' to mention the slogan 'freshness,' saying that only by having the freshest technology and the freshest prices can one then beat the opposition.

By having the leading brand, Acer offers the consumer an 'affordable' price, and to quote a phrase used by Chengchih University Graduate School of Business Management professor Ssu-tu Ta-hsien, "This kind of partnership provides the greatest competitive edge."

Transfer your headaches

Even if the product is good and the price cheap, if there aren't any good salespeople to sell them, then the product will still be "dead." In Acer's "local touch" strategy, perhaps the most important thing is the use of local talent.

Stan Shih states that in ACLA's success the contribution of Juan Manuel Rojas and the other partners cannot be left unrecognized.

"As far as I'm concerned the best feature of the 'local touch' is that headaches can be passed to locals," Stan Shih explains. In Mexico in 1995 there was an economic crisis, the peso depreciated heavily, and many American companies seemed very nervous. "If you wanted foreigners to shoulder these risks, nobody dared. But local people knew exactly where the risks lay, and so knew how to sail close to the wind but avoid disaster."

ACLA corporate sales manager Catherine Block remembers that at that time, "No one knew what the value of the US dollar would be the next day, so everyone was quoting prices in dollars, but we decided to use the peso for sales even though everything we were buying was in dollars. Acer was letting the consumer know 'We'll shoulder the risks, not you.'"

Passing through that economic storm, other computer companies' sales fell by as much as forty percent, but Acer's performance remained as rosy as before.

After the sharp currency devaluation, inflation and interest rates spiraled. At that time Acer came up with a pioneering new approach. Forming a partnership with Mexico's largest bank, Bancomer, they offered a preferential installment plan when buying Acer computers which enjoyed a fixed rate of interest. Sales agents could also get payment to cover their credit from the bank immediately following sales, and the risks of inflation would be borne solely by the bank and Acer.

After presenting this proposal, they immediately attracted 500 sales agencies wanting to join the Acer line-up. Furthermore, despite being squeezed by an all-out effort of large international companies, Acer's already sizable market share held fast.

Ten commandments

Using hindsight it's fairly easy to understand, but that period was a major test for Acer's head office and for Stan Shih. Before they organized ACLA with local partners, Mexico underwent a huge economic collapse, and so many people guessed that Acer might call a temporary halt to the plans for merging ventures. But that didn't happen. Shih proceeded with steadfast confidence according to the original plan, greatly encouraging to the local shareholders and employees.

ACLA's chairman of the board of directors is a Mexican, the shares are floated on the Mexican stock market, and the employees are encouraged by the awarding of stock dividends. From personnel to shareholders and capital, everything is localized, allowing them to feel even more a part of Acer, without the slightest feeling of working for a foreign company.

Fernando Portela, who has worked for an American company, makes a comparison, saying that American companies have a set of rules, which "as if carved into stone" cannot be changed. "At Acer, you need to understand its worldwide philosophy and worldwide aims, but there is no 'bible' you need to abide by. You can adjust what you feel needs to be adjusted in light of changes in the market."

Apart from this, "as far as employees are concerned, at Acer they can see the future." Portela points out that they don't have to worry that suddenly a manager is going to drop out of foreign skies and replace them. Because of this, their motivation is high.

In complete contrast to the usual impression of Hispanic people as romantic and easy-going, ACLA Mexico Division Operational Director Alicia Camacho says they usually "work from nine in the morning to nine at night."

"And that's not just manual work, but mental too," ACLA product manager Marcela Sanchez points out, "You have to concentrate on your work the whole time, because you can't afford any mistakes. For the company mistakes mean a loss of millions."

A republic of a hundred races

Localization of human resources has, however, one accompanying uncertainty: the problem of how to bind together Acer's corporate culture. Max Hung, however, thinks that this really isn't a problem.

"Being open, tolerating diversity, and being world citizens have always been a part of the Acer corporate culture. This era requires capital and human resources of a global nature. It needs the abilities of a 'republic of a hundred races.' The more open and integrated the culture, the greater its resources, and the greater its strength."

After ACLA's shares were floated on the Mexican market, Acer acquired a channel for raising local funds which greatly reinforced its viability, and gave it a spurt throughout Latin America. It not only settled the purchase of Brazil's sales agency and establishment of a subsidiary company there, thus forcefully targeting the largest market in Latin America, but moreover in one great step was a great public-relations boost in every Latin American country.

Government Information Office department head Marcos Chan, who was posted to Argentina for more than four years, thinks that although Acer hadn't been very active on the local market, after one year of advertising, an increase is very evident. Next to the highway from Buenos Aires' northern suburb, a large, eye-catching Acer computer advertising board has been erected.

Naturally Acer's opponents can't ignore this, and the global stock markets have unanimously been taking an interest in Latin America. The local market's hidden potential has long been confirmed, and over the last two or three years the large international computer companies have started to actively force their way in.

"The situation facing Acer today, of course, is very different from that of ten years ago," Mario Teuffer points out. However, what IBM and Compaq have set up in Latin America are branch companies. Only Acer, which through ACLA has a head office in the area, has concentrated its operations one hundred percent on this market. "I believe that in the future, when facing a strong opponent, we shall likewise be able to maintain our leading position."

He pointed out that although Acer's position in the Latin American markets is based on home computers, in the future Acer's aim is towards office computers and therefore towards attaining even greater success. "Before the end of the 20th century our aim is to become a US$1 billion company." Teuffer said.

Taiwan's courage

In June of this year the Chinese National Association of Industry and Commerce organized a business fact-finding mission to South America, visiting Bolivia, Brazil and Paraguay, and Argentina. Apart from the China Steel Corporation signing a billion dollar iron ore procurement contract in Brazil, however, they haven't yet achieved the anticipated progress.

"Our manufacturers still have too conservative an attitude towards Central and South America," says Taiwan Trade Center Miami director Carlos Liu, unable to repress a sigh. "It has to be said, only Acer can be proud of themselves in Central and South America. The significance of its success is to help others of our nation make use of its Latin American experience and courage."

The significance of its success in Latin America to Acer itself is even greater. "We discovered that even in the backyard of the strong American competitors, Acer still has the chance of becoming the leading brand, and securing a large slice of the market. In Taiwan's neighbor, Southeast Asia, there's even less reason we shouldn't succeed," Stan Shih points out. He goes on to say that this has already become the guidepost for Acer's future efforts.

Other than this, having already secured foundations in the "villages," Acer now has sufficient resources to attack the "city"-North America. "If you attack their strongholds once and don't succeed, there's always a second or third time," Shih said brimming with confidence.

The ACLA headquarters in Mexico City is a tall free-standing building. As you approach the entrance you find an impressive stone facade, beautifully engraved with the Acer symbol, causing one to remember that moment ten years ago when Stan Shih created his own brand name and put forward the concept of "sustainable growth."

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The big Acer billboard next to the highway is very eye-catching amidst the shadows of the night. The photo was taken in Buenos Aires, capital of Argentina.

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In the boutique shopping area in Mexico City (left), and in the restaurant with the most atmosphere in Buenos Aires (right), Acer is there.

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Acer Company Miami International general manager Mario Teuffer sketches out a map and company organization chart for visitors. You can see Acer's Latin American division of labor at a glance.

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In Mexico, which borders the US, where Acer's main rivals lie, Acer has more than 30% of the market, its most impressive performance anywhere in the world.

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(left, right, below) Acer's assembly plants in Latin America provide localized products at the "freshest" price to win the battle for market share.

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The stone on the front door of the Mexico headquarters is deeply engraved with the Acer logo. It symbolizes the firm's commitment to sustainable, long-term growth in the region.

The stone on the front door of the Mexico head quarters is deeply engraved with the Acer logo. It symbolizes the firm's commitment to sustainable, long-term growth in the region.