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17th December.09
Acer Uses European Strategy as Guidance in Boosting China Sales
Dec. 18 (Bloomberg) -- Acer Inc., the world’s second- largest computer supplier, will boost sales training and expand its China retail network by 30 percent as it chases Lenovo Group Ltd. and Hewlett-Packard Co. in the fastest-growing major PC market. Acer, based 400 miles away in Taipei, also will advertise more after customer interviews pointed to a lack of recognition contributing to its fifth place position in the company’s top priority market, country head Oliver Ahrens said in an interview. The company will raise its profile in computer malls, where 80 percent of mainland PC sales are made. Acer overtook Dell Inc. as the world’s No. 2 PC vendor last quarter yet isn’t replicating that success in China, where Lenovo dominates with 29.4 percent of the market. Ahrens took over April 1and is revamping Acer’s marketing, product line and vendor training. “This has been done very well by Lenovo, by HP, by Dell,” Ahrens said. “There’s something Acer was lagging behind, and now we are spending efforts to improve this.” China’s PC sales volume will rise an average of 18 percent annually during the next five years, compared with 8 percent globally, and the nation will be the world’s biggest computer market by 2013, said Bryan Ma, Director of Personal Systems Research for Asia at Framingham, Massachusetts-based IDC Corp. Low-Cost Model The China operation depended too much on local distributors for marketing and sales while headquarters focused on making acquisitions and boosting U.S. and Europe sales, said Gokul Hariharan, who rates Acer “overweight” at JPMorgan Securities Inc. in Hong Kong. “It’s a low-cost model, but you’re not running your own business,” Hariharan said. “You still need people on the ground to track demand and see for yourself how things are going.” The mainland struggles prompted Chairman JT Wang to replace T.Y. Lay with Ahrens, who ran the Europe, Middle East and Africa peripherals business, including monitors and projectors. Ahrens, 44, who joined the company in 1991, employed a different approach. He participated in focus groups, visited two customers’ homes and listened through an earpiece as staff polled shoppers in electronic malls about their habits. Visiting Customers Ahrens went to a family’s house in Weinan, central China, and learned that the Chinese father, who earned 4,500 yuan ($660) a month as a civil servant, visited the mall as many as 10 times in three months before buying a new laptop. “The people here grew up with a lot of quite cheap offers, but the quality of the product was not very good,” Ahrens said. “If I did not do this, maybe I would have put the focus on, say, ‘Acer: We are super-affordable. Buy us,’ and that would be totally wrong.” Acer this month hired Zhang Yonghong from Hewlett-Packard, where he headed the Palo Alto, California-based company’s printer sales division in China. Zhang, who previously worked for Motorola Inc. and Lenovo, will run China’s sales and strategy division. Industrywide laptop shipments in China increased 71 percent in the third quarter from a year earlier, Personal Systems’ Ma said. Raleigh, North Carolina- based Lenovo leads with 30.3 percent of the market, followed by Hewlett-Packard, Asustek Computer Inc., Dell and Acer, which own 7.4 percent, according to IDC data. No Priority “They did not prioritize China,” said Calvin Huang, who rates the company “buy” at Daiwa Securities Group Inc. in Taipei. “If they fail there, definitely the company fails.” The country accounted for just 5 percent of sales, up from 3 percent a year earlier, the company said. Acer posted 5 percent total revenue growth in the third quarter, the first advance in a year, driven by notebook sales. Profit climbed 14 percent to NT$3.47 billion ($108 million) as it cut non-operating losses. Globally, Acer’s total shipments of laptops, which account for 73 percent of its NT$167.6 billion in sales, climbed 33 percent in the third quarter, outstripping 16 percent growth for the overall notebook market, according to IDC. Acer is No. 1 in laptops in Latin America, and in Europe, the Middle East and Africa; and No. 3 in the U.S. “China for next year is probably priority No. 1,” Acer President Gianfranco Lanci told investors Oct. 30. Secondary Choice Acer was a secondary choice among shoppers at one of Shanghai’s largest electronics malls. The entrance to the Xujiahui district mall carries advertisements for Lenovo and Hewlett-Packard. “I’ve heard of Acer but I’ve never thought about buying it,” said Jin Wei, 60, a photographer who recently bought a Hewlett-Packard computer. “It’s not very well-known. I’ve never seen their advertisements on TV.” Acer faces the risk of trying to increase its Chinese presence without resorting to its European strategy of undercutting Dell and Hewlett-Packard on prices. Discounts offered in Western markets eroded the company’s net income margin to 2.8 percent last year from 9 percent in 2003. Yet Ahrens said he will follow the European model for customer service to help improve the shopping experience for Chinese. “We could brush up a little more on the product,” he said. “The perception of the brand was improvable. If you have an excellent price performance in China, it does not mean you get preference