Acer Five Forces analysis
Acer has evolved very fast in its 40 years of existence. The brand has remained steadfast and committed to its mission of spreading digital technology and making computer technology accessible to more and more people around the world. The evolution of mobile computing has resulted in a loss of profits and market share for the computer and laptop brands. Declining share of computers and laptops in the market has made these brands alter their strategic course.
However, Acer’s PC business has remained near stable and the reason is a strong product mix. The brand has innovated its product offerings to cater to the needs of various consumer segments. Gaming PCs, ultra thin notebooks and 2 in ones are some of; the innovations that have helped Acer retain its business and revenues. However, the PC market is changing continuously and to keep its business in a strong position, Acer has made its foray into cloud related business.
This is the era of Internet of Things (IoT) and PC businesses would need to alter their strategy to remain competitive. This is a five forces analysis of Acer that highlights the competitiveness of the business and how the five forces affect its business position in the industry. Porter’s five forces is an analytical model that can help business managers understand the forces that affect competition in an industry and based on it the industry’s effectiveness.
Bargaining power of suppliers:
The overall bargaining power of Acer’s suppliers is low because of their small size and low clout. Its suppliers are scattered all over the world and a very large number of them are concentrated in China. Apart from that few of them are of significant size. If some of the suppliers hold sole bargaining strength then it is because of their quality of raw materials and large size. In this way, Acer has the upper hand and because of its financial clout and ability to pay holds the upper hand. It has set rules and regulations related to quality, labor and environment that the suppliers are required to follow. Moreover, the brand conducts regular audits to see that the suppliers adhere to the rules and regulations. In this way, the overall clout of the suppliers of Acer is low.
Bargaining power of the customers:
The bargaining power of the customers is moderately high. The reason is that the power has shifted into the hands of the customers. Businesses are doing everything to attract and retail customers and to engage them. Another reason which has led to increase in clout of the customers is increased competition. Higher competition means a higher number of brands are fighting for market share and the same customer base. Now every single customer matters and it is why from product quality to customer service the brands are investing in everything to remain ahead of their competitors. Increased importance of customers can also be attributed to the higher use of online services and information. The customers have every kind of information at their disposal and can switch brands without incurring any significant costs. Some of the factors that moderate the bargaining power of the customers include the brand image, quality and marketing efforts of the brand. Overall bargaining power of the customers remains moderately high.
Threat of Substitutes:
The threat of substitute products mainly arises from the competing brands and their products. Seen in this light there are a large number of substitutes and so the threat is high. Every rival brand is pushing the line of innovation very hard. From laptops and PCs including gaming PCs and slim notebooks, there are substitutes for all products. In terms of price too the consumers have several options. The switching costs are not so high for a customer if he wants to buy a product with matching efficiency and quality. All these things make the threats from substitutes run high.
Threat of New Entrants:
The threat of new entrants in the PC industry is low. The level of competition is very high. The existing brands enjoy some privileges including Economies of scale which helps them produce more while investing less. A new player would have to invest a lot in infrastructure, operations, human resources and other things. Apart from the large financial investment new players also face the legal and regulatory barriers. In this way, while the barriers to entry are high, the barriers to exit are also high. To erect a new brand like Acer, one would have to make a major investment in operations, infrastructure, marketing and many more things. All these factors reduce the threat from the new entrants.
Competitive Rivalry between the Existing Players:
The level of competitive rivalry between the existing players is very high. Even if the number of players is low, all of them are major brands with financial strength and technological capabilities. From Apple to HP and Asus, all the brands have a strong position in the market. The situation has become tough because every brand is innovating technology and products to retain its customer base and market share. Price, quality and technological innovation become the major differentiators for PC and laptop brands. The overall level of competitive rivalry remains high.
Acer Annual Report 2016