The Multitech Group, commonly known as the MSC Group, now includes ten subsidiary companies, 82 local franchised retailers under the name Info land, and 1,000 contracted dealers in 50 countries. Group sales are projected to total US$I billion by 1991.
Beginning in 1987, MSC Group initiated its first bold steps in a five-year plan for global expansion. It signed an open-ended agreement with Texas Instruments Incorporated to sub-contract the assembly and testing of its personal computer products for the North American market, projecting a monthly output of 5,000 units within the first half year of operation. The Group also signed a merger agreement with Counterpoint Computers, Inc., based in San Jose, under which Counterpoint became a wholly owned subsidiary. The move was geared to assist Multitech's penetration of the worldwide market for multi-user systems and super microcomputers.
International investment banks have already injected US$16 million into the Group's operations. Stan Shih, the 47-year-old president of MSC Group, says: "It is very encouraging that for the first time international banks like Chase Manhattan and Citicorp have made investments in a non-financial company in Asia." The investment will be used to increase working capital, finance the rapid growth of the various companies, and expand manufacturing facilities at the Hsinchu Science-based Industrial Park in Taiwan from its present 142,000 square feet to 880,000 square feet.
Acer's "circuit power" is matched with management policies and employee benefits that encourage a "family feeling."
In another strikingly effective move, last year the Group began developing greater product recognition through a new brand name: Acer. With the establishment of Acer International Corporation in San Jose, the Group intends to make even greater inroads into international markets. "We expect to go full-scale multinational," says Simon Lin, Acer International's associate vice president for sales.
According to the Group's management philosophy, "affordable price" is no longer the only major concern. Its strategy is to provide products representing the best in advanced technology, and to match this with high performance, reliability, and better service—all at affordable prices. The Acer brand name is slated to be more than a good image; there will be high quality products to back up the name. "In a nutshell, we in fact provide greater value," says Ted Lu, associate vice president of product marketing.
Shih is confident in the Group's future: "We can assure greater value in our products because of our ability to integrate global resources, bringing together the best in each market in the most economical way. We already have R&D centers in Silicon Valley and Taipei, and we plan to set up R&D facilities in West Germany and Japan in the near future." He adds that the Group has more than 350 employees working in R&D alone, personnel who regularly link with colleagues in the product manufacturing divisions to develop and test new product ideas.
Acer engineers plan future high-tech products—R&D capabilities were emphasized "at the very beginning," and remain a high priority for the corporate group.
The new brand name of Acer was chosen to symbolize MSC Group's expectations and strength, and was part of an all-out effort to secure a sound foot hold in the U.S. market. To date, few Taiwan-based companies have established brand name recognition, and Shih is determined to overcome this shortcoming in others by promoting the Group's new brand name in the international marketplace. "If we have a world reputation," Shih says, "we can get double the results with half the effort." Shih adds that the Group's global penetration of markets will mean that "the dragon's dream has become reality."
But why have Shih and MSC Group become so successful? While part of the achievement may be attributed to the unlimited potential of the information industry itself and the availability of a skilled work force in Taiwan, there is much more to the story. Other local high-tech firms that started at roughly the same time have already failed, or are struggling to survive. Why is the Group different?
Ken Tai, general manager of Acer International and executive vice president of the marketing and international sales division, attributes the company's success to foresight and its knack of seizing an opportunity at just the right moment. "It was correct timing-we started in 1976, at the beginning of the micro-processor revolution," he says. Carolyn Yeh, Shih's wife and a co-founder of the MSC Group, agrees with the assessment. She says that most people in Taiwan knew nothing about computers in the mid-1970s, and "when you tried to sell a microprocessor, people would think you were talking about a mower."
Shih emphasizes the Group's high quality human resources, saying that they account for the firm's rapid growth. "The information industry is characterized by rapid change. You have to recruit innovative, talented people to work for the company and make them feel like they are an integral part of the operation." His comments indicate what sets Shih himself apart: he has a reputation for being a superb manager. His ability to attract and keep young talent has made Acer a powerful force in the marketplace.
One economic incentive that Acer employees find particularly attractive is its "small owner" policy. A substantial quantity or the Group's stock is owned by its own employees-a significant step in Taiwan where family ownership is still the norm. Currently, close to 2,700 employees own 80 percent or the Group's stock. Moreover, Acer expects to make a public offering in the Taiwan stock market during the 4th quarter or 1988, and employee stockholders are expected to increase to 3,000 by that time.
After three years with the company, any Acer employee is eligible to purchase a certain amount or stock; managers are eligible after one year. By being part owners, employees are motivated to join management in promoting the welfare or the company. All levels or employee are involved. Many clerks in their twenties-the average age or all employees is only 28-hold US$25,000 in Group stock. "We must devote all our energy to our work, since we are in the same boat," says Norman Huang, who presently owns company stock worth US$35,000. His words convey both pride and economic good sense: four years ago the race value or his stock purchase was US$17,000.
Shih is particularly pleased with the company's low employee turnover rate. It is just 5 percent, and a scant 1 percent for employees with over three years or experience. This stability gives Acer an additional edge in the information industry because the development or computer technology often involves long-term projects. Keeping the same people on the job ensures more probability or speedy success.
Shih's management style has done much to ensure employee stability; he believes in the view or the classical philosopher Mencius that "human nature is essentially good." While this might be considered as a cliché by many modern entrepreneurs who set "profit" as their primary orientation, Shih has taken a wholly different tack—and with startlingly positive results.
For instance, Shih insists that no timeclock be put anywhere in company offices. Employees do not have to punch in and out; yet it is common to see them working overtime to expedite documents, test circuit designs, or develop new products without asking for overtime pay. Shih says, "Our employees volunteer to work overtime without asking for overtime pay. Why should we haggle with them over every cent and ask them to punch a timeclock?"
And Shih knows how to delegate authority. Employees are entrusted with entire authority for most daily transactions, and Shih says that the procurement division is given full responsibility to purchase up to US$350 million or material without his signature. Company managers repeatedly emphasize learn spirit. Ken Tai, who is executive vice president or the International Sales Division, says: "High-tech is a risky business. Coordination and understanding among divisions are very important." This can take some unusual forms -such as employees interviewing their potential boss.
Alvin Tong, previously a senior engineer at IBM and deputy director general or the Hsinchu Science-based Industrial Park Administration, recalls the unique experience or being interviewed by those who might become his subordinates: "It is the most appealing feature or Multitech philosophy." In preparation for the company's global expansion, George Huang, who was Multitech's senior vice president at the time, and others in the International Sales Division went to Shih with a request that he find a person with suitable experience and contacts to direct Multitech's new global steps. When Tong round himself on the short list for potential hire, Shih saw to it that he met separately with the employees in the division so that they could decide for themselves whether this outsider met the qualifications to be their boss. The interview was a success, and the choice or boss has proved to be right. In 1987, Tong was instrumental in helping the company generate US$210 million in sales, putting Acer International firmly on the map.
The humble beginnings of the MSC Group are often recalled by its five co-founders. They started with no powerful sponsors or special privileges, but relied on their own talent, training, and hard work. George Huang, one of the co-founders, says they worked more than 16 hours a day in a nondescript, five-story building on Taipei's Minsheng East Road. But they had a dream that the fledgling firm could ride the mounting worldwide personal computer wave by tailoring its products to the local and regional market.
Shih's wife, Carolyn, says, "Our resources were quite limited then. When the men spewed out ideas and rummaged for new business opportunities upstairs, I had to do all the administrative jobs-everything from mopping the floors to contacting banks and customs."
Fred Lin, another co-founder, says another early orientation has paid off. "We realized that to lead our competitors in the information industry marathon we would have to establish our own R&D ability. We began that at the very beginning." With the local assistance of the Electronics Research and Service Organization (ERSO) of the Industrial Technology Research Institute, Lin worked out a product development manual which laid the cornerstone for the company's R&D system. Soon afterwards, Multitech began promoting its first personal computer, a product jointly developed by ERSO.
Shih's own intelligence has done as much as his management style to guarantee company success. Many employees describe him as having "32-bit" mind with— a good memory and quick responses. Huang says, "Stan is also a superb coordinator whenever there is friction among the partners."
Shih sets a good example for his employees. In its second year, when the firm found itself running short of funds, Shih responded by cutting his own salary by 50 percent, while the other co-founders cut theirs by 20 to 30 percent, until the company overcame its financial problems. And Shih has not been reluctant to make other bold financial moves. When the MSC Group began its major expansion in 1984, he conveyed 25 per cent of its stock to Glyn T.H. Ing, an entrepreneur with a background in construction engineering. Ing was also invited to serve as honorary chairman of the board for the entire Group in return for US$5 million of his own money to co-found with Shih a new venture capital company, called Multiventure. This money was quickly applied to developing networking technology.
When described as a forward-looking or even bold policy-maker in management systems, but a conservative decision-maker in investments, Shih only smiles, neither confirming nor denying the statement. "When talking about an investment project, if I can't be sure I'll win—even if the probability of success is 99.99 percent—I'll just forget it," he says.
A quality brand name is built on quality products—Acer has built a tough product testing program.
But worthwhile projects are implemented without delay. For instance, the Group recently put together US$2.5 million to establish a new company, Continental System Inc., in specific response to an ITT contract to build 16-bit personal computers. "The contract was signed after only one month's consideration," Shih says. "And after only one year the project had generated sales revenue of US$40 million."
With the rapid expansion of employees, and organizational structure, top management can experience adjustment problems, and communication between managers can become increasingly difficult. Shih is well aware of these potential problems and has sought to forestall them. "The problem is always there," he acknowledges, "but we face it squarely and make every effort to take a farsighted approach to things." In January of this year, the Group undertook a major reorganization of top management, structuring the entire organization around three functions: R&D and manufacturing, international sales, and trading. Many people considered this to be risky business, and Shih admits "at the beginning, it will affect our efficiency; but in the long run it will help strengthen the structure of the Group and integrate all our resources."
Shih expects the new organization will help the Group weather any international recession that may blow its way. Also, in the fiercely competitive domestic market, the new structure will assist efforts in upgrading after-sales services and bring greater vertical integration of its product line. Jeff Chen, general manager of Sertek International, Inc., a subsidiary of MSC Group, emphasizes this point. "Venders, customers, and the company are the three legs of a tripod. I believe that with the 82 franchised Infoland retailers in Taiwan, we will strengthen our system of operations and build stronger ties with our venders and customers. In international trading, we will also be more systematically connected with our branches in Europe, the United States, Southeast Asia, South America, and Japan."
Alvin Tong, who is now executive vice president of R&D and manufacturing, says: "In the coming year, we will put US$20 million into R&D, a growth rate of 30 percent, and another US$29 million into marketing, which is a growth rate of 35 percent." In addition, the Group's product policy will move from its current 50:50 ratio between OEM (Original Equipment Manufacturer) products and brand name production to 40:60.
This is a carefully considered shift in company planning. "Internationally, we will aggressively promote our brand name products. Meanwhile we won't give up our OEM channels, at least not in the near future. We believe the selective acceptance of OEM orders based on stable, long-term markets will help us balance our risk in promoting our new brand name products. In addition, through the OEM channel we are stimulated to learn new concepts and enhance our equipment to meet the quality requirements and testing standards of our clients," Tong says.
For the short term, the Group's marketing policy calls for developing a family of products, and especially promoting such star products as its laser printer and 32-bit micro-computer, the ACER 1100. The "family approach" has already worked in Taiwan. Ken Tai, who was the first local salesman for micro-processors, also oversaw the domestic franchise sales of 82 Infoland retailers within three years. He is currently the general manager of Acer International, and the executive vice president of the International Sales Division. "Taiwan will eventually lead the world market in personal computer technology," he says. "Our Unix has already become a standard for multi-user systems which Japanese and European companies are already targeting. And multi-user systems will also be included in our product line, in addition to our personal computer. Besides, we will soon be introducing our bilingual computer products into the Japanese market."
Shih shares Tai's optimism: "Taiwan's information industry is a healthy child that can withstand the fierce weather of competition in the information industry. 1988 is a year for the dragon to make a global leap."