Polarized Consumer, Corporate Segments
As a rule, an increase in the PC penetration rate in a given country derives partly from active promotion of e-enablement by the government, and partly from the large-scale adoption of PCs in the private sector in order to improve working efficiency. This in turn encourages schools and universities to introduce new computer education courses, and encourages ordinary consumers to purchase their own PCs, whether for work or for study. It is this market development model that leads to the emergence of corporate and consumer market segments.
The consumer and corporate segments exist in both emerging and mature PC markets. What distinguishes emerging markets from mature markets is that PC specifications in the emerging markets usually lag behind those in the mature markets by roughly six months, and that the disparity in prices between the corporate segment and the consumer segment can be much more pronounced than it is in the mature PC markets.
Due to the low income levels of most consumers in emerging markets, the price of home user models is usually far lower than the price of the models used in the corporate sector. Whereas in the mature markets the differences between PC models designed to target the corporate market and those developed to target the consumer market may be relatively limited, in the emerging markets completely different models are needed for the two segments. To achieve high profit margins, PC makers seeking to develop the emerging markets need to clarify their own positioning and focus on either the consumer market or the corporate market.
System Solution Providers Add Value
Motherboard makers had already been active in the emerging markets and the low-priced PC market long before these markets became a major focus of attention. Some motherboard manufacturers developed their own market and distribution channels; others developed an own-brand business in collaboration with local agents, or undertook production for local system integrators and VARs. However, new entrants will need to adopt strategies different from those of the motherboard makers if they are to achieve success in the emerging markets.
One of the most efficient methods for low-priced PC vendors in emerging markets to keep their prices down is to adopt a "one-stop shopping" solution, where a single supplier undertakes product design, provides all the components and performs PC assembly. Those PC makers that have positioned themselves as a "system solution provider" are thus more likely to achieve success in the emerging markets. Not only will they be able to differentiate themselves from other component suppliers, by taking responsibility for the integration of component procurement they will be creating more value-added for the customer, thereby reducing the risk that the customer will take their business to another supplier.
In most cases, orders for low-priced PCs are relatively small. Usually, the ODM/OEM provider is responsible for arranging the supply of all components; the situation in the mainstream market, where the price of key components such as the CPU or chipsets is often negotiated directly between the PC vendor and the component supplier, does not apply. By taking on a large number of orders in the bid market the PC maker can reduce the cost of key component purchasing, thereby developing a source of increased profits that does not exist in the mainstream market.
The Best Road: Strategic Alliances With Local Companies
Emerging markets are mainly developing nations in which political and economic systems are still evolving. The rule of law may be relatively weak, with low market transparency. To develop these markets successfully, PC makers will need the assistance of local partners.
Foreign PC makers are unlikely to have the same in-depth knowledge of local consumer needs and habits as local companies, and will not enjoy the same level of brand recognition; collaboration with local vendors offers advantages in this respect too.
PC makers seeking to develop the low-priced PC market over the long term should therefore try to form strategic alliances with local companies in the national markets that they are focusing on. By collaborating with a local manufacturer that possesses assembly and repair capabilities in the market in question, a PC maker can solve its after-sales service problems and possibly reduce its tax burden by not needing to import PCs at the full-system level. Alternatively, collaboration with a local distributor can provide access to valuable market information. Individual PC makers will need to adopt the collaborative model most suited to their own positioning.
The emergence of the BRIC markets has presented PC makers with new opportunities for growth. However, to succeed in these markets, PC manufacturers will need to overcome various problems. The nature of market demand in the emerging markets differs considerably from that in the mature PC markets; PC makers cannot expect the strategies that they have used in the past in the mature markets to work in the BRICs. PC manufacturers that wish to develop the BRIC markets must focus on a number of aspects to be successful: acquiring in-depth knowledge of these markets; developing a high level of sensitivity with respect to product specifications and fluctuations in the price of materials; precise calculation of costs; and careful appraisal of whether developing each individual market is worth the effort required. To achieve the anticipated level of profits in emerging markets, PC makers would thereupon need to devote a great deal of effort to building up the necessary capabilities in production, purchasing and logistics.