As companies across the semiconductor and electronics supply chain engage their market strategies for contending with the shifts in PC demand, we have the opportunity to monitor and explore their approaches. For those companies engaged in the mobile and PC markets, leveraging positions and core strengths (be that geographical, market, product or other) to tackle the downturn in PC sales is an obvious essential.
As we've seen throughout the first half of 2013, there is a renewed targeting of the emerging markets (EMs), particularly those beyond the leading BRIC nations (Brazil, Russia, India, and China). While BRIC markets hold significant volume opportunities, companies like Lenovo and Nokia have dedicated significant efforts to push into a variety of EMs. Importantly, leading OEMs, such as these two, among others, recognize that EMs offer broad and diverse markets and the successes in EMs is based on providing a range of products for various pricing and feature tiers, but with appropriately targeted focus to meet local user demands.
At all of the industry gatherings this year, we've seen the attention grow for the EM targets, today's market successes will rely on well-targeted geographic strategies that recognize the internal diversity of users in the EMs. Companies having a leading position already in BRIC markets, are able to leverage those experiences for successful expansions in other EMs, much as we see Lenovo doing, a company that leads over Apple in China in the smartphone market, for example, and is moving into Indonesia among other Asian markets. Similarly, Nokia is commencing sales of various ranges of smartphones in Malaysia as well as Pakistan and Thailand while including lower-priced phones for markets in Europe, recognizing pricing tier opportunities in developed markets where it has been strong.
User experiences at the core of shifts
Successful diversification is not just about pricing and models for targeted markets, it is also about recognizing that the mobility drive is based on more than devices. At the core of mobility's success is not just portability, it is the customization and highly-interactive user experiences that are delivered through the devices.
Having the agility to combine development teams that incorporate software, hardware, and services is one critical element to innovating designs that will succeed in the competitive market. Lenovo's CEO, Yang Yuanqing, was recently interviewed by McKinsey & Company discussing precisely the strategic challenges faced by companies during the ongoing PC-shift.
As noted in the interview, the issue of device, regional, and price diversification is at the core of Lenovo's market strategies. Expanding beyond its traditionally strong PC sector, Mr. Yuanqing attributes an important aspect of Lenovo's growing successes to holding onto the spark of innovation by being careful in what is outsourced and how well the company invests in R&D to support innovation. As quoted in the McKinsey interview, Mr. Yuanqing stated:
But we know that the future is not just hardware. R&D is critical because we must consider the whole package: hardware, software, services, and content. That’s how you give customers the best user experience and rich applications. Our belief is that if you want to be the most innovative, you must leverage the best talent. And that talent and new technology come from everywhere, and different countries and different markets have different demands and requirements. So having global R&D centers is very important.
Focused outsourcing demands new services
As with Lenovo's example, many companies today are strategically targeting where and what they outsource versus hold onto internally. The resulting supply chain situation has been a rise in demand for customized service suites that can leverage deep market knowledge but with dedicated targets so that companies can leverage their core competencies and exercise unique market strategies while contracting out other functions, as they deem appropriate.
Increased competitive pressures are rife; the PC-era shift only further highlights the ongoing sourcing, pricing, margin, and inventory management strategies necessary to remain competitive. The partnering situations that leading innovators are taking to strategically diversify underscores the agility demanded by the companies and their sourcing partners to successfully execute in fast-paced markets.