High-tech firms seek the expertise of external supply chain partners as they expand into emerging markets, according to IDC survey
Could high-tech products revolutionize the way people in emerging markets conduct their daily lives? Recent efforts to advance technology in developing nations indicate that a transformation is indeed underway. For instance, in India more than 5,000 schools have adopted a program called Smartclass that uses digital teaching solutions to enhance student engagement.
In February, Facebook CEO Mark Zuckerberg told attendees at the Mobile World Congress in Barcelona that connectivity to the Internet will provide people in emerging markets with basic financial services, credit to start a business, access to basic health information and educational materials.
The demand for products that deliver such critical information has encouraged high-tech manufacturers to expand their presence in emerging markets. As high-tech firms grow in emerging markets, they often face unfamiliar regulations and tax codes. Managers at some companies also find themselves struggling to manage their new-market strategy.
More high-tech firms recognize the need to partner with external supply chain experts to help them overcome some of these challenges, IDC Manufacturing Insights reports in its 2013 Change in the (Supply) Chain survey.
High Tech in Demand
Companies that achieve smooth entry into new markets could be poised for a significant spike in business. Consumers in emerging markets said they planned to purchase more high-tech gadgets than buyers in mature markets between 2013 and 2014, according to a 2013 Accenture survey on the consumer electronics market. For example, Chinese buyers expect to spend an average of $1,489 on consumer electronics over the 12-month period, while the average U.S. consumer will spend about $970 during the same period.
The opportunity to grow in these markets is not lost on high-tech firms. Almost 66% of high-tech manufacturing executives say they are already in emerging markets or plan to be there within the year, IDC Manufacturing Insights reports. Overall, 49% of executives responding to the IDC survey say they’re already in emerging markets. Another 17% of respondents say they are “very aggressively” expanding into emerging markets.
High-tech manufacturers based in North America are among the most active firms in emerging markets. In North America, 55% of executives say they are already in emerging markets, and 25% say they plan to expand very aggressively in the next year. European firms followed, with 17% of executives based in the region saying they plan to expand very aggressively.
Partner for Success
A growing number of executives at high-tech companies say they need more support from logistics providers when they enter emerging markets. Companies may struggle to establish operations in a new market because they are unfamiliar with the country’s culture, laws and distribution networks.
For instance, India has 29 states, each with their own regulations and ways of conducting business, notes Lola Gulomova, a commercial officer for the U.S. Consulate General in China.
“Choose where you’re going to go carefully, do your homework, and think strategically about what your approach is going to be,” she says. “Then find good partners and resources that will help you succeed.”
Overall, 42% of the IDC survey respondents said they need their key logistics providers to offer a comprehensive solution for product warehousing, distribution, transportation and customs management. The need is even greater for high-tech firms based in North America, where 60% of survey respondents said they need a comprehensive solution for entering new markets.
High-tech companies also say they need help establishing a presence in a new market and post-sales support. Some leading third-party logistics (3PL) providers are filling this need with various supply chain management solutions.
Some of these offerings may include customs brokerage services that help companies navigate through shipping hurdles, such as entry taxes. 3PL providers also should provide the total landed cost of shipping in their price, which includes duties and taxes, says Mark Khambatta, a UPS enterprise account
3PLs that use their own aircraft or trucks to ship goods can help companies avoid costly delays that are common with companies that rely on commercial carriers, Khambatta says. In addition, a 3PL that provides shipment tracking capabilities can help companies identify and address potential delays earlier in the process.
Supply chain partners with an in-country presence and localized expertise lessen the potential risks high-tech firms face when they enter developing regions. By leveraging the expertise of a capable fulfillment partner, high-tech firms can establish a foothold in these highly competitive emerging markets, the IDC report concludes.