The growing power of emerging markets is helping to redefine the technology sector, which includes semiconductors, consumer electronics, software, computing, and network infrastructure. Even as tech sector growth remains sluggish in developed markets, we expect much of the sector’s action to move east and south to developing markets, especially the BRIC countries (Brazil, Russia, India, and China). Most of the future growth in the PC market will occur in these markets — indeed, in the BRIC countries alone, the number of PC users is expected to increase more than 30 percent annually, to more than 500 million by 2012. And local vendors, which already control as much as 30 percent of these markets, will likely take the lead, especially in ultra-low-cost PCs and netbooks. Meanwhile, more and more sourcing activities are moving to the developing world: India and China have already captured large portions of this activity, and other countries are beginning to catch up.
As this trend escalates, developing markets will become increasingly sophisticated. Local companies will move up the value chain, from manufacturing to design to innovation, all at very low cost — a process that will mean significant disruptions to traditional supply chains. Ultimately, these firms will begin to go well beyond manufacturing goods for other companies to brand, and create their own brands at highly competitive price points.
Indeed, some already have. The success of the Chinese shan zhai companies, which make copycat (sometimes pirated) products, is a symptom of this trend — and an example of a rapid burst of disruptive innovation. The best of them — including PC maker Acer, flat-panel TV manufacturer Vizio, and Huawei, now the second-largest mobile telecom equipment maker in the world, behind Ericsson — have succeeded in transforming the dynamics of a number of markets in China and, increasingly, overseas. Other companies, such as Tianyu, Orange, Anycat, and Nokir — all of which make mobile handsets — could follow the same path. It remains to be seen whether companies in the developed world will be able to compete, given the downward pressure these new players will place on already thin margins.
Virtually all companies need to aggressively formulate and execute strategic responses to the overarching forces that are influencing their industry. The process begins with a dispassionate, focused analysis of existing assets and capabilities, and an assessment of their “fit” in a rapidly changing global landscape. Through that analysis, the path forward will become clear. It will mean holding and further developing the best assets, selling off or shutting down those that will never deliver strong performance, and inorganically filling gaps as needed. For business-to-business and business-to-consumer companies alike, it will also mean sharpening capabilities along the value chain — from sourcing through customer delivery and service — to identify and capture available growth opportunities while controlling costs at every turn. Since many companies are still reeling from the recent crisis and slowly awakening to see what tomorrow will bring, those that quickly acknowledge that they face transformational challenges more threatening than the economic recession will have first-mover advantage. A visceral and unsettling sense of urgency that leads to action is a healthy response.
- Dennis Cassidy is a principal with Booz & Company based in Dallas. He leads the firm’s U.S. energy supply chain practice, working across the oil, gas, chemicals, and utilities sectors.
- Andrew Clyde is a partner with Booz & Company based in Dallas. He leads the oil and gas team in North America.
- Matt Ericksen is a partner in Booz & Company’s global engineered products and services team, leading the industrial practice in North America. With 22 years of consulting experience, he has wide experience in strategic planning, capability development, and organizational design.
- Amit Gupta is a partner in Booz & Company’s New York office. He focuses on consumer financial services and new technology, specializing in the card and payments industry.
- Gregor Harter is a partner with Booz & Company in Munich. He specializes in strategy development, operations and performance improvement, and green initiatives for the telecom and technology sectors.
- Paul Hyde is a partner with Booz & Company based in New York. He consults with senior executives in the U.S., Asia, and Australia on a range of strategic and organizational issues, primarily serving the financial-services industry.
- Ashish Jain is a principal in Booz & Company’s financial-services practice, based in Chicago. He works on operating model transformation and growth strategies for retail bank and credit card clients.
- Barry H. Jaruzelski is a partner with Booz & Company in Florham Park, N.J., who leads the firm’s work for high-technology and industrial clients. He specializes in corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
- Glenn Klimchuk is a partner with Booz & Company based in Houston. He specializes in helping oil and gas companies manage the convergence of people, processes, and leading-edge technologies into new operating models and overcoming such models’ inherent adoption challenges.
- Kenny Kurtzman is a senior partner with Booz & Company based in Houston. He leads the firm’s technology and communications activity in North America and has served clients in such areas as corporate and business unit strategy, operations, sales and marketing performance, cultural change, leadership team effectiveness, and company turnarounds.
- Edward Landry is a partner at Booz & Company based in New York. He has extensive experience in consumer products, with a concentration in strategy development and sales and marketing effectiveness for consumer packaged goods and health-care manufacturers.
- Luis Quintiliano is a principal with Booz & Company based in Dallas. He works with the firm’s consumer, media, and digital practice, and specializes in sales force effectiveness, trade promotions effectiveness, and channel management for clients in the U.S. and Latin America.
- Robert Reppa is a partner in Booz & Company’s automotive, transportation, and industrials practice, based in Chicago. He works on growth and sales and marketing effectiveness and has served a wide range of clients in the U.S., Asia, and Europe.
- Joachim Rotering is a partner with Booz & Company based in Düsseldorf. He specializes in operations, working primarily with clients in the oil and chemical industries.
- Kolinjuwa Shriram is a Booz & Company principal based in Chicago.
- Randy Starr is a partner with Booz & Company based in Florham Park, N.J. He co-leads the firm’s strategy consulting work in the aerospace and defense sector, and also has extensive experience addressing a broad range of strategic issues in the information technology and telecommunications sectors.
- Richard Verity is a partner in Booz & Company’s London office and leads the European chemicals practice.