HP eyes Chinese market share

Eying the business potential of 200 smaller cities in China, Hewlett-Packard Co aims to garner 500 distributors in these cities within a year to expand its market share, an official said yesterday.

HP personal computers accounted for merely 2 percent in China, according to a report released by the Beijing-based CCID Net (賽迪網) last month. Legend Group (聯想) led the Chinese market with 27.2 percent, followed by Founder Technology Group (方正科技) with more than 10 percent.

"We estimate that the growth rate in China's smaller cities may reach 50 percent to 100 percent," Raymond Yau (邱秋良), sales and marketing manager of HP China, said at a seminar in Taipei yesterday. "Big cities like Shanghai and Beijing, however, may only see a 10 percent to 15 percent growth rate among all brand names."

Despite the huge market potential, Yau said capitalizing on these smaller cities will be a considerable challenge for HP due to the market differentiation of China's vast territory.

The Palo Alto, California-based computer maker may need to deploy various marketing strategies to cater to differing purchasing power and shopping habits there.

For example, consumers in big cities like Shanghai are willing to pay more to buy products from major vendors, while consumers in other cities may still pick the cheapest computer products regardless of the brand name, Yau said.

Chang Chao-shen (張朝深), president of 3Cnet Informatics Inc (旭曜電通), a computer and peripherals chain store, said the risk of exploiting the smaller markets in China is high considering the comparatively low purchasing power there. 3Cnet currently has some 60 outlets in Taiwan and opened a store in Wuchang, Hubei Province last year.

But Chang noted the West-bound move is needed.

"Judging from the speed of [economic] expansion in China, smaller cities will soon catch up with big ones, which is expected to bring us huge business opportunities," he said.

Overall, HP predicts that demands for mobile phones, notebook computers, projectors and digital cameras will enjoy more than 30 percent growth in the Chinese market in the next few years, while personal computers will only see an annual growth rate of 10 percent to 15 percent, Yau said, citing a report by research firm IDC.

While many local businessmen are eager to take a foothold in the burgeoning regions amid the ever rising China fever, Kao Koong-lian (高孔廉), a business administration professor at Chung Yuan Christian University and former vice chairman of the Mainland Affairs Council, warned that there are still several risks for small and individual investors.

The first is the poor infrastructure, such as inconvenient transportation and electricity supply in remote areas and rural regions, Kao said. The shortage of electricity, for example, has become serious in the past year and caused losses for many companies, he said.