SAN FRANCISCO (CNN/Money) -
"Go global!"
The cry resounds from the boardrooms of PC manufacturers all across the United States, echoing through the marketing and finance departments. With stateside sales stagnating, the rush is on to bring in new sales, and the market seekers are searching abroad.
For good reason, it turns out. "The overseas market isn't saturated like the U.S.," says Rob Enderle, an analyst with Giga Information Group. So far, the overseas push appears to be working: According to Gartner Dataquest, third-quarter PC sales for Europe, the Middle East, and Africa were up 6.7 percent compared with the same quarter in 2001.
The regions' growth was the "biggest surprise" of Gartner's global survey, says Charles Smulders, a Gartner vice president. Smulders attributes the increase to consumer and small-business demand, particularly in Germany, and notes, "We didn't see a return of large corporate spending."
The markets may be foreign, but the competition is very familiar. The companies leading the charge overseas are Hewlett-Packard (HPQ: up $0.49 to $14.29, Research, Estimates), Dell (DELL: up $0.58 to $28.97, Research, Estimates), IBM (IBM: up $2.15 to $74.25, Research, Estimates), and Toshiba -- with HP holding a sizable lead in market share, according to IDC. HP's market share for Europe, the Middle East, and Africa is 20.8 percent. Dell's is 10.4 percent.
HP has gotten a boost from newly acquired Compaq, which has had a strong foothold in those areas for years and has maintained a strong local presence in many countries. "HP is more established and has more distribution networks," says Loren Loverde, an analyst with IDC. "Dell has been in the market less time, and they're focusing on core markets: U.K., Germany, and France. It's working fairly well for them."
But going global doesn't always work out well for companies. Pushing outward to new, foreign markets is a common strategy for combating local downturns, but it's not a cut-and-paste solution. Companies must build entirely different inventory systems for foreign markets, developing special, low-cost machines, Enderle says.
"Companies are finding they need to be more flexible in the emerging markets. Those markets don't have the tolerance for prices, and they react more favorably to localized sales forces as opposed to U.S. teams."
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Sometimes the challenges U.S.-based PC manufacturers face in foreign markets are anathema to the very nature of their business model. Dell, for example, found that Europeans have a lower tolerance for purchasing computers via the Web or over the phone. Nevertheless, "the company has obviously adapted very well," Smulders says.
One company that hasn't caught on overseas is Gateway (GTW: up $0.05 to $2.95, Research, Estimates). The company was forced to abandon its overseas offices last year, a move that wiped out roughly 1,100 jobs and resulted in nearly $200 million in charges, part of a $475 million restructuring the company underwent in the third quarter of 2001. The move was essentially an act of triage, as Gateway decided to focus its efforts on shoring up the stateside sales instead.
"The biggest blunder U.S. companies have made is failing to take into account the nature of local conditions," Smulders says. "Failing to understand specific country markets and applying a U.S.-centric model is a recipe for failure."
For the leading PC manufacturers, heightened cultural sensitivity is no longer simply an issue of diplomacy. For some it may be the key to future success and continued growth.
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