Ever since the marketing guru C. K. Prahlad (The Fortune at the Bottom of the Pyramid: Wharton School, 2004) suggested that profit is to be made at the bottom of the pyramids, companies the world over have started taking emerging markets more seriously. Be it consumer durables or fast-moving consumer goods, China, India, the Middle-east and South America are offering promising prospects. If global television and fast food brands are making inroads in these markets, how can PCs and mobile devices be far behind?
PC sales revenue in advanced markets.
The parity in computer literacy between the developed and developing nations is more pronounced than is suggested by their lifestyle index. A closer look at the PC sales data for Europe and North America as compared to the rest of the world points to the potential of the emerging markets. The United States had 946 PCs per 1000 households in 2004, whereas China and India, countries that account for more than a third of the world population, had 80 and 20 PC respectively (Market Trends: PC Penetration Data Highlights Market Maturity, Gartner 12 April 2005). If we scrutinize the PC sales in the developed nations over the last decade, we find that there has been a rapid decline over the last few years. At over 90%, the PC penetration in the U.S. has reached its saturation point, and manufacturers can only look forward to replacement orders from customers. The average life expectancy of a home PC is approximately 5 years. So every year a fifth (20%) of the PCs get replaced/ upgraded. It is not a surprise therefore that hardware and software producers are starting to explore other markets.
Simplicity is the key
So what is it that is keeping people in Shanghai, Rio de Janeiro and New Delhi from embracing PCs? While an average Canadian would spend 3% of his annual salary to buy a $900 home computer, an average Pakistani would need to shell out half his annual income (http://www.nationmaster.com/graph-T/eco_gdp_cap\). However, a walk along the streets of these cities would defy the conventional wisdom suggesting that it is only the purchasing power that differentiates New York from New Delhi. There are a number of Pizza Hut outlets and Armani showrooms adorning them.
We are not trying to suggest that price is not a factor influencing PC penetration in developing countries. However, the success of many expensive international brands in emerging markets calls for a different angle of analysis. The other day I was doing my weekly grocery shopping at a local shop in the suburbs of the small Indian city Hyderabad. My grocer, who had never been to high school, pulled out his brand new Motorola MPX 200 running Windows Mobile 2003 and called up his boss to find out the selling price of potatoes. My curiosity rose and I spoke to him about his business in length. When I suggested a point of sale terminal for his shop, he seemed intimidated; "Computers look good with you sir. I am better off with my cash register."
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