HP has issued a rallying cry to partners in Southeast Asia, calling on the channel to help drive market expansion on a city by city basis.
In targeting like-for-like city clusters across the region, rather than countries, the technology giant is aiming to capitalise on similar market dynamics through eliminating border roadblocks.
Central to such a strategy will be the channel, as the vendor attempts to scale across core PC and print offerings.
“Think Jakarta, Bangkok and Manila,” explained Kong Meng Koh, managing director of Southeast Asia and Korea at HP. “I’d argue that Jakarta has more in common with Bangkok and Manila from a market perspective, as opposed to the closest city which is Bogor.
“Most vendors traditionally address Southeast Asia on a country by country basis, focusing on Indonesia, Thailand, Philippines, Malaysia and Singapore as examples. But increasingly, we’re seeing rapid urbanisation emerge as a key mega trend in the region which offers new opportunities for the channel.”
As the population moves from rural areas into cities, Kong Meng said new city sub-segments are emerging - starting with mega cities in excess of more than 10 million people.
“They are evolving but the fastest area of growth isn’t coming from mega cities,” qualified Kong Meng. “The fastest growth is coming from the mid-tier cities housing between 5-10 million people, while not forgetting the smaller cities of 1-5 million people.
“In Southeast Asia, there are around 195 cities with at least one million in population which is a little known fact in the market. We’re currently studying about half of those cities because when you only focus at a country level, you miss opportunities in the smaller cities - even though they could be the fastest growing areas of the market.”
In adopting a different lens, and mindset, Kong Meng said HP is carving out new potential for partners to target as city classification becomes a viable go-to-market strategy for the channel.
The theory being that by removing the political and geographic borders, eliminating nationalities and language barriers in addition to side-stepping cultures, partners have a clear shot at capitalising on a net new customer base.
“We want to work with the channel to address these opportunities and to also on-board new partners, not just in the top-tier cities because they are already saturated,” Kong Meng added. “So why not work with HP in the mid or lower tier cities? We want partners to invest and expand out of their current locations to build capabilities in these smaller cities.”
Acknowledging that city classification is common in China and India, Kong Meng said if HP’s thesis proves correct, an overarching strategy could be developed that cuts through all of the countries in Southeast Asia.
“We want to figure our where the similarities exist so we can bring resources together and work with our partners, especially in the smaller-sized city clusters,” he said. “We see opportunity in this space through consumer and SMB. A country such as Indonesia is very diverse which means it’s difficult to create one go-to-market strategy, hence why grouping together similar cities is a focus.”
For example, Kong Meng said a skilled partner in Cebu could be better suited expanding into Bali, rather than another area of the Philippines or even Jakarta, such is the similarity between markets.
“Both are very tourist centric cities which means value could exist through mirroring your environment as a partner,” he said. “For example, if you specialise in manufacturing in Thailand, perhaps emulate that in Vietnam or Indonesia.
“We want partners to bring expertise and skills into new markets but at the same time, help HP expand into smaller cities which represents a win-win for the channel.”
Yet Kong Meng was quick to acknowledge that for smaller tier-2 or tier-3 partners, national or international expansion isn’t always a leading priority.
“Everywhere I go, smaller partners are facing similar challenges,” he observed. “It’s not that they don’t want to expand, they are just hindered by a lack of resources and talent.
“Yes, some partners are happy being a small family run shop and they don’t want to expand beyond what they are capable of, but others are very keen to work with HP and expand their footprint in Southeast Asia.”
In assessing the HP ecosystem - housing value-added resellers, system integrators, managed service providers, distributors and retailers - Kong Meng said the channel remains "crucial" in helping drive increased demand at a smaller city level.
But despite such an endorsement of the supply chain, the channel veteran acknowledged that a “chicken and egg” scenario currently exists in Southeast Asia. In short, HP want partners to hunt for new business but to also help execute on deals currently in play.
“We’re being very intentional about this,” Kong Meng said. “Part of our focus is to work with partners to create demand and the other part is to help us execute and fulfil customer deals.
“But we also see potential in the consumer market. We’re driving demand for consumers in many of these smaller towns and villages in two ways; firstly, through helping our existing resellers and retailers set up shops and secondly, through building an online presence.
“Instead of getting our partners to open up physical shops which might prove costly to the business, we are encouraging the channel to open up shops via our e-commerce platforms. We will work with partners to develop offerings and strategies because we believe this makes the buying process a lot easier for customers.”
For Kong Meng, online is different in that partners can now move away from the restriction of selling specific skews, to instead provide an “endless shelf” of products.
“We can showcase more of our product range this way,” he added. “We can also base the offerings on where the customer is based and target them specifically. For example, if city A prefer certain products then we can actively promote those compared to city B which might focus on other offerings.
“We’re finding easier ways for customers to purchase HP offerings and to establish a long-term relationship with our channel.”
As partners move outside of the capital cities and into the smaller-sized locations, price invariably becomes a key consideration. Can a premium brand such as HP compete outside of the enterprise heartlands?
“Yes, we offer the right price for the right market,” Kong Meng said. “If you look at our overall product portfolio, you’ll find that despite the perception that emerging markets have lower affordability levels, we’ve made considerable share gains on a consistent basis.
“We have a combination of the right product, the right price but also additional value through security and design features across commercial and consumer segments.”
Core, growth and future
From a strategy perspective, Kong Meng said HP is focused on three key areas across consumer, commercial and channel markets, spanning "core, growth and future".
“In core, we’re very focused on PCs as well as printers,” he explained. “That is our heritage and our core. This is the area of the market that today generates a substantial amount of profitability for our business.”
Specific to growth, adjacent segments of priority include augmented reality, blended reality and mobility, in addition to changing consumption levels through the rise of as-a-service.
“We’re looking at device-as-a-service and managed print services, for example,” said Kong Meng, while also referencing the acquisition of Samsung’s A3 portfolio in late 2017. “A3 is also part of this growth strategy and while we continue to do well in our core business, we are also increasing our share in growth areas as well.”
Unsurprisingly, 3D printing represents the future market for HP, spearheaded by Rob Mesaros as regional director of Asia Pacific and Japan.
“We believe that 3D printing has tremendous potential for our business across the world, especially in manufacturing and logistics,” Kong Meng added. “All aspects of our strategy are being executed simultaneously across the business but within Southeast Asia, we’re focused primarily on our core and growth areas.
“I would qualify that by saying that we are still very focused on 3D printing in terms of developing skill-sets and ecosystems, and this is especially the case in Singapore.”
In a direct address to partners, Kong Meng stressed that Southeast Asia stands tall as one of the “fastest growing and dynamic parts” of the world, representing new opportunities for the channel as a result.
“Economically, the region is developing at pace and demographically, there’s lots of young and highly educated people about to enter the workforce,” he said. “If you examine the population size by age group in this region, the younger generation is dominating and we see that as a huge opportunity at HP.
“This is especially the case in Southeast Asia because apart from Singapore and Korea, the region is under-served as far as PC and print is concerned. There is an opportunity to address that through our channel partners.”