China's small businesses are expected to purchase about 5 million units of personal computers over the next 12 months, a move that spells a vast potential for PC vendors, says AMI-Partners.
There are 8.34 million small and midsized businesses (SMBs) in China, 99 percent of which are small with between 1 and 99 employees, according to AMI-Partners. The research firm added that the remaining 1 percent of the Chinese SMB market are medium businesses with 100 to 999 employees.
AMI estimates that 60 percent of China's small businesses still do not use PCs in their daily operations. However, 72 percent of these companies will be looking to purchase an average of 1.3 units of PCs over the next 12 months, raking up orders totaling almost 5 million units, according to AMI.
But PC makers need to understand that this particular group of users tend to be price-sensitive, said Diana Ng, research analyst from AMI-Partners' Singapore office, in a media statement.
"Before PC vendors can smile their way to the banks, they need to know that this target group are careful with IT spending," she explained. "These SMBs tend to shop around for the most competitive price before making any IT purchase decisions."
According to AMI, small businesses that still do not have PCs often prefer homegrown brands such as Lenovo, over other foreign brands. The research firm noted that these brands are preferred over others because they are perceived to be "products with world-class technology at competitive price-points".
One in 10 SMBs which the research firm surveyed planned to buy a notebook computer in the next 12 months, with the majority indicating interest in purchasing a Lenovo machine.
"Lenovo is likely to remain as the market leader in the next 12 months," said Ng. "Coupled with the acquisition of IBM's PC business, the strengths from each company will result in strong and innovative product offerings at affordable price levels.
With the launch of Lenovo's new ThinkCentre desktop PCs designed for SMBs, it is clear that the PC maker already recognizes the potential of this market. According to IDC figures, Lenovo topped the PC market in the Asia-Pacific region in the second quarter of 2005, with 19 percent of the total market share.
Apart from garnering sales from SMBs that do not possess PCs, vendors can also look forward to continuing support from their current customers.
According to AMI, 35 percent of SMBs had indicated they would buy products from the same brands they currently use. This, said Ng, could pose a challenge for other vendors looking to grab a slice of the SMB pie.
"This trait proves to be another obstacle for PC players who not only have to contend with pricing (competitively against) other brands, but to also formulate strategies and programs to convince and convert loyal customers to switch brands," she said.
Among foreign brands, Dell Computer has the highest market share in China's SMB market, says AMI. The U.S. PC maker holds 9 percent of the desktop market share and 22 percent market share of the notebook segment. Hewlett Packard owns 4 and 5 percent of these market segments, respectively.
"Given that Dell has manufacturing centers in China, they have now started to enjoy some level of cost advantages as compared to other foreign PC players," noted Ng.
Foreign brands eyeing a piece of the Chinese SMB market need to decide on which is a more viable business option, she said. Either pursue small businesses that do not have PCs, or capture a bigger share of the PC market from amongst the PC-owning SMBs, she added.
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