Global integration is a key way to achieve the business model innovation that is needed to survive in the electronics industry.
The consumer electronics (CE) industry will reach a new industry peak in 2011, with revenues exceeding $186 billion, according to the semi-annual industry forecast released today by the Consumer Electronics Association (CEA). Industry revenues also had a stronger than anticipated 2010, growing 6%. According to the CEA report titled Worldwide Consumer Electronics Sales & Forecast, consumers around the world continue to embrace technology to improve their lives.
Countries with fast growing economies and large emerging middle classes, such as the BRIC countries (Brazil, Russia, India and China), will lead the way in new CE revenue growth. By 2009, China will account for nearly 15 percent of global CE revenue, trailing only North America (22 percent share) and Western Europe (16 percent share). However, the industry players are facing a slew of emerging challenges.
A major one is that of the recognition that industry leadership—even survival—is determined not only by how companies innovate but also by what they choose to change. Product and service innovation remains a high priority, but relentless competition, intense margin pressure, greater operational complexity and changing sales channels are prompting electronics firms to look at other areas of innovation—such as their global business models.
Global integration is a key way to achieve the business model innovation that is needed to survive in the electronics industry. It means actively managing different operations, expertise and capabilities to open the enterprise up—focusing outward to connect more tightly with partners, suppliers and customers. Moving beyond the multinational Often seen as a primary agent of globalization, the multi-national corporation is taking on a new form. Until recently, the multinational typically operated as a collection of country-based subsidiaries, business units or product lines. Over the past decade, however, shared business practices have spread, along with shared modes of connecting business activity. Multinationals are handing over to outside specialists more and more of the work they had previously performed in-house.
Despite undergoing major upheaval, the consumer electronics market achieved impressive growth in recent years due to strong shipments of products including Digital Televisions such as HDTV (High Definition TVs), LCDs, Plasma TVs, MP3 players, DVD recorders and digital still cameras. However, the biggest factor driving the phenomenal growth has been the convergence.
The consumer electronics market consists of the total revenues generated through the sale of audio, video, and games console products designed primarily for domestic use. The digitalization of consumer electronics, has led to the convergence of technologies between previously distinct market segments. The market generated total revenues of $162.9 billion in 2005, representing a compound annual growth rate (CAGR) of 6.2% for the five-year period spanning 2001-2005. According to reports from global research firms, isuppli and GfK Group, we are in the midst of a very exciting growth phase for consumer electronic (CE) products.
New digital technologies are now reaching consumers through an array of products for the home, car, and personal (portable) applications. Also, there is a strong growth trend for consumer audio-visual-communications (AVC) equipment including flat TV–both plasma and LCD–digital TV, and DVD recorder (DVR) products. Emerging economies like India and China and other parts of the Asia-pacific region are increasing competition for the design and manufacture of low-cost consumer electronic products.
In the recent past events like the Common Wealth Games 2010 to be held in New Delhi, FIFA World Cup 2010 in South Africa and World Cup Cricket 2011 in India are fuelled the adoption of HDTVs including LCD and Plasma TVs and other electronics gizmos like digital cameras and camcorders. Another interesting trend that has clearly emerged and augmenting the growth of the industry is – convergence. Today consumer electronics products and PC technology are converging. This should aid economies of scale within the design process in terms of design reuse and familiarity.
N Janardhan Rao, Lead Economist
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