Targeting Emerging Markets
The seemingly recovering yet shaky global economic conditions required security companies to tighten their belts. Top performers found success in emerging markets, and aimed to increase market presence in these regions through partnerships, acquisitions or new offices.
Assa Abloy saw 2 percent growth in EMEA in 2010, up from a -12 percent drop in 2009. The Americas division fell -2 percent due to the lack of new construction, which was better than its -19 percent slump in 2009. Asia Pacific saw strong growth in China, Korea, Australia and New Zealand at 14 percent growth, up from -1 percent in 2009.
Asia continues to be a growth powerhouse. For network camera leader Axis, its revenue breakdown by market in the Americas, EMEA and Asia were 47, 43 and 10 percent, respectively; growth by region was 26, 26 and 40 percent.
The ongoing shift in economic power towards emerging markets is a particularly important trend for Bosch. A new hub in China was established last year, adding to the existing 14 sales offices in this market with an additional 10 planned for this year. Bosch is also taking this strategy to increase market presence in other important emerging markets, such as Latin America.
RCG even restructured its board of directors and senior management to focus more on developing the Southeast Asia market.
Public Spending Steals the Show,Again
The biggest verticals in security are infrastructural assets that are exposed to an increasing number of risks, such as those from terrorist attacks.
This includes utilities, governmental buildings, public areas and transportation hubs. These verticals represent more than 50 percent of the total security market worldwide.
Infrastructure projects are key drivers for the high growth rates in emerging markets. This is most evident in the transportation and public safety segments, as shown by the Safe City initiative in China.
Renewed Focus on Customer Needs
Top performers continued to invest in product development, some even investing more. As the competition continues to heat up, companies are putting more effort into R&D to stay ahead of the game. New technologies and standards, as well as increased scrutiny from end users, can make or break a company if it just sits back and smiles.
Assa Abloy's product development focuses on increased customer value, aiming to improve cost-efficiency yet maintain higher quality and increase functionality. HID Global increased its activities in value analysis, which has led to significant cost savings in both the existing product range and the production of new products.
Companies offering high-end products began to cater to the midrange market, such as the new Honeywell SMB product line. These offerings increase cost-effectiveness. On the other hand, Hikvision expanded its offerings to be more comprehensive, including products that compete in the high-end market.
Hikvision recognized the dropping profit margins for low-cost DVRs, and did not invest significant capital in this space. Instead, it shifted its focus to complete end-to-end solutions. The strategy proved worthwhile, and it won them significant government projects in China.
Avigilon also provides an end-to-end video solution to customers, while each component in the system can also be sold separately. These components are versatile enough to be configured and deployed in many different applications. Avigilon also sells accessories to complement its system.
A common product platform with fewer, integrated components enables enhanced customer value and lower costs. It also raises the technology level of traditional products and offers customers higher security and better functionality.
Efficient product development with a strong customer focus is the strongest driver of organic growth. A complete solution gives customers a single point of accountability, ensuring confidence that their project will roll out smoothly with optimum performance and stability. Furthermore, customers are unwilling to invest heavily in security amidst economic uncertainties, which creates a demand for scalable systems with lower upfront costs.
Utilizing New Technologies
The proliferation of mobile devices and their ever expanding capability create opportunities to provide more value to customers, such as mobile phone payment systems, remote monitoring on smartphones and hotel access control solutions.
Mobotix introduced remote access control functions through integration with mobile devices. As companies struggle to balance cost and value, taking advantage of new technologies can be key for growth in a shaky economy.
Assa Abloy introduced RFID and wireless technology to hotel management, allowing guests to open door locks via contactless card soreven NFC-enabled mobile phones. While new hotel construction is slow, this new technology creates strong demand for retrofit systems.
RCG believes RFID technology can be utilized in various aspects of daily life, which creates numerous business opportunities. It is currently involved in an “Internet of Things” projects in Xiangyang, China.
Nedap Security Management also sees great potential in RFID technologies, as more applications rely on it. Accurate reading of RFID tags is more important than ever, and Nedap invested heavily to develop a new generation of RFID readers that allow RFID tags to be accurately read in even the most difficult conditions.
As Jerry Maguire so eloquently put it in the 1996 film, “Help me, help you.” This is probably how customers today feel. With the economic downturn, customers began to reevaluate their options to get the most bang for their buck. In shaky economic conditions, customers would rather spend on a great product that provides true value and scalability, rather than one that merely gets the job done for the time being.
An investment in security itself may be hard to justify, as the perceived threat is generally not as evident in the commercial world. However, vendors have seen success in providing for targeted markets specific solutions that also integrate into business operations.
The bottom line is that customers who have the resources are willing to spend when it makes sense. Vendors must realize that customer demand is more important than anything, and a gazillion new features do not amount to anything when the customers do not need them. Simple as it may sound, listening to the customer is something many companies find difficult to do.
In addition, factors like industry standards are reshaping and redefining the security industry in the form of convergence and consolidation. In the coming years, the company that can provide a truly integrated solution will rise above the competition, regardless of economic conditions.
New and different approaches and business models are emerging. More so than ever before, companies need to adapt and adopt effective methods that reduce costs, increase productivity and improved core competencies.