As the subprime and financial crises boil over from the United States to the rest of the world, fears of how these could affect the security business continue to rise in Asia. Despite ambivalent forecasts and fierce competition from China and Taiwan, Korean manufacturers are finding their way out of these challenges.
When facing a globally stagnant economy, how would Korea known to be a high-tech R&D powerhouse in Asia react? Some manufacturers are struggling hard to achieve their sales targets while trying to stay afloat and maximize their profits; others are reaping benefits from usersˇ sudden needs for cost-effective solutions.
Notable security companies, such as CNB Technology, Huviron, Qtum, Seoul Commtech, Kocom and IDTECK, have taken a hit in their North American territory. "One of our customers made a full payment before delivery in a previous deal," said John Cho, Overseas Marketing Manager at CNB Technology, "but this time around, the company asked to extend credit for payment." Sales in some developing countries have also tumbled a bit, said Young Kang, Overseas Sales Manager at IDTECK. "Some foreign investments are pulling out from Asia, resulting in falling stock prices. Many security projects have been postponed."
On the other hand, some DVR manufacturers, like ServnTec and Chance-I, do not feel the pinch and are faring quite well in the current state of affairs. Young Hwa Oh, Chief Sales Director at Chance-I, was optimistic about the U.S. market: "Property protection is needed more than ever, and demand for security products is on the rise from our perspective."
Expanding Their Reach
According to Global CCTV Market Analysis (2008-2012) by RNCOS, the video surveillance markets in North America and Europe account for roughly 85 percent of the worldwide demand, making these regions the No. 1 battleground for Asian manufacturers. Many Korean companies have adopted aggressive marketing strategies in these regions, and some have increased their marketing budgets to better sales performance in existing markets and explore new business opportunities elsewhere.
Introducing more mid- to low-end products is how Artnix goes about guarding its U.S. territory. With stand-alone DVRs and peripherals in its portfolio, Artnix takes pride in its R&D capability; its latest innovation includes a DVR capable of facial detection and recognition. Its own DVR database structure, a dual filing system, ensures fast access to recorded footage and stability of hard-disk drives. Although Artnix positions itself as a high-end player, the company is also supplying low-cost DVRs to U.S. retailer Wal-Mart. "More than 50 percent of our sales revenue comes from America, and we still managed to reach the projected sales target so far this year," said Juliette Park, Overseas Sales Manager for Artnix.
The retail sector is also targeted by Chance-I, which is known for its image processing, compression technology and operating software. Now the DVR manufacturer has two offices in Los Angles and Washington D.C. to provide quality products, along with better maintenance.
Originally a provider of biometric access control systems, IDTECK has decided to branch out to provide an integrated video and access solution: a new PC-based DVR with intelligent management software. The company is targeting mid-end, mid-sized projects, said Kang. Eyeing the Middle East with great interest, IDTECK chose to host its annual conference in October at the Dubai World Trade Center, allowing buyers from the region to share their ideas on possible applications.
A home automation solution provider, Seoul Commtech already planned ahead of time before the various financial crises broke out. "We started to broaden our business scope by concentrating on overseas markets seven years ago," said Chris Kang, Assistant Manager of Home & Security Export.
While the U.S. economic outlook is not immediately clear and promising, orders from Europe and Russia have more than compensated for it, said Eddy Kim, General Manager of Sales & Marketing at Qtum. Since the Beijing Olympic Games, CNB has got more inquiries from China. Kocom and IDTECK remain profitable as the various Middle Eastern markets continue to develop by leaps and bounds. DVR manufacturers, such as Artnix and ServnTec, are expecting to see robust market growth in South Africa and South America.
Branding is certainly one of the most important aspects of marketing. While some Korean companies are more concerned with R&D, IDTECK is working to add more brand value, said Kang. IDTECK is not alone, as CNB is also committed to build a strong brand image. "We believe that investment in marketing, especially brand awareness, will boost our sales in the long run,"said Cho. "In 2007, 50 percent of our revenue was derived from CNBˇs own-brand products."
Offense is the Best Defense
"New products are the best way to promote sales," stressed Joon Park, General Manager of Overseas Sales at Kocom. Technological advancements have always been the main goal for many Korean manufacturers. With extensive innovation on home automation, Kocom products boast user- and Internet-friendly features, as well as advanced software programming. "Customers are always looking for more value-added functions."
Kim of Qtum shares the same viewpoint. "We will continue to launch new products with customized features, despite the financial situation in America."
An ASIC developer, Qtum has the know-how to manufacture DVRs that record images based on user preferences and bandwidth availability. As its new products have generated orders from Europe, the company is now ready to launch H.264 DVRs.
In addition to Kocom and Qtum, other manufactures such as Artnix, Chance-I, CNB and Huviron will continue to embody their R&D expertise in their new product releases.
What really boosted ServnTec's sales in 2007, said Jake Lim, Manager of Overseas & Domestic Sales, was the companyˇs advanced DVR technology. The DVR provider attributes 70 percent of its sales to the ever-increasing demand for IP-based products such as hybrid and stand-alone DVRs. Its MPEG-4 DVR, also known as the casino DVR, allows for full integration with any IP products and is targeted at users such as government and public services, airports and casinos worldwide.
As Chinese products continue to flood price-conscious segments, said Park of Kocom, more Korean companies are turning to develop high-end products in order to achieve stable market performance and avoid intense price competition. Lewis Oh, Assistant Manager of Marketing & Supporting Sales for Huviron, seconded the opinion: "Cash-cow products are under a cutthroat competition which results in weakened sales.' Companies like CNB, IDTECK and Seoul Commtech are taking a similar route.
Service is another differentiator, as ability to respond quickly to customers is crucial to promote sales, said Oh. "Huviron cameras are known for their low-light performance, durable lifespan and day-and-night mechanisms, and the companyˇs instant service sets it apart from the competition."
Service also includes technical training, maintenance and after-sales support. Those who have set up overseas offices, such as Chance-I, CNB and ServnTec, collect first-hand information from their customers through more interactive service networks. Others like Qtum, IDTECK and Seoul Commtech are looking to provide more technical support. "Efficient and exact technical support is always required by end users," said Kim. "Even when there is a time difference, our staffers at the headquarters can still support overseas customers at all hours."
Challenges and Outlook
Globally, manufacturers are suffering from rising costs of row materials, and Korean companies are no exception. With no plans to increase product prices, they are striving to strengthen their cost-down schemes through advanced technology development, said Lim of ServnTec.
Finding strong, reliable distributors for overseas markets will be another challenge. "Unlike consumer products," said Kang of IDTECK, "installation of security equipment is technically demanding."
Additionally, purchasing and sales powers as well as service networks have all become important parameters for manufacturers when identifying authorized distributors. CNB, ServnTec and Seoul Commtech have all turned to major players in local markets for guaranteed sales performance and service.