IBM takes cue from Beijing, eyes domestic plays
BEIJING (Reuters) - IBM (IBM.N) is targeting China's retail, auto and insurance sectors as emerging industries that are growing faster than the country's overall economy, a senior executive in China told Reuters on Wednesday.
IBM's strategy dovetails with Beijing's efforts to shift its focus for economic growth toward domestic consumption and away from the past emphasis on the export sector, which has been shrinking sharply due to the global financial crisis.
"We have identified the industries where we want to go deep on," Shirley Yu-Tsui, a vice president of strategy for IBM in greater China, said at the Reuters China Investment Summit.
"They could be small today, but we see them as big opportunities for us in the next five to 10 years," she said at the Reuters office in Beijing.
China became the world's largest auto market earlier this year and is still growing faster than the global industry.
IBM still expects the traditional sectors in China -- banking, telecom and government projects -- to continue to grow strongly, but other areas will become more important as China shifts its growth model toward consumption and away from exports.
"If you look at those three (traditional) sectors they are probably 67 percent of China's market opportunities," she said.
But retailers, such as electronics retailer Suning Appliance Co Ltd, an IBM client that opened three stores in 2006 but added more than 100 stores last year, are growing faster, said Yu-Tsui.
"Think about the pressure that puts on their back-office operations -- it's tremendous," she said.
Suning's competition is no longer just from domestic rivals, but also comes form the more sophisticated multinationals that are coming to China, she said.
"They want IBM to be their partner so Suning can concentrate on growth," she said.
Suning competes with Best Buy Co Inc (BBY.N), the biggest U.S. electronics retailer, and domestic rival GOME Electrical Appliances (0493.HK) for customers in China, the world's third-biggest economy.
Another key sector is railroads, in which consultancy McKinsey reckons foreign commercial participation is only about 1.5 percent currently, a sliver of what it could be as China modernizes and builds out its rail network.
IBM established its first rail innovation center in Beijing to help it tap into the country's planned $731 billion spending in the sector, investment that analysts say could account for more than half of the world's total railway equipment market in the next two years.
(Reporting by Kirby Chien; Editing by Ken Wills)