ARN: How did the Asian economic crisis affect Quantum in this region?
Yu: We suffered a severe cut in our sales. After years of consistent healthy growth, the market suddenly went flat - backwards in some countries. Countries like China and Australia were not greatly affected in terms of sales, but places like Indonesia and Thailand just stopped.
Every level of the channel was affected by the crisis. With a devalued currency, retailers had to be careful who they were dealing with. They didn't want to chalk up any bad debt and so on through the channel.
The region has managed to get back on track, in fact if you look at a diagram representing growth in this part of the world, you can see we have made up the ground we lost during the crisis. We are now growing at the same rate as we were before the markets turned bad.
In the wake of the Asian crisis, what kinds of strategies are you putting in place to protect regional markets from severe currency fluctuations like those which occurred during the crisis?
Certainly our sales are affected when there are sudden changes to currency at the regional level. To a certain extent we are able to hedge our business, however, as a company we can offer very little protection to our local distribution channel.
We always encourage distributors not to over stock their inventory. In fact, we will proactively stop shipping a product if there is too much already waiting on the shelves in the distributor's warehouse. We would be kidding ourselves if we went about stuffing the channel with product without keeping an eye on the local market.
Sales are always conducted in American dollars, so if the local currency falls, prices rise in regional markets.
Australia is in a very difficult position in terms of currency because it sources everything from overseas.
Given Quantum's extensive manufacturing presence in the region, is there any plan to adjust your pricing in order to reflect local fluctuations rather than pegging value to the American dollar?
Although we have a lot of our manufacturing focused in the region, the local charges make up a very small percentage of our overall manufacturing costs. The bulk of our costs have to do with the components that go into our products and they are all paid for in US dollars or Yen. We have to pass those costs on.
How will e-procurement and developments in B2B technologies affect your business procedures, especially in terms of your relationship with the distribution channel?
There are two aspects to our B2B strategy. On one side, we are working with the RosettaNet group in an attempt to establish e-procurement supply-chain standards which would apply to our relationship with our suppliers.
On the other side, we are looking at different ways to develop Internet-based B2B procedures for our distribution channel. In this respect, we are really focusing on working with our channel partners in order to develop plans to streamline business interaction.
To a certain extent, B2B development in this region relies on the communications infrastructure in different countries.
If you look at our business procedures at the moment, we still do much of our business in the traditional way using phones, faxes and multiple points of data entry. In a deal with Ingram Micro, we are looking at handling the same piece of information four or five different times, so there are clearly some important gains to efficiency which could be achieved once B2B structures are put in place.
What are the main impediments to further implementation of B2B at the moment?
The technology is available, but it is still not practical to implement across the board. There are some practical concerns we have to deal with. For a new company it is easy to implement and standardise B2B operations, but it is not so easy for older companies. Often they have to completely overhaul their IT systems.
As a company, Quantum has been looking at B2B implemention for more than a year now. Ideally we are trying to develop a corporate-wide approach. It is important to remember you can't force feed everybody with the same procedures. Even within the region each country is different, so we need to look for procedures that can be customised to suit different markets.
How important is the Australian market place and what is its role in the region in terms of Quantum's sales strategies?
Australia represents about 10 per cent of the market, excluding Japan. Although it is not experiencing the rapid growth we are seeing in markets like India and China, it is certainly growing faster than other mature markets such as Europe.
We think of Australia as a very sophisticated market, especially in terms of our high-end product sales. We generally get very useful feedback from consumers so we do a lot of test marketing in the area. Although it represents only 10 per cent of the sales, we focus more than 10 per cent of our marketing resources in Australia because we see it as a kind of test pad where we can leverage experience.