Examining Pelco's Expansion into Asia / Latin AmericaAuthor: John Honovich, Published on Aug 31, 2009
This is a different approach than common in the US. While Pelco sees this as an improvement for the international market, Pelco is continuing the traditional model inside the US. In an interview, Pelco stressed their commitment to manufacturer representatives and the traditional security channel for the United States.
With the recession and forecasts of Asia/BRIC countries driving economic growth over the next few years, expansion in these regions may be key to Pelco's own growth.
Pelco currently generates about 2/3rds of its revenue from inside the United States and 1/3rd from the rest of the world. Even though only 1/3rd is from outside of the United States, given Pelco's overall size (estimated $600 Million USD revenue), Pelco's international business alone is nearly as large as Axis overall.
Inside the United States, Pelco, like most security manufacturers, uses manufacturer representatives. Each manufacturer representative is assigned a geographical region. Pelco has 16 total manufacturer representatives listed inside the United States. Each manufacturer representative supports integrators and dealers within their territory on specifying products and designing systems. The integrators and dealers buy from distributors and the manufacturer representative is credited for those purchases.
Outside the United States, Pelco used a mixture of direct sales and manufacturer representatives. See a listing of Pelco's international manufacturer representatives. Pelco reports that Crockett started originally in the China and Signapore markets. Crockett than expanded into many other Asian and Latin American territories over the years. With the acquisition of Crockett, the approximate 90 employees of Crockett who acted as independent representatives are now direct Pelco employees.
One specific difference between Crockett and typical US manufacturer reps is that Crockett had a very limited line card - doing 90-95% of their business on Pelco products. By contrast, in the US manufacturer reps often have 5 - 10 lines and some of them can be moderately competitive (though the manufacturers attempt to minimize this).
Rationale for the Acquisition
Pelco offered 2 main reasons for the acquisition:
- International buyers prefer having sales and support conducted by direct employees of the manufacturer. Having an independent but related 3rd party was often found to be confusing and less attractive.
- Direct resources more aggressively into the Asian and Latin American markets. With Crockett as an independent company, Pelco was limited in how much they could grow sales operations in these markets. As a unit of Pelco, Pelco can now directly invest and increase the rate of expansion of employees and sales efforts.
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