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SCMP Reporter

ELEVEN months ago, Compaq Computer chief executive Eckhard Pfeiffer made his first visit to Beijing, to assess the much-talked-about potential of the Chinese personal computer market.

  The focus of that visit was the opening of the US$1 million Compaq-Tsinghua training centre. The funds for the centre were donated by Compaq, ensuring the company's access to mainland customers.

  The visit also marked the start of Compaq's intensified focus on China, which culminated in the opening, 10 days ago, of a Compaq office in Beijing. A few weeks before this, a joint-venture manufacturing operation was signed with the Stone Group.

  Mr Pfeiffer, who considers himself a ''global manager'' of an increasingly global company, said the opportunities in China had grown considerably since his last mainland visit in November.

  This was despite the nation's austerity drive and despite the difficulties inherent in doing business on the mainland.

  Compaq has set itself the global target of becoming the biggest PC company in the world - by any measure, whether it be units sold or revenue generated - by 1996.

  Right now, China's PC market could be described at best as ''modest''.

  The number of units sold annually is measured in the hundreds of thousands, not millions. But it is growing at a healthy pace - estimated at about 25 per cent by some organisations.

  ''If you are going to be a global player, then you really have to be everywhere. And China is a major opportunity, so we have to have our plans in place,'' Mr Pfeiffer said in Hong Kong last week.

  The company's plans for the China market are ambitious, indeed, with the joint-venture manufacturing operation a core activity.

  If the Tsinghua University donation was a means to getting initial access to the China market, the joint venture is designed to push the door open a little wider.

   ''There are certain constraints [in doing business in China] and one is that you cannot deal in the market completely freely - so consideration has to be given to have optimum market access,'' Mr Pfeiffer said.

  ''That is where the local activity helps.

  ''That obviously helps the overall market penetration, and the long-term opportunity is so large that being there early, and learning how to do things efficiently and with a high [degree of] productivity, is going to be an important asset for the long term,'' he said.

  The facility will start production by the end of the year, initially putting together semi-knockdown PCs produced elsewhere but, eventually, making various PC sub-assemblies. The company will also source some components from the local market.

  With the manufacturing agreement in place, Compaq is now in the process of rolling out the next stage of its marketing and distribution strategy for China. Last week, Mr Pfeiffer said the company would open five new offices across the country in the coming year.

  As quickly as the China PC market is growing, Compaq (or more particularly, Mr Pfeiffer) believes the real market ''explosion'' has yet to take place.

   He expected the mainland PC market would only really take off in the next few years - and was putting a robust distribution service and support organisation in place in anticipation of that boom.

  ''What you are seeing is a dedicated push by Compaq to put everything in place in a well organised and comprehensive manner, in the same way as we have done in markets all over the world to put ourselves in a strong position,'' Mr Pfeiffer said.

  ''China has its own set of requirements. The Tsinghua University Training Centre was the initial move, giving us access to the market and the know-how as to what it takes as far as the right kinds of products and software are concerned,'' he said.

  If the company has an ambition to ''do it right'' in beefing up its China operation, its immediate goal is to knock competitor AST Research off the top spot as China's number one foreign PC supplier, an obvious sore point with Mr Pfeiffer.

   ''We are ahead of AST in every other [market] in the world, so we're not going to leave that as it is,'' he said.

  Compaq has been nothing if not aggressive in its pursuit of market share all over the world and in China, as elsewhere, it has come under fire from business partners for muscling in as a direct presence in markets where it had been formerly represented by a distributor.

  Rumours persist of a slightly more-than-serious rift between a former China distributor - the Hong Kong-based Eekon - and Compaq. Eekon no longer represents Compaq and is understood to be unhappy about Compaq moving in to sell directly to its customers.

      It is a complaint that has been directed at Compaq before, but one quickly dismissed by Mr Pfeiffer (who, incidentally, was responsible for setting up the company's first overseas operations in Britain and Germany).

   ''As we got started anywhere in the world, it was either a case of Compaq [selling direct] right away, or having an understanding or agreement with someone that they could start marketing and distribution activities under a non-exclusive agreements,'' Mr Pfeiffer said.

  ''Always [these agreements were] under the understanding that, yes, it was a window of opportunity, but that, at some point, Compaq would make other plans, add other people, come [to the market] directly or whatever,'' he said.

  ''It is a perfectly legitimate business approach used in this industry, and in other industries, and if anyone turns it into anything else after the fact, I would say it is unbusiness-like behaviour and that is unfortunate.'' 



Compaq cashes in on China