Can Local Start-ups Outperform Global Companies in Spain?
Analyst Insight by Pedro Aguilar – Research Associate
Spain is not only a popular tourist destination; the country is also becoming a successful incubator of high-tech start-ups, with Mundo Reader SL (BQ) and other local companies competing against global companies.
The rise of local start-ups
Between 2009 and 2013, the Spanish economy experienced a general decline in all industries and segments. In 2013, unemployment stood at 26%. And yet, despite this situation, Spaniards found the motivation to materialise their ideas and start their own businesses, such as BQ. These business models are very far from the traditional strong points of the Spanish economy and it seems that Spain has room for technology companies that are able to compete against the likes of Samsung and Apple.
In 2015, the Spanish consumer electronics market benefited from government initiatives, such as the Center for Industrial Technological Development (CDTI). This public corporation under the Ministry of Economy and Competitiveness promotes innovation and the technological development of Spanish companies. It addresses funding applications and supports the research, development and innovation of Spanish companies at both national and international level. In this environment, a number of companies have thrived, and it is now possible to find in Spain companies like BQ, the trademark behind Mundo Reader SL, which began as a small start-up, created by a group of university students. BQ started with USB drives, before expanding its product portfolio to include e-readers, whilst always maintaining a more personalised, post-sales, service-orientated strategy, and moving into the fast-growing smartphones category in 2013. A personalised, post-sales service was possible because BQ’s smartphones were sold directly to the consumer rather than through a mobile operator, which competitors used to do. This enables the consumer to obtain a phone at a better deal than directly from a retailer where Apple and Samsung smartphones are sold at much higher prices. This strategy enabled BQ’s product portfolio to expand to include e-readers, tablets, smartphones and 3D printers.
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Rapid increase in market volume share
BQ is the leader in e-readers in Spain, with a 30% volume share, and the third-leading player in both tablets (12%) and smartphones (13%). In smartphones, a BQ Aquaris E5 smartphone retails for €189, whereas a Samsung Galaxy S5 Neo retails for €429, both with similar technical specifications. Beyond low prices, BQ’s competitive strategy includes a good after-sales service and a patriotic sentiment amongst Spaniards (encouraging them to support local brands), which propelled the company into third place in the overall consumer electronics market in 2015, only slightly behind Samsung and Sony. The company has gained significant market share in just three years, as it was ranked 12th in 2013 with only a 1% market volume share compared to a 7% volume share in 2015.
Alongside Mundo Reader SL (BQ), there are other successful consumer electronics companies engendered and created in Spain. Energy Sistem Soyntec SA and Quatrotec Electrónica SL (Woxter) are also excellent examples of Spanish start-ups that manage to engage with their consumers. They perceive both companies’ successes as their own personal achievements, while also contributing to the local economy by buying Spanish products.
The organisational structures of these companies are smaller than those of bigger global companies like Apple, Samsung and LG, which, combined with outsourced manufacturing and simpler cost structures, enables them to reduce production costs and offer solutions at more competitive prices. This model can be replicated and developed for smaller companies which are willing to compete against bigger players with higher cost structures and slower supply chains. Not content with just being a local player, BQ has expanded into Portugal, Germany and France, replicating its success formula to other countries in Western Europe.
When it comes to technology products, it is the norm to think that consumers will choose global companies like Samsung as they have bigger marketing budgets and stronger brand recognition. However, start-ups like BQ can compete against these giants by focusing on competitive pricing and appealing to consumers’ desire to support local starts-ups and, in turn, stimulate the local economy. Nevertheless, continued government support will be necessary to encourage technological creativity and provide local start-ups with economic backing to develop as long-term sustainable economic models.