How does Pico Far East operate?

• Despite its leadership position, Pico doesn't rest on its laurels and still continues to seek improvement. In 2018, Pico took a huge progressive and industry-leading step (called Pico X) by consolidating their project management, procurement and production processes into a centralized deployment model. Through this deployment center, there will be cost benefits to the group by overseeing and managing cost validation, procurement, the vendor network and in-house production throughout a project's work flow. Over time, this system should accumulate data, allowing it to create a useful tool to service clients in a smarter and more cost efficient manner 
• With ~100,000 square metres of production facilities across China, Southeast Asia and Middle East that is supplemented by many specialist subcontractors, Pico is able to provide unparalleled production and delivery services for their customers
• Given their size compared to regional peers, Pico probably enjoys some degree of economies of scale 
• For venues that are very far from their facilities (eg overseas), Pico will either ship completed goods or outsource them to local sub-contractors in the region depending on time frame, quality required and client's budget (higher budget and quality = ship from Pico's production facility)

Why do customers go to Pico instead of their competitors? What are the barriers to entry?

• Reputation/brand and scale are the main barriers to entry for Pico - For example, if you're a Google or Alibaba, you would prioritize quality and speed over cost as a poorly executed exhibition could have negative impact on their image
• In most cases, the venue owner will only give the organizer 1 day to prepare and set up the exhibition to maximize the usage / rental yield from their property
• Therefore timing and quality is of the utmost importance to the organizer and exhibitors - for example the exhibitor is unable to set up their booth for half a day, it would have 2 consequences: i) very bad for their image and ii) high opportunity cost as most exhibitions last for 1 to 3 days only
• Because of their long working relationships with subcontractors, their 100k sqm of production facilities and experience + know-how, Pico has a very good track record of delivering on their promises compared to their competitors 
• As one of the biggest exhibition service providers, they enjoy economies of scale - for example, they have a lot of operating supplies made of aluminium (management described it to be akin to Lego) that can be easily dismantled and sent back to their warehouse to be recycled, saving them costs on raw materials as higher demand = lower marginal cost

Risks:

• Although there are few large international players like Pico, competition is fierce as they will always have competing bids for every project from small local players. Therefore, because of their size and reputation, Pico dedicates more attention to the high-end large scale exhibitions and work with big clients who will appreciate reputation, design, quality and execution more than purely price. 
• Nonetheless, Pico cannot charge too much more than competitors, hence the relatively low EBIT margin of 6-8% despite being the market leader 
• For most exhibitions, the organizer will have an open tender and invite service providers to bid (price + design). In a sense, this industry is very similar to architects but less fragmented because of multi-city projects. So there might be 40-60 service providers in each region but only 5-10% have the capacity to handle large projects