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Automation Technologies 2/2014

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Automation Technologies 2/2014

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News and Markets Back to current issue Study: German machine manufacturers need to adjust their China strategy Marc-René Faerber, Haiying Chen The Chinese market has changed: it is now more mature, highly competitive and has become more price-oriented. According to a recent study, German companies have to adjust their China strategy and positioning on-site in order to benefit from the growing domestic market in China. Author: Marc-René Faerber is Managing Partner at Struktur Management Partner in Cologne, Germany. Haiying Chen is Head of the Struktur Management Partner office in Shanghai, China. In 2012, China manufactured machines and systems worth 678 billion euros. Today, one in three new machines in the world comes from the People‘s Republic of China. In particular, the mid-segment is growing strongly. Chinese machine manufacturers in the lower mid-segment have now become the second largest competitor for German machine manufacturers in China. The latest expert study carried out by Struktur Management Partner focuses on the chances and risks arising from the changes in the Chinese market, which may affect German medium-sized mechanical engineering companies. In Spring 2013, together with the Chamber of Foreign Trade of Shanghai, the company interviewed more than 600 German mechanical engineering companies in China via an online survey. The survey comprised interviews with experts and a comparison with the previous study of 2010. AUTOMATION TECHNOLOGIES 2/2014

News and Markets Compared to 2010, the focus of German mechanical engineering companies has shifted considerably with regard to their commitment in China. Sourcing, assembly or production for the export sector have lost Customer service applies to most German machine manufacturers in China, nevertheless, it still continues to be just a prerequisite for sales rather than a value generator. „A mature market in China requires a different approach to when it was initially set up mainly for the export sector.“ Haiying Chen much of their importance. The local Chinese market has now been brought to the fore. Being able to attract new buyer segments, as well as the introduction of new types of products, process optimisation and lean management have now become increasingly important. Another key factor for market success in China lies in knowing and taking into account the fact that the general conditions have changed. The demand mainly affects the mid-segment. This trend, however, does not greatly affect the premium segment, which is the core field of activity of German companies. For German machine manufacturers, challenges are expected to increase, unless a change in thinking takes place towards an “all-rounder for the mid-segment”. The authors of the study recommend increasing adaptation to local market conditions. The head of the Struktur Partner Management offices in Shanghai, Haiying Chen, explains: “A mature market in China requires a different approach to when it was initially set up mainly for the export sector or to when state-owned companies bought German machines as prestigious systems. Other organisational structures are required, especially for distribution. This is clearly expressed in the influence of the direct sales share on the respective growth of companies.” In recent years, Chinese customers have even increasingly begun to accept services subject to a charge. The authors give six practical recommendations in order to achieve success in the Chinese mechanical engineering sector. This is preceded by the imperative to rethink their own segment positioning in the restructured Chinese mechanical engineering market, as well as an adaptation of products to the market. In this case, what is now “less” could clearly mean “more” in the future. It is therefore necessary to further develop the organisational structure and speed up market entry in order to keep up with competitors. Moreover, human relations, intellectual property and compliance should become a top priority and, in particular, the cooperation between German parent companies and Chinese subsidiaries should be optimised. The study “Von der Pyramide zum Diamanten — Konsequenzen aus dem Wandel im chinesischen Maschinenbaumarkt” (From the pyramid to the diamond - consequences of the change in China‘s mechanical engineering market) is available for purchase at www.struktur AUTOMATION TECHNOLOGIES 2/2014