EMO Hannover 2013 focuses on India | Automation.com

EMO Hannover 2013 focuses on India

August 6, 2013 - The “waking tiger” is ready to leap: India is on the way to becoming a manufacturing location of global status, and meanwhile ranks 6th among the world’s biggest markets for machine tools. At the EMO Hannover 2011, India accounted for more visitors than any other nation except Germany, with a share of over 10 percent and more than 5,000 visitors. This year, the EMO Hannover, the world’s premier trade fair for the metalworking sector, is taking this trend responsively on board with the “EMO Focus on India”.

Today, many users and manufacturers of machine tools are progressing their strategic positioning in India. This is due not least to the soaring growth of the subcontinent’s market potential. As a location for capital investment, India is of interest not only to global players, but definitely for mid-tier machine tool manufacturers as well. The stumbling blocks on the way to achieving this can be avoided if you take note of the experience that other companies have already gained.

What does a mid-tier machine tool manufacturer have to bear in mind if it wants to gain a foothold in newly industrializing countries (NICs) like India?

“Basically, there are two conditions you have to meet: first, you have to tackle your expansion abroad from a position of strength, and by “strength” in this context I mean both the technological and the financial side of things. You have to be able to finance this expansion without any outside funding. Second, your organization has to be prepared for a lot of intercultural openness, and this on all levels. If, for example, this is the case only at the top management level, then it’s better to forget the whole idea,” outlines Dr. Frank Brinken, CEO of Starrag Group Holding AG, Rorschacherberg/Switzerland,

As sales markets or locations for investment, at the moment “India and China are definitely the major focus.” Brazil has high import duties and exorbitant hurdles to overcome for approval. Importing, and also the establishment of your own production operations, says Brinken unequivocally, “are controlled through a body in which the biggest Brazilian manufacturer and other local producers call the shots. Brazil is manifestly not complying with the WTO’s rules.”

Starrag’s CEO doesn’t think all that much of joint ventures as a means for bypassing import restrictions. “I don’t believe that joint ventures are in the longer term the right way to establish your own presence in China, India or Russia. Because of the divergent interests involved, the decision-making paths are simply too long, and incapable of matching the dynamism of the markets involved. What’s more a separation after a few years will usually be very cost-intensive.”

Up to now, expanding markets like India have still been demanding “appropriately matched technology,” such as standard machines or standardized production lines in the low price segment. Does this still apply today for what will soon enough be high-tech regions?

“Yes”, says Brinken. “You have to adapt the machines to suit the climatic conditions concerned and reduce the complexity of operator control. To achieve this, you have to invest in training and skill programs suited to the particular nation involved. You’re practically never going to find ready-to-employ machinists who have CNC skills equivalent to one of our freshly qualified apprentices. Together with several other Swiss companies, we have set up an apprentice training scheme in India based on the Swiss curriculum”.

Market entry demands staying power
Differentiated market entry chances for disparate NICs are spotlighted by Dr. Albert Neumann, Managing Partner of Strategy Engineers GmbH & Co. KG, Munich, “Although the situational backgrounds in newly industrializing countries are highly disparate in terms of political constraints, bureaucracy and cultural mindsets, there are a series of basic parallels that need to be borne in mind when going into a new market.” Building up a customer network, for instance, necessitates using local staff; local/regional trade fairs frequently offer good opportunities for increasing awareness levels and brand recognition.

Furthermore, he says, market entry should be tackled with a view to the long haul. “In most newly industrializing countries, purchasing decisions by local companies are driven principally by the initial price quoted and less by the holistic business case of a machinery investment. Overcoming this mindset will sometimes require protracted and persuasive argumentation.” It may make sense to form a sales alliance by joining forces with other machine tool manufacturers with whom you are not competing directly in terms of the product portfolio.

And finally, machine tool producers, when selecting the new markets they wish to target, should take into account not only the potential of local customers, but also and above all the investment activities of foreign companies in the nation concerned. The most attractive markets at present among the newly industrializing countries, says Neumann, besides China, meanwhile the biggest sales market for machine tools, are “without a doubt India, Russia and Brazil.”

He is quite relaxed regarding the risk of uncontrollable outflows of corporate expertise in joint ventures: “In our experience, it’s less the local, quantitative value creation proportion that constitutes the paramount risk, but the establishment of specific development and above all application know-how on the spot.” The basic principle involved, he continues, is this: the less high-end expertise is put in place locally, the lower is the risk of losing control. Nevertheless, statutory stipulations for joint ventures in the relevant nations have to be complied with, which (particularly in China) in many cases require that development activities be established and thus necessitate careful assessment of the specific arrangements involved.

In India, like in China, demand is primarily for machines in the lower price segments. Experience has shown, says Neumann, “that for German machine tool manufacturers it is difficult or even impossible to operate successfully at the bottom end of the product spectrum, even if machines are specifically “slimmed down” or old machine types are sold. What machine tool manufacturers should rather be concentrating on is their corporate expertise in the field of high-quality production, since there’s a growing demand for this, driven by the increasing focus on exports and quality among product manufacturers in newly industrializing countries.”

In this regard, Neumann has high expectations of the EMO Hannover 2013: “While China has meanwhile established itself as by far the biggest market for machine tools in the world, India is gaining steadily in importance. With a market volume of more than 2 billion euros, India is already the world’s sixth-largest market for machine tools.” The “EMO Focus on India”, a half-day seminar on September 18, 2013, offers non-Indian companies an opportunity to enjoy a dialogue with Indian customers so as to better comprehend their needs and their plans for the future. Conversely, says Neumann, “Indian visitors will gain some insights into what solutions are already available today for manufacturing high-quality parts and products”.

The choice of location is of crucial importance
When it comes to the risks involved in entering a new market, Manfred Bender, Vice President Sales Europe and Asia/Pacific at the industrial metrology specialists Carl Zeiss Industrielle Messtechnik GmbH, Oberkochen, has a few practical tips of his own. “Due to the weak infrastructure in India, the choice of location is vitally important. In regional terms, there are some very prominent industrial hotspots, such as automotive facilities in Chennai and Pune. The mechanical engineering sector is concentrated primarily in the cities of Bangalore, Pune und Chennai.”

At these hotspots, he continues, Zeiss demonstrates close-at-hand customer-responsiveness in the shape of metrological and competence centers in Bangalore, Chennai, Pune and Delhi. “In our experience”, says Bender, “it’s vital for Indian customers to work together with an internationally recognized company. Reputation and brand play a major role”. What’s also highly important is the selection and qualifications of the local staff.

When it comes to “appropriately matched technology”, Manfred Bender can draw on his own experience: “At our new production facility in India, we primarily manufacture coordinate measuring instruments in the medium and low price segments. This enables us to ensure that we can meet the substantial demand for instruments with an attractive price/performance ratio. India is a very price-sensitive market – this strategy of localization enables us to obtain improved access to local customers as well. Our major international accounts, by contrast, are demanding high-end solutions. The principal focus for these companies is maximized levels of productivity.”

High-end solutions in abundance will also be on show at the EMO Hannover 2013. To quote Manfred Bender: “The EMO is, of course, the yardstick for the machine tool industry worldwide. The demand for coordinate measuring instruments is closely correlated to the demand for machine tools; after all, most of the work pieces needing to be measured will have been produced on a machine tool beforehand. Following the current perceptible climate of restraint among purchasers, it will indubitably be very exciting to observe how successful the EMO proves to be. We’re hoping, of course, for large numbers of visitors from newly industrializing countries like India.”

For your schedule:
What:            EMO Focus on India: “Strategic commitment by numerous major
users, exploitation of potential still limited by structural deficits”
When:           September 18, 2013
Where:          Hannover Exhibition Centre, Entrance North 2, Conference Area Hall 2, Europe Room

About EMO Hannover 2013
From September 16 to 21, 2013, international manufacturers of production technology will be spotlighting “Intelligence in Production” at the EMO Hannover 2013.  The world’s premier trade fair for the metalworking industry will be showcasing the entire bandwidth of today’s most sophisticated metalworking technology, which is the heart of every industrial production process.  The fair will be presenting the latest machines, plus efficient technical solutions, product-supportive services, sustainability in the production process, and much, much more.  The principal focus of the EMO Hannover is on metal-cutting and forming machine tools, production systems, high-precision tools, automated material flows, computer technology, industrial electronics and accessories.  The trade visitors to the EMO come from all major sectors of industry, such as machinery and plant manufacturers, the automotive industry and its component suppliers, the aerospace sector, precision mechanics and optics, shipbuilding, medical technology, tool and die manufacture, steel and lightweight construction.  The EMO Hannover is the world’s most important international meeting point for production technology specialists from all over the planet.  In 2011, the fair attracted more than 2,000 exhibitors, and around 140,000 trade visitors from more than 100 different countries. EMO is a registered trademark of the European Committee for Cooperation of the Machine Tool Industry CECIMO.

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