Letter from China: How to deal with a market slowdown

Commentary: As the world’s machining market slows, now is the time to rethink your business

 

By Sean Xie, General Manager, Grundfos Pumps (Chongqing) Co., Ltd.

By Sean Xie, General Manager, Grundfos Pumps (Chongqing) Co., Ltd.

China has experienced high growth over the last 3 years in the machining industry market. The country has grown bigger than Germany, taking the No. 2 position behind Japan, the market leaders.

After the global economic crisis in 2008, the manufacturing centre of the world moved to Asia. And in Asia, China is seen as a leader.

Domestic demand drives Chinese industry. The international cities in the East – Shanghai, Beijing – show huge growth potential. Meanwhile, the government’s new “Go West” policy is bringing the country’s development focus to the south-western and north-western markets. In three years, these are expected to grow into rich markets.

Conditions are good for manufacturing in China. We have great advantages with our large labour force, labour costs, resources and logistics.

China’s challenges
Our industry faces some difficult challenges, however. And the way Chinese companies approach these challenges can make or break them in years to come. The challenges include:

- Lack of competitive advantage
China might have one of the biggest machining industries, but we are on the low or middle end of the technological side. Generally, we lack innovation and high-tech enterprises. We lack international competitive advantage.

 

- Tight Chinese monetary policy.
The monetary policy is tight in the general economic environment in China. This influences manufacturing. The domestic market tends to focus only on cost and not quality or innovative products. Customers who do want the middle or high-end components for their machines or systems are losing sales, because their customers are not buying their machines. And this – along with the first challenge above of lacking competitive technological advantage – only creates a downward spiral of that can be difficult to stop if we do not take action.

 

- Global economic slowdown.
Many joint ventures in China have slowed down their foreign investments. The export markets are suffering. The 2008 financial crisis might have helped to launch China into the major league of machining markets, but it is also one of the continuing handicaps.

Time for reflection
I suggest that now is the time – while things are slowing down – to adjust your strategies – your sales, marketing, or even your general company strategy. Now is the time to think about your weakest areas and how you can improve them.

When we are busy with sales, there is no time for thinking about these things. Take the opportunity to think about how you can improve quality, improve the technical make-up of your products, improve your management. Of course, you must keep going with your traditional way of doing business, but you must also try something new.

We have done this, and it has led us to change our mind set in how we conduct our business.

First, we are meeting with our key, OEM accounts. Previously, we dealt exclusively with original equipment manufacturers who manufacture machine tools or systems. We never dealt with their customers – the end customers.

Our customers’ customers
Now, we visit those end customers – either with our OEM customers or even by ourselves. We want to learn about their business, their needs and requirements. Maybe they have some new requirements that we do not know about, yet our OEM customer knows. We want to know their processes.

Only then can we offer improved solutions. Maybe this requires some adjustments – our technology, our products, our supply chain – to meet their new requirements.

We have now held several seminars with our automotive industry customers, and we have invited their customers, as well. We want to hear from them, and at the same time, we want to teach them about our technology.

We want them to understand our full-line pump supply. They should learn how we can help them save energy, discovering the potential energy-saving areas in their factories with our professional energy audit or pump audit.

We want to help our OEMs to sell more, to do more. Doing this calls for a change of mindset. We should do lots of things that we did not do before.

If we are successful, then we will be doing our part to help the Chinese market continue its growth.

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