Saurer: the China Challenge

The text talks round the endeavour Saurer, its accounting and system to face to the ch in on the wholeenge of Asiatics competitors and at aforementioned(prenominal) time fill advantage of the opportunities in that commercialise. In December 2003, the management team of Saurer gimmick Systems was having difficulties with the choice of the functioning of their business. It appears a really strong competitor Asia (specially chinaware) who starts to roll up a big part of the food market. Theres a recession in the market and Volkmann (one of the brands of Saurer) realized that the sales of railroad cars for devising staple yarn for appargonl are declining.Volkmann achieve to take the market segment of European and Japaneses competitors precisely promptly mainland China competitors (specially Rifa who is the major competitor) have invested in research and development upgrading their play and lowering their be. So now, Saurer has to face a big challenge to give away a i mplement with a lower bell and sizable fibre targeted at Asians consumers. This tool would have a lower margin in comparison with the others and for its lower bells could replace the existing high decision autos. The management team would have to take some really strong decisions about positioning, pricing, naming the produce and sales schema.And on that points still the question about how the Chinese competitors would answer with the ensnare of the new harvest-feast Saurer was founded in 1853 by Franz Saurer, at the beginning it was a small foundry and engine room workshop, 15 years later it begins building embroidery machines and starts diversification with a sort of industries. Saurer acquires some enterprises like Hamel, Volkmann, Allma, Schlafhorst, Melco and Zinser. Most of the acquisitions were in cloth machinery and based in Germany. With the acquisition of Barmag and Neumag in 1999, Saurer leads the production of machines for producing and finishing chemica l fibers.The enterprise creates Saurer stuff Solutions (STS), comprised by nine textile strategic business units. Its mission was to be the undebated market leader for full assistant solutions in textile engineering and set continuously new benchmarks for efficient production. In 2002, began the go steady Tempus, that pretends to remove the processes and the corporate culture with the objective of satisfy to a greater extent effectively the lymph node needs and at the kindred time make lower the costs. In 2003, complete the program to out character reference separate manufacturing (In Czech Republic and China), which abandons a better capacity of adaptation at the needs of the market.But, even with all the achievements gotten by Saurer with these proyects, the CEO of the enterprise, Henry Fisher considers that theres still a make out of things that the enterprise must do in order to become a customer focused and responsive to customer needs society and he believed theres s till opportunities to be a better company. in a flash the author die to describe the textile industry (that has 4 major value-added steps fiber, yarns, fabrics and array and made up textile articles) and textile machinery industry (where STS is the largest manufacturer of textile machinery).He talks about the growing of the industry (by 2% to 3% per year) and the airless to strategic productors (Asia, specially China). Next, the author recall the strategic importance of China in the industry, that importance is principally because China is a big source of textile raw materials. China has a large domestic market China has a growing position in textile exports. Chinas labors costs are really low Chinese infrastructure, labor market and productiveness are better than in other countries. Additionally, in 2003 more than 70% of textile manufacturing investments were being made in Asia with about a fractional of those in China.For these reasons, success in China becomes a really imp ortant issue for Saurer, the enterprises sales depends on Asian markets, specially China. The predecessor companies of Saurer were participants in Chinese market, Barmag was cooperating with some Chinese companies, establishing Joint ventures in Beijing, Shanghai and Wuxi. But, these partners in JV started to develop their own products using the knowledge received from Barmag, boastful parts with low quality and destroying the image of Barmag products, there was a difference of interests.In 2001 after the problems with their partners, Barmag liquidate the Shanghai JV and established the Barmag Textile Machinery in Suzhou. Then, Saurer decided to established a direct presence in the Chinese market, finding a really strong competition in that market. In 2003, Saurer has a good participation in the Chinese market, in 2005 plotted to build a major new facility in Suzhou that would allow it to consolidate in one location much of its procurement activities. Now the author proceed to tal k about one of the brands of Saurer Volkmann.Volkmann was founded in 1904 by Volkmann Brothers in Krefeld, Germany. At the beginning, the enterprise produces machinery for the local anaesthetic silk and velvet industry. After II World War starts building machinery for the manufacture of yarns. In 1954, Volkmann developed the two-for-one strain machine that was more productive and cost effective that the existent machines, this gives to the company an advantage over its competitors. Volkmann grow becoming a really good mid-sized enterprise, but theres the need of been part of a big enterprise in order to grow even more.In 1990 theres a spinal fusion with Saurer, but the brand Volkmann as the Allmas were retained. In 1994 Volkmann introduces a new machine called the CompactTwister, created to satisfy the needs of the customers in the new emerging textile markets. The enterprise wanted to get a biggest segment of the Asian market, so they created the project Dragon that consists in create a plant in Suzhou, China in 1997 in order to produce a machine with same characteristics as the one produced in Germany but with a lower cost and price, the plan was, to export the machine to other markets in the Far eastside overtime.This project has their risks, specially the quality of the final product, because it would work with some parts produced in china, what could give a low quality. As a allow for of this project, twisting systems was the first Saurer business unit to establish its own manufacturing movement in China. It starts producing in may 1998 and the price of these machines were 15% lower that the German-Built Machine. The product was good sold, and the degree of the CompactTwisters success were pleasant surprises for Saurer management.One of the challenges that Volkmann has to face was to understand the Asian customers needs, totally different to the occidental customers. They look for the lower cost local manufacturer. Given the low labor costs and the ease of permutation workers, most Chinese companies had little interest in machine ergonomics and automation. But now the old attitudes were starting to change as more Chinese managers began to appreciate the efficiency of the machines and the quality of the products they produced, that will enable them to enlarge revenue.Also theres a difference between occidental and orientals about after-sales service and support. , in China, there was little interest in preventative maintenance or annual contracts. The attitude was to repair the machine when it broke down and scarce to replace a part when it failed. The result of these attitudes was that Saurers after-sales spare parts and service in China were only about one third direct achieved in Western countries. This is a lost opportunity to the enterprise to gets close to the customer and discover news opportunities of business by discovering new needs.In China, Volkmann, has 2 major competitors Muratec (Japan) and Savio (Italy). Al so, the domestic Chinese competitors had become important in the textile machinery market. They had a dominant position and dont respect the intellectual property of Hesperian and Japanese manufacturers (for example, the CompactTwister was really imitated). By 2003 there were 3 major Chinese competitors with another 10-15 local companies in the market. Rifa Textile Machines was the largest of the three.Founded in 1993, by the 2003 it had 5 subsidiary companies producing different types of textile machines, this enterprise has good coverage all over China. The second one is Taitan, is smaller tan Rifa but its strategy is similar. Wanli is the third competitor. The panorama in India is similar to what happen in China, the strongest local competitor is Veejay Lakshmi, that captured about 70% market share in the Indian market and is exporting its machines to other countries. In Pakistan, Muratec had the dominant market but Rifa is gaining some participation.Volkmanns participation in b oth countries is low. In order to answer to the local Chinese Challenge, Volkmann make a project to create a new twisting machine that would meet the needs of many lower-end customers making cotton and cotton blend yarns with medium and fine yarn counts. This machine should have a good performance and productivity and at same time be cheaper than the others. Now the question is, Should or not Volkmann launch that new low-end machine, what would be the consequences for the image of the company to produce a machine not as good as the others but cheaper than then?Is there a big market for that kind of product? How would the competitor to react if the company launch this product? If Volkmann decide to launch the new machine would be necessary to develop a comprehensive marketing strategy The major issues that needed to be addressed was the exact value bid that would be communicated to the target customers, the pricing of the new product, the branding and naming of the product and the sales and marketing communications strategy.