Saurer: the China Challenge

The school text talks to the highest degree the enterprise Saurer, its history and dodging to deliver to the challenge of Asians competitors and at same term dispense advantage of the opport building blockies in that market. In celestial latitude 2003, the management team of Saurer Twisting Systems was having difficulties with the choice of the mental process of their descent. It appears a really healthy competitor Asia ( in particular mainland china) who starts to conglomerate a big part of the market. Theres a street corner in the market and Volkmann ( unitary of the denounces of Saurer) realized that the sales of appliances for fashioning staple yarn for apparel are declining.Volkmann secure to take the market segment of European and Japaneses competitors exactly flat chinaware competitors (specially Rifa who is the major competitor) view invested in research and bob upment upgrading their process and lowering their represents. So now, Saurer has to face a bi g challenge to adopt a machine with a lower personify and pricey gauge rumped at Asians consumers. This machine would have a lower margin in similarity with the differents and for its lower costs could replace the existing gamy end machines. The management team would have to take just about really hard decisions closely positioning, pricing, fitting the intersection and sales strategy.And thithers still the question about how the Chinese competitors would react with the launch of the saucily growth Saurer was founded in 1853 by Franz Saurer, at the beginning it was a small foundry and engineering workshop, 15 age later it begins building embroidery machines and starts diversification with a variety of industries. Saurer acquires some enterprises like Hamel, Volkmann, Allma, Schlafhorst, Melco and Zinser. Most of the acquisitions were in fabric machinery and based in Germany. With the acquisition of Barmag and Neumag in 1999, Saurer leads the merchandiseion of machin es for producing and finishing chemical fibers.The enterprise creates Saurer textile Solutions (STS), comprised by nine textile strategic business units. Its mission was to be the undebated market leader for secure dish up solutions in textile engineering and initiation continuously new benchmarks for efficient harvestion. In 2002, began the mould Tempus, that pretends to change the processes and the corporate culture with the objective of come across to a greater extent hard-hittingly the client needs and at the same conviction make lower the costs. In 2003, complete the program to outsource parts manufacturing (In Czechoslovakian Republic and China), which allows a expose capacity of adjustment 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 thithers still a lot of things that the enterprise must do in position to mother a client focussed and responsive to cu stomer needs federation and he believed in that locations still opportunities to be a better company. this instant the former proceed to describe the textile patience (that has 4 major value-added steps fiber, yarns, fabrics and apparel and make up textile articles) and textile machinery industry (where STS is the largest manufacturing business of textile machinery).He talks about the learning of the industry (by 2% to 3% per year) and the most important harvestors (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 sireing position in textile exports. Chinas labors costs are really low Chinese infrastructure, labor market and productivity are better than in other countries. Additionally, in 2003 more than 70% of textile manufacturing investments were being made in Asia with about a half of those in China.For these reasons, success in China becomes a really important stretch forth 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 pronounce ventures in Beijing, instill and Wuxi. But, these partners in JV started to develop their own products using the knowledge received from Barmag, full-grown parts with low quality and destroying the image of Barmag products, there was a conflict of engages.In 2001 after the problems with their partners, Barmag liquidate the Shanghai JV and established the Barmag Textile Machinery in Suzhou. Then, Saurer mulish to established a direct presence in the Chinese market, finding a really strong competition in that market. In 2003, Saurer has a bang-up participation in the Chinese market, in 2005 plan to build a major new facility in Suzhou that would allow it to consolidate in singleness location much of its procurement activities. Now the author proceed to talk about one of the brands of Saurer Volkmann.Volkmann was founded in 1904 by Volkmann Brothers in Krefeld, Germany. At the beginning, the enterprise commences machinery for the topical anaesthetic anaesthetic silk and velvet industry. After II World struggle starts building machinery for the manufacture of yarns. In 1954, Volkmann developed the two-for-one construction 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, save theres the need of been part of a bigger enterprise in order to grow even more.In 1990 theres a merger 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 rising textile markets. The e nterprise wanted to get a biggest segment of the Asian market, so they created the project genus Draco 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 East 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 result of this project, spin systems was the first Saurer business unit to establish its own manufacturing operation 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 westbound customers. They look for the lower cost local anesthetic manufacturer. Given the low labor costs and the calm of replacing 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 entrust enable them to increase revenue.Also theres a difference between occidental and orientals about after-sales service and support. , in China, there was little interest in preventative tutelage or annual contracts. The attitude was to repair the machine when it broke down and only 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 level 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). Also, the domestic Chinese competitors had become important in the textile machinery market. They had a preponderating position and dont respect the intellectual property of western and Japanese manufacturers (for example, the CompactTwister was really imitated). By 2003 there were 3 major Chinese competitors with a nonher 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 ancillary 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 prognosis in India is similar to what happen in China, the strongest local competitor is Veejay Lakshmi, that captured about 70% market packet in the Indian market and is exporting its machines to oth er countries. In Pakistan, Muratec had the dominant market but Rifa is gaining some participation.Volkmanns participation in both countries is low. In order to response 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 qualification cotton and cotton blend yarns with medium and book 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 communicate was the exact va lue proposition 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.