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Time for Asia's plastic sector to look
west
By Mark Lees
Leading
Asian machinery original equipment manufacturers (OEMs),
attracted by the size of the market - for example,
20,000 injection molding machines per year - have been
investing heavily to manufacture and to sell
lower-quality machinery into mainland China. National
and "nationalized" Chinese machine manufacturers are
now, in an overcrowded environment, too busy trying to
prevail in a lower-than-expected growing market.
For instance, the increasing political
uncertainty regarding cross-Strait negotiations between
China and Taiwan and the continued over-concentration of
investment in mainland China can only have negative
effects on the manufacturing base within Asian
countries. In effect, the Chinese market, while
presenting an opportunity for some to make large profits
in the short term, surely cannot be a sensible strategy
to adopt in a market that cannot sustain the current
rate of growth. The medium-to-long-term risks of heavy
investment in a market where interventionist and
protectionist policies could result in zero gain for
both the companies concerned and the Asian economy
cannot be ignored.
Europe and the United States
will soon recover from their actual depressed situations
and re-emerge as the largest high-quality machinery
markets in the world. The time is now right for Asian
manufacturers to look back to the West, and target these
far more stable, and potentially more lucrative markets
- markets where the potential for investment recovery is
much higher.
To give one example, in 2001,
Taiwanese plastics OEMs exported nearly half their
annual production to mainland China, machinery that had
an estimated value of NT$10 billion (US$287 million, or
49 percent of total production). Compare this with the
volume of machinery exported to the United Kingdom -
only 0.3 percent of total production, valued at NT$72
million was exported there in 2001. This is a tiny
proportion, especially when you consider that the UK
forms part of a European market worth about 5.5 billion
euros (US$5.4 billion) annually. The European market in
particular offers both stability and growth, and as such
presents an untapped opportunity for Asian
manufacturers, a market that presents the opportunity to
grow by a factor of six to match the average European or
US manufacturer.
However, in both Europe and the
United States, clear OEM leaders have appeared. European
and US machine manufacturers are consolidating, prices
are gaining stability, and the market is reaching a
maturity stage where companies will start to reap the
profits of higher economies of scale. To try to enter at
a later stage in a consolidated market will be close to
impossible, hence the time is ripe to enter the market
now, and to do so by using sound, impartial professional
help.
Asian manufacturers have a great
opportunity to succeed in the European marketplace - but
there are many diverse issues facing them if they are
serious about entering the market - cultural
differences, political and financial issues, quality and
suitability problems to name just a few, and none of
these issues are straightforward to address, but they do
need to be addressed correctly if success is to be
guaranteed. For decades now, Asian OEMs have not
succeeded with their strategy of using European sales
agents - because of the major differences between the
European and Asian markets, it is vital to choose the
right business development and consulting team to
deliver the right value proposition. An in-depth
knowledge of the market is a must that every potential
partner should bring to effectively deliver the results
expected to those seeking advice. Many companies can
offer advice in this area, but few can offer a total
service that encompasses the diverse spectrum of issues
involved, both commercial and technical.
In
conclusion, although a clear opportunity exists for
Asian OEMs, this window of opportunity will not remain
open indefinitely. A sound strategy for market
penetration, with products created to suit European
market needs, and backed by sound, impartial third-party
assistance, will reap huge benefits in the months and
years ahead.
Mark Lees is engineering
manager for MP Consulting, which specializes in the
plastic and rubber sector.
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