As industrial equipment (IE) manufacturers enter 2013, the rise of emerging economies as key growth markets and the rebalancing of the industrial manufacturing base have created new opportunities and challenges. How companies respond to this shift will greatly impact their ability to succeed long-term.
Emerging markets have become a key focus for IE manufacturers seeking robust growth opportunities. Between now and 2015, industrial production in China will grow on average by more than 9 percent a year, while Brazil, Mexico, South Korea, and India are all expected to register average growth rates between 4.1 and 6.6 percent. This is according to Accenture Research analysis based on the report “Growth Forecasts of Industrial Value Added as Percentage of GDP,” Economic Intelligence Unit, 2011.
In contrast, many mature markets see continuing economic uncertainty. There is some cautious optimism with the U.S. recovering and showing better growth rates, but developments such as the recent European debt crisis weighs heavily on many international growth expectations.
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There are a host of developments reshaping the IE global market that companies will need to address to sustain growth in the coming years. Emerging-market competitors that are increasingly powerful in their home markets represent a new competitive challenge. Both demand for customized products and services, and pressure to quickly fill innovation pipelines are intensifying while product lifecycles shrink. And, demand for more energy-efficient products is growing along with greater scrutiny of sustainability levels throughout organizations.
In this changing business environment, companies will need to adopt a number of strategies to succeed, including a focus on risk and volatility management as a hedge against economic uncertainty. These include:
Seizing opportunities. To capture emerging-market opportunities, IE manufacturers from mature markets will need to fully integrate them into their operating models.
Managing risk. A holistic and interactive approach to managing risk that includes a framework linked to strategic goals will be needed. This includes adopting standardized analytical processes that enable structured scenario planning and incorporates market intelligence with the risk management process.
Mitigating volatility. Using shared services for cross-business and support functions, combined with globally standardized processes and structures to enhance flexibility and scalability, will help manage volatility. Establishing this agile approach also will help counterbalance geographic demand shifts at reasonable costs and optimize the use of assets.
Mastering dual manufacturing. Meeting growing demand for highly customized products will require companies to be more flexible and master a dual focus on traditional and modular manufacturing processes. This will enable them to respond to traditional mass-produced product needs and satisfy specialized demand using a modular approach.
Innovating. To accelerate innovation, IE manufacturers must spread the concept throughout their organization. This will include transforming research and development into effective and efficient networks that include customers and alliances with universities, think tanks, research institutions and other firms.
Leveraging green products. Demand for energy-efficient products is increasing in the IE market. Embracing green products not only will help IE manufacturers grow but will position them as environmentally responsible players. Green revenues constitute an increasing proportion of leading companies’ total revenue.
The IE global market is changing, driven by growth market shifts, rising international competition and increased demand for specialized and energy-efficient products at a faster pace. Companies that pursue these strategies can gain a competitive edge globally and move closer to achieving high performance.
>> James Robbins, [email protected], is automotive industry & industrial equipment industry North American managing director with Accenture (www.accenture.com), a global management consulting, technology services and outsourcing company.
