German Machinery case study and lessons learned: Wake up please – your customers in Asia are not waiting for you anymore.
One of the most interesting projects GBP did execute in 2019 was a comprehensive market research for a German customer from the machinery and engineering segment. The customer (let’s call him: “Dreamer”) is having a superb reputation for quality over the last decades and as many of its peers and competitors from Germany the company enjoyed full order books and growth for a long period of time.
But as our talks with customers and competitors in Asia found out the easy days for “Dreamer” are gone. While the construction industry is booming in all of Asia, the competitors from China have been learning hard and fast. In the beginning they have been laughed at and many experienced engineers always said: “Well, you cannot really compare Chinese products with our products – they are either simple copies or they are scrap and will fail to perform”.
While everybody acknowledges that German quality has a plus side, it is by no means a justification to ask for prices which are sometimes more than double. Any reasonable CFO of the customer or the investor will look at his KPIs and decide in favor of the cheaper solution if it is not a total write off. And a reasonable solution it is. A quote from a customer: “Yes, we are very happy with the performance and service from the Chinese vendor and we will buy our extension line from them as well” This we do hear from many segments wherever we are trying to pitch for Germany.
A saturated management and a pampered workforce back home is enjoying the benefits of past successes and do not believe (yet) that times will change. But from this experience we are sorry to say that times have changed already without it being noticed in the boardrooms of some – if not too many – companies who still feel they get a free ride on the “Made in Germany Ticket”.
Let us be clear: we are not painting a doomsday scenario here. The German Industry remains vigilant after all and has survived a crisis before. But this crisis is being driven by a force nobody seems to take seriously. China and to some degree other Asian manufacturers have come a long way and are here to stay.
True – in many cases cheap mass production made in China cannot and should not compare with high-end machines from Germany or other European countries.
But the fact that some businesses are simply bought over by China is just one additional element of their overall strategy to dominate critical segments of the future economy.
We strongly urge the companies who feel strong enough and wish to dive deep and survive in Asia to conduct a true and honest assessment where they are today and where they want to be in 5-10 years’ time in comparison to their Asian competitors.
If they don’t do that and if they don’t wake up our prediction is that they will either owned by an Asian competitor or they will be hardly surviving.
On top of that the present main geopolitical trends and drivers and the technological disruptions on the horizon are not a comfortable cushion for the German industry to rest on either – so please wake up and get ready for a tsunami coming your way.