Go Global - Think Local

Go Global, Think Localt

By : Jim Pinto,
San Diego, CA.
USA

In the global village of the new economy, automation companies have little choice - they must find more ways and means to expand globally. To do this they need to minimize domination of the central corporate culture, and maximize responsiveness to local customer needs.

This article was published by:

Automation.com, July 2002

Markets today are global. Most major companies recognize that to survive, they must have a global presence.

Regional focus

In the US, industrial automation companies typically recognize four major market areas: North America (including USA, Canada and Mexico), Europe (European Community countries), Far East (the 5 tigers: Japan, Korea, Singapore, Malaysia, Indonesia) and ROW – rest-of-world (Russia, China, India, Latin America). The Middle East is typically handled from Europe, while English-speaking Australia and New Zealand are handled either from the US or Europe. The burgeoning markets of China and India are starting to demand direct focus with local presence.

All the major industrial automation suppliers are nationally and regionally organized, with the highest share of their business in their own home-market and seeking to expand into other regions through acquisitions and alliances.

Expansion through acquisition or alliance

The acquisition route to global expansion is fraught with difficulties. Many acquisitions fail because of a cultural mismatch. Even when both companies are in the same country – the culture of the larger acquirer typically subsumes that of the smaller acquired company and the very reason for the acquisition (local product and market development) is subverted.

An alliance is usually a short-term marriage-of-convenience. Both parties recognize that they will eventually need to develop their own presence in that geographical area; the alliance gives them revenue while they learn the local markets and culture. Sometimes there is a tacit understanding for an eventual merger – though that is unusual, especially for alliances between Western and Eastern cultures. (Example, Rockwell Automation and Omron). Indeed, innate Japanese cultural pride makes being acquired akin to defeat; the acquired feels shame at being defeated and the acquirer cannot respect the acquired. Therefore, the Japanese typically form 50:50 joint ventures; but these also fail because of the cooperative indecision that results (example, the now defunct JV between Yokogawa and Johnson Controls).

Corporate characteristics

Because of these difficulties, very few industrial automation companies are truly global. They tend to be dominated by the characteristics of the corporate parent. Examples are Rockwell Automation (USA), Siemens (Germany), Groupe Schneider (France), Honeywell (USA), Invensys (UK), Yokogawa (Japan); although the reach of these companies is global, few can deny the dominating influence of the central parent company. Invensys is an interesting example: although the majority of its sales are in N. America, it is based in England and still considered essentially British.

Targeting Local Needs

For industrial automation companies, the problem that inhibits truly global growth is that product developments are mostly centralized (in the country of origin) and the products that emerge tend to have FABs (features, advantages, benefits) specified by central marketing. Hence, key technologies and major product introductions cater primarily to customers in that geographical region. Marketing and customers in other regions are relegated to acceptance of custom modifications; or they have the choice to buy from other local suppliers.

True product targeting goes beyond just having user-manuals in the local language. Expectations regarding size, shape, customized items, price and availability vary widely. Hence regional markets tend to be dominated by local companies. In the Far East, for example, a controller is expected to have minimal features at a stripped down price – and quantities are high for large plants being built in that region. So, US-based companies tend to work at a disadvantage in that region. Often the best they can do is offer over-engineered products at a significant discount, simply to win market share.

Go global – think local

For growth and success in the new global economy, the guiding principle must be: Go Global – think Local! Automation suppliers must become truly global by allowing local development of products for local markets. The best approach is to develop technology (hardware & software) through global alliances – preferably with relatively small, fast-moving local companies. Product manufacturing can be done wherever quality and cost remains consistently the best. What remains is effective local service to assure that all customer needs are met.

3 keys for success

In a global market, there are 3 keys that constitute the winning difference:

Marketing abilities that assess correctly the local needs in a global arena.
Proprietary technology and products targeted specifically for local markets.
High-value-added services offered through effective local service providers.

In the global village of the new economy, automation companies have little choice – they must find more ways and means to expand globally. To do this they need to minimize domination of the central corporate culture, and maximize responsiveness to local customer needs.

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