Transcending
boundaries
SR
Rao and S Prahalathan discuss how the core competence of Indian companies
in certain products can enhance the export potential
An
observation of current production trends reveals that the Indian fluid
power industry has grown in line with industrial production. This is
because of the underlying trend towards automation and the presence
of fluid power products across the spectrum of industrial applications.
The privatisation drive and increasing defence expenditures in many
countries are now providing tremendous business opportunities for this
sector.
With market leadership well matured and established in North America
and Europe, the focus on geographic expansion has moved to emerging
markets in Latin America and Asia. Especially in Asia, the industry
is estimated to achieve a growth of over 30 per cent.
This global trend indicates a modest business growth in this sector.
As the industry matures and settles into a slower growth mode, market
leaders will seek acquisitions in order to maintain comparable growth
in sales and earnings.
A drive towards consolidation has been witnessed in the global fluid
power industry. On the manufacturing side of the industry, companies
such as Aeroquip-Vickers (Hydrokraft – Germany), Mannesman / Rexroth
(Uchida Hydraulics — Japan), Parker Hannifin (Siebe — Sweden,
VOAC — Sweden, Power Systems division of Figgie International)
and Sauer (Control Concepts) have made acquisitions over the past few
years. These consolidations and transactions have brought the companies
into new markets and have expanded the customer base and technical expertise
in this sector.
Apart from the consolidation in the manufacturing segment of this industry
across the globe, mergers have also happened on the distribution side.
Industry leader, Sophus Berendsen (Vescor, Doedijins Group— Netherlands),
as well as diversified industrial distributors, which include Applied
Industrial Technologies (Engineered Sales) and Wajax (Yellowstone Hydraulics,
Spencer Industries) have made acquisitions. These acquisitions focus
on the benefits of increased sales coverage, more complete product offerings,
assembly capabilities and additional purchasing leverage.
It is also interesting to note that most leading fluid power companies
are divisions of larger industrial units. Such companies would encompass
the likes of Eaton Hydraulics Division (Eaton Corporation), Rexroth
(Mannesman) and Motion Industries (Genuine Parts, US). As such, these
companies already offer a broad range of components and systems to their
aerospace, construction, heavy truck, agriculture, machine tool and
material handling divisions of the parent companies.
These corporations are now showing a preference to conservative expansion
as opposed to making aquisitions in the field of fluid power.
Table 1
The
Global Marketplace
The leading importers of fluid power systems in the world
are US, Germany, France, Mexico, China, Canada, UK, Hong Kong, Japan
and Italy. Except for China and Mexico, which are developing countries,
all other major players are developed nations. These major importers
together accounted for over 60 per cent of world trade in the year 2001.
The share of USA alone was around 18 per cent (Table 1).
The import pattern of these countries showed that Germany, Mexico and
China have primarily imported electric motors and parts, whereas pumps
and pump parts are the leading import item for the US fluid power industry.
In France, tubes, pipes and hoses are the leading fluid power products
being imported. This item is also the second largest import item in
many target markets.
The import data also shows that sourcing primarily takes place from
neighbouring countries. To cite a few examples, France imported its
pipes tube and hose requirements from Germany, Italy, Spain and Netherlands.
US imported pumps and parts, mainly from Germany, Canada, Japan and
Mexico. Germany imported its motors and motor parts from Denmark, Switzerland,
Czech and France. While China sourced its import requirements mainly
from Asian countries, Mexico sourced it from US, Germany, Japan and
Switzerland. Leading exporters of fluid power systems and products in
the world, therefore, are Germany, US, Japan, France and Italy. China
and Mexico are the two developing countries involved in production and
export of fluid systems in the world (Table 2). One may see that China
is the sixth largest exporter in the world, accounting for over 5 per
cent of global share.
Table2 
India
in the World
India, despite the availability of technical expertise,
continues to be a small player in the global trade of fluid power industry.
The share of India in the global trade of fluid power industry is less
than 1 per cent (Table 3). However, India’s export share in pipes,
tubes and hoses is around 4 per cent of the total world market. This
is the highest share, garnered by the Indian fluid power industry for
any product group. This reveals a comparative and competitive advantage
of Indian companies in this product group.
....CONTD
