Rubber machine enterprises: How long will it take for them to go global?

    “As Chinese economy is in the process of transformation and upgrading, the tire realm that relates closely to rubber machines shows marked structural surplus. In the coming few years, the need for rubber machine will reduce sharply and the contradiction on excess production capacity will be outstanding. Only when internationalized operation strategy is carried out in the rubber machine industry can the market be expanded, the contradiction between supply and demand be solved and steady and sustained development be achieved”, said Zhang Hongbo, director of Rubber Machine Committee of China Chemical Industrial Equipment Association, who continued, “The ‘go global’ strategy several years ago brought not only order and efficiency, but experience in technology, management and brand, etc. as well. Nowadays acceleration of internationalization is full of chances and challenges. ‘Go global’ is not for the time being. Only when effective effort has been made in technical innovation, quality and management improvement, marketing and service as well as resource integration can a business become a stable transnational corporation in the real sense.  

“Go global” is the general trend
    As a result of the slowdown of Chinese economy, diminishing infrastructure investment and especially the anti-dumping adopted by the US and other countries, exported Chinese tires inflicted heavy losses and experienced a “chilly winter”. Besides, the contradiction on excess structural production capacity of tire remained outstanding. During the first 11 months of 2015, the average rate of operation of China’s steel-belted radial tyre was below 65% and the semi-steel belted radial tyre was below 67%. Several tyre enterprises in Dongying were closed or had great difficulty in operation. The depression in the tyre realm dealt a great blow to the investors’ confidence. In 2015, there were almost no new tyre projects in China. Multiple projects as planned in 2014 were also in a dilemma by coming to a halt. The tightening fund policy as adopted by banks made it harder than ever in financing for the invested projects, and the current funds of tyre businesses were mainly used for keeping operation instead of making investment rashly. 

    The diminishing tyre projects led to great deficiency in the number of orders of the rubber machine industry. According to preliminary estimate, orders of the rubber machine industry showed a sharp decline of over 50% and the sales volume registered a decrease rate of 20%. But stimulated by the US’s anti-dumping and anti-subsidy policies, a large number of aspirant tyre enterprises set about establishing factories in foreign countries. Predictably, more tyre enterprises who have been focusing on overseas resource integration and global market layout will “go global”. Based on the above environment, China’s rubber machine sphere must carry out strategic adjustment and widen its horizon to the global market to become less dependent on the domestic market and more competitive in the international market.   

Demand of overseas market is potential
    As far as the demand on China’s rubber machine is concerned, structural surplus is most remarkable. Based on the global market need, orders from overseas market can absolutely make up for the deficient orders in domestic markets. Every year, world-famous tyre enterprises will invest in type projects in a planned way, especially for Michelin and other companies that do not produce equipment will give rise to great market potential. According to the research data of European rubber magazines, there were dozens of type-focused investment projects announced in 2015, involving a total investment of roughly USD 10 billion, most of which were used for purchasing equipment. Besides, most of the equipment of many tyre factories as established by Michelin and other countries in the 1970s was about to be scrapped and need to be upgraded, which will result in a high demand for rubber. India, among other emerging countries, are accelerating the process for meridian-based types. Hence, the tyre demand of these countries will be on the rise sharply. Additionally, there were already six Chinese tyre enterprises that have set up production bases overseas. Countries along the “one belt one road” line such as Thailand and Uzbekistan are increasing investment in the tyre projects and are in need of rubber machines to some extent.

    According to statistics, China’s delivery value on rubber machine at present is less than 20% of the total sales volume. If the ratio is over 50%, China’s surplus productivity on rubber machines will be relieved.      

Experienced internationalized operation  
    Chinese rubber machine enterprises have been carrying out internationalized operation for over 20 years. Through frequent business connection with Michelin and other countries, their product quality and level have attained a new height and enjoyed a good reputation in the international market. All of the world’s top ten tyre companies have had purchased Chinese products. 

    MESNAC Co., Ltd. regards itself as an internationalized company. As it set up technical research centers in Europe and the US and purchased MeadWestVaco, a British assembly drum manufacturer and TXT Company, a US test device manufacturer, it has basically brought about globalized technology, production, sale, purchase and service. Through internationalized operation, Guilin Rubber Machine Plant has cultivated inter-disciplinary talents who are good at both technology and trade and a total of roughly 2,000 vulcanizing machines have been exported, including around 1,000 machines exported to Bridgestone, Michelin, Sumitomo and other companies. In 2015, its export orders totaled over 200 million Yuan which was more than domestic orders for the first time and greatly relieved the pressure of deficient orders. In recent years, Yiyang Rubber & Plastic Machine Group Company finalized the development strategy of globalization, that is, enable the enterprise to become profitable and achieve development by entering international large market. The company’s introduced internal mixer adopting Germany’s WP technology becomes the top choice for Chinese tyre enterprises. Yiyang Rubber Machine Co., Ltd.- China’s first Sino-foreign joint venture in the rubber machine industry as founded in 1995 became a model joint-venture in the same area. In October 2010, Dalian Rubber & Plastic Machine Co., Ltd. carried out a merger with Makerere Mechanical Engineering Co., Ltd. of Canada. In February 2012, it carried out a merger with Buzuluk Co., Ltd. of CZ. Both of the overseas mergers were a big success, bringing an increased sales volume of over 200 million Yuan. On January 11, 2016, China National Chemical Corporation purchased Germany’s Kmuss Maffia Group with €925 million and introduced the acquirer’s technology and management team for restructuring the present chemical equipment area of China, which is expected to greatly raise the company’s equipment manufacturing level.

It is a long way to go for internationalized operation
    Chinese rubber machine enterprises are nothing more than “domestic factories” rather than international companies. An international company shall have the following characteristics.
They shall have the world’s leading or cutting-edge technologies, brands of world influence, local service system in line with global clients and client structure all over the world and capable of resource allocation in development, production and sale across the world. Despite their achievements in international operation, Chinese rubber machine businesses still have a long way to go to in achieving internationalization in the real sense. Given this, these businesses shall focus on the following aspects.    

Firstly, focus on technical innovation and lead market consumption
    When look back on the development of China’s rubber machine area, it is not hard to notice that follower strategy has been adopted. Till this day, mainstream equipment still aims at approaching or reaching the technical level of advanced countries. But study and simulation are not the end. It is necessary for continuous innovation, and leading technologies and products will enable Chinese rubber machine businesses to realize internationalization in the real sense.  

    Secondly, raise quality level to lay a foundation for brand. If the development in the past ten years is based on the principle of extensive and instant benefit, raising product quality and putting more effort in publicizing brand in China’s present political and economic environment is an issue that we must face and address.    

    Thirdly, raise management level and respond to customer need quickly
What international high-end clients need are not only excellent products, conforming to the technical agreement, timely delivery, but all the more wonderful experience, smooth communication and timely response. To meet these requirements, businesses need to keep optimization during all aspects of management and raise operation efficiency by means of advanced management concept and tool.

    Fourthly, set up advanced marketing system and global service system
    Marketing involves both daily sales and other essential aspects such as marketing system establishment, brand promotion and market management. It is of particular importance for the sales personnel who have been taking the lead in opening up international markets to know about customer needs, such as all-round knowledge and study of the customer’s technical characteristics, focus of products, trade practice and so on, based on which, to guide personnel to conduct related arrangement for meeting customer needs. Besides, sales person shall be good at taping and grasping business opportunities to make sure market information will be promptly shared in the company.  

    It is most vital for establishing service system. First of all, strive to realize service localization. Secondly, bring about customized service. On the whole, it is necessary to offer customers service guarantee and provide them with the most appropriate service when needed.    

    Fifthly, integrate global resources through cooperation, purchase, blending, and absorption. Through the development and accumulation in the international rubber machine realm over the past dozens of years, it is most important to “take what others have for our use”, which will realize the great-leap-forward development quickly. Engaging in a global business is to employ global resources. Through cooperation, joint venture, merger and other means, integrate global resources including technology, product, brand influence, sales network and talent, which is aimed at enhancing the core competitiveness of enterprises. To realize this, it is necessary to work out a long-term plan and to have a professional management team.