Global challenges and winning strategies for the mechanical engineering industry

• Top executive interviews with more than 50 machine building companies and operators worldwide
• Mechanical engineering industry is expected to fully recover until 2012
• Three global mega-trends: Shift to Asia, game change in the mid-end and go "green"
• Key challenge for Chinese OEMs is to master the technological upgrade process
• Western European OEMs have to improve their cost position

Having been hit severely by the global recession in 2009, the mechanical engineering industry is expected to fully recover until 2012 on a global level. On top experts expect that over the next decade, there will be a continued structural shift of machinery demand and production from developed countries to emerging countries, mainly into China. OEMs have to create new strategies to face these global challenges. These are the main results of a study conducted by Roland Berger Strategy Consultants titled "Production Systems 2020 – Global challenges and winning strategies for the mechanical engineering industry".

"The mechanical engineering industry is facing global challenges", says the study's author and partner with Roland Berger Strategy Consultants, Martin Eisenhut. Having been hit severely by the global recession in 2009, the mechanical engineering industry is expected to fully recover until 2012 on a global level. The mid-term growth is expected at a yearly average of 8 percent until 2015. But for individual industry segments and regions, the recovery's timeframe will be different, e.g. in Germany the 2008 level will be reached not before 2013.

Three global mega-trends

According to the study three global mega trends are dominating the future development of the industry. First there will be a continued shift to Asia. China has become the number 1 machine building country worldwide, having passed the US in 2010. Germany for example will be loosing its market-leading position to China in most segments of the machine building industry. Also the performance and quality requirements of Chinese OEMs are getting closer to European levels. While European operators plan to maintain their technological levels, Chinese operators are planning to increase them significantly.

Chinese OEMs will focus on easy-accessible markets

Secondly experts expect a game change in the mid-end: The mid-end performance segment is growing the fastest, becoming a full global battlefield. "Therefore a strong competition between European and Chinese OEMs in most of the accessible growth regions is likely," says Roland Berger Partner Ralph Lässig. "Chinese OEMs will focus mainly on easily-accessible markets in South-East Asia, Middle East and Africa."
Going green is the third global mega trend in the industry. "There will be an increasing importance of energy efficiency in Europe and Japan driven by cost savings, regulations and the ,green'" image," states Eisenhut. Substantial energy savings can be achieved at selected applications. "Many operators consider energy efficiency as important purchasing criteria, but not all are willing to pay a price premium." But: Despite this mega-trend energy efficiency and other "green" concepts are remaining a marketing issue for many applications in the near future.

Special strategies for special markets necessary

"Because of all these challenges European OEMs need to develop a tailor-made strategy, depending on the individual product/market position", Lässig says. On top technology-leading high-end OEMs should carefully enhance business into mid-end to participate in this fast growing segment.
Lässig: "European mid-end OEMs do already have a global footprint, but a further transfer of R&D into emerging markets is still required. Whereas Chinese OEMs tackle the large potential in their home market, mainly by improving their technological offerings. To manage these global challenges it is important for all OEMs to rethink their business models now.