NIAGARA-ON-THE-LAKE, ONTARIO — Mergers and joint ventures are increasingly important to U.S. and Canadian companies in the new North American market, according to speakers at the Plastics Summit — Borders without Barriers.
Countries are losing their identities as markets while regional markets evolve, said Al Litvak, an economics professor and consultant at Toronto's York University. This forces companies to join with others to be globally competitive, he said at the April 8 meeting held in Niagara-on-the-Lake.
Competition is fierce because plastics is a very fragmented industry, Litvak explained. It contains a large number of small and medium-size firms.
Even though mergers have been prevalent, Litvak predicts the number of plastics companies will grow or stay the same. Barriers to enter and exit the business are so low that the industry is dynamic.
Unlike the steel industry, where a few players dominate, there are so many plastics firms that no one can command the market. The best they can do is influence it, according to Litvak.
Litvak said the plastics industry has two major classes — firms trapped at the low end of profitability and technology, and high-end companies whose technology and resources allow them to achieve excellence. Obtaining knowledge in the form of trained workers and technology will continue to be the key difference.
StackTeck Systems Inc. is a mold maker that gained by combining the forces of two firms, said Chief Executive Officer David Brown. Mold making is a fragmented industry with little cross-pollination of information. Most mold makers approach their work as artisans and guard their secrets.
StackTeck was created last fall by the merger of Tradesco Mold Ltd. of Toronto and Fairway Molds Inc. of Los Angeles. Tradesco specialized in stack molds and high-cavitation hot-runner molds for items such as thin-wall containers. Fairway focused on multicavity, high-precision molds for consumer products.
The merger allows the two operations to enter new markets more readily through a corporate approach to planning and financing rather than an artisan's approach, Brown explained to attendees.
Brown said StackTeck plans to acquire firms to expand its injection mold range and to get into other tooling and geographic markets. It is negotiating with a Latin American firm and could announce a deal this summer, he said in a post-talk interview.