China is an important market for KraussMaffei Group — and with state-owned China National Chemical Corp. poised to take ownership of the Munich, Germany-based company, it will soon be an important corporate center, too.
The global plastics machinery company makes KraussMaffei and Netstal injection presses and Berstorff extrusion technology and polyurethane machinery. KraussMaffei Group China CEO Christian Blatt recently sat down with Plastics News to discuss his company's future in China.
Q: How was 2015 for KraussMaffei Group in China?
Blatt: 2015 was a good one. There was significant growth. It's not over all segments, but in general for the organization the growth from 2015 will continue in 2016. Definitely automotive and construction had double-digit growth.
There are areas that are slowing down, but since we are diversified over a wide area of markets and customers, so as a complete organization we can compensate. For the last two years, the beverage sector was slowing down, but we're seeing it pick up again. A similar development could be in the electronics field, where we saw some volatility but there is some growth again.
We benefit from the trend in China that product quality is increasing. Specifically in automotive, it goes away from cheap products to more sustainable, individualized and quality products. So, in general, the development of the market is going in our direction. It goes to more automation. We perceive, maybe not in every market, but in general for the Chinese market, a shift into areas where we are strong.
Q: How will the upcoming purchase by China National Chemical Corp. affect KM's China operations?
Blatt: The closing will happen in the next one or two months and at the moment there is no operational impact. For sure there will be, because ChemChina is a huge powerful company and will provide access specifically in China and Asia to additional customers and markets. So the acquisition will help the organization here to grow at even a faster speed that in the past.
ChemChina will integrate some of its assets into the KraussMaffei Group organization and will enlarge the activities and portfolio of what we are doing in China. Details are being worked out at the moment, so what it will finally look like is under discussion. The sheer size of the organization will become bigger.
In our existing organization we have a very ambitious growth plan. We have been introducing new products over the last years and we will continue to introduce new products over the next years and we will follow the growth plan independent of what is happening with the integration of additional companies.
Q: Does the slowing China economy affect you?
Blatt: Our growth rate goal remains double-digit.
When you read the general media about China you can get the impression that the door to the market is getting smaller, which maybe is correct. The market itself is getting bigger; the opening of the door is getting smaller. I think the requirement to be successful is to specialize and to become better than the competition. So I think for the companies who are doing the right things, they can still get a pretty big part of the cake. I think this will affect the mainstream companies who are not able to differentiate themselves. They will have a tough time. The right thing to do is differentiate and service, provide value, focus on customer needs and stick to the promise.
Q: How is China different from KraussMaffei's other markets?
Blatt: There is a stronger segmentation of the market here in China. There are competitors who are serving a segment that doesn't exist anymore in most parts of the world. The customers served in this segment have budget-driven needs that customers in other parts of the world don't. Here in China a lot of customers are applying a total cost of ownership approach, but there is also the market that is mainly budget driven.
I think this will be a big advantage for [our new owner]. We have an investor who on the finance side is extremely strong and who can support our sales efforts with regard to financing. So if we are facing customers who are strongly budget driven, then with this new investment by ChemChina we'll be able to support them on the financing side as well.
We are a German company operating in China so basically we have to have a good mix. It is absolutely important that the customers get the experience of working together with German quality, with German brand promise, but also with Chinese people. For me, the most important quality in interaction within the organization is trust. Within the organization here in China, we have a high focus on harmony that is internal and external towards our customers. We give them the experience that they are dealing with a German company.
The main challenge for a Western company here in China is the transfer of the know-how. The German and our Swiss colleagues who are transferring the know-how, and the Chinese colleagues who are receiving the know-how — they have to work in a way that is effective. They work in different cultures in different languages. The buildup of trust takes time. It is built in steps. I recently heard an analogy that it is like a chain. You build one link after another. If you break it, the whole chain is broken and you have to build it up again. But if you do it properly, then it grows.
Q: Tell me about KraussMaffei's strategy in China.
Blatt: We have built up a lot of stability. The know-how transfer from Germany and Switzerland to the organization is a process that has stabilized, and is showing really good success rates. We see that from the reactions from our customers and the quality of our locally made products. So in this respect the organization has made good progress.
It's very important that we are providing customers with an interface where they can communicate in their own language. So the support we are getting from headquarters is temporary support and the Chinese colleagues who are interfacing with customers are the ones who take up the know-how and they are the ones with the responsibility. I think this was a change our organization went through in the last years. Our Chinese colleagues have been more empowered to interact with customers. They received support from German and Swiss colleagues. But the German and Swiss colleagues were here to teach, and the Chinese colleagues are developing and take the responsibility.
We are mostly No. 1, but minimum No. 2, in the segments we're operating in. I think it will continue in this direction. The markets that are served are focused on the really high-end requirements and to provide these customers with the best products and the best service.
