China market insight: Industrial products

China is the world’s second largest economy. Despite the deceleration in its growth, it remains a highly attractive market as the macro drivers supporting domestic consumption and industrial usage remain sound

AMR’s China team has been busy over the past year in China, mostly supporting market entry. This paper sets out some selected insights from our work.

Selected insights

Growth: Most China markets we have assessed have twice the forecast capex compared to mature markets. For example, the expected 2015-18 CAGR in water infrastructure is 13% in China vs. 9% in the US and 4% in the EU; growth in robotics is estimated at 15% per annum in China vs. 6–8% elsewhere.

Scale: In some markets China holds the lion’s share of the global market. For example, China currently accounts for 40% of the global bulk handling size reduction equipment market.

Local presence: It is essential to have extensive on the-ground presence to be successful in China. Given the high cost and risk for a new entrant, breaking in through a local partnership is an obvious route.

IP protection: Western companies can improve IP protection through astute partner selection. For example, a software-led company serving the automotive market chose a sales and service business as its partner as opposed to one with the capability and aspiration of mimicking its offering. This was a hard-learnt lesson from the Korean market. Others support their partners with their own staff to reduce the risk of losing their IP.

Margin: In many markets there is a premium category where western standards are welcomed and buyers do not expect to pay Chinese prices. Nonetheless, much of the market is price driven and the need for partnership can reduce margins.

Environment change: Environmental awareness in China is increasing and in some instances this has led to greater opportunities for western players in industries such as water treatment.

Overview of selected China projects in the last 12 months:

Market Objective Outcome
Vacuum technology Determine the scale of the opportunity for western market specification products in a seemingly commoditised market for a player that was a late entrant Provided insight on growth opportunities for high specification, high margin products, including route to market options and competitor segmentation
Screening equipment Assessment of the attractiveness of a potential acquisition target by determining the size and growth outlook of the market Provided primary insight into the purchasing behaviour of screening equipment users, coupled with confirmation of the scale of the opportunity and insight to the underlying market drivers
Flow control systems Develop a five-year growth strategy for a multinational manufacturer Identified distribution network opportunity based on in-depth analysis of the value chain dynamics and appropriate routes to market by exploring market size, competitive offering, and drivers for long-term growth
Automotive testing product Market attractiveness and growth review for a corporate buyer Evaluated position and capabilities in China. Assessed major industry developments and provided insight to procurement behavior
Building products Market entry for world-leading building products tradeshow organiser Identified opportunity to enter what was thought to be a crowded market in China by targeting an underserved region in which there will be major investment
Industrial crushing equipment Market entry potential of the Chinese market, along with other geographic regions, for a leading manufacturer of industrial crushing equipment AMR recommended a tailored go-to-market strategy and supporting actions which would allow access to target markets

“AMR provided us a clear understanding of the size reduction industry within the Chinese market in a quick turnaround. Their excellent methodology assisted in the development of our go-to-market strategy and provided direction on what our critical strategic initiatives should be. We have had a great experience with AMR and look forward to future projects with them