Global Machine Builder Markets: Handle With Care

By Jim Montague, Executive Editor

Don't forget your toothbrush. That's the simplest travel advice ever. But the basic preparation it implies is what machine builders and anyone else must do to explore new places and break into new markets.

Of course, the world is conceptually smaller and flatter now. However, when you get off an airplane, so to speak, and end up in the center of a city where no one speaks your language, you'd better be prepared—as well as patient, tolerant, generous, willing to learn and friendly. The same goes for doing business there, but sometimes it takes a favorable environment and a friendly push to make it happen.

For example, packaging machine builder Z Automation (www.zautomation.com) in Arlington Heights, Ill., considered establishing a presence in Europe for a long time, but held back until just last December, when it opened its new sales office in Frankfurt, Germany. Though it's focused on sales now, the office is expected to start offering support and service soon.

"In the past, we were pushed by multinational end users that we supply equipment to in the U.S. to help them in other parts of the world. We did what we could, but we resisted opening an international office until the economic downturn in 2009 made the exchange rate between the dollar and the euro better for us to do it," says Randy Spahr, Z Automation's executive vice president. "The European packaging market began to change at the end of 2008 when the overall business environment started to slide, and many big OEMs cut staff and business activity. The downturn and relatively weaker dollar made it hard for them to sell in the U.S., but made it easier for us to begin to sell there. So we decided to move, open our sales office, and exhibit at Interpak in Düsseldorf this past May."

At the same time Z Automation set up its sales office, Spahr found and now partners with two local machine builders in Germany. One makes pouch-forming machines and the other makes labelers. In exchange, he adds, Z Automation plans to help them break into the North American market. "We'd been talking with them for years about moving into Europe, and they said to let us know when we were ready," Spahr explains. "Now they're helping us do service, support and production-line integration. They build primary packaging equipment—in this case pouching—and we do the secondary packaging, mainly cartoning and case packing."

In fact, the head of Z Automation's German sales office secured its first large order in December, and with its partners is now installing and integrating two cartoning and case-packing lines for parts manufactured by a large automotive accessories supplier (Figure 1). This initial installation is especially important, Spahr adds, because it gives Z Automation a showcase and references that demonstrate what it can do for other potential clients in its new market.

Packing Pouches in Germany

Figure 1: Z Automation's new sales office in Germany helped sell and integrate its CH9 251 Intermittent Horizontal Cartoner (above) and its CP15 251 case packer (right) for packing parts produced by a local automotive accessories manufacturer.
Z Automation

"Our German sales guy has a lot of experience in this market, and he was able to bring in an automotive end user, and convince them we would be a good supplier. He works directly for us now, but we also knew him previously," Spahr adds. "Even now, this is still a relationship business, and developing partners and customer contacts takes time, cooperation and work."

To further aid its U.S.-based end users who need even easier access to its machines in Europe, Z Automation's next logical step will be to open a manufacturing facility in Eastern Europe, and probably get it up and running by the second half of 2012, Spahr reports. "We're going to start making individual parts, which are less costly to make in Europe than shipping them from the U.S. We'll see how the market evolves, and then start to build whole machines there."

Good Guidance

Because local knowledge is the key to entering and succeeding in a new market, a local sales representative and technical support is the starting point for doing business there, according to Brian Deal, packaging market segment manager for Schneider Electric. "A local sales rep and tech support can cost more initially, but they're what allow machine builders to reap long-term benefits in new markets," he says. "In fact, a couple of machine builders I know were at Interpak for the first time, and on the first day they were approached by other builders about filling in holes in each other's product lines, so they could offer end users a more complete solution together."

Besides securing local help, machine builders also must be flexible—even with their machine designs—when seeking to serve users in new markets. Mike Wagner, Rockwell Automation's global OEM business manager for packaging, reports that he just finished working with a German packaging machine builder that had to do more redesign than it expected before it could set up shop and provide machines to users near Shanghai, China. "The builder originally wanted to simply market the bagging machine it sells in Germany, but its bag forming and cutting process had more automation and was more costly than many potential Chinese users wanted," Wagner says. "They often use a manual foot switch, which is slower but they feel gives them better accuracy. As a result, the German builder had to go through three redesigns to reduce the bagger's automation and price, and is now selling machines and gaining customers."

Another builder of vertical form, fill and sealing (VFFS) machines also redesigned its equipment with less automation for use in China, and then assumed that users in India would want the same less costly, more manually controlled and slightly slower devices, Wagner notes. "However, they were surprised yet again because users in India wanted full, European-style automation and were OK with the higher price," he says. "So you can never assume that you can take an existing machine design, and just sell it somewhere else. This is why it's so important to find and get together with people you can trust in a new market."