Globalisation and the rubber roller industry
The good news first: globalisation does not and will not affect the rubber roller business to any great extent. There will be indirect implications but they will not be severe and will not change the character of the business.
Globalisation is an extremely complicated issue. Originally used to describe economic changes in worldwide production and trade, the word globalisation now expresses all kinds of political, social, financial, and economic alterations mainly from the point of view of the losers.
Surely it is not a very polite gesture to forcibly open protected markets as happened in La Paz/Bolivia with water supply or in India with power supply. Any opening of a market to a superior competitor is not only a political or an economic act, but has also a moral aspect – notably when the new competitors do not deal according to economic rules but take political and strategic decisions that can turn purely economic behaviour upside down.
Despite this ugly aspect of globalisation there is a reason for big changes in the worldwide economy and whenever economic changes create social ones there will be this kind of alteration. The basic cause for all massive shifts in the world economy since 1980 is the growth of the population in Asia, Africa and South America, followed by political, social, and economic revolutions or accelerated evolution.
During the last 25 years and also for the next 50 years the economic importance of Asia has and will steadily grow. At the same time the importance of Europe and also North America must decline. Apart from Japanese money, today it is still American and European money that makes the world go round, but things are changing already and within the next two decades it will be mainly Asian money that will dominate the world economy.
When things like these happen, big changes in demand and supply occur and affect the existing production and distribution systems. Until the middle of the last century the production of industrial goods mainly took place in Europe and the USA and whoever needed these things had to import the products – shaped according to Western fashion, priced according to Western levels and provided according to Western terms of delivery.
In consequence Western products spread all over the world but these were no genuine world products but mostly an expression of Western civilisation – like jeans, Coke and many others.
In the 1960s for the first time an Asian country joined the exclusive club of industrialised nations: Japan – and created a tremendous amount of trouble in Europe and North America.
Though often blamed for their behaviour the Japanese only copied their industrialised examples by producing at home and exporting cheap goods all over the world. It is remarkably typical, that the Japanese did not invent new products, not even new styles, but only manufactured existing goods extremely cheaply. Meanwhile Japan is the second richest nation on earth – but Japan was only the prelude to what will happen next.
Countries like Thailand, Malaysia, Indonesia, Vietnam, South Korea, China and India are developing at a velocity that is simply incredible. Together these countries represent nearly three billion people, 50 percent of the world’s population; in comparison the EU comprises 400 million people, 13 % of the figure above! The centre of world wide industrial production will shift to Asia – simply to cover the demand of the indigenous population. The direction of world trade will change: The Europeans (and Americans) will import most of their industrial goods and no more export them.
But – and this is a crucial fact – the goods in discussion must be world wide valid items, in other terms ‘global’ products. The word ‘global’ in this sense means that the goods in question do not represent a regional style or the taste of a society but are taken everywhere for granted. This view on a product is possible when it covers exclusively basic needs, when there is no identification potential for the buyer and when the availability is high, i.e. when the products are kind of omnipresent.
Branding these goods is rather useless, the location of manufacturing is completely unimportant, the business is depending mostly on the quality of the distribution systems, and subsequently we talk about rather cheap goods compared to the income of the consumer. Cheap products in this sense are nails, screws, and pens but also knives, toys, TV-sets, DVD-players, or even small cars.
Global products are manufactured for an anonymous market, they are never tailor-made and on top there is never a customer relation between producer and consumer. The importance of the retailers, sometimes even of their house brands, grows to a formerly unknown extent. Since there is no identification potential in these goods competition is reduced to price and the subsequent price wars normally will lead to an oligopolistic or even monopolistic market shape with unimaginably low prices.
The rubber roller market does not fit at all to this description of global markets. The big recovery market and the smaller original equipment market as well can never become anonymous. The close contact needed between customer and supplier/manufacturer prevents the appearance of a specific distribution layer between demand and supply. The unique shape of nearly every rubber roller is the main obstacle for becoming a ubiquitous standard product.
The missing distribution systems and the mostly short delivery times required compel the rubber roller manufacturers to work in the neighbourhood of their customers, at least within a two-day’s-travel-distance. In such a situation price cannot be the driving factor – and obviously is not. In the rubber roller business price also in the future will be the fair expression both of the value of the product from the customer’s perspective and the real subsistence assuring costs of the manufacturer.
Despite this theoretically ideal situation big “players” do exist in the rubber roller world and this fact could nurse the fear of a development towards standardisation and globalisation. We can dispel this fear. First, the biggest rubber roller producer in the world covers a market share of less than 20%. Its importance is concentrated on the graphic roller business (in Europe), which in fact shows signs of standardisation. But we can also predict that in the foreseeable future this standardisation will not increase and the predominant position of Böttcher can hardly grow.
It is also remarkable that this company’s position in the non-graphic roller business is comparably weak: the same size as or even smaller than the next 3 or 4 competitors. All the big players grow very slowly in the natural way, i.e. by extending their existing business; an exemption to this rule is the flexosleeve business, which expands at a rate of more than 15% per year and where Böttcher at present is concentrating its efforts to gain market shares. Generally speaking, the rubber roller market structure is stable and we see little impact on any changes to this fact.
Nevertheless there are two trends changing the shape of this industry to be watched carefully:
- Concentration on the suppliers’ side
Many companies who want to obtain a strong position in a market place and cannot achieve it by natural growth try to acquire competitors or merge with them. This strategy has been pursued intensively for about the last 30 years mainly in non-growing markets and during the last 5 years we note that it has reached the rubber roller market, too. Because of the existence of hundreds of small manufacturers on all continents it is rather easy to find competitors who are willing or forced to sell their company or to join for bigger shelter.
But due to the characteristics of rubber rollers and their usage we can predict that this concentration process is difficult to be kept alive when companies have reached a certain size: organisational issues, overhead costs, logistic costs and the risk to damage the customer relationship are serious obstacles to change this business from a local to an anonymous distant business.
So we can expect that after a period of “normal” mergers and acquisitions in the rubber roller world we will come to a rather stable market structure again and that this new structure does only slightly differ from the actual shape of this industry. So most of the existing small rubber roller producing companies will not be crucially affected.
More dangerous is the trend to specialisation, which is an essential part of all global changes. Specialisation comprises the concentration on a certain type of product, branches of industry, material and thus the developing of worthy skills, experience and deep knowledge of customer needs.
Specialisation opens the door towards supra-local business, growth; increase of productivity and to a very close customer relationship as well. Competitors like Stowe-Woodward, Miller Graphics, Böttcher, or Schäfer are typical examples of the increase of specialisation and we have to face the fact that others like MITEX, Hannecard, RUMA, and Hilzinger & Thum will follow. Their approach is no more the (re-) covering of rollers due to the wishes of the customers but the competence to give technical support in a field where the customers are not at all skilled though there are many options to improve production processes or products.
The relationship between supplier and customer changes to a partnership where discussions and problem solving takes place in an environment of trust, friendliness and mutual respect. As soon as this way of cooperation is available the former importance of distance, logistic service, or delivery terms fades away. Specialised partners must also be present on the continent where their customers are located, but no more just around the corner.
This specialisation takes business away from the typical small manufacturer around the corner – and he has nearly no chance for compensation. But when we look at the kind of rubber rollers that are apt to this enhanced treatment and service we note that it is mainly the original equipment business. The recovery business (of non-graphic rollers) will not be troubled by this trend (exception: steel industry); it remains the domain of the small suppliers.
Changes will take place also in the very traditional rubber roller market all over the world. They are not directly caused by the big shifts, set in place by globalisation. They are part of the spin-offs or only the co-expression of some economic rules that underlie globalisation. In the rubber roller world all these impacts meet an industry that is used to living in a well-structured world with very specific habits and practices. Fortunately these latter are very strong and will inhibit globalisation to turn the business upside down. There will be changes in the OEM-business and maybe also somewhere in the recovery work but we are convinced that all this will not influence the basic shape of this market. Twenty years from now we still will find small rubber roller companies next door and this is a very reassuring fact.
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