Saurer: the China Challenge

Topics: Textile manufacturing, Textile industry, Marketing Pages: 5 (1620 words) Published: May 5, 2011

The text talks about the enterprise Saurer, its history and strategy to face to the challenge of Asians competitors and at same time take advantage of the opportunities in that market.

In December 2003, the management team of Saurer Twisting Systems was having difficulties with the choice of the functioning of their business. It appears a really strong competitor: Asia (specially China) who starts to hoard a big part of the market. There's a recession in the market and Volkmann (one of the brands of Saurer) realized that the sales of machines for making staple yarn for apparel are declining. Volkmann achieve to take the market segment of European and Japaneses competitors but now China competitors (specially Rifa who is the major competitor) have invested in research and development upgrading their process and lowering their costs.

So now, Saurer has to face a big challenge: to produce a machine with a lower cost and good quality targeted at Asians consumers. This machine would have a lower margin in comparison with the others and for its lower costs could replace the existing high end machines. The management team would have to take some really hard decisions about: positioning, pricing, naming the product and sales strategy. And there's still the question about how the Chinese competitors would react with the launch of the new product

Saurer was founded in 1853 by Franz Saurer, at the beginning it was a small foundry and engineering workshop, 15 years later it begins building embroidery machines and starts diversification with a variety of industries. Saurer acquires some enterprises like: Hamel, Volkmann, Allma, Schlafhorst, Melco and Zinser. Most of the acquisitions were in textile machinery and based in Germany. With the acquisition of Barmag and Neumag in 1999, Saurer leads the production of machines for producing and finishing chemical fibers.

The enterprise creates Saurer Textile Solutions (STS), comprised by nine textile strategic business units. Its mission was “to be the undebated market leader for full service solutions in textile engineering and set continuously new benchmarks for efficient production.” In 2002, began the project Tempus, that pretends to change the processes and the corporate culture with the objective of satisfy more effectively the client needs and at the same time make lower the costs. In 2003, complete the program to outsource parts manufacturing (In Czech Republic and China), which allows a better capacity of adaptation at the needs of the market. But, even with all the achievements gotten by Saurer with these proyects, the CEO of the enterprise, Henry Fisher considers that there's still a lot of things that the enterprise must do in order to become a customer focused and responsive to customer needs company and he believed there's still opportunities to be a better company.

Now the author proceed to describe the textile industry (that has 4 major value-added steps: fiber, yarns, fabrics and apparel and made up textile articles) and textile machinery industry (where STS is the largest manufacturer of textile machinery). He talks about the growing of the industry (by 2% to 3% per year) and the most important productors (Asia, specially China).

Next, the author recall the strategic importance of China in the industry, that importance is principally because: China is a big source of textile raw materials.
China has a large domestic market
China has a growing position in textile exports.
China's labors costs are really low
Chinese infrastructure, labor market and productivity are better than in other countries. Additionally, in 2003 more than 70% of textile manufacturing investments were being made in Asia with about a half of those in China. For these reasons, success in China becomes a really important issue for Saurer, the enterprise's sales depends on Asian markets, specially China.

The predecessor companies of...
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