Chapter 24 Comparison of Chinese and German Hidden Champions

When I wanted to find two companies as representatives to compare the differences between Chinese and German invisible champions, these two names immediately popped up in my mind - Sany Heavy Industry and Putzmeister.If we look at the performance of China's concrete conveying equipment market in the past ten years, the ebb and flow of these two companies just reflects the growth rules of many "import substitution" Chinese invisible champion companies, as well as the certain status of world champion companies in the Chinese market. A degree of "acclimatization".On the other hand, if we look at the history, goals, and strategies of the entire enterprise, these two cases typically reflect the differences in values ​​and development ideas of some outstanding small and medium-sized enterprises in China and Germany.

In 1958, 25-year-old Karl Schlecht founded a company called KS-Maschinenbau in Aichtal, a suburb of Stuttgart in southern Germany. Schlecht himself is a mechanical engineer.In the second year of the company's establishment, the world's first mortar machine was born along with his master's thesis. In 1963, the company changed its current name—Putzmeister, which translates to “Putzmeister” in Chinese.The name means "Mortar Expert" in German.Since the first day of its establishment, the company's business has never left the field of mortar and concrete machinery.Putzmeister's "Elephant" brand concrete pumps have been selling well all over the world since the early 1970s, and the company has gradually become a leader in the world's concrete conveying equipment market.Whether it is market share, market geographical coverage, technological advancement, and richness of product lines, it is in the forefront of the industry.As a result, Putzmeister became a member of Hermann Simon's list of hidden champion companies in Germany.

Because of its focus on market segments, Putzmeister has maintained a steady but not rapid growth rate for about half a century.Compared with comprehensive construction machinery giants such as Caterpillar, Putzmeister is still only a medium-sized enterprise. The consolidated revenues of the PM Group in 2004 were US$755 million.The total number of employees at that time was 2,357. In 1998, the 40th anniversary of the company's establishment, the founder Mr. Schlecht officially announced his withdrawal from the company's daily management and became the chairman of the supervisory board.And, Schlecht donated his shares to a public benefit foundation that bears his name.Now, Putzmeister's shareholding structure is: About 99% of the shares belong to the foundation of Schlecht and his family, and less than 1% of the shares belong to Mrs. Schlecht.

Compared with Putzmeister, Sany Heavy Industry Group, the leader in China's concrete pump market, is much younger.The company was established around 1994 in Changsha, Hunan.Its parent company, Sany Group, originally focused on artificial diamond and other hard materials.The founders of the company, Liang Wengen, Tang Xiuguo, Xiang Wenbo and others saw the huge potential of China's construction machinery market, and chose concrete delivery pumps as the first product to enter the market.The reason was that at that time 80% of Chinese construction companies were still using relatively backward tower cranes to transport concrete, and due to the existence of technical barriers to advanced concrete pumps, domestic manufacturers had almost no production capacity, and the entire market was basically dominated by Putzmeister and other high-priced Imported brands dominate the world.Such a market structure leaves a lot of room for local manufacturers who may achieve technological breakthroughs.

The subsequent rapid development of Sany Heavy Industry confirmed the vision of decision makers.In less than five years, a group of local manufacturers represented by it and Zoomlion quickly replaced most of the imported brands and "recaptured" 90% of China's concrete machinery market share.The author mentioned these two companies in the opening remarks of the "Invisible Champion" column of "Winning Weekly" in 2003. In July 2003, Sany was successfully listed on the Shanghai Stock Exchange, becoming a public company and the first private listed company in China's construction machinery industry.Liang Wengen, chairman of the company, indirectly holds 42.73% of the shares of Sany Heavy Industry through the controlling shareholder Sany Group, and is the actual controller of the company.

In 2004, Sany Heavy Industry's main business income reached 2.656 billion yuan (about 320 million US dollars), of which 82.5% of the income was contributed by concrete machinery products.At present, the company has about 5,000 employees. Putzmeister products entered the Chinese market through Hong Kong agents as early as the 1970s.For quite a long period of time before the mid-1990s, imported products represented by Putzmeister and another German brand Schwinn occupied the absolute right to speak in the Chinese concrete machinery market.However, due to the high price, the demand for concrete pumps was relatively small at that time.

The cautious Germans actually set up a subsidiary in China a bit late, at the end of 1995.Immediately, Putzmeister established its third global production plant in Songjiang, Shanghai, which showed its importance to the rapidly growing Chinese market.Ironically, however, it was from this time that the power of local Chinese manufacturers began to expand at a faster rate.Therefore, although Putzmeister's sales in China have increased in the following years, its market share has been facing a downward trend.By 2004 and 2005, Putzmeister's share in China's concrete machinery market had retreated to about 6% to 8%1, and it was mainly concentrated in high-end pump truck products.

In fact, this phenomenon is not isolated.Caterpillar, the "big champion" of the global construction machinery industry, behaves very similarly in the Chinese market.Although the income of Caterpillar's investment business in China has continued to grow for more than 20 years, the market share is not high. In 2002, Caterpillar's market share in China was less than 6%, which was extremely disproportionate to Caterpillar's global market share of 31%.The following table roughly reflects the reasons for this contrast: on the one hand, a large number of engineering companies in the Chinese market are still price-sensitive users, and the high prices of international companies make it difficult for them to bear; on the other hand, many international companies in the Chinese market I am afraid that the marketing ability still needs to be improved.

According to Putzmeister's annual report in 2004, the only region where the company experienced negative sales growth in the global market was the Far East region dominated by China.Sales fell by about 1/3 from the previous year.The explanation for this in the annual report is the "cooling off" policy of the Chinese central government on infrastructure construction.According to some securities analysts, the capacity of the domestic concrete machinery market did shrink, but only by about 5%.This shows that high-end foreign brands have suffered particularly heavy blows in the face of host country's contractionary economic policies.

In fact, although the growth rate of Sany Heavy Industry's concrete machinery products slowed down in the same year, it benefited relatively from the perspective of market position due to the adoption of a very active marketing policy.Its market share in trailer pumps and pump trucks rose from 20% and 40% in 2003 to 23% and 50% in 2004, respectively. In the global market, the relative market positions of the two companies are completely reversed. Putzmeister's global market share has been as high as about 40% for a long time, and more than 90% of its sales revenue comes from overseas. In 2004, the European (except Germany) and North American markets contributed the most to the performance, accounting for about 3/4 of the total sales.The Far East, Near East and "Other" (Africa, etc.) markets contributed relatively little.To a certain extent, this shows that the high-quality but high-priced "Made in Germany" is relatively weak in the "emerging markets" where customers are more sensitive to prices.

Sany began its internationalization attempt after about 3 years in the company.The first step is to set up a subsidiary in Hong Kong to carry out leasing business. In early 2000, the International Department was formally established to gradually promote exports.Although the annual export volume has doubled in recent years, the absolute scale is still small. The export value in 2004 was 14 million US dollars. As of December 2005, it reached 23 million US dollars.Even so, it still accounts for less than 10% of its total company revenue.The company's total market share in the global concrete pumping machinery market is also about 10%. Corresponding to Putzmeister, Sany's main overseas target markets are concentrated in developing regions such as India, Africa, and Eastern Europe. In 2005, Sany Heavy Industry's largest overseas order - 74 sets of 80C trailer pumps worth 5 million US dollars - came from Angola, a West African country.The country is also the most enthusiastic export market for all Chinese construction machinery manufacturers this year. It didn't take Putzmeister and Sany Heavy Industry a long time to achieve champion status in their respective home markets, but the paths they followed were very different. For more than 40 years, Putzmeister has adhered to a very typical hidden champion strategy.The first feature is focus, or differentiation based on focus.As mentioned earlier, Putzmeister's product line has never been involved in businesses other than mortar and concrete machinery.And in this field, it has maintained the world's most outstanding technology and product quality.Closed hydraulic system, S pipe distribution valve and other technologies are all pioneered by it. A "Investigation Report on Foreign Brands in China's Construction Machinery Market" initiated by the magazine "Construction Machinery and Maintenance" at the end of 2004 showed that "Putzmeister's leading position in the field of concrete pumping is still unshakable. Almost all of them chose Putzmeister." Even in the corporate training materials of Sany, Zoomlion and other top Chinese counterparts, Putzmeister is an unavoidable name. The second feature is globalization.As early as 1967, Putzmeister had already achieved a 40% market share in its home market, the German market, roughly equivalent to the current level of Sany Heavy Industry in the Chinese market.At this time, if an enterprise wants to continue to maintain relatively rapid growth, there are only two options—either enter a new field, or expand overseas.For companies determined to focus on niche markets, overseas is the only direction.Although I cannot see when the first overseas branch was established in the company's chronicle, at least it can be judged that in the early 1970s, Putzmeister already had four overseas branches in France, the United Kingdom, Spain, and Brazil. Subsidiary.And the dependence of the entire enterprise on overseas markets is also obviously increasing year by year.Today, markets outside Germany account for 90 percent of Putzmeister's total sales, up from 60 percent ten years ago. Compared with Putzmeister, Sany Heavy Industry faced completely different opportunities and challenges when it entered the field of concrete machinery, and the advantages relied on by the company were also different.However, when the share of China's domestic market rises to a certain level, Sany also needs to find new room for growth.Internationalization or Diversification?this is a problem.Different from Putzmeister, Trinity chose to diversify at this watershed. Around 1999, Sany's concrete trailer pumps had already accounted for about 25% of the Chinese market, basically being the champion in the domestic market.At this time, in addition to further developing high-end products - concrete pump trucks, Sany's decision makers began to target new fields.In the past five years, Sany's two most important diversification attempts were directed at the communication product market and the automobile market respectively.Although the demand in these two markets is indeed growing rapidly, objectively speaking, Sany's development in these two fields has not been considered a success so far.It is completely different from its performance and status in the concrete machinery market. In 2000, Sany Optoelectronics Co., Ltd., with an investment of 80 million yuan, was established in Beijing to produce various optical devices required for optical fiber communication networks.However, it was soon discovered that the sales were not as good as expected, so in 2002, Sany Optoelectronics Co., Ltd. changed its name to "Sany Communications Company", and then shifted its product focus to IP network equipment.Because Sany Communication is not a listed business of Sany, we cannot find public data.However, according to the report of "IT Manager World" magazine in early 2005, "Sany Communication has been in a state of loss". Also around 2000, Santo became very interested in the automobile industry.Due to the state's license restrictions on vehicle manufacturers and the local government's support for "powerful enterprises", the way Sany finally "realized its dream" in the auto industry has a flavor of "diversification with Chinese characteristics" mentioned in this chapter—January 2003 In March, Sany integrated and acquired Hunan Automobile Manufacturing Co., Ltd. and Changsha Automobile Manufacturing General Factory, and established Sany Automobile Manufacturing Co., Ltd. to become a "leading enterprise supported by Hunan Provincial Party Committee and Provincial Government to produce heavy-duty vehicles and chassis".In the vision of decision makers, the main product of this division is the lucrative luxury bus.But at this time, the Chinese bus market is already in a state of contention between dragons and tigers.In the following two years, Sany's passenger cars had few gains in other markets except for some orders in the province due to government support.In the middle of 2005, it was reported that Sany was preparing to transfer its automobile business. It should be pointed out that the main body of this series of non-related diversified investments in name is Sany Group, the parent company of Sany Heavy Industry.But because Sany Heavy Industry has been the undisputed core enterprise of the group since the mid-1990s, contributing more than 80% of the group's sales and almost all of its profits, and the strategic decision makers of the two companies are almost exactly the same group of people, It can even be said to be the same person - Mr. Liang Wengen, the chairman of the group, so this experience can be roughly regarded as the process of diversified expansion of a "hidden champion" in the concrete machinery industry. Although we say that Putzmeister is a highly focused company, it does not mean that they have only one type of product.In the statement of the Putzmeister Group, in addition to concrete pumps (pump trucks) contributing 80% of the sales revenue, about 20% of the revenue comes from the three major categories of mortar machinery, high-pressure cleaning equipment and "other businesses". business unit.However, it is obvious that the products and services related to these three departments are closely related to the company's long-term accumulated core capabilities and resources.For example, the mortar pump 2 is similar in terms of the applicable technology and target customers, and the high-pressure cleaning equipment produced by Putzmeister is mainly used to clean the solidified concrete and mortar.So even if we want to call this kind of product line extension behavior "related diversification", it is related diversification that closely revolves around the core resources of the enterprise. However, there are some obvious differences in the business department setup of Sany Heavy Industry.In addition to concrete pumps and pump trucks, Sany also has road rollers, excavators, bulldozers and other products belonging to other categories of construction machinery industry.Although they may share differently in terms of technology, production equipment, channels, brands, etc., the differences are quite obvious.For example, there may be two completely different engineer teams developing concrete pumps and road rollers within Sany.Moreover, before going public, Sany Heavy Industry had separated its excavators, rotary drilling rigs and other businesses that originally belonged to it, and became part of another company, Sany Heavy Machinery.In fact, when Sany Heavy Industry chooses which construction machinery products to launch, it pays more attention to the gross profit margin of the product in the Chinese market, not necessarily its relevance to its own existing resources.For example, for road rollers, 311 only produced full-hydraulic large-tonnage vibratory rollers with the highest market price from the very beginning.And, like concrete pumps, it quickly became the market leader among products of the same category and specifications. However, there are certain similarities between the two companies in their organizational setup relative to their product lines. In 1995, Putzmeister owner and CEO Karl Schlecht decided to split the various business units (concrete conveying, cleaning equipment, mortar machines, industrial pumps, etc.) into separate business units.Although this kind of split may bring unnecessary internal competition and duplication and loss of resources, he is more worried that if the company continues to centralize management, it may breed bureaucracy as the scale of the company expands, prolonging the decision-making time, and alienating. relationship with customers.Coincidentally, Liang Wengen, chairman of Sany Heavy Industry, also made the same decision in a more arbitrary way in 2003. The differences and connections between Putzmeister and Sany Heavy Industry in terms of strategic direction are not difficult to find clues from the values ​​and corporate culture of their respective companies. Putzmeister's corporate purpose is "service, improvement, and value creation".On its official website, whether it is the description of the company profile or the introduction of the company's history, the main emphasis is on the quality of innovation and excellence they have contributed to the field of concrete machinery.In terms of the goal of enterprise growth, Putzmeister seems to pay more attention to its position in the market segment it dominates, rather than the absolute size of the enterprise.For example, the first sentence of the company founder Schlecht's 2004 annual speech was: "The growth of our Putzmeister global family in 2004 once again exceeded the world average level." In 2005, 72-year-old Schlecht was accepting In an interview with a reporter from China's "Architecture Times", he also clearly expressed his judgment on the company's success criteria: "Putzmeister's business scale is not large in the world, but it is a company with very healthy finances, and it is a leading company in the industry. A company with product quality and technology leadership." Judging from the corporate slogan, Sany Heavy Industry is also a company that pursues product quality and strives for excellence.For example, Sany's slogan is "Quality Changes the World".Moreover, there is a very eloquent saying about product quality on the website of Sany Heavy Industry: "Quality is the starting point of value and dignity, and it is the only thing that cannot be compromised." In fact, it is true that Sany Heavy Industry's concrete machinery products can stand out because Because of their superior quality and technology compared with domestic competitors. However, judging from Sany’s more and deeper corporate culture phenomena, it seems that what makes this company really proud is not the technological advancement, quality reliability or customer value of a specific product field, but its contribution to the national industry. The contribution of the company is the social attention brought about by the continuous expansion of its enterprise scale and influence.For example, in the part about the company introduction on Sany's official website, almost all of what we see is about the company's assets, sales revenue, number and structure of personnel.Sany has a distinctive catchphrase called "slowness is like hatred", which expresses a strong desire for growth.Liang Wengen, the soul of the company, once said that in 2004, the total revenue of Sany Group will reach 10 billion.He also declared with pride: "The next 10 years will be the 10 years for China to produce enterprises with a scale of 100 billion yuan, and it will be the 10 years for world-class enterprises and entrepreneurs to be produced. The potential, environment and conditions for Chinese enterprises to become world-class enterprises are unprecedented! 3 From these words, it is not difficult to see that Sany is more concerned about the timetable for becoming a "world-class enterprise".Which product and industry happens to be chosen is secondary.In terms of the so-called "Chinese-style management", the former is "Tao" and the latter is just "art". In fact, companies with such grand ideals are destined not to continue to focus on niche markets like concrete machinery.Because the current global capacity of this market is only about 2 billion US dollars, and the growth is not so fast. No matter in the concrete machinery market in China or in other parts of the world, the global invisible champion Putzmeister and the Chinese champion Sany Heavy Industry are still continuing their competitive history. On the one hand, there are various signs that Putzmeister is paying more and more attention to the Chinese market. In an interview in 2005, Schlecht made it clear: "I am particularly optimistic about the Chinese market. I firmly believe that in a relatively long period of time, China's construction machinery market will maintain a sustained and stable growth momentum." "Elephant Company" invested in Shanghai The most advanced concrete pump truck assembly equipment in the Asia-Pacific region, after the expansion of the production base, the production capacity has increased by 2 times compared to the original.Shanghai will become PM's production, sales and after-sales service center throughout the Asia-Pacific region and Southeast Asia. In the autumn of 2005, Putzmeister also established its first branch in China in Beijing, which is a sign that PM began to strengthen its relatively weak marketing and after-sales service in the Chinese market. On the other hand, Sany Heavy Industry's interest in overseas markets is also growing unprecedentedly.By the end of 2005, Sany had successively established marketing and service networks in India, Morocco, Saudi Arabia, Kazakhstan, Ukraine, etc., and its export business has expanded to Eastern Europe, Africa, Southeast Asia, South Asia, the Middle East, Russia, South Korea, and South America.Mainly pumping machinery, all Sany products including graders, road rollers and other road machinery have been exported.In projects such as the tallest building in the world - the Burj Khalifa with a height of more than 700 meters, Sany's concrete pumps are already competing with Putzmeister's products.In addition, Sany's top managers also revealed on different occasions that they are eyeing the European and American markets, the most powerful regions of Putzmeister.In fact, as the growth rate of China's domestic construction machinery market has slowed down, it has become a general trend. Whether Sany Heavy Industry can make breakthroughs in overseas markets with greater demand and better sales credit has become a question of whether it can continue to bear the "cash burden" of the entire group. An important factor in the role of "cow". Although both Putzmeister and Sany Heavy Industry have used concrete pumping machinery as the cornerstone of growth and have become leaders in their respective markets, there are obvious differences in the temperament of the two companies.Founded in 1958, PM seems mature and prudent. Although its performance in the Chinese market is suspected of being conservative, the focus and calmness of this company make people feel at ease.Sany, which is rising rapidly, is aggressive and ostentatious. Although it has achieved respectable performance in both the Chinese market and overseas markets, its high-profile expansion behavior makes people feel uneasy.Considering its rather unsuccessful diversification attempts in the past and the current dual pressure from the capital market and entrepreneurial ideals, people inevitably have such worries: If the dream of a company with tens of billions or hundreds of billions of dollars comes true, it will be this excellent company that will be eliminated. When its overly heavy dream is overwhelmed, has all the previous efforts lost its original meaning? Note: This article is selected from the book "Focus - Interpretation of China's Hidden Champion Enterprises" written by Deng Di and Wan Zhongxing, planned by the Blue Lion Financial Creative Center, and published by Zhejiang People's Publishing House in April 2006, Chapter 9 "Made in Germany VS China Manufacturing - Comparison of Chinese and Foreign Champions".