#153 Re-Constructing China
The German company Wacker Neuson develops, manufactures and distributes concrete technology, compaction equipment, worksite technology and compact construction equipment on a global scale. In 2015 the company launched a new excavator line with 6 to 9 metric tons operatingweight. The new line was revolutionary in that it drastically reduced weight, made design changes, and for the first time the excavators were designed with their ownelectronic control system and software. They were very well received in the European market which appreciates advanced engineering and technology. Naturally, the company also started to offer the products in China, a market whose decades of economic growth have made it an important market for Wacker Neuson. Initial feedback from trade shows and promotional events was very positive – until Chinese construction companies started to use the excavators. The work force in China had less appreciation of the latest innovative technology, it was not as well trained as in Europe, and did not use the equipment correctly. As a result, mechanical failures occurred and service and maintenance requirements increased. Wacker Neuson stopped marketing the new product line in China altogether and regrouped: Should they resurrect older generations of excavators for China? Or should they make adaptations to the new line of excavators? Ultimately, by the end of 2018, the company decided to develop a completely new product line for the Chinese market that was more robust and had fewer and less advanced technical features.
April 22, 2020 @ 7:02 pm
What an interesting dilemma. I am curious to discover how Wacker Neuson’s new product line performed in the Chinese market after 2018 since it appears it took them at least three years to reintroduce and adapt its strategy. Was a competitor able to take a piece of market share as they realigned their strategy? The biggest concern, from a marketing perspective, is the false sense of security Wacker Neuson received at trade shows and promotional events. For liability purposes, most trade shows only allow vendors to display their products and only allow vendor employees to operate the equipment. Wacker Nesuon employees may have been behind the wheel showing it off, we don’t know, but Wacker Neuson should have allowed potential Chinese buyers and workers to test out the equipment, similar to test driving a vehicle, before production for China began.
It seems Wacker Neuson made the right decision by adapting and tailoring its product to the Chinese market. By correcting this early, the company may have saved itself from jeopardizing its image and brand to potential Chinese buyers and Asian markets.
Interestingly, this reminded me of the Toyota Tacoma. For decades, Toyota has kept some of the old simple stuff like the manual parking brake lever and the old school shift lever because Toyota understands the people who buy their truck. Their customers appreciate things that will not break. As they innovate, they gradually begin to introduce some of the components into their cars while still keeping customers happy.
If they wish, as Wacker Neuson pushes forward with their equipment in China, they have an opportunity to do the same thing Toyota does; innovating and introducing new components gradually while still providing reliable and robust equipment.
June 29, 2020 @ 7:17 pm
This failure is a good example of the different wants and requirements of different countries. While in Europe every company aspires advanced engineering and technology in emerging markets like China education standards are not that high and people have problems using certain applications and machines. This caused the machine to be operated incorrectly and consequently endangers the safety of the workers too. Besides the money they lost for servicing and maintenance I think the reputation of the company in China also got damaged because people there perceived the excavators as not rugged enough for their work. Instead of adapting their product, they could also offer training courses to teach people how do use the application in the right way. If the new and advanced technology of the excavator is really increasing the productivity or safety during work, China should also benefit from it. My suggestion here is to adapt the communication and not the product by mention the time-saving features and promote the training for it.
January 11, 2021 @ 9:22 am
Having worked in the steel and engineering industry for over 20 years, I know this problem and it shows how different the technical requirements and technical know-how of employees in different countries often are.
The mistake that many companies in these sectors often make is that they do not have their machines and equipment tested sufficiently by actual users and simply do too little market research in advance.
Personally, I think it is very critical when a company like Wacker Neuson then reverts to its old product line. In the long term, technological progress cannot be stopped and the technical know-how of employees will also continue to grow in these countries in the future.
It would make sense here to carry out targeted training measures with regard to the applications on the equipment and extensive communication with the business partners and equipment users. If absolutely necessary, only minor adaptations should be made to the new devices in China in further steps.
I am convinced that this approach is the cheaper and more effective option for the company in the long term and from an economic point of view.
December 20, 2021 @ 9:12 pm
It was a very interesting case. New and innovative technologies will usually be welcomed everywhere. But at the same time, it was an example that reminds us that complex functions require knowledge to handle them. Innovative products are, in a sense, weak. It can be easily broken by improper use. Also, if the user does not understand how to use the product, the product will not work properly. I also think this case is not just a worker-level issue. Specifications of common items such as outlet plugs and voltage are completely different between Europe and Asia. As this example shows, living environments are different in Asia and Europe. Each country or region has its own environment and work methodology. Enterprises will need to consider in the beginning that they will be used in different environments.
January 15, 2022 @ 8:14 am
In my opinion, it is not good idea for Wacker Neuson to decide to develop a completely new product line for the Chinese market that was more robust and had fewer and less advanced technical features. First, with decades of economic growth and market development, Chinese market became an important market for the industry of Wacker Neuson. If it changed the product instead of the advantage technical products, other brands’ companies could enter the Chinese market to make Wacker Neuson lose their market shares. In addition, it will spend a huge budget and a long time to build a completely new product line for the Chinese market. The cons of the new product line outweigh the pros. If it loses the markets, the new product line will lose the value. Therefore, I think Wacker Neuson should not resurrect older generations of excavators for China. They could make adaptations to the new line of excavators instead of fewer and less advanced technical features. They also could offer the training for people who use the new product in China. The Chinese market could get benefits from the new products, while Wacker Neuson could get good reputation and more market shares. The cost of training is much less than building the new product line.
February 10, 2022 @ 5:50 am
Wacker Neuson, a German company offering products and services revolving around construction technology and equipment, decided to create a new product management line for their innovative tangible good. The new excavator line was developed based on the company resources, technological expertise, inventory control, internal demand for capital, and market needs for an improved electronic control system in excavators. Factors such as product cost and product quality determined its beginning entry into the European market. I believe that the companies original decision of vertical integration to make their own product paid off for them initially as their new invention received such positive feedback in selling to foreign countries. Whether Wacker Neuson believed that they were developing a global product design or not, the Chinese market did not respond well to the innovation. Unfortunately, the German company lost revenue from this foreign market attempt as well as losing the overall positive opinion on the brand from Chinese citizens. Before integrating their product overseas, Neuson should have altered or reassessed the potential success for the excavator line in a marketplace that is not equipped with the newest technology creations. I believe it was smart for Wacker to integrate their product into the European market first in regards to the foreign sequence. However, the company needed to assess the different risks and opportunities in this potential country. Instead, they should research and then design, based on the Chinese market goals, revenue, cultural tendencies, and consumer preferences.
I think that resurrecting older generations might be easier for the Chinese to use, but that won’t necessarily be placing the company on a pathway to innovating success. I believe that a few adaptations can be done on Wacker Neuson’s new product, but nothing enough to steer their direction away from being one of the most innovative companies. Communication methods such as offering training services are a great intangible practice to adapt to less innovative societies while hopefully continuing to sell the excavator overseas. The organization already has completed corporate readiness and target market selection, now they need to slightly adjust the product, choose an entry mode, and plan a better marketing mix.
March 9, 2022 @ 5:13 pm
For me, coming from the special mechanical engineering and automotive branch, this business case reflects very well the predicament of international operating organizations, offering technologically highly developed products in various markets with strongly deviating technology levels. Especially when the introduced product demonstrates a clear USP which can provide a competitive benefit, it becomes challenging for the business development to decide which solution should be used for market entry.
From my professional experience I can report, that it makes absolutely sense to customize the product portfolio map according to the regions and countries where deployment is envisaged. This is not only due to the available budget possibilities of the target market but also caused by level of knowledge, service network, working mindset as well as the technological acceptance in that specific region. Of course, there are great advantages if the product offered, corresponds to the modular system, in which components can be easily interchanged without starting costly new developments just for one single market region what seems to have happened in the case of Wacker Neuson. I think this business case lacks an input from the user’s perspective in the form of factual feedback from the field.