Submitted by -Name- Raghunath singh, Div.-A, Roll no.

51 Topic-GROWTH WHILE MANAGING ECONOMIC VOLATILITY Manufacturers are reshaping their business models in order to deal with this more volatile world. Firms are changing models in order to cope with market dynamics. For an industry that is often perceived as being relatively slow-moving, this is a striking common factor that there are numerous shifts that individual firms will make, but three themes stand out: 1.Manufacturing/sourcing closer togrowth markets; 2. A greater focus on innovation and product diversification; and 3. More rigorous approaches to both risk and demand management. Operating closer to new sources of growthAs in many other industries, the macro trend of a steady shift eastwards continues in manufacturing. However, the US surprisingly topped this years list for expected demand in the next 12 to 24 months, just barely edging out China for the number one position.India and Brazil both feature in the top five as well, and Germany ranked fifth. Manufacturers increasingly see emerging markets as crucial demand engines. Many firms agreed that their growth strategy is reliant on these markets. Emerging markets are now more important as sources of demand than for low-cost production .Siemens, for example, is actively exploring opportunities in lesserdeveloped countries such as Indonesia and Thailand. The core of our strategy is to shift our focus and look more toward [these] markets, says Barbara Kux, Siemens head of supply chain management, in order to ensure our planned business growth. Meanwhile, emerging market manufacturers see little reason to leave their core markets. Demand within China is significant enough that we have not had the opportunity to explore such avenues, says GSIs Mr. Yu. Delongs Mr. Liguo says that more than 90 percent of the companys sales go to Chinese customers.As the worlds second largest economy, some see China as having outgrown its developing nation label, but Andy Williams, ASPAC Leader for Diversified Industrials, KPMG in Singapore, says the reality is more nuanced. There is no doubt that China has grown significantly on a commercial level. But, there are enormous differences from region to region within China. Some areas boast thriving business centers, while others are still decades behind in their development. However, theres no doubting the growth trajectory. By 2020 or 2030, the majority of the worlds middle class is expected to be in China. While that strategy may give domestic brands something to chew on, Western companies have a lot to learn from the Chinese way of doing things as well. Chinese companies tend to go global on a sector basis. They consolidate domestically first, then look to buy outside. Says Williams, by the time a DI sector, such as engineering, has gone from being a thousand strong to just the five top players, the scale, the cash on hand and the acquisition experience are usually massive. That gives them the means to move forward globally, buying up big name companies and solidifying their leadership on the international stage NEW PRODUCT EMPHASIS An emphasis on new products A second growth theme is a greater focus on product diversification and innovation. This is a significant shift from recent years. Existing products will be significantly less important in existing markets, while much greater emphasis is placed on new wares in both existing, and new, markets. While cost management remains the top priority, innovation and R&D comein second. This will be a particular priority for US firms, which rank R&D and innovation on a par with cost management. AGCO, for example, has dramatically increased R&D investment. Weve tripled the level of spending, so its now close to 3.5 percent of sales, says

Mr. Richenhagen.Luvata is investing in both new products and new markets, establishing factories in Mexico and Malaysia. This helps give it both geographic and product diversity. The [market]changes recently have reinforced our strategy of being a global player, in multiple end-business segments. Its been a good risk mitigator for us, says Mr. Kickham. When auto was having the most horrible time known to mankind, people were still buying MRI scanners and spending on healthcare. To support this drive for new products and to lower product development , 48 percent of manufacturers are establishing design centers in emerging markets. Companies based in mature markets are especially likely to consider this a challenge, whereas manufacturers based in emerging markets worry about development of executive-level talent. Companies plan to grow both by increasing production capacity and via mergers and acquisitions (M&As), joint ventures (JVs), and strategic alliances). This is not surprising given that companies are cash-rich after the last few years of stringent cost saving measures. Noteworthy from a regional perspective is that European are overwhelmingly in favor of M&As, JVs or strategic alliances),while firm from Asia-Pacific andNorth America slightly favor a more inward approach, namely increasing production capacity. respondents overall) a Rigorous approach to risk, cost and demand management Manufacturers have learned a lot about risk in recent years. Looking ahead, risk remains important for all, but will be a particular emphasis for Asian firms. Another crucial aspect of managing volatility is better cost management. And while manufacturers have notionally embraced the pursuit of growth as a strategic priority, none are loosening their grip on costs. From an investment perspective, this will remain the top priority in both West and East. Companies are becoming more sophisticated about how they look at cost efficiencies. The more straightforward general and administrative expense cost-cutting has already been done, and to reduce costs further, companies may well have to cut back in what were formerly untouchable departments such as engineering or R&D. Firms will seek to reduce costs by shortening their overall product development life cycle. This will largely come through restructuring of engineering and product development functions, improving technology systems to promote collaboration with customers and closer relations with suppliers. Delong is focusing on improving its operational cost efficiencies to minimize the impact of volatility. GSI, meanwhile, is actively exploring new upstream partnerships or acquisitions to better control costs. Ultimately, however, given the severity of input price increases, many manufacturers will be forced to pass on cost increases to clients. Manufacturers will also look to their supply chains to manage volatility and costs at the same time they focus on growth. The top two cost-control measures on which manufacturers expect to focus in the next 12 to 24 months involve their supply chains: one is collaborating more closely with suppliers; the other is consolidating their manufacturing or production). It is clear that supply chain management will be a key focus for manufacturers seeking to implement their growth strategies. MANAGING ECONOMIC VOLATILITY BY JAGUAR AND LANDROVER WITH GROWTH