Market Intelligence Five process steps to keep up with global competition
What is the key to success in times of internationalisation? The WBA Aachener Werkzeugbau Akademie defined process steps that have to be taken in order to gain market intelligence and thus compete on a global market.
The internationalisation of production has led to an increasingly competitive business situation for European tooling companies. This can be traced back to two main causes. On the one side, non-European competitors from low-wage countries have entered the European market with low-priced tools and dies. These competitors profit from factor costs far below the European average and are able to offer quality standards comparable to their European counterparts by now.
On the other side, growing economies all around the world have developed large selling markets, leading to an increased scattering of the tool and die industries’ customer base. Local competitors from these markets have advantages over European tooling companies because they are able to service customer needs on much shorter notice. The internationalisation of production therefore puts the European tool and die industry under pressure to offer low prices and short reaction times, while retaining the high quality standard it is known for.
Global sourcing vs. local for local
In order to cope with these challenges, two strategies have proven to be successful solutions for European tooling companies: global sourcing and local for local.
Global sourcing describes the purchasing of strategically irrelevant parts from international suppliers. Thereby, tooling companies in Europe are able to profit from low production costs and are also able to focus on strategically differentiating parts. Despite obvious cost-saving benefits, global sourcing also offers potential to increase flexibility as peaks in demand can be dealt with without holding standby capacities internally.
The “local for local” concept describes the establishment of sites in immediate proximity to customers in selling markets. Local competitors benefit from shorter communication and delivery routes from the production site, enabling them to serve customers rapidly and reliably. “Local for local” thus seeks to maintain this by developing production sites as close as possible to the series production or by building up strategic partnerships with local tooling companies. This allows for close collaboration between tooling companies and their customers as well as short reaction times to fulfill customer demands.
The successful application of global sourcing and local for local strategies requires detailed knowledge regarding the structure and characteristics of the respective markets. Reliable information about existing tooling competencies, employee qualification, available local suppliers or infrastructure in specific markets is crucial. However, many tooling companies have difficulties in selecting relevant markets and potential suppliers, mainly because of insufficient information search and location study. In addition, contract placing is frequently unsuccessful due to imprecise supplier analysis. Lastly, international suppliers in many cases do not fulfill quality standards and other requirements, threatening the success of global sourcing and local for local strategies. The reason for these difficulties can be found in insufficient market intelligence, which has become one of the key success factors for European tooling companies to overcome today’s challenges and remain competitive.
5 process steps for gaining market intelligence
In order to gain market intelligence and apply knowledge regarding market participants and available products, tooling companies need to follow a five-step process developed and proven at the WBA Aachener Werkzeugbau Akademie.
The process steps have to be conducted consistently and thoroughly to guarantee successful decision-making in global sourcing and local site development.
The process steps identified by WBA are:
- 1. requirements definition
- 2. data collection
- 3. data analysis
- 4. on-site audits
- 5. data application and storage
The process of gaining market intelligence starts with the definition of requirements. These always have to be selected individually according to the specific goal of the analysis. In case of a sourcing decision, product requirements such as dimensions, surface quality or tolerances are required. An analysis regarding the development of a local site, on the contrary, requires information about workforce education, local supplier base and infrastructure. The selected requirements also have to be rated according to the degree of importance in order to allow for a successful and practical evaluation later in the process.
After the first process step is completed, the information search can be started. Data collection incorporates the identification and description of information regarding potential markets and their characteristics in accordance with the previously defined requirements. This includes the search for potential suppliers or locations in a first step, as well as the gathering of assessable information relating to the identified alternatives in a second step.
Tooling companies can access data through a large variety of different sources. In general, databases, scientific studies, trade associations and expert opinions have proven to be reliable sources of information.
In the subsequent step, the collected data has to be analysed by comparing the defined requirements with the characteristics of the identified suppliers or locations. The output of this process step is an individual evaluation of each identified supplier or location, which reflects the degree of fulfillment regarding the defined requirements and highlights the most suitable alternatives. However, before the final selection of an alternative, the evaluation results have to be thoroughly verified in order to ensure correctness and reliability.
This is guaranteed by on-site audits conducted by a team of experts. Simultaneously, these visits provide additional information to complement hitherto purely data-based evaluation with real-life impressions.
After this process step is concluded, tooling companies have gained market intelligence for specific markets and are able to make successful decisions regarding new suppliers or the development of local sites.
Long-term usability und sustainability of the newly developed market intelligence has to be ensured in the concluding process step. Therefore, the acquired data has to be stored safely and intuitively, intelligent analysis tools need to be implemented and the data needs to be verified as well as updated frequently in order to take full advantage of the acquired market intelligence.
Working closely with customers and partners, the WBA Aachener Werkzeugbau Akademie GmbH has been able to establish detailed knowledge of the international tool and die market. This knowledge has been published in several studies. These contain general information about the relevant international tool and die markets (World of Tooling) and developments in the sector as well as detailed information about specific markets (Tooling in China, Tooling in Germany, Tooling in South Africa, Tooling in Turkey).