Is bigger always better?
June 28, 2012

Inchin Closer’s corporate consultancy team recently accompanied a Chinese delegation to the Western state of Gujarat on a fact finding and investment investigation mission to assuage the viability of constructing a factory there. The leader of the delegation owned an electrical components business which supplied parts to power equipment manufacturers. What was fascinating to observe was that his clients both International and Indian were so keen to have him set up a factory in their vicinity that they pulled no stops in laying out a plush red carpet welcome. The reason? No Indian company till date or projected has the capacity to build electrical components of his size and scale.

As demand drives, and China steers the world to everything grandiose, requirements, factories and equipment are all scaling up. China is single-handedly altering the size of businesses globally by manufacturing, demanding and producing things in large scale. Visitors to China in the early 2000’s joked that everything in China is a superlative – the middle kingdom has the largest parks, the tallest buildings, the longest wall, the biggest dam etc etc. China seems to have successfully changed the scale of the world over the last decade.

Its this very conundrum which is now driving companies that produce small gauge equipment to be squeezed out of the market. With no buyers left for smaller manufacturers, most of them are closing shop and moving out of the factory of the world. Take for example Suzlon’s wind turbines. China was their star market a few years ago, the government offered huge incentives for green energy, investments and industries were built around it. Now Suzlon has sold its China (Tianjin) manufacturing plant to China Power New Development Company. The reason being it produces smaller turbines than the industry demand. Knocked off the radar of large Chinese companies who bolstered on government incentives are producing superlative equipment the wind energy maker is pumping assets back into its India business which it had abandoned a few years ago in the wake of the great China boom. “The market is changing towards bigger machines. It is moving to 3 MW onshore turbines and 6 MW offshore,” the spokesperson said. Suzlon doesn’t have any products in its portfolio with which it can compete with the Chinese manufacturers in the large turbine space.

Is bigger always better? Will the smaller players be edged out? We don’t think so, yet for now Chinese companies have a clear advantage.

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