Yes. Not all small manufacturers in the power electronics segment will be able to survive this era of competition—competition they face from bigger brands. Nevertheless, many compete and survive. There are numerous examples of small and medium manufacturers (SMMs) of UPS and inverters, who are not only surviving but are flourishing in today’s age of competition.
These enterprises stand out from the crowd because they have adapted to the new order of the industry by being innovative, adept at monitoring customers and by offering them competent services. They are quick to adapt to market changes and have emerged more profitable than ever. What makes these manufacturers small? What is holding them from growing big? Market analysts term a manufacturer ‘small’ if an enterprise has a modest workforce and a relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships or sole proprietorships. Other benchmarks used to classify small companies include annual turnover, value of assets and net profit.
Wednesday, August 19, 2009: SMMs often face a variety of problems related to their size. Besides undercapitalisation, poor planning, excessive governmental red tape, the most severe impediment that pushes these small fish out of the water is the competition they face from bigger players.
“Competition isn’t a threat, it’s rewarding,” says Anupam Baid, director, Baid Power Services, Kolkata. Nisha Menon, chief information officer, Micro Technologies of Mumbai, also believes, “Competition is good. Ultimately, everyone benefits—the big and small players as well as the customers. Due to competition, the market has segregated, but the smaller players are not only growing, they are learning about the new requirements of the industry.”
These companies are composing a portfolio of market niches and a diverse customer base to help them to avoid the stiff competition represented by big brands. Companies like Accura Automation Engineers feel that the only way to survive along with the big players is to grow bigger with time. “If we do not grow, we will be out of the market. The moment stagnation creeps in, you are over and out,” states Vijayanand, director, marketing, Accura Automation Engineers, a regional name concentrating on Tamil Nadu, Kerala and Andhra Pradesh. “The market has space only for medium and big players. The small cannot survive in this market,” Vijayanand insists. Accura Automation, therefore, targets to expand its business to Rs 200 million by 2015.
In contrast, players such as Natasha Electron and Subha perceive no threat from bigger brands. “They have a different target market and a different customer base. The big brands are not our competitors,” says D K Pacheriwala, director, Natasha Electron, Kolkata.
All the small and medium companies ePower talked to are confident about and content with the strategies they are applying to counter the rigours of competition. In a nutshell, industry analysts believe that SMMs are the emerging stars, who are not afraid of big competitors and have devised new strategies that can “turn on a dime” when required. “Only a handful of big manufacturers are dominating the market. Over the last few years, other brands have tried to capture the market but there is still a huge gap,” remarks Praveen Aggarwal, director, Subha, a company that has a monthly production capacity of 20,000 units and a vision to enhance its business from Rs 250 million to Rs 700 million by 2011.
SMMs prefer high margins, low volumes, employ excellent cost reducing tactics and are constantly on the lookout for new opportunities. Strategies used by these new stars of manufacturing are many and varied.
NETTING NEW CUSTOMERS
Servotech Power Systems, a company in the forefront of power conditioning since 1994, is doing quite well. Part of its sales strategy is not to sell a large percentage of its capacity to the main market. The firm is segregating and seeking new buyers. Says its managing director, Raman Bhatia, “Faced with the unyielding competition in the market from big players, who are vying for larger market share, we have positioned ourselves as risk averse players. We are increasingly supporting a roadmap that requires us to hunt for new customers and new sectors to sell our products.”
The Stabline Company has also diverted from the main market and reserved the foreign missions, MNCs and industrial houses as loyal customers. “We worked with them once and they were satisfied with our products. Now, we receive regular orders from them. We also export to South Asian countries through these houses,” discloses Satya Pal Gupta, proprietor, Stabline.
Natasha Electron, on the other hand, is primed to tap the rural areas of West Bengal, realising the immense potential for power solutions in the region.
TO PROMOTE OR NOT?
The fierce competition means that products that are not supported by heavy marketing or advertising may find it challenging to find space on the shelves. However, most SMMs lack the capital outlay required to advertise their products on a large scale. Here, a bigger player steals the show because he has the capacity to invest in solid advertising campaigns that virtually guarantee sales. “Competition is one of the major reasons why we left the larger national market and became a regional player. Now, we conduct promotions in West Bengal only,” explains Baid. Established in 1982, Baid Power Services is engaged in manufacturing and exporting various power backup solutions. “Being a local company, customers of our region choose us over the national brands,” he adds.
“Brand awareness is required for small inverters and UPS but we produce big ones, for which promotion is not necessary. Our target customer base is such that consumer marketing techniques are not very effective. We cannot advertise through electronic media like the TV as the big brands do because it is quite exorbitant. However, we engage in common marketing techniques like networking, word of mouth tactics and regional promotions,” expounds Bhatia. “Advertising via a niche media is also effective but it can be time intensive,” he adds.
Having ventured into power electronics quite recently, Micro Technologies India understands its target market well. “We know where our strength lies and where we want to expand. Our target buyers do not need to be made aware of our products. So, we don’t get involved in largescale promotions. We believe that customers are intelligent and spend on good technology and we are technologically strong,” points out Menon.
According to Bhatia, big products are sold differently. “In government departments, orders depend on tendering. If you are registered with some of the government departments, you will get orders from them every year. In the corporate sector, too, promotion is not required. Here, only direct marketing is necessary. Also, one needs to know how to build a good rapport with customers,” says Bhatia.
SOMETHING MORE THAN USUAL
Cutthroat competition in the power sector has led manufacturers to offer products with more features and improved quality. As a result, the end consumer has benefited tremendously. “SMMs are offering a variety of new features and new technologies to entice customers. When it comes to UPS and inverters, customers tread carefully and shop around for new technologies and features,” says Vijayanand. “This forced implementation of new features and technologies is a result of the competition we face. It is absolutely necessary to stay a step ahead of the big brands,” explains Gupta.
By studying competitors, using effective market research manoeuvres and focusing on customer requirements, Micro Technologies has developed new products with considerable competitive advantage. Subha has also created successful new products with unique features. Small manufacturers are also providing value added products to meet the requirements of demanding consumers.
TREADING NEW PATH
Faced with the challenge of staying ahead in the race, a majority of small manufacturers are now willing to experiment a little more. They are venturing into new areas like renewable energy, forging foreign collaborations, launching subsidiaries and manufacturing products of other verticals. While Subha has started exporting directly to many countries, Micro Technologies has started manufacturing security products. Baid Power Services will soon launch an entire new range of products and also intends to foray into the solar energy domain.
As most small and medium UPS and inverter makers have been burned by the increasing competition, they are resorting to cost cutting strategies. Companies like Servotech Power Systems, Subha, Accura Automation, Stabline and Natasha Electron have all reduced overheads and cut prices of products to compete “or else we’ll get squeezed out,” says Bhatia.
To stay in the rat race, some SMMs have trimmed the unit price of their products. “We always have to compete for lower prices,” says Gupta. Elucidating further, he says, “The uneven distribution of the market is largely due to the cost factor, where the local players have an edge over the big players. The price gap has always instigated buyers to opt for locally made UPS and inverters, which are cheaper than branded products.” Accura’s products are almost 15 per cent cheaper than the national brands, claims the company.
“Natasha Electron has slashed the prices of its models as a strategic move to bridge the gap between the big and small manufacturers,” says Pacheriwala. “We want to make our product an all-season product. Price reduction is mainly for the higher end models,” he adds.
Competition is also urging small manufacturers to focus on methods which will help in curtailing manufacturing costs, controlling overheads, increasing productivity and enhancing product and service quality.
NICHE PRODUCTS FOR NICHE CUSTOMERS
Baid Power Services doesn’t merely rely on cost reduction or improved operations to compete. “Selling a niche product to niche customers through customisation is profitable,” illustrates Baid. “We need every possible advantage to maintain an edge over our competitor,” he adds. Stabline acknowledged the need to improve design turnaround so that it could address each vendor’s customisation needs. “Since we have the capability to offer customised solutions, we survived the competition,” says Gupta.
Cross-vertical applications of many industries result in the need for complete solution providers. Responding to this requirement, manufacturers are rebranding themselves as complete solution providers. Many such manufacturers use customised techniques to build a successful marketing plan. The market, therefore, is witnessing a soaring demand for manufacturers who offer complete power protection solutions. End users prefer hiring one company for a whole gamut of services rather than different companies for different services. This is where SMMs score over the big fish.
“Bigger brands are also into customisation but their prices get hiked. Also, they can only take up big projects, whereas we not only customise smaller products and work on minor projects but can also reduce the cost as per customer satisfaction,” explains Vijayanand. Natasha Electron and Stabline have been extremely successful in creating specialised products for niche markets, where they could gain a competitive advantage and maintain profitability.
CUSTOMER FOCUSED APPROACH
Many manufacturers are building good rapports with valuable customers. SMMs usually tend to be on good terms with their patrons and clients, which results in greater accountability and responsiveness. This is achievable, as they only cater to a small number of customers. After recession struck, Micro Technologies, too, decided it could not compete on the grounds of the cost factor alone. “Fostering good relationships with customers pays off. Once they are satisfied, they come back for good support. Developing a rapport with end users through customer-oriented programmes can enable one to sustain one’s growth momentum. These strategies, if judiciously implemented, can go a long way in capturing a good share of the market,” states Menon.
“Customers know what they want. If they think they need a certain product, they know how to reach it. The problem with big markets is that they’re hard to enter. It’s the niche markets that big companies don’t care about, giving us ample opportunity to tap them,” says Gupta.
Services have emerged as the most profitable segment of the UPS and inverter market. In this competitive market, SMMs know they have to come up with ingenious ways to generate sales. They are increasingly looking at the services business to boost their overall growth and turnover. They have increased the size of their field service force in order to attend to every customer on time. “This strategy has worked and service orders have doubled,” is the unanimous verdict of the SMMs.
SMMs have always proven resilient and bounced back, whenever faced with threats and hurdles, feel industry observers. “In fact, the power electronics arena is big enough for all players to thrive in—big, medium or small. We have been in this market since the last 20 years—even the small can survive in this sector,” affirms Baid.
Aggarwal concludes defiantly, “In fact, the competition is not for us. It is for the big players. Some of the upcoming brands are so strong in their local areas that the big brands face problems in penetrating these areas. These upcoming brands are posing a threat to the big brands and are cutting into the latter’s share. Almost 70 per cent of our (SMMs’) share of the market actually comes from the share of the big brands. So, it is, in fact, the bigger players who should fear us and not the other way round.”
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine