Barriers to Entry: What Overseas Manufacturers Must Know

May 6, 2013

A market research company recently asked for my opinions on the construction equipment market. Happy to oblige, I offered her half an hour on the phone.

I consider these conversations my opportunity and obligation to speak on behalf of Construction Equipment’s primary audience: equipment managers and buyers. My purpose is to educate the consultant and their client, with the understanding that these are my opinions based on what I observe in my interactions with my constituencies.

As I listened to the questions and conversation (I am a journalist; I know how interviewing works), I formed the presumption that this particular client was a Chinese equipment manufacturer seeking insight on the North American market. Here’s a sampling of the questions and how I responded.

How would the market greet an entry-level, lower-priced product? If this product meets a specific need, there is opportunity. The history of this industry is peppered with innovative machines that have developed into categories of equipment populated by multiple manufacturers: skid steer loaders, backhoe loaders, and others.

I asked if this was the case, but the answer was, “No.” Apparently, the client manufactures machines in existing categories. I have no idea what machines, nor any idea what manufacturer.

My answer changed. That would be a tough sell, I said, especially in well-established categories such as most earthmoving machines. Brand loyalty is strong, and price is rarely the first—or even a top 3—consideration for a buyer. Performance history, product support, operating cost, and dealer relationships usually rank higher than price.

Having come shortly after Bauma, this conversation was starting to reveal its source.

Do buyers care about the country of origin? No, there is little prejudice when buyers can evaluate the attributes I mentioned earlier. The questioner listed several countries, including China, at which point my suspicion began to crystallize.

Overseas manufacturers, whether based in Korea, Japan, China—or Great Britain—have historically faced an uphill climb in North America. Three things need to be in place before a product or brand gains acceptance here: distribution, product support and performance quality. Some familiar and well-respected brands started out decades ago in the same place some of the Chinese are today. History has shown North Americans welcome excellence and performance, but they expect dealer support and cost-effective operation.

For the Chinese—or any other manufacturer drawing a bead on North America—the same applies.

About the Author

Rod Sutton

Sutton has served as the editorial lead of Construction Equipment magazine and since 2001. 

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