You are here: Home > Business > Manufacturing

Going global in more ways than one

: 0 Comment(s)Print E-mail China Daily, November 22, 2012

Adjust font size:

Sandvik AB's global assembly center for mining and construction equipment in Jiading, Shanghai. From 2002 to 2011, the average annual sales growth of Sandvik China was more than 25 percent, with total sales amounting to 7 billion yuan ($1.12 billion) last year. [China Daily]

Sandvik AB's new global headquarters is located in Stockholm's World Trade Center - a modern complex of the sort seen in every modern city, such as New York and Shanghai. It sits alongside the Swedish capital's Central Railway Station.

About a two-hour drive away, the Swedish industrial group's old headquarters was in Sandviken, where it was born 150 years ago and named after the town. The castle-style building is now both the company museum and the headquarters of Sandvik's materials technology business.

The first batch of outside visitors to the new headquarters were Chinese media representatives because the multinational company regards China as one of its most powerful growth engines amid the global economic downturn, according to Olof Faxander, who took the position of president and chief executive officer of Sandvik last year when he was 40.

The celebration of the 150th anniversary of the company was accompanied by the relocation of the headquarters and a series of changes including restructuring the business, streamlining management layers and expanding the global executive board. Olof, who speaks fast, briefly and in a determined manner, said all of these moves were to "make Sandvik faster-paced, more global and more customer-focused".

Making changes

The relocation of the headquarters is an important step in the company's internationalization. Olof said: "Relocating in Stockholm gives us a much better opportunity to create a top global leadership because it's easier to attract international talent than the small town of Sandviken can."

He also introduced overseas staff into Sandvik's top management team for the first time in the company's history. So far, three business units are led by non-Swedes. Olof expanded the 10-member executive management team to 13 and included the heads of the India and China businesses - both local people - together with the head of global research and development.

Originally an iron and steel company, Sandvik evolved to become a high-tech engineering group with a business portfolio covering mining and construction, materials and tooling. Olof has further divided the three businesses into five units - mining, machining solutions, materials technology, construction and venture.

The fundamental change initiated by Olof is making the corporate organization simpler, and ensuring that "decisions are made closer to the reality that prevails in various markets", he said. The company is creating synergies among IT solutions, human resources issues, logistics and research and development. A decentralized structure previously allowed the three businesses to have their own facilities and be run independently, sometimes resulting in duplicated operations and delayed feedback to, and response from, the group.

According to Anders Nyren, chairman of the board at Sandvik, one of the reasons Olof was chosen to take up his current position was the hope he could "bring some changes, new strategies to the company with its long history".

"If you ask me to mark his performance, it's 100 percent so far," he said.

A financial report on the Stockholm Stock Exchange-listed company shows that its operational profits amounted to 3.33 billion Swedish Kronas ($528 million) from July to September, or 14.2 percent of invoiced sales, compared with 1.67 billion Swedish Kronas and 7.1 percent a year earlier.

However, Europe accounted for less than one-third of Sandvik's total business for the first time in the company's history. Emerging markets have become more attractive.

Chinese market

China is the fourth-largest market for Sandvik to date, accounting for 7 percent of the total external sales of the group. From 2002 to 2011, the average annual sales growth of Sandvik China was more than 25 percent, with total sales amounting to 7 billion yuan ($1.12 billion) last year. Now it has 65 offices and 15 manufacturing facilities in the nation.

Olof admitted that Europe is experiencing a crisis and developing economies, such as China and India, are the main driving force, contributing around 40 percent to international economic growth. Thus Sandvik is attaching great importance to them.

Chinese economic growth cooled to a three-year low of 7.4 percent in the third quarter of this year. As wages and operational costs rise and domestic consumption is not strong enough, some multinational companies chose to delay or slow down their investment plans in China or even moved manufacturing facilities to other nations where costs were lower.

Olof said he was "surprised" to hear that. "China's continuous growth in double-digits is impossible. China turning to normal growth is something we expect. China is the second-largest economy in the world. Even if China grows at 6 percent, it's still high growth," he said, adding that his company did not come to China for low labor costs - it's eyeing the market potential.

Sandvik is a company that develops not only through organic growth, but also through mergers and acquisitions. From 2000 to 2011, the group conducted around 40 M&As in 20 nations and regions. It adopted the same strategy in China to expand its portfolio and get new market access.

In October 2011, half a year after Olof became CEO, Sandvik's construction business completed the acquisition of 80 percent of the equity interest of Shanghai Jianshe Luqiao Machinery Co Ltd, one of the top crushing and screening equipment suppliers in China, with 1,000 employees and around 1 billion yuan in invoicing in 2010. The Swedish company used to be focused only on the high-end market. That acquisition has helped it enter the medium-end market, said Wan Ge, an analyst with ChinaVenture Investment Consulting Group.

Sandvik's latest deal was to set up a 50-50 joint venture with Shandong Energy Machinery Co for the production and sale of coal mining equipment. The joint venture became operational in June. Mining and machining solutions are the most profitable business for the industrial group, especially its self-developed automatic mining equipment. Cooperation with local partners helps foreigners get distribution access, said Wan.

China surpassed North America to become the world's largest mining machine market by sales in 2009. According to statistics from domestic industry information website hc360.com, mining machinery sales in China made up 41 percent of the world total last year. The figure was 36 percent a year earlier and is expected to exceed 50 percent from 2012 to 2015.

"What we can bring to China's manufacturers is high efficiency," said Olof, explaining that higher prices from high production, long usage duration and safety guarantees are the selling points of Sandvik.

Many mines are in remote areas and deep underground. The company's automatic mining solutions mean people can operate and supervise the machines from an isolated control room, which greatly increases production and offers safety and a sound working environment for miners.

Although it is an industrial group with a wide business portfolio, Sandvik does not have direct competitors but each unit has strong competitors both internationally and in China.

Large Chinese companies, such as Sany Heavy Industry Co and Zoomlion Heavy Industry Science & Technology Development Co Ltd, are expanding globally to acquire foreign counterparts. Changsha-based Sany and private-equity firm CITIC PE Advisors (Hong Kong) Ltd announced the acquisition of German pump maker Putzmeister Holding GmbH for $476 million in January. Zoomlion acquired Compagnia Italiana Forme Acciaio, a concrete equipment manufacturer, in 2008 for 376 million euros ($479 million).

"Chinese companies are very ambitious. They are stalking the high-end market. It's natural," said Olof, adding that people always pursue high-quality products, no matter whether they come from a Chinese company or a Swedish company. "Competition can promote the development of the industry as a whole."

Career path

Olof might be regarded as a master for working with people older and more senior than him. So far, on the executive level, the only person younger than him is the new chief finance officer. "It's the first time in my life there's an executive (in the company) who is younger than me," said Olof.

Just before leading Sandvik, he served for five years as president and CEO of SSAB, a Sweden-based international company specializing in processing raw materials into steel.

With an education background in both science and business administration, he became the marketing manager of a stainless steel company in 1997, only a year after graduating from university.

"I don't have a strong age focus. If you are young leaders, the people senior and older than you are advisers. You should be a listener," he said. "As a good leader, you should have a good vision, good strategy, bring energy to your team, inspire people around you and let them shoulder responsibilities."

Olof's father is Swedish and has a small business. His mother emigrated to the United States in 1956 from Hungary and then to Sweden, which might account for his inclusive character.

Olof has three boys aged 10, 8 and 6. "There is much hard work to do at home but I enjoy it," he said.