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Porter’s Five Force Analysis of Sany Heavy Industry

Discuss about the Management Analysis for Sany Heavy Industry Co. Ltd.

The company Sany Heavy Industry Co. Ltd. is a renowned Chinese multinational organization operating in heavy machinery manufacturing industry. The company is considered as the sixth-largest heavy equipment manufacturer in the world (Khl.com 2012). The company has many industrial parks in China and other various countries. The company was founded in 1994 under Sany Group. The company got pubic in the year 2003. The company Putzmeister was founded in the year 1958. The Karl Schlecht foundation sold 100% shares of Putzmeister in the year 2012 to the Sany Heavy Industries (Putzmeister.com 2017).

The report discuses about the Porter’s five force analysis on the Sany Heavy Industry. Along with that, the report also discusses about the PESTEL analysis of China. The report also discusses about the Putzmeister GmbH which is an undertaken company of Sany Heavy Industries. Along with that, the report also discusses about the PESTEL analysis of Germany. The analysis is based on the data collected from various sources falling in the year 2007-20112.

The report focuses on the potential analysis of Sany Heavy Industries and it performance in China along with the case understanding of Putzmeister and the acquisition .by Sany Group. 

Porter’s five force model consists of the power of five forces which influences the market position and the internal and external environment of a company in a particular industry.

The company Sany Heavy Industry has the business model of manufacturing heavy industrial machineries. The market of such business has low competition rate along with the business need to have large amount of financial support. Thus, threat of new entrant is low.

There is no as such substitute product available in the market and chances of entry of such substitute is also low for the company Sany Heavy Industry.

The machinery manufactured by the company needs to take supply from various other hardware companies. However, there are various such suppliers in China and the other countries where the company operates. Hence, the bargaining power of the suppliers are high.

The buyers of such high tech machinery are the companies who are in the manufacturing and production business too, but they don’t product machinery.

There are few competitors of Sany Heavy Industry such as Caterpillar Inc., Sichuan Tengzhong Heavy Industrial Machinery and Wowjoint Holding Limited. The companies also have good reputation in the market and there is string competition in the Industry and increasing Industrial Rivalry.

Political

·         Unstable political government (Researchgate.net 2011)

·         Government supports for the industrial business.

Economic

·         China is the second biggest economy in the world.

·         High population growth.

·         It has increasing GDP rate during 2007-2012 and till present.

·         It has higher rate of GDP increase than US (Theguardian.com 2017).

·         Valuation of industries are also increasing (Theguardian.com 2017).

Social

·         Ethic culture is there in China.

·         Issues with gender discrimination

·         Comparatively poor class is more accounted

·         Attractive market for the foreign investor (Scmp.com 2017)

Technological

·         Technological developments is a priority in China (Cao 2017).

·         Various challenges for attaining advanced implementation processes.

·         Price wars are issue for the big industrial set ups (Cao 2017).

Environmental

·         Various kind of environmental problems.

·         High air pollution rate due to excessive use of cars and other industrial manufacturing set ups (Livescience.com 2017)

·         Water pollution rate is also high in the cities of China (Livescience.com 2017)

·         Cancer villages found in some areas of China

·         Segmented and diverse markets for the industrial goods (Livescience.com 2017)

Legal

·         Various International and Trade laws imposed by the government of China for global companies (Anzbusiness.com 2017).

·         Various financial and legal regulation for the heavy industries (Anzbusiness.com 2017)

·         Regulation for foreign currency conversions and other trade practices (Anzbusiness.com 2017)

PESTEL Analysis of China

(Source: Created by author)

The heavy manufacturing industry merely use to have threat of new entrants in the market. The business startup requires huge amount of investment and lies with high risk too. Thus, the force of threat of new entrants is low for Putzmeister GmbH, Germany (Jessberger and Liefner 2014).

There are very few substitutes and it is hardly found in the market. Henceforth, the chance of getting threats from the substitutes in the market is very less.

In Germany there are also many suppliers of the machinery parts, equipments to the manufacturing machine builder companies like Putzmeister GmbH. Henceforth, the bargain power of the suppliers is low and the for force is not so influencing for Putzmeister GmbH (Jessberger and Liefner 2014).

The buyers of such machinery are the manufacturing companies of other sectors like food and vehicles, automobiles and hence they use to have low power of bargain (Jessberger and Liefner 2014).

The machinery and equipments industry is very lucrative industry in Germany and it is considered as the best field for the foreign investors too. Though there are rivalry in the industry since the products are used to be expensive and quality and longevity also matters in such cases of this type of products. There are few big companies in Germany who are in the same industry and the trading use to be competitive in Germany (Jessberger and Liefner 2014).

Political

·         Largest consumer market in Europe (Export.gov 2017)

·         Stable political environment (Export.gov 2017)

·         Government approaches for the growth of the business sectors (Export.gov 2017)

Economic

·         High GDP growth rate due to service sector and the industrial sectors (Businessculture.org 2017)

·         Automobiles and metals industries have good influence in the economy of the country (Businessculture.org 2017)

·         In the years of 1991 to 2010, the growth of the industrial sectors were higher than other sectors (Businessculture.org 2017).

·         Resilient labour market during the financial and economic crisis

Social

·         Germany has 82 million residents

·         It has a modern and multicultural economy in the country.

Technological

·         Many independent laboratories in the country.

·         Government investment in various sectors of research.

·         Most preferable position for various field of research among the other various countries in Europe.

·         Automobile industry is the main strength of the country.

·         Germany is considered as very advanced country since lots of money got invested in the research purposes.

Environmental

·         Frequent climate change

·         Most populated country in the world (Smith 2017)

·         Consequences of global warming and carbon emissions

Legal

·         Various regulation for the domestic automotive industries

·         Regulations regarding the labour wages and overhead costs

(Source: Created by author)

Conclusion

The report has gone through various news and articles to understand the current market position of the two companies Sany Heavy Industry and the Putzmeister GmbH. The research has found that, both of the companies has very good market position now and also they has good market position in the years 2007-2012. Along with that, the research has found the five forces analysis of the markets in the China and the Germany and it is concluded that, the companies has very good market situation for the future growth and it is recommended for both of the companies to implement more strategic management methods to achieve more growth in future.

The report has also gone through the environmental analysis of the two countries China and the Germany. The analysis has gone through the political, economic, environmental, social and cultural, technological and legal environments factors for both the countries. The research has found that, there are sufficient potential in the environment for the business the heavy industries are doing. There are high competition but market players are very few hence it is easy for the companies to follow their rivals and act accordingly.

References

Anzbusiness.com. 2017. China – Business Regulations. [online] Available at: https://www.anzbusiness.com/countries/china.html#.WPOt6NzafIU [Accessed 16 Apr. 2017].

Businessculture.org. 2017. Business culture. [online] Available at: https://businessculture.org/western-europe/business-culture-in-germany/ [Accessed 16 Apr. 2017].

Cao, C. 2017. Technological Development in China’s Industry. [online] Chinaperspectives.revues.org. Available at: https://chinaperspectives.revues.org/924 [Accessed 16 Apr. 2017].

Export.gov. 2017. Political environment in Germany. [online] Available at: https://2016.export.gov/germany/MarketResearchonGermany/CountryCommercialGuide/DoingBusinessInGermany/index.asp [Accessed 16 Apr. 2017].

Jessberger, S. and Liefner, I., 2014. The German M&E industry: an analysis in the context of innovation. E-Journal of China Urban Studies, 9(1).

Khl.com. 2012. Global ranking. [online] Available at: https://www.khl.com/videozone/item72304/ [Accessed 16 Apr. 2017].

Livescience.com. 2017. China's Top 6 Environmental Concerns. [online] Available at: https://www.livescience.com/27862-china-environmental-problems.html [Accessed 16 Apr. 2017].

Putzmeister.com. 2017. Putzmeister - Germany. [online] Available at: https://www.putzmeister.com/enu/putzmeister-germany.htm [Accessed 16 Apr. 2017].

Researchgate.net. 2011. Political China. [online] Available at: https://www.researchgate.net/publication/257679695_China%27s_Political_Stability_Global_Comparisons [Accessed 16 Apr. 2017].

Scmp.com. 2017. Environmental and social concerns of China. [online] Available at: https://www.scmp.com/news/china/article/1313968/environmental-and-social-concerns-rise-china [Accessed 16 Apr. 2017].

Scmp.com. 2017. Environmental and social concerns of China. [online] Available at: https://www.scmp.com/news/china/article/1313968/environmental-and-social-concerns-rise-china [Accessed 16 Apr. 2017].

Smith, B. 2017. Germany: Environmental Issues. [online] Azocleantech.com. Available at: https://www.azocleantech.com/article.aspx?ArticleID=549 [Accessed 16 Apr. 2017].

Theguardian.com. 2017. China economic. [online] Available at: https://www.theguardian.com/news/datablog/2012/mar/23/china-gdp-since-1980 [Accessed 16 Apr. 2017].

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