3B Global Customer Demands and Globalization

Question 1

Key areas for globalization

Answer 1

1. Global customer demands require region-specific product strategy to be successful
2. Globalization of engineering key to success
3. Local sourcing required to meet product cost expectations
4. Deep localization of manufacturing for additional savings

Question 2

Four main reasons for regional differences in customer demands

Answer 2

1. Quality of road conditions
2. Strictness of regulations
3. Population density
4. Professionalization of logistics industry

Question 3

NAFTA customer demands

Answer 3

• comfort product
  Past:
• regulation less strict, not uniform across states
  Current:
• Nevada first state with autonomous truck pilot

Question 4

Brazil customer demands

Answer 4

• Brazil as first BRIC country to introduct EURO V regulation

the “advanced product”

Question 5

Europe customer demands

Answer 5

strict regualtions

TCO focus

Question 6

India customer demands

Answer 6

• the oldest product
  Current development:
• first upgraded products already in the market

Question 7

China customer demands

Answer 7

the fast follower

- rapid development of advanced technologies GPS, ABS leading to dominating mid-market

Question 8

Russia customer demands

Answer 8

the power product
Current:
- cooperation with global players to support upgrading

Question 9

Mid-market Heavy Duty Trucks (HDT) criteria:

Answer 9

• good engine performance (200-450 HP)
• Engine Euro-IV and -V conformity
• some special equipment (AC, Airbag, GPS, ABS)
• increased comfort (cushioned seats)
• moderate price (35-65k)
• advanced TCO (medium fuel efficiency and increased reliability)

Question 10

Two product strategies

Answer 10

• Downgrading strategy

- Upgrading strategy

Question 11

Downgrading strategy

Answer 11

Downgrading of established market truck concepts

• using localization of production, sourcing, and R&D to reduce costs
• reducing product technology and equipment to the level required in BRIC

Question 12

Upgrading strategy

Answer 12

Upgrading of existing concepts

• Acquisition of advanced know-how required
• Powertrain is usually bought or delivered from global OEM or OES (Original Equipment Supplier), cabin redesigned with outside help.

Question 13

Types of engineering globalization

Answer 13

• Home players
• Exporters
• Explorers
• Settlers
• Global players

Question 14

Home players approach

Answer 14

• no presence in basic research
• limited presence in engineering
• no presence for product conception

Question 15

Exporters approach

Answer 15

• no presence in basic research
• limited presence in engineering
  Product portfolio:
• small task force driven by HQs defining local adaptations

Question 16

Explorers approach

Answer 16

• task force adapting component to local specs
• small team delivering low-spec engineering solutions
  Product portfolio:
• large task force specifying local market requirements

Question 17

Settlers approach

Answer 17

• small R&D department serving local needs
• Engineering responsible for some global components
  Product portfolio:
• local department participating in joint decision on products.

Question 18

Global players approach

Answer 18

• large R&D department serving global needs
• Engineering with full responsibility for Center of Competence (CoC) contents
  Product portfolio:
• large CoC defining portfolio of imported and locally produced goods

Question 19

Five elements of an effective sourcing organization –> Competitive Cost Country sourcing

Answer 19

• Formal structure
• Coordinating mechanism
• Processes and policies
• People and skills
• Metrics and support systems

Question 20

How many production costs can be saved by localization of manufacturing?

Answer 20

High localization like fully localized produciton of Daimler trucks in Brazil leads to 40% reduction in production cost. A bit lower in Thailand where there is localized assembly and sourcing. (20% cost reduction).