Zoomlion Heavy Industry Sci & Tch : Creates a New Path to Internationalization for China

Author: Zoomlion 　Date:　2014-12-31

As a benchmark for Chinese companies looking to become more international, Zoomlion used its sophisticated international thinking and ideas in 2014 to continue to increase resource allocation to achieve a global layout and global operations in its research and development, production and sales channels in response to profound changes in the international market. In doing so, the company has pioneered an effective new path to internationalization for the Chinese construction machinery and equipment manufacturing industries.

Successful Overseas Expansions

Since March 2011, when an overall slowdown in the country's economic growth took place and other factors such as overcapacity occurred, China's construction machinery industry bid farewell to ten years of tremendous growth and began a period of L-shaped consolidation.
"The production capacity of the country's excavator industry has already exceeded 400,000 units per annum," notes Li Hongbao, General-Secretary of the Excavator Division at the China Construction Machinery Industry Association. "However, global excavator demand is less than 400,000 units. Although many construction machinery manufacturers have plans to suspend and reduce production, there are still many products piled up in warehouses."
At a Prime Minister's Forum, Zhan Chunxin, chairman of Zoomlion, admitted frankly that the industry is experiencing a downward adjustment period during its transformation and upgrading phase and is facing issues such as weakening demand, overcapacity and dwindling profits.
Against this backdrop, Chinese construction machinery companies have turned their attention to foreign markets and continued to expand exports. According to statistics from the General Administration of Customs, in the first half of 2014, China exported construction machinery worth US$9.642 billion, up 0.87% compared to the same period last year. 
As a leading construction machinery company, Zoomlion has achieved successes in overseas markets. At CONEXPO-CON/AGG 2014 held in Las Vegas, US, in March 2014, Zoomlion secured a major heavy machinery contract worth US$20 million thanks to its high-quality localized products. Moreover, Zoomlion achieved year-on-year growth of over 100% in the Americas and the Middle East (including Saudi Arabia) in the first half of the year.

Global Resource Integration

The company has achieved gratifying results. However, Zhan Chunxin feels that for Chinese companies to march onto the global stage, it will take more than simply selling Chinese products overseas or setting up manufacturing plants and sending people abroad. Instead, companies will have to integrate into the global industrial ecology and become world-class enterprises supported by different ethnicities, countries and cultures.
"Internationalization is like a race. Multinational companies from Europe and the US started earlier and are running faster than Chinese companies. In addition, their management philosophies, technical resources and localization capabilities far exceed those of Chinese companies." As such, Zhan Chunxin believes that Chinese companies cannot afford to wait for natural growth and evolution, but must take the new path to internationalization.
The new path to internationalization is an all-new concept based on Zoomlion's past experiences first proposed by Zhan Chunxin at an EU-China High-Level Forum in 2013.
In essence, it is about leveraging international capital markets to consolidate global resources so that the system, management, technology and culture of Chinese companies can quickly catch up with international market leaders and companies ultimately achieve rapid development and success on the global stage.
Guided by this internationalization concept, Zoomlion committed itself to parallel development utilizing domestic and global capital platforms in 2014.
On the one hand, the company has further consolidated its international resources with the acquisition of Germany's M-TEC, the Netherlands' Raxtar and Chery Heavy Industry. On the other, Zoomlion has accelerated the construction of its overseas research and development platform, assembly bases, joint-venture plants and market channels; founded an Indonesian subsidiary and a finance company; and built and put into operation a new service center in Brazil.
Zoomlion has overseas manufacturing bases in Brazil and India as well as sales and service platforms in nearly 80 countries and subsidiaries in over 40 countries, all of which comprise its comprehensive multinational business operations. 

Global Knowledge Accumulation

By adhering to this new path to internationalization, Zoomlion has also garnered recognition from authoritative international organizations.
At this year's Summer Davos Forum, Boston Consulting Group, a global consulting firm and leading global business strategy consultancy, released its 2014 Top 100 Global Challenger List. Zoomlion was ranked 28th and was the only construction machinery company to make the list.
In a research report discussing China's "one belt, one road" strategy, Haitong Securities pointed out that Zoomlion's continual progress in internationalization has become a natural benchmark for the strategy and will help Zoomlion usher in new opportunities. The report also said that "this is the result of the bold move by Zoomlion's core team of having RMB 843 million of holdings."
"Through constant exploration, refinement and adjustment and with the country's promotion of the 'one belt, one road' strategy, Zoomlion will experience rapid development in overseas markets in the near future," Zhang Jianguo, senior president of Zoomlion's overseas business, said. "Within the next three to five years, the proportion of the company's profits that come from overseas operation will increase to 30-40%. The company is already prepared to compete against major international companies in their home markets in the next few years."
In 2014, Chinese companies accelerated efforts to venture into overseas markets through mergers, stock acquisitions and wholesale acquisitions as part of their global strategies. Based on this, the world is welcoming its sixth wave of mergers and acquisitions, spearheaded by China. This shows the forward-looking nature of Zoomlion's new path to internationalization.