Emerging markets are "where the music plays"

  • 23-Oct-2008 01:47 EDT
Convergence Neumann.JPG
Dr. Karl-Thomas Neumann serves as the Chairman of the Executive Board at Continental AG, a 137-year-old company whose Automotive Group is focused on safety, powertrain, and the interior.

Supplying components to affordable cars sold in emerging markets occurs in "an entirely different environment" from established markets, Dr. Karl-Thomas Neumann, Chairman of the Executive Board for Continental AG, said during his keynote address on the final day (Oct. 22) of Convergence 2008 in Detroit.

Whereas mature markets are "all boring in terms of growth," emerging markets are "where the music plays," said Neumann. Continental has had a presence in India, China, and other emerging markets for some time. Finding success in developing countries can be summarized as being where the customers are. In terms of research and development, it's a good strategy to "have your engineers on the ground," said Neumann. Having a presence in the local markets also applies to sourcing and manufacturing.

Neumann cited labor costs as the underlying difference between two of Continental's wheel speed sensor factories, one in Belgium and one in China. The China plant has 1200 workers—600 of whom monitor parts quality. Only a few hundred workers are employed at the Belgium plant, but the plant in China with many more workers has considerably lower labor costs, according to Neumann.

"The most important point is you have to balance your investment with labor costs," he said. "That means if you have a very low labor cost it makes no sense to do high investments, and vice versa. It's possible to create the same quality out of a very simple, hand-labor-intensive environment as you can from a fully automated, highly robotic environment."

In developing product for an emerging market, the technology should match the performance needs of that market, said Neumann. "We must benefit from [our knowledge and expertise] because if we don't do that, then basically anyone could be our competitor in this field and do as well as we do."

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