ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive The Effects of...

ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

The Effects of Globalization on the

Aluminum Extrusion Industry

The Effects of Globalization on the

Aluminum Extrusion Industry

Bruno G. Rüttimann, Alcan Singen GmbHBruno G. Rüttimann, Alcan Singen GmbH

8th International Aluminum Extrusion Technology Seminar ET‘04 May 18-21, 2004 Orlando, Florida8th International Aluminum Extrusion Technology Seminar ET‘04 May 18-21, 2004 Orlando, Florida

Part 1: Theoretical ConsiderationsPart 1: Theoretical Considerations


The Phenomenon of Globalization

Deriving Typologies of Globalization

The Characteristics of Extrusion Business

Quantitative Modelling

Outlook Part 2: Implications

The Phenomenon of Globalization

Deriving Typologies of Globalization

The Characteristics of Extrusion Business

Quantitative Modelling

Outlook Part 2: Implications

CONTENTCONTENTPart 1 (Technical Session): Theoretical considerationsPart 1 (Technical Session): Theoretical considerations

..


Saturation in existing

end markets

Saturation in existing

end markets

World-wide communication

network

World-wide communication

network

Searching for optimization potential

Searching for optimization potential

Searching for geographical expansion

Searching for geographical expansion

Searching for diversification opportunities

Searching for diversification opportunities

M&AM&A

Opening of a global market

with new competitive environment

and new world market

price

Opening of a global market

with new competitive environment

and new world market

price

+PricePrice//margin pressure margin pressure PricePrice//margin pressure margin pressure

Change of competitive system

Change of competitive system

Shake-outShake-out

Concentration processConcentration processConcentration process

The Phenomenon of GlobalizationThe Phenomenon of GlobalizationMain drivers Main drivers


Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationFramework and determinants Framework and determinants

MarketstructureMarketstructure

ProductcharacteristicsProductcharacteristics

OperatingconfigurationOperatingconfiguration

BusinesstypeBusinesstype

Type of globalizationType of globalization


Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationThe characteristics of extrusion business The characteristics of extrusion business






Product characteristics:

In general:

•determined by the value and uniqueness of product

•competitive intensity given by the differentiation degree

For extrusions:

•customer-designed semi-finished product

•virtually sold is the capacity

•the transaction object is a service


Deriving Typologies of GlobalizationDeriving Typologies of Globalization






Market structure:

In general:

•sets the competitive nature of the business

•given by concentration curve of supply and demand

For extrusions:

•fragmented (polypolistic) competition structure

•relative low entry barriers

•reproducible know-how

•limited geographic scope of action (soft alloys)

The characteristics of extrusion business The characteristics of extrusion business


Deriving Typologies of GlobalizationDeriving Typologies of Globalization






Operating configuration:

In general:

•depends on product characteristics (value, customization, durability)

•determined by product-value/transport-cost ratio

For extrusions:

•multiplant configuration with strategy of adding geographical market share - typical for a fragmented business

The characteristics of extrusion business The characteristics of extrusion business


Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationBasic classification of business typesBasic classification of business types

MarketstructureMarket

structureProductcharacteristicsProductcharacteristics


BusinessclassificationBusinessclassification









PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted








PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

polypolistic oligopolisticMARKET STRUCTURE

Commodity

Speciality

Standards

Convenience


Deriving Typologies of GlobalizationDeriving Typologies of Globalization2 main types 2 main types


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IIType II






Type IType I

Type 1: material G. (physical)

Type 2: immaterial G. (financial)


Deriving Typologies of GlobalizationDeriving Typologies of Globalization2 main types 2 main types


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IbType Ib

Type IaType Ia

Type IIType II









Quantitative ModellingQuantitative ModellingPrice discrepancy within different economies and corresponding propensity for globalizationPrice discrepancy within different economies and corresponding propensity for globalization

Volume

Price

FDI

CH

B GA

EpA

pK

Price span of similar economies

Demand ZSupply Z

ZpZ

Transaction cost cZK

Globalization propensity (pK-pZ-cZK)


Deriving Typologies of GlobalizationDeriving Typologies of Globalization... An additional subtype is emerging ... An additional subtype is emerging


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IbType Ib

Type IaType Ia

Type IIType II






Type IcType Ic




Quantitative ModellingQuantitative ModellingPropensity function and corresponding elasticity for globalizationPropensity function and corresponding elasticity for globalization

0

100

200

300

400

500V Z

K G

lob

alizati

on

volu

me (

kto

n)

0 0,5 1 1,5 2

Propensity (Euro/kg)

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

Ela

sti

cit

y

Propensity function Elasticity for globalization

0p

LK

ZKZK

ZK

pp

s

KZK eLV 0

ZK

ZK

ZK

ZK

ZK

ppV

V


Theoretical ConsiderationsTheoretical ConsiderationsPrice drop and shake-out in economy K due to globalizationPrice drop and shake-out in economy K due to globalization

Volume

PriceDemand K Supply

K

pK

VK

initial equilibrium

Supply Z

pZ

VZ

price drop of domestic supplies

volume increase

pdom

VK‘

Supply K‘

final equilibrium

shake out

remaining domestic

supplies Vdom

import

supplies VZK


What does that mean?What does that mean?Analyzing the impact on the extrusion industryAnalyzing the impact on the extrusion industry

Will a world market price establish?

Do we have to expect structural changes?

Is a new business paradigm crystallizing?

What is the extent of globalization in extrusions?

How can we respond to this challenge?

Will a world market price establish?

Do we have to expect structural changes?

Is a new business paradigm crystallizing?

What is the extent of globalization in extrusions?

How can we respond to this challenge?

Outlook part 2: ImplicationsOutlook part 2: Implications


Thank you for your attention and

see you tomorrow in the General Session

for:

Part 2: The Implications

Thank you for your attention and

see you tomorrow in the General Session

for:

Part 2: The Implications

ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive The Effects of...

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