PRODUCT STRATEGY IN EMERGING MARKETS Ryan Flynn

© 2012 Konecranes. All rights reserved.

06/09/2012

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Product strategy in emerging markets / Ryan Flynn

AGENDA • Emerging market orientation • Wire Rope Hoists and the China market • Equipment development in the process and port industry • Service in emerging markets • Summary

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Product strategy in emerging markets / Ryan Flynn

EMERGING MARKETS “SEEING THINGS DIFFERENTLY”

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Product strategy in emerging markets / Ryan Flynn

GLOBAL STRUCTURAL CHANGE IS CONTINUING – SHARE OF WORLD INDUSTRIAL PRODUCTION 45 % 40 %

North America

35 %

Asia Europe

30 % 25 % 20 % 15 % 10 % 5% 0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Maddison (Historical Statistics), IMF, ETLA © 2012 Konecranes. All rights reserved.

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Product strategy in emerging markets / Ryan Flynn

APAC’S SHARE OF OUR SALES HAS INCREASED FROM 7% TO 21% IN 10 YEARS

EMEA

AME

APAC

70 % 60 % 50 % 40 % 30 % 20 % 10 % 0% 2002

2003

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2004

2005

2006

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2008

2009

2010

Product strategy in emerging markets / Ryan Flynn

2011

CHANGING WORLD ORDER

The Old Triad

Almost 50% of our growth is coming from emerging markets

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Product strategy in emerging markets / Ryan Flynn

EMERGING MARKET PRODUCT PLATFROMS

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Product strategy in emerging markets / Ryan Flynn

EMERGING MARKET PRODUCT PLATFORMS: 1: GLOBAL HIGH END PRODUCT PLATFORMS

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Product strategy in emerging markets / Ryan Flynn

EMERGING MARKET PRODUCT PLATFORMS: 2: LOCAL “GOOD ENOUGH” PRODUCT PLATFORMS

Open Winch CD/MD

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Product strategy in emerging markets / Ryan Flynn

WIRE ROPE HOISTS AND THE CHINA MARKET

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Product strategy in emerging markets / Ryan Flynn

WIRE ROPE HOIST MARKET

ESTIMATED GLOBAL WIRE ROPE HOIST MARKET IS:

350.000 UNITS PER ANNUM (EUR 1+ BN)

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Product strategy in emerging markets / Ryan Flynn

CD/MD WIRE ROPE HOISTS ESTIMATED CD/MD WIRE ROPE HOIST VOLUME:

200.000 UNITS PER ANNUM (EUR 250 M)

ESTIMATED CD/MD WRHs IN USE over

1.000.000 UNITS

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Product strategy in emerging markets / Ryan Flynn

CHINA – DEVELOPMENT OF MID-SEGMENT End users: FDI Prime SOE

Prime SOE Prime Chinese

(Prime Chinese) Developing Chinese

Local Chinese

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Product strategy in emerging markets / Ryan Flynn

SANMA PRODUCT DEVELOPMENTS NEW high-quality painting

NEW brake lining

NEW re-engineered hoist brake

NEW long-lived wire rope

re-engineered motor shaft

NEW

NEW standardized - overload device - upper limit switch NEW bottom hook blocks

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Product strategy in emerging markets / Ryan Flynn

SANMA QUALITY IMPROVEMENT • Manufacturing processors • Investments in machinery • Testing facilities and quality control • Packing and shipping • Documentation

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Product strategy in emerging markets / Ryan Flynn

INCREASING HOIST VOLUMES

After JV closure

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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Product strategy in emerging markets / Ryan Flynn

Mid Sgement product development

WIRE ROPE HOIST PRODUCT SEGMENTS

KONECRANES’ CXT HOIST SANMA CD/MD

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Product strategy in emerging markets / Ryan Flynn

EQUIPMENT IN THE PROCESS AND PORTS INDUSTRY

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Product strategy in emerging markets / Ryan Flynn

WINCH SOLUTIONS IN THE PROCESS INDUSTRY Smarton from Konecranes

Open winch solution from WMI

• • • • •

• Robust construction using local components • Conventional open winch technology • Modular construction enabling ease of maintenance

Automation features as standard Energy saving regenerative braking Wide range of Smart options Maintenance friendly Modular and serial production

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Product strategy in emerging markets / Ryan Flynn

EXAMPLE OF SCALABLE VALUE CREATION

Price

Additional features

Basic Crane

’Apples-to-apples’ comparison

“Good enough” © 2012 Konecranes. All rights reserved.

2

Smart Features

3

Unique features of basic SMARTON

Basic SMARTON

SMARTON 06/09/2012

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Product strategy in emerging markets / Ryan Flynn

market level

competitor does not have

Value based

1 Smart Features that the

CONTAINER HANDLING - IMPORTANT SEGMENT • R&D will be visible in our offering during 2013

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Product strategy in emerging markets / Ryan Flynn

PROJECT MANAGEMENT EXPERIENCE AND LEVERAGING SERVICE OFF EQUIPMENT DELIVERIES 689 ft. 210 m

384 ft. 117 m

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Product strategy in emerging markets / Ryan Flynn

SERVICE IN EMERGING MARKETS

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Product strategy in emerging markets / Ryan Flynn

SERVICE POTENTIAL IN EMERGING MARKETS Developed markets • Stronger understanding and orientation towards ROI • Total cost of ownership philosophy • Safety compliance and employee well being

Emerging markets • Less value placed on service where labour rates are low • Preventative maintenance concept has less emphasis • Non OEM parts are often used

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Product strategy in emerging markets / Ryan Flynn

MARKET SEGMENTS AND OFFERING PROGRESSION

Basic Services • Compliance • On-Call Services • Spare Parts

Service Contract & Preventive Maintenance Program

Advanced Diagnostic, Analytic and Planning Services

• Inspection • Preventive Maintenance • Predictive Maintenance • Remote Services • Repairs / Spare Parts • Field Modernizations • SmartSolutions • Operator Training • Lifting Equipment • Site Agreement • Extended Warranties

• Crane Reliability Survey • Runway & Crane Geometry • Critical Components Assessment / NDT • Remote Monitoring , Troubleshooting, and Production/Performance optimization • Maintenance Assessment Plan (MAP)

Emerging Markets © 2012 Konecranes. All rights reserved.

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Advanced Performance Services and Solutions • Prescription and Reversed Engineered Parts & Components • Rebuilds & Overhauls • Engineered Modernizations • SmartSolutions • Customized Training Programs • Outage Support • Complete Maintenance Outsourcing

Developed Markets 25

Product strategy in emerging markets / Ryan Flynn

SUMMARY OF WHAT WE ARE DOING

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Product strategy in emerging markets / Ryan Flynn

Yes

Value Innovation

No

No

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Going-to-Market Innovation 06/09/2012

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Yes

Product strategy in emerging markets / Ryan Flynn 27

KC Strategic Top Segment focus

KC Strategic Mid Segment focus EM current technology level

KC to-be technology level

EM to-be technology level in 1-3 years

Constructions do not get smaller but smarter

KC current technology level

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Product strategy in emerging markets / Ryan Flynn

SUMMARY • Emerging markets are growing and more important • R&D is now being undertaken in China and India • We have a program that focuses on our offering and path to market in Emerging Markets • We will continue to leverage our group position and will see further growth in Emerging markets

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Product strategy in emerging markets / Ryan Flynn

NOT JUST LIFTING THINGS, BUT ENTIRE BUSINESSES © 2012 Konecranes. All rights reserved.

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Product strategy in emerging markets / Ryan Flynn