Meeting competition in Italian drives market

With declining consumer budgets, electric drives end users in Italy are becoming increasingly price-sensitive and are seeking all-inclusive packages, says a report.

With declining consumer budgets, electric drives end users in Italy are becoming increasingly price-sensitive and are seeking all-inclusive packages.

In order to remain competitive, manufacturers will, therefore, need to reduce production and maintenance costs, as well as take necessary steps to improve product quality and identify potential end-user sectors.

Technological advances and the entry of new participants will further increase competition in the market, which remains highly fragmented.

Barriers to the entry of Chinese manufacturers are being gradually broken down as traditional market prejudices concerning their processes and the quality of their products erode over time.

Competitors are also emerging from South Korea and their low production and labour costs will make them increasingly difficult to compete against, in an already mature market.

It can be argued that some manufacturers risk becoming complacent over the potential threat posed to their revenues by new entrants.

As a result, growth is becoming increasingly dependent on both, the manufacturer's ability to successfully identify and defend specific market niches, as well as their ability to target the marketing of relevant products in specific industrial sectors and applications.

"Undoubtedly, the primary challenge for manufacturers at present, is to determine and protect these niches more effectively", noted Richard Tamworth, research manager at Frost and Sullivan.

"Such market niching will offer manufacturers a defence against globalised competition and may prevent new entrants establishing foot-holds in their key markets." Presently, machine tools, heavy industrial manufacturing and consumer-driven or fast-moving consumer goods (FMCG) manufacturing end-user sectors are supporting the uptake of electric drives in Italy.

The machine tools market sector, in particular, offers exciting long-term growth potential for the electric drives market, due to growing foreign demand for Italian goods.

In keeping with these trends, revenues in the Italian electric drives market are expected to increase from $404.7 million in 2005 to $462.0 million by 2011.

Relatively strong growth is projected for AC electric drives, due to their overall cost advantages, compared to DC units.

Driven by these advantages, several of the smaller manufacturers are seeking to establish niches in the intelligent / customised AC electric drives market.

End-user interviews conducted by Frost and Sullivan also revealed that quality and reliability, price and standardisation were important purchasing criteria.

The product's price/performance ratio was identified as the crucial factor that affected most companies, while some companies also purchased electric drives, purely influenced by price.

With industrial margins likely to continue to decline, the price of electric drives will remain an important factor.

"The electric drives market is likely to face a tough and competitive future," revealed Tamworth.

"Manufacturers will benefit from a closer screening of their potential markets, to rule out less profitable sectors and focus on those sectors where long-term positions can be established.

At the same time, offering differentiated products and integrated packages will also prove useful." * About Frost and Sullivan - Frost and Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years.

The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities.

Frost and Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics.

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