team 1 cummins case
TRANSCRIPT
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Cummins Transition Path - Now and Future
2015 Yale Beijing Pre-MBA Program
Team 1:Lawrence BowersXiaofan ChenYi BianZhongji Wang
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Table of Contents
Historical Success
Customers and Products
Parallel Competition
Government and Public Relations
Conclusion
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Historical Success
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Historical Success• Differentiated business model• Established presence since 1975• JV Partnerships in China up to 16…
Among others….
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Unprecedented Growth
• 23% average Y-o-Y growth past 8 years• Expect new ISG engine to drive 2015 growth
in first full year of production
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CustomersandProdcuts
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Consumers• Across these markets, our customers are on a global basis.
• Engine Joint-ventures: Dongfeng Motor Corporation, Shanxi Automobile Group Co., Ltd. Foton
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Products in the Future …
Strategy: •A diverse portfolio engine power•Focus on GREEN Energy, not only on diesels: Natural Gas, Electricity…..
Ex: New products: June 11, 2014 1st generation of natural gas engine designed and manufactured in China---L8.9G, which satisfies NS 5th.
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• PM 2.5 concentration will decrease 45% in 2022; • Cummins will continue to contribute to, as it always did, this standard. o Ex: Clean engines in the buses in Beijing: more than 4600. o Its clean engine will also be a perfect choice for the machinery used in
the construction of the Olympic venues.
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ParallelCompetition
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China Top 10 Diesel Engine Manufacturers’ Market Share (2015 Jan – May)
Source: automarket.net.cn
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Competing MarketThe whole diesel engine
market is crowded with many competitors
High NS IV Emission Standard
Opportunities for diversified development in engine market
Reducing market share of traditional diesel engine manufacturer tycoons ( Quanchai, Chaochai, )
- Cummins’s technology leadership- Competitors’ preparation for NS IV is technologically insufficient.
- Booming market of light energy market (Futon Cummins ISF) - Technology Leardership at both ISG and Gas engine
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Cummins Technology Leadership
Competitors
Integrated Customer Solutions
Market Needs
ISGHeavy-duty engine
ISF
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Competitors ≠ Competing
-Using technology leadership to improve market participation;-Only through establishing more partnership can Cummins captures more market share in China.
Cummins
MAN -SINOTRUCK
Weichai
Partnership with positive player at heavy truck market (JAW China)
Components;Out-sourcing;Technology Support
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Government and PublicRelations
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Government Relation
Central government : 1.Sino-US Joint Statement on Climate Change (with
Cummins Headquarter in US)2. Strong connection with National Development and
Reform Commission (with officials eg. Mr. Xie Zhenhua) (Approval for special program with subsidies)
3. Win favor through sponsorship for big events in China (2020 Winter Olympics)
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Government Relation
Local government: 1. Partnership with local business with a strong
connection with government (eg. Yiqi, Foton and Dongfeng)
2. Win-win situation (through creating jobs, technical support in environmental protection)
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Public Relation
Media diverse channels, positive media exposure NGO China Foundation for Poverty Alleviation China Environmental Protection Foundation Industrial institution University Cummins Scholarship
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ConclusionIn the short termFocus on green energy as standards tightenMaintain technology leadershipBuild on existing JV partnerships
In the long termTurn competition into cooperation Keep high profile on gov and public relationsSolve geographic inconsistency