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ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Effects of Globalizationon the
Aluminum Extrusion Industry
The Effects of Globalizationon 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 2: ImplicationsPart 2: Implications
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Mergers & AcquisitionsMergers & Acquisitions
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Trade DeregulationTrade Deregulation
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
IncreasingCompetitionIncreasingCompetition
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Price PressurePrice Pressure
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Flow of InformationFlow of Information
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
InterlinkedMarketsInterlinkedMarkets
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
World-wide StrategiesWorld-wide Strategies
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ReducedGrowth RatesReducedGrowth Rates
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
OvercapacityOvercapacity
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Un-employmentUn-employment
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
g Summary Part 1: Theoretical Considerationsg The Dimension of Globalizationg The Emerging New Paradigmg The 10 Extrusion Postulates of Globalizationg Restrictions and Strategic Options for Extruders
g Summary Part 1: Theoretical Considerationsg The Dimension of Globalizationg The Emerging New Paradigmg The 10 Extrusion Postulates of Globalizationg Restrictions and Strategic Options for Extruders
CONTENTCONTENTPart 2 (General Session): ImplicationsPart 2 (General Session): Implications
..
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationBasic classification of business typesBasic classification of business types
MarketstructureMarket
structureProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinessclassificationBusinessclassification
Type of globalizationType of globalization
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationBasic classification of business typesBasic classification of business types
MarketstructureMarket
structureProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinessclassificationBusinessclassification
Type of globalizationType of globalization
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationBasic classification of business typesBasic classification of business types
MarketstructureMarket
structureProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinessclassificationBusinessclassification
Type of globalizationType of globalization
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationBasic classification of business typesBasic classification of business types
MarketstructureMarket
structureProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinessclassificationBusinessclassification
Type of globalizationType of globalization
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
polypolistic oligopolisticMARKET STRUCTURE
Commodity
Speciality
Standards
Convenience
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Deriving Typologies of GlobalizationDeriving Typologies of Globalization2 main types2 main types
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
Type IIType II
MarketstructureMarket
structureProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinessclassificationBusinessclassification
Type of globalizationType of globalization
Type IType I
Type 1: material G. (physical)Type 2: immaterial G. (financial)
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Deriving Typologies of GlobalizationDeriving Typologies of Globalization2 main types2 main types
MarketstructureMarket
structureProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinessclassificationBusinessclassification
Type of globalizationType of globalization
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
Type IbType Ib
Type IaType Ia
Type IIType IIType Type IcIc
Type 1: material G. (physical)Type 2: immaterial G. (financial)
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Bauxit mining,
alumina production
,
Primary smelter, casting,
Rolling, extruding,
die casting, forging ,...
, ,
,
Components, ,
finished productsU
sage
Recycling
Usa
ge
Scrap,
waste
Remelters, foundries
, Scrap,waste
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationAluminium industry structure and globalization typeAluminium industry structure and globalization type
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
Type IbType Ib
Type IaType Ia
Type IIType II
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Bauxit mining,
alumina production
,
Primary smelter, casting,
Rolling, extruding,
die casting, forging ,...
, ,
,
Components, ,
finished productsU
sage
Recycling
Usa
ge
Scrap,
waste
Remelters, foundries
, Scrap,waste
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationAluminium industry structure and globalization typeAluminium industry structure and globalization type
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
Type IbType Ib
Type IaType Ia
Type IIType II
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
Bauxit mining,
alumina production
,
Primary smelter, casting,
Rolling, extruding,
die casting, forging ,...
, ,
,
Components, ,
finished productsU
sage
Recycling
Usa
ge
Scrap,
waste
Remelters, foundries
, Scrap,waste
Deriving Typologies of GlobalizationDeriving Typologies of GlobalizationAluminium industry structure and globalization typeAluminium industry structure and globalization type
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
Type IbType Ib
Type IaType Ia
Type IIType II Rolling, extruding, die casting, forging ,...
, ,
,
Rolling, extruding,
die casting, forging ,...
, ,
,
Rolling, extruding,
die casting, forging ,...
, ,
,
Rolling, extruding,
die casting, forging ,...
, ,
,
Rolling, extruding,
die casting, forging ,...
, ,
,
Rolling, extruding,
die casting, forging ,...
, ,
,
Rolling, extruding,
die casting, forging ,
, ,
,
olling, extruding
casting, forging
,
,
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
... a Big Change is Occurring... a Big Change is OccurringEuropean price evolution of rolled and extruded productsEuropean price evolution of rolled and extruded products
0
1000
2000
3000
4000
5000
1980 1984 1988 1992 1996 2000
LME
DM
/Ton
5
6
7
8
9
10
DM
/kg
LMERollingExtrusion
Opening of Eastern EU
?
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Dimension of GlobalizationThe Dimension of GlobalizationGlobal view of extrusion production in 2001 Global view of extrusion production in 2001
L. America675
N. America1770 West Europe
2400
E. EU300
CIS650
Japan1020
China1300
Asia1197Africa
450
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Dimension of GlobalizationThe Dimension of GlobalizationGlobal view of extrusion flows in 2001 Global view of extrusion flows in 2001
L. America675
N. America1770 West Europe
2400
E. EU300
CIS650
Japan1020
China1300
Asia1197Africa
450
27
13
93
14
171
2443
1615138
5439 55 66
23
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Dimension of GlobalizationThe Dimension of GlobalizationGeographical distribution of selected group plantsGeographical distribution of selected group plants
Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa
Alcan 5 4 1Alcoa 45 17 11 14 1 1 1Bonnell 7 7Capral 6 6Corus 5 4 1Hydro 40 10 2 23 1 1 3Indalex 15 15Kaiser 7 7Pechiney 9 9Sapa 14 2 11 1YKK 6 1 4 1
Source DIAC
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Dimension of GlobalizationThe Dimension of GlobalizationGeographical distribution of selected group plantsGeographical distribution of selected group plants
Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa
Alcan 5 4 1Alcoa 45 17 11 14 1 1 1Bonnell 7 7Capral 6 6Corus 5 4 1Hydro 40 10 2 23 1 1 3Indalex 15 15Kaiser 7 7Pechiney 9 9Sapa 14 2 11 1YKK 6 1 4 1
Source DIAC
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Dimension of GlobalizationThe Dimension of GlobalizationGeographical distribution of selected group plantsGeographical distribution of selected group plants
Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa
Alcan 5 4 1Alcoa 45 17 11 14 1 1 1Bonnell 7 7Capral 6 6Corus 5 4 1Hydro 40 10 2 23 1 1 3Indalex 15 15Kaiser 7 7Pechiney 9 9Sapa 14 2 11 1YKK 6 1 4 1
Source DIAC
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Dimension of GlobalizationThe Dimension of GlobalizationGeographical distribution of selected group plantsGeographical distribution of selected group plants
Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa
Alcan 5 4 1Alcoa 45 17 11 14 1 1 1Bonnell 7 7Capral 6 6Corus 5 4 1Hydro 40 10 2 23 1 1 3Indalex 15 15Kaiser 7 7Pechiney 9 9Sapa 14 2 11 1YKK 6 1 4 1
Source DIAC
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Emerging New ParadigmThe Emerging New ParadigmDynamics of paradigm change in fragmented marketsDynamics of paradigm change in fragmented markets
Strategy to growglobally for K
+
GlobalizationType 2
Take overin Z
+
Propensity for globalization(Type 1c)
+Strategy to grow
globally for Z
+
GlobalizationType 1c
Export (Z K)+
Domesticdemand K
+
-
Domesticdemand Z
-
-
+
-
Shake outin K
+
+
+
+
-
-
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The Emerging New ParadigmThe Emerging New ParadigmDynamics of paradigm change in fragmented marketsDynamics of paradigm change in fragmented markets
Strategy to growglobally for K
+
GlobalizationType 2
Take overin Z
+
Propensity for globalization(Type 1c)
+Strategy to grow
globally for Z
+
GlobalizationType 1c
Export (Z K)+
Domesticdemand K
+
- -
Domesticdemand Z
-
+
-
Shake outin K
+
+
+
+
-
-
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 1Type 2 globalization will not change the fragmented market structure and itsrelated market rationale.
Postulate 1Type 2 globalization will not change the fragmented market structure and itsrelated market rationale.
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
ddi
ffere
ntia
ted
Type IbType Ib
Type IaType Ia
Type IIType II
MarketstructureMarketstructure
ProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinesstypeBusinesstype
Type of globalizationType of globalization
MarketstructureMarketstructure
ProductcharacteristicsProductcharacteristics
OperatingconfigurationOperatingconfiguration
BusinesstypeBusinesstype
Type of globalizationType of globalization
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 2Family-owned independent SME will continue to exist in concomitance of group integrated extruders.
Postulate 2Family-owned independent SME will continue to exist in concomitance of group integrated extruders.
25.03.2004
1900 20001950
20overall aluminium consumption 25 Mt
10
5
Independent 56%
Integrated 44%
INDEPENDENTS VS INTEGRATEDS WORLD ALU USERELATIVE SHARE
Mt
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 3The new opportunity of internet biddingcan create the preconditions for a new world market price.
Postulate 3The new opportunity of internet biddingcan create the preconditions for a new world market price.
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
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 4Price difference in different economieswill generate a propensity for type 1cglobalization.
Postulate 4Price difference in different economieswill generate a propensity for type 1cglobalization.
Volume
Price
FDI
CH
B GA
EpA
pKPrice spanof similareconomies
Demand ZOffer Z
ZpZ
Transactioncost cZK
Globalizationpropensity(pK-pZ-cZK)
0
100
200
300
400
500
V ZK
Glo
baliz
atio
n vo
lum
e (k
ton)
0 0,5 1 1,5 2Propensity (Euro/kg)
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
Elas
ticity
Propensity function Elasticity for globalization
0p
LK
( )ZKZKZK
pps
KZK eLV0−Δ⋅=
ZK
ZK
ZK
ZK
ZK
pp
VV
ΔΔ∂
∂
=ε
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 5A new eclectic market type is potentially arising with a still fragmented market structure but type 1c world price characteristics.
Postulate 5A new eclectic market type is potentially arising with a still fragmented market structure but type 1c world price characteristics.
polypolistic oligopolisticMARKET STRUCTURE
PRO
DU
CT
CH
AR
AC
TER
ISTI
CS
non
diffe
rent
iate
d
d
iffer
entia
ted
TypeType Ib Ib
TypeType Ia Ia
Type IIType IIType Type IcIc
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 6This type 1c is unstable, and has only transient character because of growing overseas demand and shrinking propensity.
Postulate 6This type 1c is unstable, and has only transient character because of growing overseas demand and shrinking propensity.
Strategy to growglobally for K
+
GlobalizationType 2
Take overin Z
+
Propensity for globalization(Type 1c)
+Strategy to grow
globally for Z
+
GlobalizationType 1c
Export (Z K)+
Domesticdemand K
+
- -
Domesticdemand Z
-
+
-
Shake outin K
+
+
+
+
-
-
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 7Price level in high-price economies will drop temporarily as long as price differences will exist.
Postulate 7Price level in high-price economies will drop temporarily as long as price differences will exist.
Volume
Price Demand K Offer K
pK
VK
initialequilibrium
Offer Z
pZ
VZ
price drop ofdomestic supplies
volumeincrease
pdom
VK‘
Offer K‘
finalequilibrium
shake out
remaining domesticsupplies Vdom
importsupplies VZK
0
1000
2000
3000
4000
5000
1980 1984 1988 1992 1996 2000
LME
DM
/Ton
5
6
7
8
9
10
DM
/kg
LME Rolling Extrusion
Opening of Eastern EU
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 8Shake-out of less competitive extruders is foreseeable.
Postulate 8Shake-out of less competitive extruders is foreseeable.
Volume
Price Demand K Offer K
pK
VK
initialequilibrium
Offer Z
pZ
VZ
price drop ofdomestic supplies
volumeincrease
pdom
VK‘
Offer K‘
finalequilibrium
shake out
remaining domesticsupplies Vdom
importsupplies VZK
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 9Demand will increase due to lower price level and open the access to new applications.
Postulate 9Demand will increase due to lower price level and open the access to new applications.
Volume
Price Demand K Offer K
pK
VK
initialequilibrium
Offer Z
pZ
VZ
price drop ofdomestic supplies
volumeincrease
pdom
VK‘
Offer K‘
finalequilibrium
shake out
remaining domesticsupplies Vdom
importsupplies VZK
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
How to RespondHow to RespondRestrictions and strategic options for extrudersRestrictions and strategic options for extruders
CO
MPA
NY
TYP
EG
roup
In
tegr
ated
SME
Inde
pend
ent
BASIC STRATEGY ORIENTATIONDefend Export Type 2
Concentrateon service
(cost remains an issue)
Idem
Technology orsolution driven
Idem, but exploitspecialization
within the network
X
Take over / JVin economy Z
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
The 10 Extrusion Postulates of GlobalizationThe 10 Extrusion Postulates of GlobalizationPostulate 10Extruders situated in high-price economies will have to further concentrate their offer on service ortechnology based performance.
Postulate 10Extruders situated in high-price economies will have to further concentrate their offer on service ortechnology based performance.
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive
ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive