“In the last ten years, the rise of emerging markets, particularly the four BRIC markets of Brazil, Russia, India and China, has revolutionized the markets and significantly influenced the development of our company,” he explains. “Indonesia and Africa have also become serious markets. At present, sales volumes in emerging markets are higher than in traditional markets, including Europe and North America. The ratio tipped in 2007. At Volvo Construction Equipment, we do not follow trends – we are always one step ahead of our competitors.”
Recognizing the growing importance of emerging markets, Volvo Construction Equipment acquired the established Chinese manufacturer Shandong Lingong Construction Machinery Co., Ltd. (SDLG) in 2007. Together with the Chinese team, the company built up a second market.
The purchase created a win-win situation for both parties. SDLG, one of the biggest Chinese suppliers of wheel loaders and a very profitable one compared to all other Chinese construction equipment companies, now benefits from Volvo’s extensive network.
Joining forces in Sweden and China, Volvo unites the best of both worlds: value and premium quality. While SDLG machines are extremely robust and durable, Volvo vehicles and machines boast special features needed for particularly demanding jobs, for example on mining sites, where the machines run 24 hours a day.
“This merger is unique in the global business world,” says Dr. Wedekind. “Several universities have chosen us for case studies.”
In recent years, Volvo Construction Equipment has been following a stringent investment strategy. In 2014 Volvo Construction finalized the 2013 acquisition of the US hauler Terex Corporation, a manufacturer of off-highway rigid and articulated trucks.
This transaction represented an opportunity to fill product gaps. This acquisition is an example of a growth process which has helped Volvo Construction Equipment expand from its modest beginnings nearly two centuries ago in a machine shop in Eskilstuna, Sweden, to become a global player, diversified across a swathe of leading business segments.
The construction specialist produces in Germany, France, Sweden, Scotland, Poland, the USA, Brazil, China, Korea, India and Russia and has a huge technological center in Jinan, China, with hundreds of engineers working for both Volvo and SDLG.
Although Volvo holds 70% of SDLG shares, the complete management and the main actors are still Chinese. “We did not overload the SDLG brand with the costs and policies of a big group,” explains Dr. Wedekind. “Instead of making SDLG a copy-and-paste product of Volvo, we continued to develop the Chinese brand. We integrated both brands whenever we saw advantages, for example to improve quality management, but we also believe that points of friction can be constructive. This brand strategy is already paying dividends.”
However, the national economies of the BRIC markets did not develop as expected. In the last three or four years, growth rates have slowed. At the same time, the traditional economies have recovered.
“Last year, we enjoyed promising growth in North America and Europe again, in particular in Germany and the UK,” says Dr. Wedekind. “But we still believe in the potential of the emerging markets and expect them to pick up again by 2016. We will continue to pursue our investment strategy in emerging markets, but we will also expand in our traditional markets.”
Volvo Construction Equipment encompasses a comprehensive range of wheel loaders, excavators, articulated haulers, soil and asphalt compactors, pavers, compact equipment, and material handling equipment.
“We are at the forefront of technological development. Innovation infuses every aspect of our product development process – from design and engineering to production. It is at the core of everything we do. We are very proud that machines like the A40F articulated hauler, the L220G wheel loader and the EC380E tracked excavator received the highest accolade from the largest design competition in the world – the coveted ‘Red Dot: Best of the Best’ product design award,” says Dr. Wedekind.
The company regularly showcases its latest developments at international trade fairs such as the INTERMAT in Paris, the bauma in Munich and China, and CONEXPO in Las Vegas. Every year, the company’s clients and other visitors have the opportunity to get to know Volvo better at the Volvo Days, which is a spectacular and popular promotional event at the customer center in Eskilstuna, Sweden.
Volvo Construction Equipment has ambitious plans for the future. “We will move towards customer solutions,” Dr. Wedekind explains. “Of course, the excellent performance of our machines will continue to be an important focal point for us. Our goal has always been to be at the forefront of the market. Now, we want to extend this aim to our services.”
Connectivity, site and fleet management, machine control, and load weighing will be important issues in the future. “We will grow into these new solutions in close cooperation with our clients. We are already working on several projects together with our major customers. We will also try to internationalize SDLG as well as our third brand Terex. We still have some white spots left on our map. Certainly, our new solutions demand deeper consultancy knowhow. You need to understand your customers’ needs, and you need to create value for your customers. We have already started to enhance our sales network in order to meet future demands.”