Valued at $305 million in 2004, the French electric drives market is likely to reach $347.4 million by 2011 at a compound annual growth rate of 1.8 per cent, according to a report issued by research and consulting firm Frost & Sullivan. The report says that the highly competitive French drives market is likely to see growth that will be increasingly dependent on manufacturers' ability to identify specific sectors in which they can compete as well as their ability to develop and target suitable products.
"Electric drives manufacturers need to closely screen all their potential markets in order to rule out sectors that are less profitable," says Mylan Nguyen, program manager at Frost & Sullivan. "This will enable them to focus on areas that offer them the opportunity to establish strong, defendable and long-term positions."
According to Frost & Sullivan's report, the French market is seeing increased competition from China and South Korea, and manufacturers in both countries have a distinct advantage in their ability to offer economical but high-quality products. The low-cost options they are able to offer pose a strong threat to existing participants in France.
The report states that low production and labor costs allow the new competitors to offer their products at far more attractive prices than those of their European competitors, making it difficult for western manufacturers to competie on cost.
"Market niching could offer an effective solution to manufacturers and provide a solid defence against increasing competition, particularly from new entrants, as well as rising globalization," says Nguyen. "By developing application-specific technologies or focusing on particular end-user sectors, manufacturers could adapt their offerings to selected markets."
End-user interviews conducted by Frost & Sullivan revealed that companies' reputations tend to be sector-specific and that end users in different sectors view these companies differently. According to the findings, entering a new and unexplored sector or trying to establish cross-industry positions might prove to be an expensive and less effective exercise. Therefore, manufacturers would do well to focus their efforts on specific end-user sectors.
The interviews further revealed that end users increasingly perceive electric drives as 'commoditized' and are unclear about the technical differentiation between individual products. Changing these perceptions and communicating product differentiation is bound to be a considerable challenge for market participants.
Across all sectors, the study found, quality and reliability, price, delivery time and ease-of-use of electric drives emerged as the most important purchasing criteria.
Frost & Sullivan also reports that new opportunities in the maturing French electric drives market are likely to spring from ongoing innovations and product development, which are already having a positive impact on the market. These technological innovations will be the result of increasingly complex manufacturing systems that require a new generation of electric drives that enable easy programming, remote operation and some amount of drive independence.
In response to these needs, manufacturers have started offering more precise, small-sized and complex solutions, particularly in the servo drives market. The trend towards more 'intelligent' and customized electric drives is likely to support future market growth, according the report.