Strategy of the KION Group
Objectives of the Strategy 2020
The KION Group has clearly outlined its objectives for the next few years in its Strategy 2020.
- Growth: The KION Group wants to accelerate its growth and close the gap on the global market leader by 2020. To this end, it is strengthening its leading position in Europe and Brazil so that it can go on to capture additional market share in growth markets, particularly those in Asia and North America. This growth is to be accompanied by a far greater presence in the largest price segment (volume).
- Profitability: The KION Group aims to further improve its EBIT margin in order to entrench its position as the most profitable supplier in the market. In doing so, it aims to improve its EBIT margin so it is permanently in the double digits range – a target that remains unchanged in communications since the IPO. This requires not only an increase in the gross margin but also strict control of fixed costs.
- Efficient use of capital: The KION Group is working steadfastly to optimise the return on capital employed (ROCE). Besides increasing earnings, the focus here is on how assets and finance are to be managed going forward.
- Resilience: The KION Group aims to improve its ability to cope with economic downturns. It is therefore also diversifying its business in terms of regions and customer sectors alongside its efforts to optimise the production network and expand the service business.
Strategic focus areas of the Strategy 2020
The Strategy 2020 essentially encompasses six closely related areas of focus.
The starting point is the further development of the successful multi-brand strategy. The premium brands, Linde and STILL, are consolidating their presence at the upper end of the volume segment on the basis of the platform strategy (see below), particularly in North America and Asia as well as South America. This means that Linde, after successful market launches, now covers all product categories in the middle price segment as well. As the international brand for the economy segment, Baoli will gain a foothold at the lower end of the volume segment with a product and sales strategy that is tailored to regional requirements. The KION Group will therefore be represented in all these regions and in all price segments through its four international brands – Linde, STILL, Baoli and Egemin Automation. Especially in the premium segment and at the upper end of the volume segment, the seamless integration of material handling products and solutions into customer processes is playing an increasingly important role. IT-based assistance systems, such as fleet data management and truck control systems, look set to bolster sales of trucks in the premium segment in particular. The wide-ranging offering of the new international brand company Egemin Automation and the Linde Robotics and STILL iGo products give the KION Group a solid base of expertise in automated industrial trucks and warehouse logistics. As such, it is able to offer its customers along the entire supply chain solutions that are compatible with Industry 4.0, or the fourth industrial revolution. The KION Group is aiming to lever this expertise to become a leading provider of material handling solutions.
Global modular and platform strategy
Further development of the multi-brand strategy requires the product portfolio to be managed end to end on the basis of a global modular and platform strategy. For this reason, a Product & Module Committee was formed in 2014 as a cross-brand steering unit. In 2015 the Company also stepped up the level of cross-brand collaboration in procurement and coordination with the research and development centres. From 2016 the KION Group will then be bringing together the technology functions that are critical for the Company’s success going forward into a central KION organisation under the new CTO Executive Board role, held by Dr Eike Böhm.
In the volume and economy segments outside western Europe, the KION Group is working with cross-brand, cost-efficient platforms for product development and production that are also allowing a strong degree of regional differentiation in the industrial trucks. The new diesel truck with mature converter technology, for example, which was launched in the fourth quarter of 2015 on the basis of the Baoli platform in China, is being localised for use in numerous other markets. There were also new platforms created and products brought to market for electric forklift trucks and warehouse trucks. In western Europe, the premium brands, Linde and STILL, will continue to use different platforms in order to maintain the defining characteristics of their brands, but will increasingly deploy shared modules. Innovation underpins the premium positioning of the two brands.
Global production network
The KION Group wants to build its industrial trucks close to the markets in which they will be sold. To this end, production facilities worldwide are being efficiently integrated – harnessing economies of scale and ensuring a high level of capacity utilisation. A programme of capital expenditure is aimed not only at updating and expanding existing plants but also at establishing factories in new locations.
The core element in western Europe is the modernisation of the plants in Aschaffenburg (Linde) and Hamburg (STILL), with a clear focus on increasing capacity, improving processes and containing costs. A total of around €83 million has been allocated for this between 2014 and 2021. Both sites are also working closely with the new plant in Stříbro (near Plzeň in the Czech Republic). In January 2016 the plant commenced production of warehouse trucks that had previously been made in Aschaffenburg. Capital expenditure on this undertaking amounted to approximately €12 million. The Aschaffenburg plant is now able to focus on making electric and diesel trucks and structuring its production processes more efficiently. Again in response to growth in regional sales markets, capacity is being significantly increased and processes optimised at sites in China (Xiamen and Jingjiang), the USA (Summerville) and Brazil (Indaiatuba / São Paulo).
Regional growth strategies
Having enhanced its multi-brand strategy and its modular and platform strategy, as well as increasing integration between the sites in its production network, the KION Group has put everything in place to increase its market share in strategically important regions. The main focus is on China and North America.
In North America, one of the largest markets for industrial trucks, the KION Group aims to move from being a niche provider to a major market player offering a full portfolio of products by 2020. This will enable it to capture an increasing share of this growing market. In order to achieve this goal, the KION Group is pursuing a multi-brand approach. A Baoli diesel truck was launched in North America in 2015 – the brand’s debut in this market, where it will cater to the lower price segment; other products will follow in the second half of 2016. In addition, the KION North America plant in Summerville is being expanded for the production of IC and electric forklift trucks as well as warehouse trucks in order to close gaps in the portfolio; the various platforms are being adapted specially for the American market.
As well as expanding the range of products, KION North America is also strengthening its sales and service network, which encompasses over 70 partners at almost 150 sites. In 2015, for example, a new sales app was introduced and collaboration with sales partners was intensified. The KION Group is also looking to gain additional market share in the high-growth markets of Asia, including through new products for the volume segment that have been developed on the basis of Baoli’s economy platform. China’s fast-growing e-commerce sector is driving demand for electric forklift trucks and warehouse trucks such as LMH’s newly developed pallet stacker.
Aftersales and service business
The strategy for the aftersales business is designed to unlock more of the potential offered by the installed base, which is expanding worldwide. This will help to boost revenue. To this end, the KION Group is continually extending its portfolio of services and improving their quality at every stage of the product lifecycle. For example, the KION Group is progressively extending its comprehensive service offering to also cover the volume and economy segments in high-growth markets. As part of this, the rental fleet in China was substantially enlarged in 2015, turning the KION Group into the country’s biggest provider of rental trucks.
Financial services are also a key component of the service portfolio as they support the KION Group’s core industrial business. The Company intends to further increase its market share by opening additional service outlets in attractive growth markets and stepping up the short-term rental business.
In addition, the KION Group is aligning its groupwide back-office services to the growing requirements of the global organisation in order to leverage economies of scale and synergies. For example, KION Group IT – a global shared services organisation with four functions: IT governance, key account management, application services and infrastructure services – is focusing even more on increasing its contribution to the success of the Company and on providing cost-efficient and reliable IT services. In order to keep the costs of the expanded service offering low, the KION brand companies will be integrating their administrative tasks more closely.
Reorganisation of the Group structure
In November 2015 the KION Group announced that it would be comprehensively reorganising its Group structure from the beginning of 2016. The aim is to step up collaboration across all brands and regions and make this collaboration even more efficient. The creation of four operating units will sharpen focus on the specific customer and market requirements of the world’s key regions and on cross-brand synergies, enabling the Strategy 2020 to be implemented in a more rigorous way. The Linde Material Handling EMEA and STILL EMEA operating units will concentrate on Europe, the Middle East and Africa, while KION APAC and KION Americas will hold cross-brand responsibility for the Asia-Pacific region and the Americas respectively. In the new organisation, the operating units will oversee marketing, sales and service and the production plants in their regions and will have individual profit and loss responsibility.