Strategy of the KION Group
Objectives of the Strategy 2020
The KION Group presented its Strategy 2020 in March 2014, clearly setting out its goals for the next few years:
- Growth: The KION Group wants to accelerate its growth and close the gap to the global market leader by 2020. To this end, it is strengthening its leading positions in the European and Brazilian markets 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 expand its position as the most profitable supplier in the market. It has therefore set a target of a sustained EBIT margin of above 10 per cent. 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 managing assets and finance.
- Resilience: The KION Group aims to improve its ability to cope with economic downturns. It is therefore stepping up efforts to diversify its business in terms of regions and customer sectors alongside its initiatives 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, coupled with greater differentiation within it. The premium brands, Linde and STILL, are to consolidate their presence at the upper end of the volume segment on the basis of the platform strategy (see below), particularly in North America and the emerging markets. As the global brand for the economy segment, Baoli is to gain a foothold at the lower end of the volume segment with a tailored product and sales strategy. In future, all three global brands – Linde, STILL and Baoli – will be represented in these regions and cater to all price segments.
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 the reporting year. The KION Group will establish shared, cross-brand and cost-efficient platforms for product development and production that are geared to the volume and economy segments outside western Europe. However, market success depends on these platforms allowing a strong degree of regional differentiation in the industrial trucks. One example is Baoli’s diesel truck platform, which is used for region-specific trucks in India (Voltas) and Brazil (STILL). The global deployment of platforms is managed by the research and development centre in Xiamen, China, wich was significantly expanded in 2014.
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. Currently, the focus is on optimising lithium-ion batteries for electric and hybrid trucks, which are superior to lead-acid batteries in many regards. The first models were launched on the market in October 2014. Sales in the premium segment are also boosted by innovative intralogistics solutions, such as fleet data management and automated industrial trucks as part of Industry 4.0 scenarios (see ‘research and development’).
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 – utilising 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. Approximately €83 million will be made available for these projects between now and 2021. Both sites will collaborate closely with the new plant in Stříbro, near Plzeň in the Czech Republic. The ground-breaking ceremony for the new factory was held in November 2014. Due to open in 2016, it will initially produce warehouse trucks currently manufactured in Aschaffenburg. Capital expenditure on this undertaking amounts to approximately €12 million. At the same time, capacity is to be significantly increased and processes optimised at sites in China (Xiamen and Jingjiang), the USA (Summerville) and Brazil (São Paulo).
In October 2013, small-scale production of heavy trucks was ended at a dedicated production site in Wales and transferred to a contract manufacturing facility in the Czech Republic. The winding-up of the former production site was completed in the reporting year.
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.
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. As part of the new multi-brand approach, Linde North America was renamed KION North America in November 2014. The plant in Summerville is to be expanded so that it can start manufacturing IC trucks, electric forklift trucks and warehouse technology. The region-specific configuration of the platform products is especially important here. Particular emphasis will be placed on the volume market, which is very well developed in North America. As well as expanding the range of products, KION North America is also strengthening its sales and service network.
New products for the volume segment are aimed at increasing market share in the fast-growing markets of Asia. They are based on the economy product platform developed by Baoli.
Strategy for 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. The KION Group is continually extending its portfolio of services and improving their quality at every stage of the product lifecycle. Because the premium segment is already well covered, the focus is on expanding sales and service structures in the economy and volume markets. Financial services are also a key component of the service portfolio as they support the KION Group’s core industrial business. The Company also intends to increase its market share by, for example, opening additional service outlets in attractive growth markets and stepping up the short-term rental business.
Strategy for back-office functions
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 – will focus even more on increasing its contribution to the success of the Company and on providing cost-efficient and reliable IT services.