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The Effects of Globalization on the Aluminum Extrusion Industry

8th International Aluminum Extrusion Technology Seminar ET‘04 May 18-21, 2004 Orlando, Florida. The Effects of Globalization on the Aluminum Extrusion Industry. Part 2: Implications. Bruno G. Rüttimann, Alcan Singen GmbH.

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The Effects of Globalization on the Aluminum Extrusion Industry

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  1. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  2. 8th International Aluminum Extrusion Technology Seminar ET‘04 May 18-21, 2004 Orlando, Florida The Effectsof Globalization on the Aluminum Extrusion Industry Part 2: Implications Bruno G. Rüttimann, Alcan Singen GmbH ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  3. Mergers & Acquisitions ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  4. Trade Deregulation ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  5. Increasing Competition ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  6. Price Pressure ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  7. Flow of Information ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  8. Interlinked Markets ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  9. World-wide Strategies ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  10. Reduced Growth Rates ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  11. Overcapacity ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  12. Un-employment ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  13. Globalisation Globalisation Globalisation Globalisation Globalisation Globalisation ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  14. Globalisation ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  15. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  16. CONTENT Part 2 (General Session): Implications . • Summary Part 1: Theoretical Considerations • The Dimension of Globalization • The Emerging New Paradigm • The 10 Extrusion Postulates of Globalization • Restrictions and Strategic Options for Extruders ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  17. characteristics Product characteristics Product Market Product Market characteristics structure characteristics structure Operating Business Operating Business configuration classification configuration classification Type of globalization Type of globalization Product Deriving Typologies of Globalization Basic classification of business types ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  18. characteristics Product characteristics Product Market Product Market characteristics structure characteristics structure Operating Business Operating Business configuration classification configuration classification Type of globalization Type of globalization Product Deriving Typologies of Globalization Basic classification of business types ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  19. characteristics Product characteristics Product Market Product Market characteristics structure characteristics structure Operating Business Operating Business configuration classification configuration classification Type of globalization Type of globalization Product Deriving Typologies of Globalization Basic classification of business types PRODUCT CHARACTERISTICS non differentiated differentiated ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  20. characteristics Product characteristics Product Market Product Market characteristics structure characteristics structure Convenience Speciality Operating Business Operating Business configuration classification configuration classification Type of globalization Type of globalization Standards Commodity Product Deriving Typologies of Globalization Basic classification of business types PRODUCT CHARACTERISTICS non differentiated differentiated polypolistic oligopolistic MARKET STRUCTURE ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  21. Product Market Product Market characteristics structure characteristics structure Operating Business Operating Business configuration classification configuration classification Type of globalization Type of globalization Deriving Typologies of Globalization 2 main types Type II Type I PRODUCT CHARACTERISTICS non differentiated differentiated polypolistic oligopolistic MARKET STRUCTURE Type 1: material G. (physical) Type 2: immaterial G. (financial) ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  22. Product Market Product Market characteristics structure characteristics structure Operating Business Operating Business configuration classification configuration classification Type of globalization Type of globalization Deriving Typologies of Globalization 2 main types Type II Type Ic Type Ib PRODUCT CHARACTERISTICS non differentiated differentiated Type Ia polypolistic oligopolistic MARKET STRUCTURE Type 1: material G. (physical) Type 2: immaterial G. (financial) ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  23. Bauxit mining , , alumina production Type II Type Ib Primary smelter , , casting PRODUCT CHARACTERISTICS non differentiated differentiated Rolling , , extruding , , Type Ia die casting , , forging ,... Components , , Remelters , , Scrap Scrap , , foundries polypolistic oligopolistic MARKET STRUCTURE finished products waste waste Usage Usage Recycling Deriving Typologies of Globalization Aluminium industry structure and globalization type ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  24. Bauxit mining , , alumina production Type II Type Ib Primary smelter , , casting PRODUCT CHARACTERISTICS non differentiated differentiated Rolling , , extruding , , Type Ia die casting , , forging ,... Components , , Remelters , , Scrap Scrap , , foundries polypolistic oligopolistic MARKET STRUCTURE finished products waste waste Usage Usage Recycling Deriving Typologies of Globalization Aluminium industry structure and globalization type ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  25. Bauxit mining , , alumina production Type II Type Ib Primary smelter , , casting PRODUCT CHARACTERISTICS non differentiated differentiated Rolling , , extruding , , Type Ia die casting , , forging ,... Components , , Remelters , , Scrap Scrap , , foundries polypolistic oligopolistic MARKET STRUCTURE finished products waste waste Usage Usage Recycling Deriving Typologies of Globalization Aluminium industry structure and globalization type ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  26. 10 9 DM/kg 8 7 6 5 5000 Opening of Eastern EU 4000 3000 LME LME DM/Ton Rolling 2000 Extrusion 1000 0 1980 1984 1988 1992 1996 2000 ... a Big Change is Occurring European price evolution of rolled and extruded products ? ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  27. The Dimension of Globalization Global view of extrusion production in 2001 CIS 650 E. EU 300 N. America 1770 West Europe 2400 China 1300 Japan 1020 Asia 1197 Africa 450 L. America 675 ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  28. 24 43 14 93 13 171 54 16 39 55 151 66 27 38 23 The Dimension of Globalization Global view of extrusion flows in 2001 CIS 650 E. EU 300 N. America 1770 West Europe 2400 China 1300 Japan 1020 Asia 1197 Africa 450 L. America 675 ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  29. Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa Alcan 5 4 1 Alcoa 45 17 11 14 1 1 1 Bonnell 7 7 Capral 6 6 Corus 5 4 1 Hydro 40 10 2 23 1 1 3 Indalex 15 15 Kaiser 7 7 Pechiney 9 9 Sapa 14 2 11 1 YKK 6 1 4 1 Source DIAC The Dimension of Globalization Geographical distribution of selected group plants ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  30. Alcan 5 4 1 Alcoa 45 17 11 14 1 1 1 Bonnell 7 7 Capral 6 6 Corus 5 4 1 Hydro 40 10 2 23 1 1 3 Indalex 15 15 Kaiser 7 7 Pechiney 9 9 Sapa 14 2 11 1 YKK 6 1 4 1 The Dimension of Globalization Geographical distribution of selected group plants Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa Source DIAC ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  31. Alcan 5 4 1 Alcoa 45 17 11 14 1 1 1 Bonnell 7 7 Capral 6 6 Corus 5 4 1 Hydro 40 10 2 23 1 1 3 Indalex 15 15 Kaiser 7 7 Pechiney 9 9 Sapa 14 2 11 1 YKK 6 1 4 1 The Dimension of Globalization Geographical distribution of selected group plants Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa Source DIAC ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  32. Alcan 5 4 1 Alcoa 45 17 11 14 1 1 1 Bonnell 7 7 Capral 6 6 Corus 5 4 1 Hydro 40 10 2 23 1 1 3 Indalex 15 15 Kaiser 7 7 Pechiney 9 9 Sapa 14 2 11 1 YKK 6 1 4 1 The Dimension of Globalization Geographical distribution of selected group plants Group TOTAL N-America L-America W-Europe E-Europe CIS China Japan Asia Africa Source DIAC ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  33. Propensity for globalization (Type 1c) + + Strategy to grow Strategy to grow globally for K globally for Z + - - + + - Globalization Globalization Type 2 Type 1c - Shake out + + in K Take over + in Z + Export (Z K) - + + - Domestic Domestic demand K demand Z The Emerging New Paradigm Dynamics of paradigm change in fragmented markets ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  34. Propensity for globalization (Type 1c) + + Export (Z K) + - Domestic demand Z The Emerging New Paradigm Dynamics of paradigm change in fragmented markets + Strategy to grow Strategy to grow globally for K globally for Z + - - + - Globalization Globalization Type 2 Type 1c - Shake out + + in K Take over + in Z + - + Domestic demand K ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  35. Type II Type Ib PRODUCT CHARACTERISTICS non differentiated differentiated Type Ia polypolistic oligopolistic MARKET STRUCTURE The 10 Extrusion Postulates of Globalization Postulate 1 Type 2 globalization will not change the fragmented market structure and its related market rationale. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  36. The 10 Extrusion Postulates of Globalization Postulate 2 Family-owned independent SME will continue to exist in concomitance of group integrated extruders. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  37. The 10 Extrusion Postulates of Globalization Postulate 3 The new opportunity of internet bidding can create the preconditions for a new world market price. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  38. Price A C B p E G D A F H Price span I of similar p K economies Demand Z Offer Z Globalization propensity Z ( p - p - c ) Transaction K Z ZK cost c p ZK Z Volume The 10 Extrusion Postulates of Globalization Postulate 4 Price difference in different economies will generate a propensity for type 1c globalization. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  39. The 10 Extrusion Postulates of Globalization Postulate 5 A new eclectic market type is potentially arising with a still fragmented market structure but type 1c world price characteristics. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  40. The 10 Extrusion Postulates of Globalization Postulate 6 This type 1c is unstable, and has only transient character because of growing overseas demand and shrinking propensity. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  41. 10 9 DM/kg 8 7 6 5 5000 Opening of Eastern EU 4000 3000 LME DM/Ton 2000 1000 0 1980 1984 1988 1992 1996 2000 LME Rolling Extrusion The 10 Extrusion Postulates of Globalization Postulate 7 Price level in high-price economies will drop temporarily as long as price differences will exist. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  42. The 10 Extrusion Postulates of Globalization Postulate 8 Shake-out of less competitive extruders is foreseeable. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  43. The 10 Extrusion Postulates of Globalization Postulate 9 Demand will increase due to lower price level and open the access to new applications. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  44. Concentrate on service Technology or SME Independent ( cost remains solution driven an issue ) COMPANY TYPE Idem , but exploit Take over / JV Integrated Group specialization in economy Z within the network BASIC STRATEGY ORIENTATION How to Respond Restrictions and strategic options for extruders X Idem Defend Export Type 2 ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  45. The 10 Extrusion Postulates of Globalization Postulate 10 Extruders situated in high-price economies will have to further concentrate their offer on service or technology based performance. Innovation ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  46. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  47. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

  48. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive

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