Features

Market equilibrium

The Big Project catches up with Kanoo general manager Bob Jennings, who warns that a dual boom may not be the good news it sounds like

Not all news is good news. With anticipation growing over the huge project opportunities in Saudi Arabia, Qatar and even Abu Dhabi, the region’s suppliers, dealers, manufacturers, consultants and contractors are understandably preparing for an upturn.

However one man is erring on the side of caution, warning that the combination of global credit conditions and an influx of far eastern firms could cap many of the opportunities regionally based companies are counting on across markets such as Saudi Arabia, Qatar, Abu Dhabi and Kuwait.

“We [the industry] will eventually come to a situation where we are not able to supply the demand, because we will not be in a position to take the risk to put a lot of money into a market, just in case things don’t go the way we plan,” Kanoo GM Bob Jennings tells The Big Project.

“We are ordering more stock, but manufacturers are coming to a point where their [supply] chains are becoming stretched and delivery times are extending. The industry will invariably end up in the same situation we ended up in between 2004 and 2006,” he added, continuing: “China will come in and start to fill the market gaps because we will not be able to manage it.”

Eighteen years in the region has given Jennings considerable insight to the peaks and troughs every economy and market experiences. Arriving in 1994, he says it was a further decade before he began to realise the local market was “for real”, marked by the start of construction on Dubai Marina and its surrounding neighbourhoods.

It was during this boom the eastern markets gained their first foothold in the UAE, but issues surrounding the quality of their products capped their success and damaged their reputation. Returning now with higher quality machines and a “long term mindset”, Jennings predicts this time will be different.  “The Chinese will come out with a better reputation and they will get an even bigger foothold in the region than the last time round. That will be at the expense of the western and Japanese companies and it will be difficult for them to recover,” he predicts.

It’s not just construction; the oil and gas industries have benefitted from significant increases in the number – and quality – of eastern manufacturers and suppliers, with China-UAE trade posting a 35% YOY growth over the last decade, according to figures published by Messe Frankfurt.

That said, not every eastern market is able to compete with the company.

 

Uptime

Currently, Jennings is based in Saudi Arabia where Kanoo has driven its market share for Grove branded rough terrain machines alone from “about 11% in 2010 to over 52% in 2011”.

Influenced as much by economic conditions as any other factor, Jennings reports currency and supply issues experienced by Japanese competitors paved the way for Kanoo to effectively price its products, and stock more of them, to reduce that price further and ultimately drive sales.

“Knowing that we have more products in stock, means we are able to compete.

“Also we have taken quite a lot of business from competitors due to our service capability. We have a lot of customers now insisting they would not go back to our competitors because of the level of service they have gained from us,” he adds.

Included in that service is a machine-to-machine remote monitoring system, that flags critical issues with machinery and mitigates the risk of downtime.

“It has been happening with car dealers, but it has never happened with machinery dealers before,” Jennings explains.

“Typically you’ll find downtime is about 30% on average per year. On a sizable operation, that could mean a significant amount of money. But we can come in, particularly with our remote monitoring system, and take that to 95% up time,” he claims.

Increasing market share today is achieved on service, not equipment, Jennings explains and the ability to remotely support customers is a large part of that, particularly if a business wants Mecca and Madinah, Jizan Economic City Port, Riyadh Dry Port and Princess Noura University reeled off on their project portfolio.

It’s such business sustainability that offers protection in the face of continuing threats from global economics and politics, not to mention the uncertainty of how much the region’s biggest brands will cash in on its next biggest markets.

 

Absolute certainty?

“The [market] dynamics are completely different now. What drove Dubai was the speculation, but Saudi Arabia is being driven by an acceptance that they have to spend on infrastructure; it’s inherent money,” he observes.

For Jennings, therein lies a large part of the problem. Calling it a “tale of two cities” the collapse in Dubai is now being replaced with dual booms; firstly in a massive country that requires infrastructure build up from the most basic elements to entire civil networks, and secondly in a country that has a non-negotiable deadline and the eyes of the world on it.

But the crux of his caution is thus: “We are preparing for a joint boom in Qatar and Saudi Arabia, but you have to be careful, because you can never really judge how it might go. The global economy is a problem, growth in China is dropping, demand for oil could also start to drop as well. If that price comes down it could also affect Saudi Arabia’s appetite to spend money.”

“The only certain thing is Qatar and the build up for the World Cup. There will definitely be a demand there that will have to go ahead, irrespective of what’s going on elsewhere,” he adds.

0 0 votes
Article Rating

Comments

Most Popular

To Top
0
Would love your thoughts, please comment.x
()
x