Not very familiar with Cummins Power Generation? Well, it is the portable electricity unit of Cummins, Inc. which is a publicly-traded company that generates more than $14B a year in sales worldwide and is known mostly for its diesel engines. In fact, in China any diesel engine of any brand is often simply referred to as a Cummins, according to this article in the People’s Daily Online.
Of greater significance is what Cummins Power Generation executives and stock followers are saying about the unit’s emerging market position today and in the future. While this article is most specifically focused on the company’s successes in China, one investment analysts weighs in on Cummins’ all emerging markets strategy:
“That emerging economies such as China, India, and Brazil will need more power is a theme that has been going on forever,” said Roger Sit, chief investment officer for Sit Investment Associates, which owns 60,000 Cummins shares. “But now (Cummins) is demonstrating that (those predictions are) coming to fruition.”
This is one of the few articles I’ve read about emerging markets in which corporate executives openly acknowledge that they have to sell harder or differently to market premium products to a baseline, no-frills consumer in emerging markets. I think that fear is what keeps many developed nation manufacturers from entering developing markets. Can you sell a high end, premium solution of any kind in these regions? Cummins, according to Steve Chapman, the company’s group vice-president for emerging markets and businesses, says yes:
The challenge for Cummins, according to analysts and executives, is that customers in emerging economies such as China and India still prefer lower cost, basic generators. Cummins must convince customers to pay for sophisticated devices that command premium prices and higher profit margins, Chapman said…” In China and India, they still prefer the low end stuff, where the technology requirements are not demanding,” Chapman said. “We do better with the more demanding requirements. We have to develop the (sales) people necessary to sell the benefits” of Cummins technology.
The actual numbers coming out of China for Cummins show that the company is making headway on this market reality: In 2008, Chinese sales totaled $783 million, a 30 percent jump from the previous year and more than twice as much as in 2006. The Power Generation unit accounted for 31 percent of overall China sales.