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Japan's Daikin eyes Africa after establishing itself in Asia and India


08/21/2018


Japan's Daikin eyes Africa after establishing itself in Asia and India
Africa is the new frontier for the largest manufacturer of air conditioning equipment - Daikin Industries. The company has been successful in the Asia in its efforts for a decade since it took the risk of sharing the technological expertise it possessed with a Chinese company.
 
It was about a decade ago that the then established Japanese manufacturers such as Panasonic started to withdraw from the home appliances market to side step price wars with Asian rivals, Daikin took the exact opposite path and started a direct competition with oteh rAsian brans such as LG of South Korea.
 
Daikin managed to capture large market share in markets such as India through its strategy of local partnerships and acquisitions to fend off cost competition. 
But Africa apparently could prove to be another tough terrain for Daikin because LG and China’s Haier are the dominating players in the market.
 
But is it not uncommon for the company to the company to give befitting reply to critics – for example its role in answering critics about 15 years ago when the company was heavily criticized for its strategy to move to overseas markets for mass selling, said Yoshihiro Mineno, Daikin’s senior executive in charge of Asia.
 
“Many skeptics at the time said it would be impossible to make profits in the ‘volume zone’ in Asia, and that it was pointless to invest there,” Mineno said in a media interview.
 
While conventional analysts believed that Daikin should focus on markets with high-end consumers, the company however believed that there was limited growth potential in such markets. the company understood the importance of focusing on low cost and high volume in order for it to be globally recognized.
 
The market value of the company is now more than those of electronics conglomerates Panasonic Corp and Hitachi Ltd.
 
“If advanced technologies or added-value products are your only selling points, your rivals are likely to catch up and overtake you,” said Hideki Yasuda, an analyst at the research arm of Ace Securities.
 
“But Daikin’s business model is backed by cost competitiveness,” Yasuda added. “It’s among a few Japanese companies that can compete head to head with the Chinese.”
 
The company has found it tough to crack the United States market which is the world’s largest market for air conditioning.
 
On the other hand, the company has managed to crack the Indian market despite tough competition from LG, Samsung Electronics and local manufacturers and company executives claimed that India is now Daikin’s biggest growth driver.
 
The company hired a local industry veteran Kanwal Jeet Jawa to lead operations in the market, established a sales network and localized production with low-cost know-how from OYL.
 
And within a period of 8 years from 2010 to 2018, the market share of the company in India jumped form 2 per cent to 17 per cent. The company is now the top seller of air conditioners for commercial buildings and industrial use.
 
The company said that the African expansion would also be led by Jawa will lead the expansion. A regional office in Africa would be set up by the company with a few months.
 
Volume growth would be the strategy for Daikin in Africa as well, Jawa said.
 
“It’s a very price-sensitive market,” he said of Africa. “We want to use our leverage of Indian operations and we want to replicate what we have done in India.”
 
(Source:www.reuters.com)


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