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Interview

with John Brookshire, General Manager – Compressor Technique, Atlas Copco China

23.04.2012 / Energyboardroom

Mr. Brookshire, prior to the interview, we began to discuss Atlas Copco’s global vision of “First in Mind-First in Choice○R.” Can you please begin by explicating your own understanding of this maxim?

The idea behind “First in Mind-First in Choice○R” is that it is not enough for customers to simply think of us when they wish to purchase a product or service. Of course, we first work quite hard for them to think of us when making a purchase decision, via our promotional efforts at venues such as the CIPPE. However, clients should also make the final conversion to “First in Choice”—they should go on to buy our products or services. They should then come back to us for subsequent purchases!

As Atlas Copco, we also have three additional core values: Innovation, Commitment, and Interaction. We were recently recognized by Forbes magazine as one of the 100 most innovative companies in the world—within this list, which ranks companies according to the Innovation Premium, we were 67th. We were the only compressor company to be featured, alongside organizations such as Apple and Google! This was very exciting for us.

Recently, we also climbed up to number 13 on the patent ranking list by The Patent Board; furthermore, at the World Economic Forum in Davos, we were named the 10th most sustainable company in the world. These are further recognitions of our efforts and our implementation of our core values.

The market seems to be really taking note of the kind of company that we are—and from an equipment supplier point of view, we are really growing.

How rapidly are your latest global innovations introduced in the Chinese market?

China and the U.S. are our largest global markets. The positioning between number one and number two actually frequently switches between these two, depending on the period. China is immensely important for our company.

We have 15 manufacturing facilities in China, and over five and a half thousand employees. We bring a lot of technology to China—but we also create technology in China. We have two R&D centers in this territory: one focused on mining and construction, and another focused on compressors. To succinctly answer your question, we bring our latest technologies to this market right away; otherwise, we develop them locally!

Do you utilize your domestic research and manufacturing centers to create localized products, or to serve the broader international market?

The majority of manufacturing that we carry out in China is for China. We have started to export throughout the Asia region a bit and the small remainder has started flowing to the U.S.

No matter our products are manufactured in China or Europe or elsewhere, they bear the same quality standard and technology, and it makes no difference at all where they are made.

We discussed this point with one executive from a prestigious industrial company. He remarked that his company initially brought its standard Western products to the Chinese market—but found that a Chinese audience did not always require many of the components that Western clients did. Furthermore, Chinese customers wanted a lower price point, and his company was not able to meet such needs with their global products. The company is now looking into localizing their product line. Do you agree with him? Are China’s needs quite different than those of the West?

This market here is extremely large, and diverse. We serve many of our traditional customers here—foreign international companies. These customers tend to buy the same products globally.

However, if we only focused on our international clients, we would miss a huge portion of the market! Our business is changing, and we are focusing increasingly on local clients, and local content. Indeed we have recognized that, for domestic clients, needs can be different.

Like our international clients, our Chinese clients want a robust product, a strong return on investment, an attractive total life-cycle cost, energy efficiency, and simplified maintenance—they may not require some of the higher functionality features of our global products, but on the other hand, the local customers may have more stringent requirement for energy consumption or higher temperature tolerance, for instance. That’s why we launched last year in China a screw compressor which has higher duration for temperature and humidity than those we sell in Europe.Atlas Copco understands the local customers’ needs and requirements very well. We offer a wide range of air compressors, with multi-product offerings.

How do you cultivate your relationship with China’s national oil companies?

In Atlas Copco’s China Compressor Technique Customer Center, our sales and service branch, I am the only foreign national. This gives you an idea of our approach to the market. We have employees that have been with us for 15-20 years, and some even longer, and this equates to a stable, very strong sales force of Chinese nationals. They attended Chinese universities; they have built solid relationships with their counterparts in the industry.

In China, business—as you have probably heard—is truly all about relationships. We cultivate our business with China’s NOCs the old fashioned way!

Indeed, Atlas Copco has been present in the China market since the 1920s, and boasts the establishment of Atlas Copco Hong Kong Limited as early as 1980. How is this brand perceived and positioned in the Chinese market today, and what would you say have been the benefits of a long history?

Atlas Copco is perceived as one of the top suppliers in the fields where we operate: compression, aftermarket services, mining, drilling, exploration, offshore platforms, etc.—the components that we supply therein are, I believe, perceived as best-in-class. We are certainly not the only players here; nonetheless, we are perceived as adding value, and clients choose our products because they understand that we are a large, reputable company that will stand behind them through good times and bad.

Our global philosophy, and our strategy, is to be product leaders. We achieve similar positions here as we do elsewhere. And yet our task is not easy in China: in this huge market, we face all of our typical global competitors, and we also face domestic suppliers. The latter is an entirely different stratosphere of competition, largely unique to this market.

How does Atlas Copco manage the task of competing with these local equipment manufacturers? After all, China has a famously low cost structure, which international players often cannot afford to match.

You are correct—but we address this challenge with what we call our ‘multi-brand’ strategy. Within the Group, we have different tiers of products that offer different value propositions for different levels of the market. These tiers range from the high to the low end.

In China, for instance, we have already purchased three local compressor manufacturers. This allows us to offer a different cost structure, and a different value proposition, to align with the needs of customers who are not interested in our more expensive products.

How difficult is it to acquire Chinese businesses as a foreign company? Do you encounter much resistance from this nationalistic market?

Actually, we have not found that making acquisitions here is exceptionally challenging. We have already made 12 separate acquisitions in this country. Of course, due diligence must be conducted, and the formal process must be followed—but, in our experience, acquisitions made in China by foreign businesses are not as uncommon as some would believe.

Are your China acquisitions chiefly intentioned to boost your competitiveness on the local market, or is there a wider purpose for Atlas Copco in securing these assets?

Our acquisition strategy in China is multifaceted. Some of the companies that we have acquired here were headquartered in other countries—as part of the global acquisition, we went through a separate process to also merge the China subsidiary. Some of our acquisitions are local Chinese companies that have traditionally competed with other domestic firms; some are international companies that happened to have Chinese branches, which we have been happy to integrate into our strategy here.

Let’s consider your oil & gas activities more specifically. Indeed, the company would be smart to do so—construction and mining has experienced 500% growth in Asia in recent years. How would you appraise the success of your oil & gas solutions in China, and what role do they play within your domestic business as a revenue driver?

Oil & gas is in itself a very large market: from upstream exploration, to pipelines, to conversion into oil derivatives, to downstream. We have solutions for the entire value chain. Some of our products in this sphere are well known in China; others are not.

Oil & gas is becoming an increasingly important part of our strategy in this country. We have decided that, over the next three years, we will have focused teams that will be responsible for the different aspects of the value chain. We will work to make our products known.

We are also investing in our compressor factory in Wuxi, in the engineered products division. Much of the time, oil & gas clients will take a standard Atlas Copco product, but they want it modified to meet their specifications. Previously, we made these modifications outside of China—now, we have begun to do so within China.

We would like to double our oil & gas business over the next three-five years. It already contributes to a sizeable portion of our revenues, but we see the opportunity to really grow in this sphere.

You earlier mentioned the strength and longevity of your staff—what do you believe attracts them to Atlas Copco?

Atlas Copco has quite a culture. We have 139 years of history. We are Swedish, and thus have a persona of being environmentally friendly, sustainable, open, and willing to change and adapt. The Chinese people seem to really accept and embrace our values.

This culture exists throughout the global organization, and we work very hard to preserve it. We conduct a high volume of acquisitions, and we grow so quickly that it is easy to lose ourselves. However, we implement a number of tools to maintain our core identity. For instance, we release booklets every two or three years, detailing our culture. Our CEO gathers our top management, and conducts a presentation about who we are, what our culture and our values are, our vision, our mission, how we operate, etc. It is all so simple! We proliferate these ideas throughout the organization, from the top down. Every new employee is ingrained with these same values.

Although our salaries are competitive, we do not believe that we can buy loyalty. Rather, we invest in our people: we train them, and we give them opportunities to travel outside the country. We offer tremendous job opportunities—for instance, we have an ‘internal job market’ where all jobs are posted, national and international. At my level, this meant that when I was a manager for the company in Korea, and saw an opportunity to take a General Manager position for the Compressor Technique Customer Center in China, I was able to apply through that database and ultimately receive the transfer. We are very transparent! If people appreciate that, they can truly feel at home with us.

What is your final message to the international readers of Oil & Gas Financial Journal, about how to be a successful manager in such a challenging market?

I spent four years in Korea before coming to China. From my experience, I have seen that in Asia, one must be a strong leader—but one must also have a degree of humility. Your staff will not want you to come in and say, “This is how we do it in America.” You must seek to understand before you make yourself understood. People appreciate that! Then, you can get a consensus on what the company is trying to do and why, and how you will accomplish it. If everybody agrees and understands, this unity is extremely powerful—especially in Asia. Once the team buys into the concept, then you just have to hope that the factory can keep up!

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