Alfa Laval
Background
Gustav de Laval founded Alfa Laval in 1883 based on his brilliant invention of the continuous separator. Since then Alfa Laval has added heat transferring and fuel handling. The first product sold was a pump used to pump skimmed milk from the centrifugal separator. During his lifetime, Gustav de Laval acquired 92 Swedish patents and founded 37 companies. He was recognised as "The man of high speed". In 1938 Alfa Laval introduced its first heat exchanger and moved the development and production of heat exchangers to Lund.
Modern History
In the early 1970s Alfa Laval acquired a Danish company. A few years later Alfa Laval started the construction of new offices and an international centre in Lund. This plant is the international headquarters, the site of the R&D department and the production site. To strengthen Alfa Laval's core competence a number of acquisitions were made in 1982 in France, Germany, the U.S., Brazil and Great Britain. Tetra Pak, owned by the Rausing family, acquired Alfa Laval and in 1993 Alfa Laval became an independent industrial group. (Alfa Laval Customized heat transfer).Today, Alfa Laval has three product areas, heat transfer, separation and fluid handling (Alfa Laval plate heat exchangers).
Interview at Alfa Laval
We interviewed Mr. Martin Hermansson, market manager, at Alfa Laval.
Markets
The degree of internationalisation of Alfa Laval is very high since 92 % of turnover comes from abroad, and the internationalisation of the market is also high. The market consists of three or four main competitors and many small established and establishing companies. Western Europe accounts for a third of export and then comes Asia and North America followed by the Nordic countries. Central and East Europe, Latin America and others follow and constitute a fifth of all export. Alfa Laval has 20 production units in the U.S., France, China, India, Russia and Sweden. It also has service centres in 47 countries where a great deal of revenue is earned. The company has sales representations in 45 countries and sales companies in 50 foreign countries.
New Market Entries
According to Mr. Hermansson the main motive for a company to enter a new market is market potential. An important factor is low costs in setting up new facilities. Alfa Laval is investing heavily in new machines in order to be less labour intensive. The main goal for Alfa Laval is to be present at the key markets. Alfa Laval started exporting to Germany and the U.S. The company established production units earlier in Russia and China than their competitors did. Alfa Laval entered the Russian and Chinese market in the early 1990s through joint venture, due to the Rausings' sympathies and contacts in these eastern markets. Alfa Laval acquires market information from Frost & Sullivan that works interactively with clients to develop innovative growth strategies. Frost and Sullivan publish world-class market consulting information and intelligence on emerging high technology and industrial markets. Alfa Laval keeps informed about the local market conditions through 45 internal sales representatives. Alfa Laval also tries to launch a customer-relationship programme. The main competitive advantages Alfa Laval posses are a strong international brand, technical know-how, high quality and effective logistics due to many production units and sales offices.
Problems and Possibilities Connected to Market Entries
Alfa Lavals' products need a great deal of adaptation to different local markets. A simple example of this is differences in the electrical power used for the products in different countries. The possibility to use the knowledge from the home market is high. Today Alfa Laval has no major problems with psychic distance since the company has sales offices and production all over the world. To keep transaction costs low Alfa Laval uses netting. The Internet and intranets are other tools to lower transaction costs for information and knowledge. In a joint venture situation Alfa Laval tries to keep the finances in Sweden.
Networks
Mr. Hermansson states that Alfa Laval invests 3% of the revenue in R&D. The company is engaged in various networks, such as industry organisations and customers, for instance, Statoil, in order to lower costs and gain access to market shares. Further reason for networking is R&D and Alfa Laval has co-operation with the University of Lund. According to Mr. Hermansson social and informal networks are of great importance. He has many international contacts in Alfa Laval's matrix organisation.