SCENARIO
Durodrill Equipment (Pty) Ltd manufactures diamond-headed drill bits for mining and civil engineering sectors. These drill bits are used to sink shafts or drive tunnels in mines, road building, hydroelectric schemes and other civil engineering projects where it is essential to drill through hard rock. Durodrill produces drill bits in the wide range of sizes, from 5 cm to more than 50 cm in diameter, to meet a variety of needs and conditions. The bits are impregnated with industrial-grade diamond (known as boart) or with a synthetic substitute, depending on the application. They could be used with all main makes of drilling equipment available in South Africa.
Typically, buyers of drill bits are the drilling crews employed by some of the large mines and the independent drilling contractors who undertake work for mines and civil engineering organisations. Drill bits are also purchased by the manufacturers of drilling equipment when they are demonstrating their equipment to potential buyers or when they are supplying the buyer with new equipment.
Durodrill has been in business for more than 30 years. Its products are used throughout sub-Saharan Africa, as well as in Canada, parts of United States and in Brazil. Development of its markets in Africa and Brazil has been done in cooperation with drilling equipment producers and, in some cases, mining companies themselves. This is especially the case with growth of Durodrill’s Brazilian market, where South African mining interests have direct investments in certain Brazilian mining ventures. In these regions, Durodrill supplies its drill bits to the drilling equipment manufacturers’ agents or distributors in the markets concerned.
Durodrill developed its Canadian and US markets independently and five years ago established its own marketing office in Ottawa. This has proved to be the highly successful operation and penetration of both markets has been greatly facilitated by on-the-spot dedicated marketing and sales personnel. A mainfactor in the success of this operation is that the environment in Canada is basically similar to that in South Africa and that there are no major cultural differences affecting way business is conducted, especially in mining sector. Part of Canada is primarily French speaking, but this has not presented a major hurdle as the company has ensured that its Ottawa office has high-level personnel with the required language skills.
The company feels growth of sales to markets in Africa as quite satisfactory and is content to leave marketing arrangements in this region as they are. Though, Durodrill is not especially pleased with growth of sales to Brazil and believes that, by limiting itself to the business derived through South African mining interests in that country, it is losing out on overall expansion of Brazilian mining sector. Furthermore, it is not supplying the growing Brazilian civil engineering sector. At the same time, Durodrill has not tapped the potential of the Australian market, although South African mining interests are also active in that region. The company is also having thoughts about possibilities in the Far East, in Indonesia and Malaysia, for example, and wonders whether the establishment of a foothold in Australia may be eventually used as a stepping stone into those markets. Durodrill feels that it requires a wider spread of risk than it has at the moment. It is also concerned that if it does not move quickly into some of these new market areas–new to Durodrill, but well established as mining regions–competitors in Australia, Brazil and, even more worryingly, in China would pre-empt it. The company is financially reasonably strong. The Board of Directors is generally conservative although not averse to well-planned new projects. Most of the directors are engineers, with the strong technical orientation. The plant’s output could be increased by 20 per cent in volume within a few weeks and expanded further within four months, if necessary.
TASK
Your task is to compile the memorandum for the next board meeting, to be held in two months’ time, outlining a possible export market development programme for Durodrill, why it is advisable and how it can be undertaken. Bear in mind that your audience consists of your fellow directors who are very knowledgeable about mining, not only in South Africa, but also in other parts of world.
As engineers, they are generally rather ignorant of need to promote their products–they tend to believe that technical excellence speaks for itself! Your memorandum should:
1. First briefly touch on the basics of marketing industrial products for the sake of other directors.
2. Consider which markets must be developed–you must evaluate the possibilities mentioned in the scenario.
3. Suggest the type of market presence that might be established in the selected markets, and the type of strategic alliances that may be essential or advisable.
4. Consider how Durodrill would promote itself in these markets–it will seem that its name is not known in Australia and the Far East, although it may be known in Brazil