Heavy Equipment the Global Heavy

Heavy Equipment The global heavy equipment market is divided into four main segments -- mining, oil and gas, forestry and construction. The quality of a country's heavy equipment market will therefore be dictated by the size and growth of these markets. In France, none of these industries are considered major. The nation has an economy based on service industries and manufacturing. Construction is the main heavy equipment industry in France. By virtue of the nation's size and wealth, it is one of the largest markets for construction equipment in Europe.

The market, however, is relatively mature. Oil and gas consumption vastly outweighs production, and while the nation has some iron and steel industry, mining is not a major component of the French economy. In contrast, Bolivia has heavy demand per capita for heavy equipment. While the construction sector is underdeveloped, the nation has sizeable mining and natural gas industries. The three largest industries are mining, smelting and petroleum In France, the marketing institutions are western-style. Heavy equipment is sold through dealers, and sales representatives market directly to customers.

Relationship-building is important, as is after-sales service. In Bolivia, most of the mining and energy companies are foreign. Heavy equipment not distributed through local dealers, but rather arrangements are made between Westerners, even on Western soil. These contracts are therefore negotiated at higher levels. This is driven by the logistics of operating in Bolivia -- equipment firms are unlikely to simply open up a sales office and hope for the best. Plans must be made in advance. There is an active B2B secondary market as well.

In France, the industries are relatively mature. There is a trend, however, towards increased liberalization. The French government historically held a significant influence over resource operations, but privatization has opened the market. There has been significant growth in the French construction equipment market in particular, as a result of these new policies. France is the fourth-largest purchaser of construction equipment, after the U.S., Japan and Germany (BuyUSA.gov, 2009). Because of the size of the French market, the competition is intense.

Several manufacturers have plants in the country, including Caterpillar, Liebherr, and Case-New Holland. Komatsu, JCB and Volvo are also active in the French market. The Bolivian industry, by contrast, is in a state of flux. The socialist government of Evo Morales has enacted strict constraints on Western firms operating in the country and there is the ever-present threat of nationalization. As a result of this threat, foreign investment in Bolivia in both mining and hydrocarbon has declined of late.

The nation has tremendous resources and potential, but if the primary extraction firms hesitant to invest, this reduces the potential size of the heavy equipment market. The political environment in France is favorable. The government has been moving away from its centrally-guided economy to one that is based on free market principles. The nation is open to foreign investment, as evidence by the large number of foreign heavy equipment firms that have operations in France. In general, there is little risk of adverse legal or political events.

This contrasts with Bolivia, where the government is considered a threat to foreign firms. Foreign direct investment declined as a result of the policies of the Morales government. While it is unlikely that the Bolivian government would national service firms such as heavy equipment marketers, the risk that mines or gas fields could be seized is a threat. Additionally, there are two other political/legal threats in Bolivia. One is the treat of civil war, given the tensions between right-wing groups of European ancestry and the Morales government.

The other is corruption. While Transparency International has France listed as one of the more corrupt Western European nations (at #23 worldwide), Bolivia is ranked #102. The lack of effective rule of law in Bolivia is a significant impediment to business development. In terms of business operating resources, France is superior. As one of the largest markets for construction equipment, not only is there an ample customer base, but the institutions are well-developed. Transportation networks and financial institutions are relatively strong.

It is easy to do business in France, as there are few restrictions on capital flows, financing, and few impediments to business development. In contrast, Bolivia has many issues. The financial sector is poorly developed. While it appears to function for resource exploitation firms, it is safer to conduct transaction in other jurisdictions. The infrastructure is poor. Bolivia is a landlocked country so it is difficult to get equipment in and out. Capital flows are not as easy in Bolivia and the currency is not liquid.

Of the two countries, France has the most potential. Although Bolivia has more mineral and fossil fuel wealth, there are significant risks associated with entry into that market. By contrast, the French market is not only large but it is becoming more open. This provides sufficient opportunity for a new entrant. There is opportunity in Bolivia, but with foreign investment declining, the opportunities to gain a foothold in the market are slim. The rewards of Bolivia do not justify the substantial risks.

In France, the competition might be more intense, but the opportunities are stronger and the risk level is low. The most effective strategy for getting into the French market would be to establish a subsidiary. This is the typical method of entry into this market for heavy equipment firms. There are no discernible benefits to setting up a joint venture and this is not the norm in the industry.

Setting up a dealership would allow the firm to bring in equipment and set up a typical marketing structure for the industry in France. Because of the importance of after-sales service to French contractors, we should.