Some sidestep the issue by providing niche services, but a few are taking the braver route of trying to provide a total global service.
One such is Gateshead-based precision engineer Express Group, which designs and manufactures special-purpose equipment and press tools. It was established with just two employees 27 years ago by group managing director Chris Thompson’s father. Now it has a £30m turnover, and 220 staff.
Express Group has 10 companies which operate autonomously, but work together to provide a wider engineering service for the automotive or consumer durables sectors.
In the past two years Express has started to expand globally and aims to double its annual turnover and workforce by 2001.
‘Being a relatively small company, we can’t afford to set up global manufacturing sites. So strategic alliances are vital to our growth,’ says Roy Stanley, group business development director.
Alliances will be used to tackle two key markets: the US and Japan. In April it launched a 25% joint venture with Detroit-based Omega Plastics, and in July it formalised a joint project with Japanese company Mishima-Kosan. Further alliances are being negotiated in Canada.
Express applies definite criteria for its alliances. ‘There has to be a good cultural fit,’ says Stanley. ‘We want to meet companies with an appetite for growth, which have common information technology and design platforms.’
Finding strategic alliances is not as difficult as it sounds, says chief executive Chris Thompson. ‘If you do your homework, rely on people with local knowledge and put forward the selection criteria, you end up with just a few to choose from.’
Express had support from the local regional development agency, the Northern Development Company, which has offices in the US and Japan, and helped identify Express’s partners in these markets.
Express’s US alliance with Omega added new skills to its portfolio, while Omega gained a route into Europe for its products. ‘The deal fills the gap in our capability between being a provider of rapid prototypes to production tooling and fits in with our strategy of selling total engineering solutions,’ says Thompson.
Omega specialises in rapid cut aluminium tooling and is known as a provider of ‘bridge to production’ solutions for plastic components. It has invested heavily and made good use of IT, as has Express. Using CAD and ‘time compression’ working methods, it can get new products to customers in weeks rather than months.
Forming the alliance presented its challenges. ‘It takes time to build up trust,’ says Thompson. ‘You have to ensure they are working to similar values this may be all you have to rely on if contractual commitments break down. We didn’t initially get into the contractual details in case these became barriers to the deal.’
Omega had not been looking for a strategic alliance, but Stanley and Thompson sold it the idea.
For the Japanese venture, the approach was different. ‘With the Americans you can be open and very up front but the Japanese don’t disclose as much, so it was harder to apply the selection criteria,’ says Thompson.
On the Mishima-Kosan deal, says Thompson, ‘we initially talked about providing tooling for car windows for Honda, with a view to a joint venture in the longer term’. The 18-month initial project has three phases during which design, manufacture and installation of the tooling will be moved from Japan to Express in the UK. This enables Mishima to supply Honda in the UK, meeting the car manufacturer’s demands for global support, while for Express, it brings new business and a potential future joint venture.
In a further part of its strategy, Express is looking at joint ventures in low-cost countries such as Poland and Korea to keep costs down.
Express continues to seek acquisitions to enhance its capabilities. It recently bought the industrial design department of Northumbria University, for example, commercialising it and renaming it XPD.
A US branch of XPD will be launched this year. The team’s design skills and knowledge of advanced visualisation and communication techniques will allow Express customers to see and collaborate on product designs as a project progresses.
Stanley believes the US office will indirectly create new business for the whole group. ‘Most of the design decisions are made in the US and it is potentially one of our biggest markets,’ he says.
Back in the UK, Express has also taken a 50% stake with the local TEC in a training company which it, and other local firms, will use.
The secret of the company’s success, says Thompson, is ‘allowing people to think out of the box. There’s no fear of expressing the unthinkable. In too many companies when you let the creative bird out there’s always someone there ready to shoot it down.’