Keeping customers close
Christian Schw?rer, of Peri on the challenges of operating in a Middle Eastern market for a European company.
Christian Schwörer,, managing director, Peri, talks to Christopher Sell about how a European company operates in the Middle East market and how to keep pace with the challenge.
As a Germany company, when did you begin to pursue the Middle East market?
When the company was founded in 1969, the export market was handled directly, so when there was a big project further afield, such as Saudi Arabia, people went with the company from Europe to that particular country. The first project in the UAE was actually in 1990 - before we even had an office there. It was a project with Six Construct. This was the starting point.
So there was no specific point of time when we said: 'Let's look at the Middle East market'. As the market emerged and developed, and our customers started to go to the region, we went with them, but only on a project-by-project basis. We decided in 1994 to found a subsidiary in Dubai. That was the strategic decision, before that we did it on a case-by-case basis.
How are you keeping pace with the demand being placed on you by customers. What systems do you have in place to meet, match or anticipate this?
It is a very good question, because it is difficult in Dubai's market to put in place a forecasting system. However we have regular surveys to our subsidiaries where they have to predict the demand for different product groups, which we try to match with our production capacity.
And the reason that the demand was far higher than our production capacity led us to the decision to enhance the production capacity here in Germany to meet demands in future.
So, I would call it a rough version of a forecasting system but the most important thing we do to keep pace with demand is enhance our production capacity.
Are there grounds to set up a permanent manufacturing facility in the Middle East - such as a central production hub?
We did a lot of analysis on where to enhance our production facilities, the decision in the end was made for Germany because we have a lot of advantages here that we wouldn't have anywhere else. So establishing another facility isn't something we are considering right now.
What advantages are you referring to?
In Germany, we have pooling effects. We pool different products in one place. We have a steady utilisation because we pool international demand in one place so the regional volatility levels out. We have a very good, experienced workforce. We have organisation in place. We have good infrastructure and we are in the middle of our major market.
Production issues aside, what are the main issues for Peri operating in the Middle East?
Quantities. To keep pace with the constant changes we are facing -at the implementation stage and during the project, which causes a lot of extra work. That is the main challenge.
Contractors tend to make decisions at the last minute. They have plenty of time - say the project starts next year - but you will never find a contractor who decides early about the formwork; he will decide closer to the time. He knows about lead times and shortage of material, but he will not decide on this.
Why would they if they know it places greater strain on companies such as yours?
That is a really good question, if you have the answer. But it is the same in Italy, France or the US. One reason could be that it is only 1 to 2% of the cost of the project is the formwork, but this is only a guess.
Are you affected by the ongoing issues relating to piracy of your products and systems?
One of our most important philosophies is that the client doesn't want a product but a solution to a problem. So you can copy a product but you cannot copy a solution. So that is how we protect ourselves, through the technical competencies of our people. That is way stronger as a barrier to other competitors than just the product.
Yes, we have innovative products and there is piracy in the market, but even if you can copy our product, it is very difficult to offer the same services. So that is a very important point of our philosophy.
It is a very service-intensive industry, and on a construction site, things always change, things happen, maybe they need additional material or they need changes to the drawings, that is why we have to stay close to the customer.