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Emerald Group Publishing Limited
Copyright © 2001, MCB UP Limited
The European market for pneumatic equipment a new study by Frost & Sullivan
The European market for pneumatic equipment – a new study by Frost & Sullivan
Keywords Pneumatics, Europe, Sales
Continuing automation and investment in new product types drives pneumatics market forward
Sales in the European market for pneumatic equipment continue to show potential for growth, expected to rise from $3.49 billion in 2000 to $4.56 billion in 2006. In the short term, the strength of the European economy is expected to fuel demand. However, according to a new study by Frost & Sullivan, the international marketing consulting company, mounting price pressures and the likely moderation of European economic growth in the medium term mean that suppliers of pneumatic equipment must focus their competitive strategies to maintain margins.
Technical innovation and interaction with customers to produce complex pneumatic systems are rising in importance. At the same time, falling prices are generating a need for volume production in order to gain economies of scale, which is driving consolidation between leading firms. Frost & Sullivan's study highlights the necessity for suppliers to choose where to position themselves on the price/quality continuum.
Mik Sabiers, research manager at Frost & Sullivan, comments:
The automation of production processes is sustaining strong demand for pneumatic equipment and, as secondary producers automate production, pneumatic systems are increasingly penetrating new application areas. Equally, users of the large installed base of pneumatic equipment are being encouraged to invest in new products by the constant upgrading of pneumatic technology.
The combination of electronics with pneumatics and the creation of intelligent products, which both are faster and permit precise electronic control, are spurring replacement demand and contributing to the market's appeal to new users. Nevertheless, while it is strong, growth is not outstanding. The market is sensitive to variations in gross domestic product (GDP) and is being impacted by the ability of new products to last for an increased number of product cycles. Most importantly, growth has been eroded by falling prices. Suppliers to the European market for pneumatic equipment compete in an intensely competitive environment.
Pneumatic equipment is combined for use in pneumatic systems. Individual product areas are therefore strongly interrelated, and growth across the market tends to be fairly uniform. The varying intensity of price competition is largely responsible for differing rates of revenue growth in individual product markets.
Growth in this market for valves, accounting for the largest share of sales across all product markets, is expected to be driven by favourable economic conditions, by the continuing popularity of solenoid valves, and by the rising availability and use of intelligent valves.
Meanwhile, similarities can be drawn between the market for filter regulator lubricators (FRLs) and the market for cylinders. In both product areas, revenue growth is being impacted by falling prices. While demand for FRLs is being driven by growing demand for pneumatic systems, it is being constrained by price reductions caused by competition and the sale of products in a modular format.
In terms of national markets, Germany remains the largest market, followed by the UK and Italy. A strong industrial focus, including a large materials handling and assembly sector and a large processing sector, contributed to Germany's importance. The revenue significance of both the UK and Italy will experience an upswing and, under the influence of stronger economic activity, the significance of France, Iberia and Benelux is expected to increase.
More than 100 competitors are active in the European market for pneumatic equipment. A substantial number are smaller firms operating in their domestic markets on a regional basis. An upper tier of the market contains five larger and internationally focused participants: Festo; Bosch-Rexroth; IMI Norgren; SMC; and Parker.
Additional firms operate on an inter-European basis, but have yet to attain the market share of those in the first tier. Competition between firms in all areas of the market is intense. The standardisation of many products means that price is the principal method of distinguishing between products. Delivery, the author observes, is also crucial.
As demand for control systems rises, it has the power to alter the competitive landscape. Competition may become less price focused as customers place greater emphasis on expertise, Frost & Sullivan's study concludes.
For further information, contact: Frost & Sullivan, An International Marketing Consulting & Training Company, Sullivan House, 4 Grosvenor Gardens, London SW1W 0DH, UK. Tel. +44 (0)20 7915 7882; Fax: +44 (0)20 7730 3343; e-mail: Benjamin.Barwick@fs-europe.com; Web site: http://www.frost.com (report code: 3889, price: E5,300, published: February 2001).