Like many American manufacturers, Challenge Machinery has forged strong partnerships with businesses in India, China, and other countries with growing economies. You might be surprised to learn, however, that most of these relationships involve selling to businesses, not buying from them. Over the past few years, Challenge has observed a growing demand for well-made American finishing machinery in many countries traditionally known as equipment exporters. Interestingly, much of this demand has come from small to mid-sized printing companies. And I believe that this new trend will have a direct impact on domestic graphic arts businesses.
Quality, the Universal Language
Our recent success in these markets defies conventional wisdom about international trade. Countries like China and India have well-earned reputations for producing goods extremely cheaply. Certainly, low-priced machinery is readily available in both markets. At Challenge, our goal is to manufacture machinery of supreme quality and durability. We believe our cutting, trimming, and drilling machinery is an excellent value, but it’s rarely the lowest-priced option on the market. If price were the only factor in a machinery buying decision, we could not compete successfully in the Chinese and Indian markets. But it isn’t.
Many Chinese and Indian graphic arts businesses now approach price and quality as American graphic arts businesses do: price matters to them. But they also understand that, in general, price and quality are inversely proportional. Many of these companies are willing to pay a bit more for a machine that’s durable and reliable.
I’m sure you understand the need for this trade-off between price and quality. Take a walk across your production floor. Is every piece of equipment you own the absolute cheapest available? I doubt it. You know that buying a cheap machine is pointless if you end up sinking half the cost again into maintenance and parts replacement.
Similarly, graphic arts businesses in China and India are starting to understand that investing in reliable, sturdy finishing equipment pays dividends. Whether a company prints and finishes in Bangor, ME, or Bangalore, India this principle holds true: You can’t have happy clients without reliable equipment, and you can’t have a successful business without happy clients.
And while this growing trend may have positive outcomes for large manufacturing companies, it may prove inauspicious for the small to mid-sized printing market in the US. Why do I think this is the case? Consider the factors that have contributed to this shift.
First, as a result of standard of living improvements, businesses in Asian countries now have more money to invest in quality—both the graphic arts businesses, in terms of quality machinery, and their customers, who seek quality finished products.
Thirty years ago, more than 40 percent of Indians lived on $1 a day, and about 60 percent lived below the poverty line. Today, these numbers have happily shrunk to around 25 percent and 40 percent, respectively. China has experienced similar standard of living increases since undertaking economic reforms in the 1970s. Over the past 20 years, standards of living have also in risen in countries in the Middle East, eastern Europe, and South America. Not coincidentally, Challenge has had recent success selling into these regions, as well.
Overall economic growth in these countries has also increased the demand for better made equipment. As the Chinese and Indian economies continue to expand, graphic arts businesses in these countries are facing tougher throughput and turnaround demands than in the past. Many of these businesses may be finding that cheaply made domestic equipment can no longer meet their needs effectively. Increasingly, these printers are turning to better quality machinery that will help them make their clients happy.