Question

The Sany Heavy Industry Co., Ltd is China’s largest producer of heavy equipment. In fact, it is the fifth largest producer of this type of equipment globally. In 2014, its revenue was decreasing because of the downturn of overall GNP in China. Sany’s total sales revenue in 2012 was $12.9 billion, well behind industry leader Caterpillar at $65.9 billion. However, Sany has a goal of eventually unseating Caterpillar as the industry leader. Sany plans to achieve $47 billion in annual sales within 10 years. Sany has already surpassed Caterpillar as leader in it Chinese domestic markets. Sany has four core businesses: (1) cranes, (2) road construction machinery, (3) port machinery, and (4) pumpover machinery. While each is distinct, some similar technologies are used in the production and equipment. Furthermore, similar technologies allow similarities in production processes and equipment for certain parts. Therefore, there is a transfer of knowledge across these businesses. In addition, customers and markets share some similarities because all relate to some form of construction. For this reason, in the United States, Sany has become a major sponsor of Chevrolet on the NASCAR auto racing circuit. Sany America’s marketing director, Joe Hanneman, said that research showed NASCAR racing events to be the primary recreation event for people in the U.S. construction industry. Sany invests 5 percent of its annual sales in R&D to continuously improve the quality of existing products, identify new technologies, and develop new products. Through the end of 2012, Sany held 3,303 patents as a result of its R&D efforts. Indicative of its intent to be a technological leader in its industry, Sany has developed new postdoctoral research centers to attract top research scientists. In 2013, the company was awarded China’s National Technology Invention Prize for its” super-length-boom” technology. Although it has been pursuing technological innovations, Sany was recently accused of patent violations by Manitowoc, a diversified producer of equipment including large cranes. In 2014, a judgement went against Sany concluding “one Sany crane product infringed one of Manitowoc’s patents and that six trade secrets of Manitowoc were both protectable as trade secrets and misappropriated.” This is a negative signal for Sany as its seeks to pursue more diversified growth outside China. Sany continues to grow organically and through acquisitions. For example, in 2012 it acquired Putzmeister, a well-known concrete pump manufacturer. In addition, it has established subsidiaries in many countries, including the United States, Germany, and Brazil, to enhance its international equipment sales and broaden its market reach. Largely because of its major goal of internationalization, it is moving its corporate headquarters from Changsha to Beijing for enriched international connections. 2) How does the level of change in gross domestic product (indicator of country economic health) influence a firm like Sany?

Answer 1

Gross domestic product refers to the monetary measure of all goods and services produced in a country over a period of time. It is a measure of economic well-being of a country. Positive GDP is good for business as it allows firms to hire more employees and even increase their wages and salaries. This in return increases disposable income of the firm. As for Sany, the GDP will directly and indirectly affect the expansion process of the firm mainly because of interest rates. When the GDP stagnates, the government will regulate the same by reducing the rates to increase money supply in the economy, which will lead to higher consumption in the domestic market due to which the expansion will be hindered.