What do you do when you have to sell in a market where aggressive local competitors can beat you on vanilla product prices?
S.A. Armstrong Ltd. has answered that question with aplomb. The mid-sized company from Toronto has been in the engineering business since 1934, but it didn't land in India until about three years ago. The timing was just right for the company that, among other things, makes pumps that go into air-conditioning plants, but if that was its only business, it would not have been able to stand out in India.
S.A. Armstrong has a well-packaged plan to address competing in the emerging, fast-growth economy, and like many successful small and medium-sized businesses, it banks on a unique formula. The focus lies not on selling its products but on solutions that employ a combination of intellectual property, energy-saving services and maintenance, giving a clear message to customers, which include Delhi's spanking new international airport, a coming metro link to the airport and some of India's large corporate houses.
S.A. Armstrong, with global revenue of $500 million (U.S.) and 1,000 employees, now records slightly more than 1 per cent of its sales in India, but it has picked up 150 clients in three years and it has 80 employees divided between a capacity centre, a manufacturing unit and a foundry in Bangalore, the technology capital, where it serves customers nationwide.
Two things work in favour of the India unit, Armstrong Design Pvt Ltd. One is the construction and real estate boom that fans demand for air conditioning systems, and the other is the variety and change in climate conditions in a country where snow and scorching sun can both be found at any time of the year, depending on the location.
"India is a country of contrasting climates. Air-conditioning is a must. About 40 per cent of the power spending is on HVAC (heating, ventilating and air conditioning). We want to save 50 per cent on that," says Kiran Dharwadkar, Armstrong's national sales manager.
It might have helped that Vid Mehta, Armstrong's director of global processes, based in Toronto, is of Indian origin (he is also the managing director for the Indian subsidiary). But the company has nevertheless had to contend with a landscape in which air-conditioning controls have been traditionally treated like a commodity.
"Because of a lack of knowledge and understanding and old systems in place, they don't want to change. That's why it is taking time," Mr. Dharwadkar said about building the market.
Another factor is that pump for pump, Armstrong cannot fight a price war when local engineering companies are strong on cost and quality. "That's why we want to go beyond price war. Solutions are important," Mr. Dharwadkar said.
Armstrong relies on a special, somewhat rare technique called the Hartman loop methodology, and buttresses it with automated controls that give it an edge when it comes to comprehensive management of facilities that regulate office climates.
Mr. Dharwadkar said the company is increasingly gaining from new regulatory and monitoring principles on environmental management being pushed by Indian agencies such as the Bureau of Energy Efficiency and The Energy Research Institute (TERI).
One challenge the company faces is that air-conditioning plants are often a component of building contracts, so companies have to deal with contractors looking for cheap products. To get around this, Armstrong talks directly to the end users when selling its energy-saving message. With growing awareness of both energy costs and carbon footprints, the message is increasingly well-received, especially among progressive firms that pursue global benchmarks for greener offices.
"Contractors never understand solutions. So we try to influence end users," Mr. Dharwadkar says.
Special to the Globe and Mail
Narayanan Madhavan is associate editor of the business news pages of Hindustan Times, a leading Indian daily newspaper. He has previously worked for Reuters, the international news agency, as well as The Economic Times and Business Standard, India's leading business dailies. Though focused mainly on business and economic journalism with a strong focus on information technology and the Internet, he has also covered or written about issues including politics, diplomacy, cinema, culture, cricket and social issues. He has an honours degree in economics and a master's degree in political science from the University of Delhi.