Much of the world is focused on the quickly developing BRIC nations and their potential security markets. As these security markets grow, how suitable are they for local manufacturing? Intelbras makes products solely for the Brazilian market, a very large, quickly growing, yet somewhat closed, economy. Would ‘Made in Brazil’ products fair better in Brazil?
Much of the world is focused on the quickly developing BRIC nations and their potential security markets. As these security markets grow, how suitable are they for local manufacturing?
Brazil
Intelbras makes products mainly for the Brazilian market, a very large, quickly growing, yet somewhat closed, economy. Would ‘Made in Brazil' products fare better in Brazil?
“Hard to say,” said Rafael Carmisin Duarte, Business Development Manager at Intelbras. “Brazil is not a well-known country for high technology and new products. Specifically, for the surveillance market and when we talk about lowand mid-end products, they would rather take Brazilian products because it will be easier for them to deal with local support and long term customer-manufacturer relationships. They will have a closer approach. If we talk about the high-end products, it's going to be an international dispute, between local and multinational companies, of balancing the local support, technology reference and cost/benefit evaluation. For the high-end market, people will trust products more if they are from a well-known and recognized brand, whether it is from Brazil or not."
But regardless of preference for country or international supplier, Brazil does have policies in place that help to promote domestically manufactured goods. However, there are several requirements to obtaining such priviledges. “There are many customs-barriers for incoming products; the tax on import goods is very high,” said Duarte. “So if you have a product developed by manufacturers in Brazil, the same product might be more expensive if imported.”
Interestingly, components are not highly taxed because there are not many component manufacturers within Brazil. If there are, then other manufacturers higher on the assembly line may need to worry about the price of their components increasing.
India
Another BRIC country, India, consists of a highly educated, quickly growing population, with a market yet to be tapped. As the market continues to develop in India, local manufacturing will likely become more prevalent. India is already starting to see some domestic manufacturers and it would be no surprise if many more started popping up in the coming years.
“The opportunity and requirement in India for the security and surveillance products is huge,” said Iqbal Singh Jagdeva, MD of Turbo Consultancy Services. “I think the local manufacturing and assembling in India has the advantage of available resources and man power. However they require proper training and they need to ensure product quality that meets international standards.”
As with many places, price versus performance is important for the Indian customer. “People are very much conscious and concerned about the prices of the products,” said Singh. “Generally the buyer will ask the prices first before asking for the specifications of the product.” Because of quality concerns, Indian customers typically still go for international brands. But that will change as the quality of Indian manufactured products increases. “Presently the buyer always prefers to go for imported products as they are unable to find good quality products that are manufactured in India,” said Singh. “Hence they prefer imported products. However with time, after quality improves, we feel their preference will be for India-manufactured products.”
Russia
Russia is yet another growing BRIC with lots of market potential. There are a few industries that only accept security made in Russia, like orders from government and law enforcement. However, in recent years, Russia
has had difficulty sustaining their manufacturing industry. “Manufacturing in Russia has declined greatly over the past 20 years due to mismanagement by the government,” said Svetoslav Antyushin, Business Development Manager, Smartec. “Production was not profitable due to high utility bills, taxes and relatively high wages. Additionally, factories have not been modernized since Soviet times, and have quickly become unprofitable.”
The decline of manufacturing has had an impact on the skilled labor population. “In Russia, we traditionally have a very highly educated population,” said Antyushin. “Russian engineers and scientists are appreciated throughout the world. But working in manufacturing is not prestigious in Russia. So, we lose our talent to other countries and deal with an enormous ‘brain drain'. The government is now trying to raise the prestige of these professions. In general, finding skilled developers in Russia is not a problem; it's a problem with qualified management personnel.”
Infrastructure and import regulations also make it difficult. “The import of components across the border also causes a lot of problems for manufacturers. This greatly increases the cost of products on 90% of high-tech products made in Russia from foreign components.”
Today, the Russian government is trying to revive this industry throughout Russia. Though the final outcome is yet to be seen, there are signs things are moving in the right direction. “They are creating free economic zones, like industrial parks, programs to support small- and medium-sized businesses, and they are paying attention to innovation in high technology areas. Support has been given in many manufacturing areas, including the field of security systems. Now, Russian produced fire systems and access control systems offer good price-performance and are popular in comparison to their foreign counterparts. Surveillance cameras, on the other hand, still have a long way to go.”
The way forward
What is a possible vision for the future? Duarte thinks that the future of manufacturing will be one with regional manufacturing centers. “The market is always looking for where manufacturing would bring the most benefits, and migrating to where the cheapest products can be produced," said Duarte. "In the short run, other Asian countries like Vietnam, Philippines, Indonesia and Malaysia are already taking a share of China's place, currently the main manufacturing site worldwide, due to its constant labor cost increase during the past few years. With the increase in growth in each region, I think we will have different manufacturing centers close to different markets. So I think that each big area will have their own manufacturing zone that will put together logistics, labor costs, and local benefits over taxes, like in Europe where they have the Eurozone. South America and North America also have their own trade agreements."