Coping with changing markets.

In the foundry business, our economic destiny is governed, to a large extent, by the basic fact of business life: We who make castings almost always are producers of components, not of end products. As a result, our sales are a direct reflection of the sales of our customers, who use the castings involved in their own product.

This fact has far-reaching implications for metalcasters. To some degree, we all are economically captive producers, dependent on the business success of our customers and the general condition of the economy. It's the price that we inevitably must pay for being part of a basic industry.

In this situation, foundrymen have a tendency to do several things to cope with this dependency. One is to operate with a minimal sales effort, waiting for orders to come in over the transom. Another is to operate without the benefit of a well-organized, effective marketing approach.

Both practices are inadequate in the contemporary environment of competitive materials and processes. Worst of all, though, is the all-too-common tendency to sell castings on the basis of quoting the lowest price.

Long-Term Success

The only effective approach to achieving long-term success as a casting producer starts with a comprehensive marketing program. And the first step in the organization of such a program is recognition of the fact that although marketing and sales are aspects of the same function, they are by no means the same thing. Marketing precedes sales, and it should increase sales. The degree to which it increases sales, however, depends on the imagination and energy that goes into the marketing planning effort.

Life would be easier if marketing were a simple matter, but unfortunately it isn't. To be effective, a program need not be as complex as General Electric's, but it should include some basic things. Above all, one element is vital: action based on awareness of the fact that casting markets change. Some change faster than others, but all are in a constant state of flux.

In their marketing efforts, most foundries can't afford to concentrate just on sales to existing customers and potential customers in a given market. The status quo often is a myth. In fact, it probably always was a myth. The only lasting element in the status quo is change. Metalcasters with vision use that point to their advantage by constantly staying on top of change, seeking out new markets as early as they develop and adapting their facilities to serve them.

The operative word is "early." Several casting markets have decayed during this century. And it also must be recognized that some markets that haven't decayed have been attacked by various competitive materials, methods or processes. When a market shrinks, casting producers need to find new markets to maintain casting volume. And the best time to penetrate a new market is as soon as it emerges.

In terms of overall competition, early action can bring a new application into the casting field. In terms of competition within the casting industry, it can bring the new application into the area of a particular cast metal or casting process.

Twenty years ago, markets for gray iron appeared to be relatively stable and unchanging. However, this stability was deceiving, primarily masked by the relative size of the industry. Despite its long history of growth, there is no more volatile and ever-changing material than cast iron. Basic iron casting markets in such typical areas as pipe, automobiles, steelmaking, railroads and ordnance have undergone profound change, reducing market demand over this period by 61%.

Survival

No foundryman dares assume that there always will be a demand for his particular types of castings. The successful foundrymen in the years ahead will be those who expand to accommodate normal growth and those who constantly are on the lookout for new areas for the use of their castings. This effort costs time and money, but it's the basic price of survival.

Marketing data is of key importance to any foundryman who wants to diversify the mix of markets he serves and minimize the risk of having them all go down simultaneously because of either a weak economy or technological change. If all the markets served by a particular foundry are on the same cycle, no diversification is possible.

This point is of special importance to casting producers because normally their diversification is limited to the market mix. In other words, they can't diversify by producing a variety of end products themselves, but they can do it by trying to supply castings for a wider diversity of end products.

Profound market shifts generally occur over a longer period of time--sometimes even over decades--depending on particular technological developments. But, on occasion, the change takes place very rapidly. For example, it didn't take long for chilled iron car wheels, cast iron engine blocks and heads, soil pipe, and ingot mold markets to deteriorate.

Similarly, the last 20 years have seen the explosive growth of two types of castings.

Since 1970, for instance, aluminum die castings have multiplied in tonnage almost 10 times--partly at the expense of other materials and processes, but to a great degree through penetration of new markets, such as motor vehicles, business machines, appliances and electronic equipment.

Secondly, in the past two decades ductile iron has grown to comprise 35% of the total market for all ferrous castings.

In these two instances, brilliant marketing efforts weren't the whole reason for the success, but they helped. Both aluminum diecasters and ductile iron producers aggressively pursued new markets, and they coupled that effort with technological progress that multiplied their successes.