Team 1 Cummins Case

Cummins Transition Path - Now and Future

2015 Yale Beijing Pre-MBA Program

Team 1:Lawrence BowersXiaofan ChenYi BianZhongji Wang

Table of Contents

Historical Success

Customers and Products

Parallel Competition

Government and Public Relations

Conclusion

Historical Success

Historical Success• Differentiated business model• Established presence since 1975• JV Partnerships in China up to 16…

Among others….

Unprecedented Growth

• 23% average Y-o-Y growth past 8 years• Expect new ISG engine to drive 2015 growth

in first full year of production

CustomersandProdcuts

Consumers• Across these markets, our customers are on a global basis.

• Engine Joint-ventures: Dongfeng Motor Corporation, Shanxi Automobile Group Co., Ltd. Foton

Products in the Future …

Strategy: •A diverse portfolio engine power•Focus on GREEN Energy, not only on diesels: Natural Gas, Electricity…..

Ex: New products: June 11, 2014 1st generation of natural gas engine designed and manufactured in China---L8.9G, which satisfies NS 5th.

• PM 2.5 concentration will decrease 45% in 2022; • Cummins will continue to contribute to, as it always did, this standard. o Ex: Clean engines in the buses in Beijing: more than 4600. o Its clean engine will also be a perfect choice for the machinery used in

the construction of the Olympic venues.

ParallelCompetition

China Top 10 Diesel Engine Manufacturers’ Market Share (2015 Jan – May)

Source: automarket.net.cn

Competing MarketThe whole diesel engine

market is crowded with many competitors

High NS IV Emission Standard

Opportunities for diversified development in engine market

Reducing market share of traditional diesel engine manufacturer tycoons ( Quanchai, Chaochai, ）

- Cummins’s technology leadership- Competitors’ preparation for NS IV is technologically insufficient.

- Booming market of light energy market (Futon Cummins ISF) - Technology Leardership at both ISG and Gas engine

Cummins Technology Leadership

Competitors

Integrated Customer Solutions

Market Needs

ISGHeavy-duty engine

ISF

Competitors ≠ Competing

-Using technology leadership to improve market participation;-Only through establishing more partnership can Cummins captures more market share in China.

Cummins

MAN －SINOTRUCK

Weichai

Partnership with positive player at heavy truck market (JAW China)

Components;Out-sourcing;Technology Support

Government and PublicRelations

Government Relation

Central government : 1.Sino-US Joint Statement on Climate Change (with

Cummins Headquarter in US)2. Strong connection with National Development and

Reform Commission (with officials eg. Mr. Xie Zhenhua) (Approval for special program with subsidies)

3. Win favor through sponsorship for big events in China (2020 Winter Olympics)

Government Relation

Local government: 1. Partnership with local business with a strong

connection with government (eg. Yiqi, Foton and Dongfeng)

2. Win-win situation (through creating jobs, technical support in environmental protection)

Public Relation

Media diverse channels, positive media exposure NGO China Foundation for Poverty Alleviation China Environmental Protection Foundation Industrial institution University Cummins Scholarship

ConclusionIn the short termFocus on green energy as standards tightenMaintain technology leadershipBuild on existing JV partnerships

In the long termTurn competition into cooperation Keep high profile on gov and public relationsSolve geographic inconsistency