Tomorrow's Global Manufacturing Competitors Could Be Today's Customers

Oct. 24, 2012
Companies doing business in new emerging high growth markets like China or India will fail without proper attention to future trends and standards decisions.

As manufacturers transition to providing products and solutions for individual global markets it becomes increasingly necessary to invest in R&D on a global scale to stay competitive. 

In the climate technologies market, making products that are more efficient is the fastest way to reduce emissions and lower global warming -- key customer performance requirements. 

Similarly, companies doing business in new emerging high growth markets like China or India will fail without proper attention to future trends and standards decisions.

The commercial refrigeration and air conditioning industry may not seem fast-paced compared to others, but the landscape is changing and decisions being made in emerging markets such as China and India are driving large U.S. companies to evaluate coming (or future) plant locations, product line choices, investment decisions and more.

The consequences could play out in some key areas: in the international competition for investment in an important manufacturing industry; in the battle for market positioning within the industry; and in the environment, of course, with respect not only to the ozone layer but also to greenhouse gas emissions.

The lessons learned in this industry are applicable to all manufacturers looking to increase market share in developing nations.

A brief contextual history shows that international concern for the depletion of the ozone layer led to the 1987 Montreal Protocol and the phase out of harmful chlorine-containing refrigerants. Growing anxiety about climate change attributable to greenhouse gas emissions led to the adoption of non-ozone depleting hydro-fluorocarbons (HFCs) which has been both rapid and effective.  But it’s not as simple as switching a good refrigerant for a better one.  That would be equivalent to putting diesel gasoline in a non-diesel engine.  Refrigerants have very different temperature and pressure requirements and improper use can result in damage to the equipment or environmentally harmful leakage.

So with the international call for safer, more environmentally friendly refrigerants, much of the world agreed to move, for example in air conditioning, from the then popular refrigerant known as R-22 to the much more eco-friendly R-410A.  That process was started almost a decade ago and manufacturers have invested in new product lines, technology and R&D that would be able to produce equipment capable of working with the new refrigerant. 

Complying with Global Standards

Yet China and India, as originally exempted developing counties from the Montreal Protocol, are now faced with freezing their R22 quantities next year with decreases starting in 2015. 

 At the time of signing the Montreal Protocol, the United States and Europe were the driving forces behind the demand for refrigerants.  But with the strong economic growth in China and India over the last 25 years as well as in their middle classes, the growing demands for more comfort goods such as air conditioning and refrigeration have given both countries significant influence in global refrigerant decisions. 

As manufacturing companies look to the future and make decisions on emerging markets, it becomes necessary to not only evaluate current demand, but anticipate decisions made my economies still in development.  Therefore, in the climate technologies industry as an example, the direction taken by these countries will greatly influence the global direction of refrigerants in the industry. 

It is not surprising then that countries like China and India would ask themselves if they should follow the path of the western nations or if they should leap frog and go on a different path.  This decision is not a simple one to make.

Because energy consumption plays such a dominant role in the total environmental impact of refrigerants, energy efficiency becomes very important.  For countries like India and China where electric utilities are being pushed to their limits with the growing demands, efficiency becomes everything. 

These economies are seeing greater demand for U.S. goods while at the same time needing different power requirements just to 'keep the lights on.' By far, energy consumption is the largest driver of emissions that impact the environment.  In a typical air conditioning system for example, 95% to 98% of the global warming impact comes from the indirect energy consumption. 

The decision on refrigerants is a complex one -- and not dissimilar in practice from those decisions facing many international manufacturers today.  By investing in the necessary research, U.S. companies can be prepared to address changes in standards, economies and requirements for prospering in tomorrow’s global marketplace. 

Rajan Rajendran  is vice president of engineering services and sustainability at Emerson Climate Technologies. Emerson Climate Technologies, a business of Emerson, is  a provider of heating, air conditioning, and refrigeration solutions for residential, commercial and industrial applications.

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