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Insight

Product Diversification Techniques

Wed, 02/24/2016 - 16:22

WEG has a tradition of focusing on industrial products, from motors to transformers, across a wide range of industries. The company has a presence in a wide range of countries from Portugal, Austria, Germany, Colombia, and Argentina to India, and produces specific products for these markets. The company has been in Mexico for 15 years, and the country holds a coveted position in the growth strategy of the company as it caters to the US, Canada, and Central American markets. Rather than buying the finished product, WEG will source the raw materials and produce internally. This means that WEG will be shifting suppliers and searching for new ones further down the chain.

Recently, WEG expanded its operations and included more products into its portfolio. “Now we do not only assemble but we also manufacture certain components internally. The vertical integration allows us to control the planning and production of the products from the start to finish,” shares Mauro Mendes, Managing Director of WEG. He claims there are a series of competitive advantages that come with vertical integration, such as quality and cost control, and being able to deliver products to clients more efficiently.

WEG products can be applied to a wide range of industries, but the best opportunities for the company are in the mining, oil, and gas industries. WEG holds a unique position in the energy value chain because its products are sold to OEMs and subsequently arrive at PEMEX refineries or CFE power generation plants or substations. “We have direct contact with CFE in our transformers division, since these products have a range of applications from power generation to distribution,” Mendes explains. Setting its sights on PEMEX, it has spotted a niche in ultra-low-sulfur diesel (ULSD). PEMEX is planning to increase the production of this fuel, thus it will need new infrastructure and WEG will participate in providing the products to make this a reality. Mendes is evaluating other areas of the energy sector that could be beneficial to the company. “The cogeneration sector represents 10% of our revenue, and, given the heightened focus the government has given to this technology, we believe this figure will rise to 15%.”