The strategy we have implemented is designed to serve us well in both good and challenging times for the reasons described below:

• Our broad spread of markets, products and customers gives us wide geographical and industry coverage. Serving different markets provides exposure to different economic cycles, with customers in sectors as diverse as pulp and paper, semiconductors, transport, utilities, pharmaceuticals and food and drink. As no sector accounts for more than 15% of sales, the impact of tough conditions in a single sector on overall sales is limited. In addition, our range of blue-chip customers spans all industry sectors, with no single customer accounting for more than 1% of sales.
• Our products typically involve low capital outlay but provide a significant and rapid payback. Customer benefits include improving production efficiency, reducing downtime, eliminating wastage and enhancing product quality. These benefits become even more attractive to customers as they seek to reduce their own costs of production.
• The majority of our sales come from upgrades to customers’ existing facilities, rather than installation of new capacity. In addition to participating in the growing markets of many of our customers, we also seek to identify opportunities in all of our markets where we are able to develop new applications based on our existing technologies.
• All of our businesses are strong players in niche markets where there are significant barriers to entry. Experienced engineers develop applications which are tailored to the customer’s specific requirements – designing solutions which are difficult for competitors to copy. In addition, much of our technology is protected by patents.

Although the drivers for the purchase of our products do not change, uncertainty in macro-economic conditions means that the sales cycle lengthens as customers postpone purchasing approvals as temporary capex freezes are in place. Although our priorities remain unchanged, we have increased the emphasis on a number of existing initiatives to strengthen our competitive position within the constraints of tight cost controls:

• We continue to place significant emphasis on new product development. Over the past five years we have consistently allocated an annual spend of between 5% and 7% of sales to the development of new products and technologies, with the result that approximately 30% of sales are now from products which are less than 3 years old.
• We continue to focus on sales and marketing activities and have expanded our presence in Asia Pacific to take advantage of the growing opportunities in this region. This is particularly apparent in China, where many of our operations now have a representative office to offer sales and applications support to customers (for further details see Spectris expands its operations in Asia Pacific).
• We continue to emphasise the significant paybacks that our products offer customers even when their production volumes are reduced.
• We continue to focus on outsourcing manufacturing and non-core activities wherever possible in order to reduce inventory and fixed costs and speed up response times.

Examples of these initiatives are described in the articles in this issue of Perspectives.

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