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Strategic Analysis, Option Development
 

Strategic Analysis, Option Development

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  • Last year I talked about the major reorganization we undertook in Climate Control. Today we have three P&L leaders: Americas, ESA and Asia Pacific with responsibility for driving our total portfolio of products and the cost synergies from consolidating our back office and manufacturing operations.

Strategic Analysis, Option Development Strategic Analysis, Option Development Presentation Transcript

  • Three Leading Brands Climate Control Technologies Americas Asia Pacific European Served Area
  • Situation Analysis
    • SWOT - strengths, weakness, threats and opportunities
      • Does a strong understanding/appreciation of Market, Customer and Competitor dynamics exist?
        • What is the Scenario of future market conditions – areas of change, growth?
        • Are there any potential disruptive technologies, products, approaches
        • Are Competitive Profiles up to date (Product/Service Portfolio, Capabilities, Market Position, Dimensions on which they compete)?
        • Are Customer Profiles (Product Sales, Profit, Investment, Performance, Satisfaction, Key Decision Makers) up to date?
      • Profitability Analysis - What Products, Segments and Customers actually contribute to IR’s profit?
      • Tactically chasing programs or executing Product Plans ? Which Customers are Key?
      • Can we sell more of what we have today? Do we need new products to win programs and improve margins? How can we increase our win rate ?
      • Do we have a differentiated competitive position ? Are we unique or like all the rest in the eyes of the Customer?
      • What should IR be doing? - Industry and Opportunity Analysis
      • What is IR doing? - is there a solid, robust Strategic and Tactical Plan?
      • How effectively is it getting done? - growing as fast as the competition or industry? Customer Satisfaction Survey, Marketing Audit
      • Where are improvements needed? And why do it?
        • What is the payoff if achieved? What are the priorities and timing?
    • Should the
      • Holes in the boat be plugged first (problems w/ current programs, products, customers and partners)?
      • Or can we Add more sail to go faster (new programs, products, customers, partnerships)?
  • Situation Analysis
    • External market forces, market opportunities, competitive analysis
      • Identify market trends to access future profit potential of business
        • Scenario of future market conditions - potential areas of change, growth
      • Sales opportunities - territory market potential, competitive profile & where compete
        • IR relative strengths/weaknesses, image & reputation re customers, prospects and competitors, customer issues
        • Definition of IR’s value proposition and Unique Selling Points - five greatest strengths in the market
    • Review Strategic and Tactical plan elements and execution – profit and investment profile
      • Market Strategy – Civil, Military
      • Product Strategy/Roadmap – OE and Aftermarket, New Improved, Mature, End-of-Life
      • Technology Strategy/Roadmap – Research, Product Development, Product Enhancements, Prioritization, Funding Sources
      • Customer Account Strategy – to implement Market and Product Strategy and balance investment across Customer base
        • Strategy defines needed products, services, marketing and selling strategies and efforts to achieve operational excellence in the eyes of this customer
      • Alliance, Acquisition Strategy
      • Operational Strategies
      • Organization Alignment – Customer & Product Strategy, OE & Aftermarket
      • Balance of Portfolio of Investments – Account Development, Strategic Pursuits,
      • Technology and Product Development, CapEx, Skill Development
      • Define need for increasing product/service coverage, presence to the sale and hit rate to grow market share
      • Evaluation of Marketing & Sales Force Organization
  • Potential Plan of Attack – Marketing and Sales
    • Set the target: $5.0 to $6.0 B by 2012
      • Grow faster than market within designated “Growth” Markets, Customers, Platforms and Products, Aftermarket Product and Service Expansion
      • Leadership with Directional Customers
      • Achieve desired balance in sales base – OE/AM, Regional, Customer base
    • Define Differentiation and Positioning strategy that provides
      • Competitive advantage in product/service offering, way IR does business
      • Best in category position in mind of customer – Technology and Relationships, Speed, Service?
      • Reduction in selling efforts, expense and emphasis on price
      • Differentiates on the quality of ideas and tangible top and bottom-line impact on customer’s business
        • Build IR value proposition around business know-how, supply chain optimization, operation support, ease of doing business, organizational strength as well as product/service design
    • Identify high-level Market Segment, Platform, Customer and Product Strategies
      • Strategies to create strategic leverage and build upon IR’s strengths/core competencies
        • Establish IR Unique Selling Points and leverage in execution
        • Target is sustainable competitive advantage
      • Create guidelines for investment consistent with strategies, balance and manage portfolio, address multi-year timeframe
      • Delineate and pursue appropriate alliances and acquisitions
        • Craft a global footprint and manage set of global extended enterprise relationships
          • Satisfy customer needs for global service and support
          • Required to stop development and growth of new competitors
      • Pursue Innovation and create best practices in Product Strategy, Marketing and Business Development
  • Building an Innovation and Growth Engine
    • Utilize Platform/Customer-focused vs. Product Business strategy
      • Define and pursue “growth” platform opportunities as primary focus – products secondary
      • Focus on Customer Value to build Customer Preference and Loyalty
      • Deploy key account Customer development strategy
      • Pursue selective partnerships/acquisitions
        • Enhance system integration capability, fill product void, provide next gen technology
        • Extend Customer base, Market access, geographic base
    • Grow Installed Base – WIN the new platforms
    • Identify, build position with profitable, high-growth market segments/niches
      • Entrepreneurial teams focused on high-impact opportunities ($25-50 M/yr)
    • Focus on the Customer and Follow Market Growth re product/market expansion
      • Services are integral, not secondary to growth strategy, build Service Portfolio
    • Differentiate and WIN with technology – Doing the Right R&D
      • Pursue and invest to achieve technical leadership, Innovate along several fronts
      • Reduce product maintenance to help fund new product R&D
      • Establish Engineering Centers of excellence to eliminate duplication
      • Leverage technology from other IR Groups
    • Upgrade sales/marketing techniques to improve effectiveness
      • Strategic Selling, Large Account Management, Account/Competitive intelligence
    • Discipline creates focus
      • Move away from unprofitable products, market segments and customers
      • Reduce # of Marketing and Engineering projects – focus on high payoff
      • Finance incremental Marketing/R&D, lower cost of operation
    Includes Products, Technologies, Customers and Marketing
  • Climate Control Technologies
    • Solutions to transport, preserve, store and display temperature-sensitive products:
      • Transport Temperature Control Units - #1 Worldwide Transport Refrigeration
      • HVAC Systems
      • Refrigerated Display Merchandisers - #1 NA
      • Beverage Coolers
      • Walk-in Storage Coolers and Freezers
    • Core Competencies: Climate Control, Packaging, Service
    • Corporate Objectives:
      • Sales Growth – 8-12%/yr (4-6% Organic, 4-6% Acquisition)
      • Operating Margin – 15%
    • Recent Financial Performance: 9 mos. 2006 2005 2004 2003
    • Sales $2.3 B $2.9 B $2.8 B $2.6 B
    • Op Profit 261 M 315 M 309 M 217 M
    • Op Profit % 11.3 11.0 11.1 8.3
    • Cap Ex 9.7 M 13.5 M 18.1 M
    • Acquisition Targets:
      • Well-run, complimentary businesses
      • Fill strategic voids (new products/technology, geographic coverage)
      • Accelerate growth
      • Last acquisitions – 2001- National Refrigeration Services, Taylor Industries
  • Environment
    • Market
    • Product Integrity – Enhanced interest/concern over freshness, potential contamination; Product inspection/record keeping
    • Efficiency – Fuel costs, improved productivity; Control/reduce refrigerant loss;
    • Optimize performance of individual and multiple HVAC systems
    • ECO-Friendly – Prevent CFC, HCFC loss into atmosphere, Montreal Protocol Compliant
    • Infrastructure development in emerging markets – India, China
    • Consolidation – Linde AG, York International, Sensitech
    • Technology
    • Efficiency, ECO-Friendly – More-efficient powerplants, control systems;
    • Puron, HFC-134a refrigerants
    • Smaller, Lighter, Faster, More Reliable – Hybrid diesel-electric powerplant;
    • Higher performance controls
    • Sensing, Control Automation – High-speed networks/communications;
    • Intelligent Facility architecture – electronic control,
    • Monitoring of Refrigeration, HVAC, Lighting, etc.
    • Integrated Systems – Cooling, Heating, Power with Security Management:
    • Total Building Energy and Control System
  • Competitor Overview IR - Carrier Competition – Transicold, Linde, Tyler, Beverage Air, International Cold Storage Heat Transfer Products Group
  • Industry Dynamics
    • March 2004 - Carrier acquirers Linde Ag
      • European leader in Commercial refrigeration, Asia & L America position
      • $1 B sales, $486 M purchase price
      • Refrigerated Display Cases/subsystems, Industrial & Commercial refrigeration
      • Wider product portfolio, geographic product/service balance
    • Dec 2005- Johnson Controls acquires York Intl.
      • Single source of integrated products/services to building owners to optimize comfort and energy efficiency
      • $5 B sales, $3.2 B purchase price
      • Provide ability to bundle Residential, Commercial and Industrial HVAC&R equipment
      • with Building Controls
      • Access to larger $200 B global market ($130 B building control, fire and security services)
      • Stronger position in China, C Europe, L America and Middle East
    • June 2006 – Carrier acquires Sensitech
      • Leading global provider of Cold Chain visibility solutions – Food, Pharmaceutical
      • $130 M purchase price
      • Data acquisition, enterprise software systems, analytic services – food quality/safety
      • Strategic importance – high potential cold chain monitoring market
      • Detects & documents temperature-critical control points, archives data, provides record
  • Carrier
    • World Leader in Air Conditioning, Heating and Refrigeration Systems:
      • Residential, Commercial, Industrial HVAC Systems
      • Commercial, Transport Refrigeration
        • SMARTAIR System (in-transit ripening), Ultima XTC (Next Gen Reefer)
      • Food Service Equipment
      • Building Automation & Controls
      • Energy Management & Air Quality Systems
    • Core Competencies: Climate Control, Packaging, Systems Integration, Innovation, Service
    • Recent Financial Performance: 9 mos. 2006 2005 2004 2003
    • Sales $10.3 B $12.5 B $10.6 B $9.2 B
    • Op Profit 1044 M 1104 M 830 M 853 M
    • Op Profit % 9.6 8.3 7.8 9.2
    • Cap Ex 243 M 176 M 89 M
    • Restructuring 65 M 220 M 240 M
    • Key Milestones:
    • 2004 – Avant AC Electric AC technology for Bus, Coaches
    • 2005 – Acquires Linde AG – Commercial Refrigeration
    • Evergreen energy-saving Variable Speed Chiller
    • UTC acquires Lenel – Security Management
    • 2006 – Deltek Hybrid diesel-electric technology – leverage Ham-Sund
    • New range of 13 SEER Residential AC
    • Acquires Sensitech – Cold Chain Visibility
  • IR Climate Controls’ Strategic Thrusts
    • Grow Cold Chain Position
      • Moderate: Refrigeration for Warehousing, Walk-in Refrigerated Storage
      • Strong: Refrigerated Transport from Farm, Shipping Tracking & Monitoring, Multi-Temp
      • Refrigerated Transport, Retail Refrig Display, Refrigerated Home Delivery
      • Total Market India & China
      • Transport Refrigeration 3.0 B  5.0 B 26 M  302 M
      • Stationary Refrigeration 5.8 B  9.0 B 245 M  927 M
      • Refrigerated Production/Storage 6.7 B  11.0 B
      • Mass Transit HVAC 1.2 B  2.0 B 362 M  609 M, +125 M Rail China
      • Aux Power Units .2 B  1.0 B
      • HVAC Service/Installs 3.5 B  5.0 B 48 M  283 M
    • Diversify Customer Base – Provide Business Solutions
      • Big Box Retail, Food Service, Blood Banks
      • Food Processing Centers, Refrigerated Warehouses, Pharmaceutical Mfg.
    • Growth Investments
      • Technology: Expansion of Truck APU, Bus HVAC for China
      • Market Development: Cold Chain Expansion for India, China
      • Operations: Czech Republic Engineering Center
  • Additional Options
    • Expand Controls & Monitoring Capability
      • Competing firm’s offerings appear to be broader, have higher level of sophistication
        • Johnson Controls
          • Refrigeration: Temp, Pressure, Lube Oil, Flow Switches, Water Reg. Valves, Fan Speed
          • System Level Controls: Convenience Store Controller – Refrigeation, HVAC, Lighting, etc.
          • Up to 6 Condensing Systems, 5 HVAC zones, Remote Monitoring/Setup
        • Emerson Climate Technologies
          • Supermarket Controller: Parallel/Single Unit Compressor Systems, Condensers, Distributed
          • Control at Display Fixtures, Packaged HVAC Units: Can be integrated
          • into Building Control, Leak Detection
          • Convenience Store Automation: Lighting, HVAC, Refrigeration, Security, Fuel Systems, Car Wash
        • Carrier Tyler Refrigeration
          • Enviroguard: Reduction in Refrigerant Charge, Loss, Early Warning on Condensor Malfunction
    • Leverage Internal Capabilities to achieve this
      • Work with IR Security Technologies – Integrated Systems & Services
        • Sensing, Monitoring, Detection, Alarm Management, Tracking, Information Security
          • Biometric (Finger, Hand, Facial Recognition) Proximity, Temp Sensing, Bar Code, Smart Card,
          • Closed Circuit TV
        • Think Sniffers, Tasters, RFID Tags
    • Expand Aftermarket Options
      • Diagnostics  Prognostics – Failure Prediction
      • Performance Upgrades – Energy, Reliability, Refurbished Equipment w/warranty
      • “ Cold-by-the Hour”
      • Tier 1 MRO Provider – responsible for other ‘s equipment within the system
  • Additional Options - Acquisitions
    • Trane Div. of American Standard
      • $ 6B Sales, 11.0 % Operating Margin
      • Refrigeration, Comfort and Process Applications, Air Handlers, Large & Light Commercial
      • Automation & Controls, Residential
      • American Standard - $10.2 B – Kitchen & Bath - $2.4 B, Vehicle Control Systems - $1.8 B
    • McQuay, JE Hall Div. of OYL Industries
      • $1 B Sales, 7.4% Operating Margin
      • Commercial, Industrial HVAC, Refrigeration and Freezing Systems
      • Includes American Air Filter
      • OLY Industries - $1.45 B, Malaysia
    • Daikin Transportation & Refrigeration Div of Daikin Industries
      • A/C Business ~ 80 % of Daikin or $5 B
      • Includes Residential and Refrigerants with Marine Container
    • Hill Phoenix Div of Dover Industries
      • Refrigeration systems, display cases, walk-in coolers and freezers, electrical distribution products, engineering services
      • Dover Industries - $6.1 B
  • Growth Options Market/Customer Product Same Pdt New Cust Same Pdt Same Cust New Pdt Same Cust New Pdt New Cust
    • Refrigeration for W/Hing
    • Walk-In Refrigerated Storage
    • Refrigerated Transport from Farm
    • Multi-Temp Refrigerated Transport
    • Retail Refrig. Display
    • Refrigerated Home Delivery
    • Shipping Tracking & Monitoring
    • Hill, Phoenix, Daikin
    • Prdt Strat, Competitor Analysis
    • Product Improvements, Time to Market
    • Segment, Customer Focus
    • Customer Satisfaction
    • Service, Ease of Doing Business
    Extend Truck APU Bus HVAC for China Extend Sensing/Detection & Control/Automation Remote Diagnostics/Prognostics Aftermarket Service Extension Identify New Competencies License, Alliance, Acquisition to provide new Products technology - Indstrl, Comml HVAC - Trane, McQuay - Post Harvest Cooling - Food Processing and Packaging Refrig Residential HVAC - Trane Truck/SUV Tail-Gaiters Micro Vehicle Refrig. Toolkit - Strategic Planning, Portfolio Balance, Positioning - Strategic Leverage – Strengths, Core Competencies - Pdt/Technology Roadmaps
    • Regional Focus
    • - India, China Cold Chain Expansion
    • Customer Diversification
    • - Big Box, Retail, Food Service, Blood Banks
    • - Food Processing Centers, Refrigerated W/Hs,
    • Pharma Mfg.
    • - Marine, RV
    • Military
    • Alliance, Acquisitions to provide
    • Market/Customer Access