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An analysis of the case study given by Deloitte on Air filter market.

An analysis of the case study given by Deloitte on Air filter market.

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    Deloitte Maverick Campus Champions Deloitte Maverick Campus Champions Presentation Transcript

    • The Maverick 2013 Submitted by: Team Iguanas, IIM Ranchi Pulkit Bohra M106/12 pulkit.bohra12@iimranchi.ac.in 8986733521 Pulkit Mathur M107/12 pulkit.mathur12@iimranchi.ac.in 8051173946 Tarun Gupta M044/12 tarun.gupta12@iimranchi.ac.in 9000015915 Team Members
    • Recommen- dation Go-To-Market Framework Regional Analysis Opportunity Assessment Value Proposition To assess global markets and gauge market attractiveness Analysed the global gas power generation market North America, Middle East & Asia are the most attractive regions Compared E10 grade filters with E9 and E12 Performed a Cost-Benefit analysis for different types of filters using case data and team estimates E10 has cost savings of ~1% & 10% over E9 & E12 due to lower downtime GTM strategy is focused on product life cycle and target market Competitor response may vary from maintaining status quo to JVs and hostile takeover depending upon their own competencies To analyse the health of individual regions and their business prospects Strategic objectives Analysis Insights It is an appropriate time for ABC to enter into gas-turbine air filter market. However, all regions do not provide equal opportunities. It should target replacement market in North America; Growth market in Middle East and Rest of Asia in the same order of priority; Restrain from entering into rest of the markets for now. To determine the Value Proposition for Client Offerings To determine the Go-To- Market strategy Used equivalents to estimate global filter market size by value and volume Performed macro-economic analysis and used market size to identify most attractive markets Developed a GTM framework based on existing GTM frameworks and case specifications Analysed each of the shortlisted region in detail to identify favourable and unfavourable factors Applied GTM: Analysed prospects for JVs/ acquisitions Identified entry and exit barriers Analysed the potential response from existing competitors Middle East & Rest of Asia reaches US$122m and US$75 m by 2022 North America is the biggest annual replacement market of ~ US$333 m Cartridge (synth) filters are more cost efficient than cartridge (cell) filters NA has the biggest replacement market, hence ABC should focus on customer centric marketing Middle east & Rest of Asia has the highest growth numbers, hence GTM should be channel focused ABC has expertise in air filter servicing Executive Summary: ABC should target N America, Middle East & Asia
    • Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation $0 $50 $100 $150 $200 $250 $300 $350 Synth-Catridge Cell-Catridge Europe Middle East Rest Of Asia Africa North America Latin America Europe Middle East Rest Of Asia Africa North America Latin America Europe Middle East Rest Of Asia Africa North America Latin America 2012 2017 2022 North America Rest Of Asia Value : Volume: 0 200 400 600 800 1,000 1,200 Cell-Catridge Synth-Catridge Volume(in'000units) Value(inmillion$) • There is a tremendous growth in air filter market by volume and value in Middle East and Rest of Asia regions. • North America has the largest market in the initial years, but has almost stagnant growth. • Europe, Africa & Latin America have either very small markets or have shown negligible growth in market. Inlet Air Filter For Gas Turbines-Market Sizing (>= 150 MW) Source: Team analysis based on data accessed from Global Gas Observatory and case data
    • Gas Turbine Industry Drivers • Increasing global power demand • Environmental concerns & regulations opposing coal and oil fired power plants • Mature technology • Nature of Gas Turbines: Efficient and Flexible • Availability & Price North America, Middle East & Rest of Asia seem to be most attractive regions Gas Turbine Industry Constraints • Global economic slowdown • Fluctuation and availability of natural gas supplies • Volatile fuel prices • Emphasis on renewable energy Trends & Issues in Global Gas Turbine Industry • Biggest gas-fired power market • Shale gas boom • Slow growth • Growing, but still a small market for gas power • Growing on a very small base • Leveraging its hydro-electric sources • Moderate base • Low growth • Decommission- ing of old plants • Large natural gas reserve • Rise in power demand • Limited regional pipeline cooperation • High growth markets • Rising power demand • Increased government spending • Stalled pipeline projects      Gas Turbine Industry: Regional & Global Trends  Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation Source: Frost & Sullivan; International Energy Agency; MarketWire company website; TurbineTech company website; US Energy Information Administration
    • E9 E10 E12 E12 Market status Available Testing Available Available Probable Type Cart/Synth Cart/Synth Cart/Cell Panel/Synth No. of filters per MW of power generated 10 10 12 15 Filter price $300 $330 $100 $100 Filter replace- ment rate (months) 24 24 12 12 Filter Cost/yr $1,500 $1,650 $1,200 $1,500 Turbine wash time (hrs/yr) 90 120 180 180 Downtime for filter cleaning (hrs/yr) 60 20 300 300 Avg turbine Capacity (MW) 160-180 150-190 160-180 160-180 Avg Turbine Uptime 98% 99% 96% 96% Net Turbine Operation 8610 8620 8280 8280 Net Uptime (hours) 8437.8 8533.8 7948.8 7948.8 Potential Elec Production (MW) 8437.8 8533.8 7948.8 7948.8 Arid (Middle East) Avg Power Gen Losses 2% 2% 4% 5% Net Production 8269 8363 7631 7551 Price of Elec (per MWh) $60 Revenue $496,143 $501,787 $457,851 $453,082 Revnue Net Filter $494,643 $500,137 $456,651 $451,582 Cost Savings $5,495 $43,487 $48,556 Mixed (Asia, North America) Avg Power Gen Losses 3.7% 3.7% 6.0% 3.7% Net Production 8128 8221 7472 7657 Price of Elec (per MWh) $60 Revenue $487,705 $493,254 $448,312 $459,441 Revnue Net Filter $479,267 $484,720 $440,364 $451,492 Cost Savings $5,453 $44,356 $33,228 High efficiency filter consideration set (Calculation per MW/12 months) ABC: Providing unmatched value to the customers Huge Cost Savings Lower Turbine Downtimes Filter Servicing Expertise ABC ‘E10’ Filters To provide the best customer experience in filter industry with the technologically most advanced filters and expert after sales services Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation Source: Team analysis based on data accessed from Global Gas Observatory and case data
    • Marketing ChannelProduct Customer Based on the product life cycle and the target market in a specific geography , one or more of the three pillars has been chosen as focus to meet our clients business needs. Customer Product Channel New Product Entry Customer Product Channel Entry of Competition Mature Markets Customer Product Channel Primary focus Secondary focus Post analyzing the primary and secondary focus for ‘E10’ in a region, we have studied the market entry strategy from various perspectives and suggested the most preferred route. From Product To customers JVs/ Acquisitions Distributors / Agents Channel Partners Marketing Strategies Maintenance & Service Providers Source: From-To Approach, BCG; Redefining GTM, AT Kearney GTM Framework Competitors’ Potential Response Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation
    • North America • Among all regions, North America currently has the highest air filters penetration and about 75 % of which are either Panel filters or Cartridge (cell) filters. • Considering the advantages of Cartridge (Synthetic) filters over other filters , all of which have a filter lifetime value of <=12 months, North America potentially has a huge Annual Replacement market. • The opportunity can be tapped by pitching in the new filters at the time of replacement of the old filters. • The annual growth for North American market is low @ 0.4%, making the opportunity for new market growth sales limited. Opportunity Assessment Market Sizing Go-To-Market Strategy Since the majority opportunity lies in the replacement market , hence the primary focus should be the existing Customers and secondary focus should be on Channel & Product. Key to-dos are: • Develop a sales force which will target the turbine operators directly pitching the Value Proposition of the new product. • Turbine maintenance providers, OEM’s, Agents etc. who are in touch with the clients directly can be used for pitching the product. • The existing channel of the competitors can be used to reach new customers. The competitors can be given margin per sale. • Providing additional services like maintenance & Filter service with the new product will help increase the reach. Risks/Concerns • The Shale Gas boom in North America is on the decline. The Gas Turbine Market has reached stagnation and is hence affecting the air filter market too. • The long & rigorous compliance needs for companies in North America makes the operations in North America restricted. • Strong competition from imports by Middle-east & China. • North America is a mature market and should have a strong competitor presence. They may attempt for a hostile takeover in pursuit of new technology. Tapping the Replacement Market Customer Product Channel 0 1,000 2,000 3,000 4,000 5,000 2012 2017 2022 Volume ('000 Units) Existing Total No. of Filters Annual Replacement Market New growth Market Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation Source: Team analysis based on data accessed from Global Gas Observatory and case data; Frost & Sullivan; Redefining GTM, AT Kearney; International Energy Agency
    • • Middle east shows the highest growth among all the regions, making it an attractive market for new product sales. • The replacement market is also growing at a steady rate , which can be harnessed by using customer centric marketing. • 22 % of the market in middle east for air filters is captured by Cartridge (cellulose) filters. Given our value proposition, this is a prime market to target replacements. • The majority of energy requirements of Middle east is fulfilled by gas powered power plants, further the dependence on oil fired power plants is set to reduce. Opportunity Assessment Market Sizing Go-To-Market Strategy • Significant Annual Replacement market can be targeted by targeting the “Customer” pillar of the GTM model.  Tie ups with Turbine operators, Maintenance providers, OEM’s .  Focus Agents, sales representatives in matured markets like UAE, Egypt , Qatar etc. • Opportunities in New Growth market can be harnessed by focusing on building the Channel pillar  Collaboration with Distributors in the region to enhance the reach.  Tie-up with other companies operating in this region, on share of margin basis. Risks/Concerns • Burgeoning gas demand in the region combined with concern over security of long term gas supply • Increased domestic gas demand, delayed supply response, limited regional pipeline cooperation, and below-market pricing pose long term threats • Growing investments by countries over alternative sources of energy (Solar & Nuclear). • Non-Homogenous distribution of gas reserves. Middle East Customer Product Channel Tapping the New Growth market 0 200 400 600 800 1,000 1,200 1,400 1,600 2012 2017 2022 Volume ('000 units) Existing Total No. of Filters Annual Replacement Market New growth Market Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation Source: Team analysis based on data accessed from Global Gas Observatory and case data; Frost & Sullivan; Redefining GTM, AT Kearney; International Energy Agency
    • Rest of Asia • ASEAN countries along with Japan, South Korea, Australia and New Zealand have more than 35% of their energy requirements met by Gas Power plants. • The share of gas in the overall fuel mix is expected to rise strongly in the above countries in the current decade. • ASEAN is promoting the development of a trans-ASEAN gas pipeline system (TAGP) by 2020, aimed at improved cross-national links. • The Fukushima nuclear accident has marked a fundamental shift in Japanese energy policy, turning away from nuclear energy towards other sources. This implies strong growth for gas-fired power generation as a substitute. Opportunity Assessment Customer Product Channel Tapping the New Growth market Go-To-Market Strategy To tap the opportunity in the Replacement and New Growth Market • India & China (Growing Market)  Salesmen to take brochures to new plant owners, explaining the cost benefits of their air filter.  Joint venture with similar companies operating & maintenance providers in the region. • ASEAN Countries & OPAC (Mature Market)  Tie ups with Turbine operators, Maintenance providers, OEM’s .  Existing filter distributors should be approached.  Tie-up with other companies operating in this region, on margin share basis. Market Sizing Risks/Concerns • India and China have a high dependence on coal making the role of natural gas in fuel mix extremely limited. • Unstable regulatory environment in some of the Asian countries. • Lack of gas resources, Japan and South Korea are highly dependent on foreign supplies. • Capacity expansion has been significant till now, however, countries like China and India are also investing heavily in Solar & Wind Energy 0 200 400 600 800 1,000 1,200 1,400 2012 2017 2022 Volume ('000 Units) Existing Total No. of Filters Annual Replacement Market New growth Market Opportunity Assessment Value Proposition Go-To-Market Competitors Response Regional Analysis Recommendation Source: Team analysis based on data accessed from Global Gas Observatory and case data; Frost & Sullivan; Redefining GTM, AT Kearney; International Energy Agency
    • Appendix
    • North America Latin America MW No of Powerplants Total Installed Capacity (MW) MW No of Powerplants Total Installed Capacity (MW) <30 429 4763.88 <30 1 17.94 30-60 198 8710.3 30-60 7 272 60-120 181 2367 60-120 2 153 120-180 117 1241 120-180 8 1140 >180 565 28192.5 >180 65 37833.8 Africa Middle East MW No of Powerplants Total Installed Capacity (MW) MW No of Power Plants Total Installed Capacity (MW) <30 3 78 <30 2 53 30-60 4 216 30-60 10 475 60-120 12 1130 60-120 26 2607.4 120-180 8 1169 120-180 16 2322 >180 56 33229 >180 148 123515.5 Rest of Asia Europe MW No of Power Plants Total Installed Capacity (MW) MW No of Power Plants Total Installed Capacity (MW) <30 8 169.7 <30 2 22 30-60 18 741.7 30-60 7 326.4 60-120 38 3741.6 60-120 27 2703.5 120-180 35 5426.7 120-180 26 4030 >180 299 255485.48 >180 225 154671.5 Gas Turbines Installation Over The World – Breakup by Plant Capacity
    • capacity in '000 MW Year 5year CAGR 10 year CAGR 0 1 2 3 4 5 6 7 8 9 10 Europe 2.40% 1.10% 71.52 73.24 75.00 76.80 78.64 80.53 76.37 77.21 78.06 78.92 79.79 Middle East 8.10% 4.70% 83.55 90.32 97.64 105.54 114.09 123.33 110.06 115.23 120.65 126.32 132.26 Rest Of Asia 5.20% 4.50% 73.15 76.95 80.96 85.16 89.59 94.25 95.26 99.55 104.03 108.71 113.60 Africa 7.30% 5.00% 0.42 0.45 0.49 0.52 0.56 0.60 0.57 0.60 0.63 0.66 0.69 North America 0.40% 0.40% 369.36 370.84 372.32 373.81 375.31 376.81 378.31 379.83 381.35 382.87 384.40 Latin America 4.30% 3.80% 41.84 43.63 45.51 47.47 49.51 51.64 52.33 54.32 56.38 58.52 60.75 Europe, 79.79 Middle East, 132.26 Rest Of Asia, 113.60 Africa, 0.69 North America, 384.40 Latin America, 60.75 Europe, 80.53 Middle East, 123.33 Rest Of Asia, 94.25 Africa, 0.60 North America, 376.81 Latin America, 51.64 71.52 83.55 73.15 0.42 369.3 6 41.84 Year 10 Year 5 Year 0 Gas Turbine Market With capacity >150 MW • North American Market – Biggest by Volume but Stagnant in Growth • Middle East – Strong Growth & Market presence by 2022 • Rest Of Asia – Strong Growth till 2022 Global Gas-powered Electricity Generation, by Region
    • Year 4 Year 5 Panel Cartridge Panel Cartridge Cell Synth Cell Synth Cell Synth Cell Synth Europe 78.64 235.92 471.84 94.37 157.28 80.53 241.58 483.16 96.63 161.05 Middle East 114.09 114.09 171.14 273.82 684.55 123.33 123.33 185.00 296.00 740.00 Rest Of Asia 89.59 268.78 268.78 215.02 268.78 94.25 282.76 282.76 226.21 282.76 Africa 0.56 1.40 2.10 1.35 1.68 0.60 1.50 2.26 1.44 1.81 North America 375.31 562.96 1,407.39 450.37 1,876.53 376.81 565.21 1,413.02 452.17 1,884.03 Latin America 49.51 123.77 185.66 178.23 99.02 51.64 129.09 193.64 185.89 103.27 Year 9 Year 10 Panel Cartridge Panel Cartridge Cell Synth Cell Synth Cell Synth Cell Synth Europe 78.92 236.77 473.54 94.71 157.85 79.79 239.37 478.75 95.75 159.58 Middle East 126.32 126.32 189.48 303.17 757.92 132.26 132.26 198.39 317.42 793.55 Rest Of Asia 108.71 326.12 326.12 260.90 326.12 113.60 340.80 340.80 272.64 340.80 Africa 0.66 1.64 2.46 1.58 1.97 0.69 1.72 2.58 1.65 2.07 North America 382.87 574.31 1,435.77 459.45 1,914.36 384.40 576.60 1,441.51 461.28 1,922.02 Latin America 58.52 146.30 219.46 210.68 117.04 60.75 151.86 227.80 218.68 121.49 Inlet Air Filter Market for capacity >150MW Gas Turbines Year 0 Panel Cartridge Cell Synth Cell Synth Europe 71.52 214.57 429.14 85.83 143.05 Middle East 83.55 83.55 125.33 200.52 501.31 Rest Of Asia 73.15 219.45 219.45 175.56 219.45 Africa 0.42 1.06 1.59 1.02 1.27 North America 369.36 554.04 1,385.10 443.23 1,846.80 Latin America 41.84 104.59 156.88 150.61 83.67
    • annual replacement market Panel Cartridge Cell Synth Cell Synth 321.85 429.14 85.83 71.52 125.33 125.33 200.52 250.65 329.17 219.45 175.56 109.72 1.59 1.59 1.02 0.63 831.06 1,385.10 443.23 923.40 156.88 156.88 150.61 41.84 annual replacement market market growth Panel Cartridge Panel Cartridge Cell Synth Cell Synth Cell Synth Cell Synth 353.88 471.84 94.37 78.64 5.66 11.32 2.26 3.77 171.14 171.14 273.82 342.28 9.24 13.86 22.18 55.45 403.17 268.78 215.02 134.39 13.98 13.98 11.18 13.98 2.10 2.10 1.35 0.84 0.10 0.15 0.10 0.12 844.44 1,407.39 450.37 938.26 2.25 5.63 1.80 7.51 185.66 185.66 178.23 49.51 5.32 7.98 7.66 4.26 annual replacement market market growth Panel Cartridge Panel Cartridge Cell Synth Cell Synth Cell Synth Cell Synth 355.15 473.54 94.71 78.92 2.60 5.21 1.04 1.74 189.48 189.48 303.17 378.96 5.94 8.91 14.25 35.62 489.18 326.12 260.90 163.06 14.68 14.68 11.74 14.68 2.46 2.46 1.58 0.98 0.08 0.12 0.08 0.10 861.46 1,435.77 459.45 957.18 2.30 5.74 1.84 7.66 219.46 219.46 210.68 58.52 5.56 8.34 8.01 4.45 2012 2017 2022 Inlet Air Filter Market: • Annual Replacement Market • Market Growth
    • Panel Cartridge Cell Synth Cell Synth No. of filters per MW of power generated 30 30 24 10 Filter lifetime (months) 24 24 24 24 Avg. Price $80 $100 $100 $300 Total Price 2400 3000 2400 3000 Average retention in power generation (%) post subtracting losses. Marine 0.92 0.98 0.92 0.95 Arid 0.94 0.95 0.96 0.98 Humid sub-tropical 0.96 0.96 0.94 0.96 Price of Usable Generation (60$ /MW) Marine 55.2 58.8 55.2 57 Arid 56.4 57 57.6 58.8 Humid sub-tropical 57.6 57.6 56.4 57.6 Revenue advantage of Cartridge (Syn) filters Marine 1.8 -1.8 1.8 0 Arid 2.4 1.8 1.2 0 Humid sub-tropical 0 0 1.2 0 Cartridge (Syn) filters become cost effective for plant capacities greater than below mentioned Marine 333 0 333 Arid 250 333 500 Humid sub-tropical 0 0 500 Cost effectiveness of Cartridge (synth) filters