Management3 Automotive Aftermarket Business Partners
Introduction to: Management Three Results & Execution OrientedBusiness Strategy Consultants July, 2011
M3’s strategy is to focus on customers, channels and market strategies in theAutomotive Aftermarket space, working for global or globalising clients Management Three at a glance Equity Partners Strategy Consulting Automotive Aftermarket Automotive Industry Wide IAM Innovation OES Emerging Markets & VM (Fiat Vice President) Marketing Deep Marco Neil Information Technology Management3 Srl I.D. Results & Execution Oriented Business Strategy ConsultingIndustry Focus: AutomotiveSpecialty: AftermarketGeographic Focus: GlobalLaunched: March 2009Growth 2010/2009: + 180%Automotive AM Customers 2009-2011: 11Countries in scope of projects: Europe (>10); India; Middle East
Marco and Neil founded M3 based on a strong automotive aftermarket competence and started developing the firm as a “global born” start up Founders Professional Profile Marco Bicocchi Pichi Neil Fryer Languages Languages Italian EnglishStarted his management career in the Information Automotive industry career holding senior positions inTechnology and Services Industry with international Experience Lucas, TRW, Bosal and Fiat Group Automobiles.business roles up to Marketing Director in EDSElectronic Data Systems, and VP Etnoteam where he 20+ years experience in delivery of results inlead the start-up of Internet Consulting. Competence extremely competitive markets, often in adverse conditions, culminated in involvement in the turn-Management consultant with Ernst & Young working around of Fiat with Sergio Marchionne between 2004on Global Automotive programs, Principal with Booz Flexibility and 2008.Allen Hamilton Automotive and InformationTechnology practice recipient of the ProfessionalExcellence Award , Chief Marketing Officer with Speed Board member experience in large IAM distributor.Unicoop, Associate Director with AT Kearney. Held international and pan-European organizationMarketing, Strategy, Organization and Information Independent responsibilities; strong capabilities of acting across different cultures and in HQ to subsidiary dynamics;Technology; held senior management marketingpositions in business to business and business to Judgment excellent people skills; ability to develop the strong working relationships needed to work successfully inconsumer. Active Business Angel board member of stressful situations.different start-ups. AddedM.Sc. in Economics & Commerce, University of Turin Value B.A. in English, University of London (UK); MBA, Warwick Business School (UK)(ITA); MBA, Nyenrode Business School (NL)
M3 solid foundations are based on work done for automotive companies inthe past, adding significant value in different aspects of their business Founders Experience in the Automotive Industry Automotive Companies where Management3 Founders have project and management experience Experience includes working and living in Europe, North America and Emerging Markets
We believe in using a combination of quantitative and qualitative analysistechniques and that “go and see” is a must do to define market strategies PROJECT EXAMPLE: INDIA ENGAGEMENT ACTIVITIES APPROACH Primary and secondary data collection data analysis and Data collection and analysis • Primary Data Collection reporting to address quantitative and qualitative data needs to satisfy engagement objectives. Extensive • Secondary Data Collection library and web research has been performed including • Data analysis and reporting last 15 years issues of auto magazines published in India. In depth interviews M3 Managing Partners personally performed a number of • Top Management relevant interviews with Top Management representatives • Associations Leaders of Vehicle and Components Manufacturers, Large • Management along Value Chain Dealers, Independent Repair Workshops, Associations, complemented by local partners activities. Direct observation M3 Managing Partners visited relevant sites to gain a first • Car repair workshops hand view of different representative situations in term of • Parts logistic centers quality, approach and behaviors as far as the Parts and • VM Aftermarket Services value chain in India is concerned. A total of about 100 interviews, visits and observations was completed.
We work with a view on the big picture that influences the business ofautomotive aftermarket, but … Automotive Aftermarket Economic Environment REGULATORY ENVIRONMENT DRIVERS TRADE COMPETITION EMISSION SAFETY INSURANCE LABOUR RESTRICTIONS LAW REGULATIONS REGULATIONS REGULATIONS REGULATIONS MACRO GEOGRAPHIC OEM PARTS TECHNOLOGY REGIONAL LEGACY AND VEHICLES QUALITY ASSEMBLY FOCUS PLATFORMS / MODULES PART MODULES DECISIONS ASSEMBLY ENGINEERING CHANGES PARTS MANUFACTURING LIFE CYCLE USA VEHICLE MANUFACTURERS VEHICLES PARTS PARTS MANUFACTURERS NORTH AMERICA MANUFACTURING WARRANTY EUROPE and EU FOOT PRINT VEHICLES BADGES & BRANDS MAINTENANCE REPAIR PARTS and CAPACITY MANUFACTURING CRASH JAPAN and KOREA DRIVEN KMS SERVICE INTERVALS VEHICLES SALES AUTHORIZED VEHICLES REPAIRS PARTS CHINA DISTRIBUTION OWNERS DEALERS WORKSHOPS DISTRIBUTORS IAM & USERS PARTS PARTS SALES FOOT PRINT BRASIL BANKS & CAR INSURANCE FINANCIAL COMPANIES INDIA and ROW COMPANIES OES PARTS ECONOMIC AND FINANCIAL DRIVERS MARKETS FINANCIAL COST OF COMMODITIES CAPITAL CURRENCY GROWTH MARKETS LABOUR COST COST EXCHANGES RATES SITUATION
... we have also a pragmatic deep understanding of the complex aftermarketvalue chain and the multiple variables influencing one the other Automotive Aftermarket Services Demand and Supply Variables Influencing Costs and Market Share along the value chain INFRASTRUCTURE SPARE PARTS COSTS COST DRIVERSREPAIR BAY TECHNICIAN PARTS STOCK DELIVERY WORKSHOP INVESTMENTS AVAILABILITY of (CAPEX) VOLUME (Economies of Scale) SPARE PARTS High(er) Vehicle Brand Vehicle Age STOCK Parts Brand (WORKING CAPITAL) RESOURCES COST to Perceived Quality of Parts SERVE Customer Service Experience Perceived Quality of Labor SATURATION Price Timing LABOR COST Competition (OPEX – Semi-Fixed) SERVICE MIX Low(er) PARTS COST Fast(er) Slow(er) (OPEX – Variable) Time to delivery
Since M3 was founded several international clients have already engaged ourcompany to deal with complex strategic issues We deal with complex strategic issues …. with a pragmatic yet rigorous fact based approach Market Entry Managers experience Valuation New Geography Consulting approach Pan European Market Entry Commercial Valuation Strategy OE to IAM Primary Search AUTOMOTIVE AFTERMARKET Field Interviews STRATEGIES Partners Delivered Price Positioning OES Market Data Collection Strategy Multifunctional view Internationalisation Strategy Execution oriented
GLOBAL COMPONENT MANUFACTUREREuropean Commercial Policy SITUATIONThe client is a global component manufacturer and a Fortune 500 company with a leading position in the European IAMmarket willing to improve its commercial strategies, with particular reference to trade spending and pricing policies, for theEuropean market. M3 has been engaged thanks to its distinctive combination of automotive aftermarket industry and strategicbusiness consulting expertise to identify issues and propose solutions in a high-complexity and challenging environment. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• The client has undergone significant internal • M3 conducted an extensive assessment of client’s market changes in the last 15 years and has gained a practices and internal processes, through desk research leading position in the European market that has to and field interviews, in order to highlight and prioritize be further developed and protected needs for intervention.• Intra-channel relationships within the distribution • For this purpose M3 investigated: chain have been reshaped by the rise of large • Pricing strategies and differentials across 32 national distributors and international buying groups markets and branches;• Pricing model is perceived to be a key issue but has • Trade Marketing Promotion current practices, discounts, bonuses and incentive programs to be investigated in its fundamental drivers and • Relationships within distribution chain, interviewing dynamics in order to understand how to balance client’s managers and customers decision making between HQ and branches • Client’s competitive position in the European market RESULTS• Client have been provided with a fact based quantitative and qualitative comprehensive cross view of current situation gained also trough field research in the eight major European markets visiting clients and client organization• A fact based recommendation to implement a business transformation aimed at addressing the challenges of Pan- European and International clients while managing a still relevant local domestic market of small players
LEADING BRAKE FRICTION MANUFACTUREROES Strategy and Account Management SITUATIONThe client is a leading friction materials manufacturer with a strong position in both OEM and OES markets but changes inmarket practices are impacting its market position and needed to be understood and addressed with a conscious structuredstrategic approach. The decoupling of OEM/OES sourcing was the main issue on the spot but other changes taking place inthe business model called to action. M3 has been engaged to support the client in the identification of key strategic dynamicsand success factors in order to align enterprise strategy to the on going changes and exploit areas of opportunities. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• Changes in the OEM/OES paradigm • M3 has helped the customer in identifying and understanding impact of changes in business model and• Architectural best practices: modularity and VM customer relationships commonalities vs. proliferation of variants • As such M3’s role was to:• Service strategy models in the service business • Prepare and lead meetings with VM clients to discuss (OES and IAM) and competition with VMs and other market view and supplier role; actors to capture market share in the AM services • Highlight the changes taking place in intra-channel market (esp. for older vehicles) relationships, in both the parts distribution market and• OE Brand equity vs. IAM manufacturer and mega- the service market; distributors image • Assess market environment changes: technology,• Opportunities implied by emerging markets growth process, geography, regulatory, customers .. • Provide client with a comprehensive framework of strategic analysis tools to support decision-making RESULTS• M3 delivered a broad analysis focused on both industry and market global trends and customer’s core competencies from which derived recommendations to approach the OES market within the changing scenario• The assignment deliverables conveyed a wide range of tools and frameworks to support strategic thinking and address the issues of alignment of organization, process and technology
LEADING COMPONENTS MANUFACTURERIAM European market expansion SITUATIONThe client is a market leader present in three continents, with a portfolio of several brands it is organized in two divisionsmanufacturing and marketing distinct automotive components technologies. One division is present in the OE and IAM marketwhile the other is only operating as OE supplier. Having reacted in a positive way to the 2008 automotive market crisis andobserving an higher resilience of business of the division with an IAM presence, the client was willing to evaluate the IAMmarket entry opportunity for the second division. Management Three (M3) was asked to evaluate the strategic options. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• Entry in new market/channel: from a OE-only • M3 has been engaged thanks to its coverage of key business to competing in the IAM market; competence domains required to answer the client’s• Strong competition in a relatively small market due request: a specific industry expertise combined with a to strong specialization and long lifecycle of market strategy knowledge. The aim was to provide the products. Impacts on economies of scale; client with:• Different possible production processes bearing • A clear identification of all the drivers for decision- making different cost and quality levels, with a direct relation • An assessment of revenues and profit potential of of volume to technology (different for OE and IAM); alternative opportunities• Future product and process innovations for • The definition of a set of strategic options (from pure lightweight vehicles is expected to have significant organic growth to M&A initiatives) impact in product and processes (change in materials and production technologies) RESULTS• A fact-based in-depth analysis of the market, the competition arena and the technology has been carried out so that the client gained a deep insight on opportunities and threats• The project highlighted the risks and complexities of an organic market entry and defined a framework to evaluate possible targets for M&A as well as alternative growth strategies
LEADING AUTOMOTIVE COMPONENTS MANUFACTURERMarket entry evaluation (India Aftermarket) SITUATIONThe client, a component manufacturer, with a global footprint, was seeking business expansion opportunities. Afterestablishing more than a bridgehead in the Indian market by establishing strategic JVs with local manufacturing companies theclient was looking to develop the aftermarket business line. Management Three (M3) was asked to present a proposal tosupport the international expansion strategy focusing on the Indian market potential opportunity and the evaluation ofalternative options. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• The target market was and still is growing at a quick • M3 was engaged thanks to the expertise and industry rate but players in the IAM distribution chain need knowledge of its managing partners in automotive substantial improvements in standards and aftermarket and strategic marketing and was asked to performance; evaluate opportunities and challenges of India market• Competition from major players aiming at capturing entry options focusing in particular on a potential JV: the service market is increasing: significant • As such M3’s role was to: investments are being made in the building of Conduct a thorough assessment of the automotive aftermarket organized IAM networks value chain in India (including prices and costs);• Approach and timing where decisive and the client Analyse client business model and test its components against Indian market conditions; was looking for a professional and detailed Transfer lesson learned to management, discuss alternatives assessment in order to take an informed decision and recommend action plan RESULTS• The assignment conclusions highlighted the opportunities and challenges to enter the market on a first-mover basis given the projected development of the IAM in following years and the elapsed time required to built a credible operation• M3 hands-on approach allowed the client to have a visual (photo diary) and factual (parts prices, car population size and distribution by brand and model, market structure of repair shops ..) view of the market and take a well grounded decision
AFTERMARKET INFORMATION SERVICES PROVIDERIndian Automotive Aftermarket Market Analysis SITUATIONThe client, a European based service provider to the global automotive aftermarket value chain, is expanding internationally,and has recently established a presence in North America and in China. Management Three (M3) was asked to present aproposal to support the international expansion strategy focusing on the Indian market potential opportunity. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• The client organization was stretched with important • M3 was engaged because of the deep industry development programs and the on going knowledge of its partners in automotive aftermarket and international expansion initiatives; digital services strategies and asked to take over a• Client is a digital value chain service provider program management – back to back - role to define an focusing on providing data based services to the appropriate market entry strategy in India. automotive aftermarket value chain; • As such M3’s role was to:• The successful business model of the client is tuned • Conduct a thorough assessment of the automotive to the market conditions of the European domestic aftermarket value chain in India; market • Analyse client business model and test its components against Indian market conditions • Transfer lesson learned to management, discuss alternatives and recommend action plan RESULTS• The assignment provided the client with a well researched and lively hands-on picture of the Indian Automotive Aftermarket allowing for a fact based, reality rooted discussion on possible strategic options.• The project approach based on a mix of desk and field direct observation allowed the client to realistically size the opportunity and understand the challenges of current business model to succeed in the Indian market
AFTERMARKET INFORMATION SERVICES PROVIDERIndian Automotive Aftermarket Market Entry Approach SITUATIONThe client, a European based service provider to the global automotive aftermarket value chain, was expanding internationally,and had recently established a presence in North America and in China. Following a previous assignment to ManagementThree (M3) to evaluate the market potential in a second step the client asked for an overall evaluation of possible market entrystrategies in the Indian market and to outline an execution plan. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• A market overview has been produced in the • M3 performed extensive field research involving a series previous assignment, and execution planning was of interviews to prospect partners on both supply and required as second step demand side.• The target business model had to be defined and • Based on findings M3: fine-tuned based on the identified key success • Delivereda first proposal for the definition of service factors offering and pricing strategy• Scope of service offering to be defined according to • Highlighted level of awareness and willingness to adopt client’s solutions of industry leaders drivers and criteria (content, delivery platforms, data • Identified additional areas of intrinsic opportunities sources and formats) different when compared with related to Indian landscape (ITC platforms above all) those adopted in Europe RESULTS• The assignment conclusions showed a set of substantial opportunities to enter the market with a first-mover advantage and a strong relationships with global and local market leaders with a favourable role of local ICT developing environment• M3 offered three distinct layers for market entry execution, from a “full-speed” plan to a phased one, all aimed at fostering the best opportunities for the client to achieve its strategic goals
LEADING BRAKE FRICTION MANUFACTURERIndian Automotive Aftermarket Market Analysis SITUATIONThe client is a leading friction materials manufacturer with a strong position in both OEM and OES markets that is consideringan international expansion targeting the Indian market considering different alternative routes. M3 was asked to provide anoverall analysis of opportunities and success factors and to outline possible market entry strategies KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS• Strong and constant Indian vehicle park growth is • M3 leveraged its experience and knowledge of the Indian expected for coming years but a channel strategy market to deliver to the client a structured analysis tailored for the client has to be assessed and focused on: devised • a fully detailed depiction of the Indian regulatory environment;• Indian market is still a relatively far environment • an Indian automotive aftermarket overview, focusing from EU/US standards and practices with a specific on trends, distribution and customers’ and consumers’ regulatory system and a distinctive on-going behaviour; progressive process of transformation towards free- • collecting and presenting a thorough assessment of market the brake friction market and its potential• Complex evolutionary dynamics in the market • Extensive field research activities have been performed in landscape for each possible target market: Cars, order to acquire and present first-hand evidence and LCV, HCV, 2- and 3-wheelers knowledge RESULTS• From field-gathered evidence and desk research key success factors for a coordinated and strategically sound market entry and a subsequent sustainable growth have been identified• A range of tools and strategic decision tools have been delivered to the client together with a set of recommendations and indications for the development of a well-balanced entry strategy considering market size and price points of products
CLUTCH AND HYDRAULICS COMPONENTS MANUFACTURERMarket entry evaluation (Italy Aftermarket) SITUATIONThe client is a global manufacturer of clutch and hydraulics components, with a core focus on the HCV market, active on bothOE and IAM channels with facilities in India, UK, USA, that was evaluating expansion opportunities after acquisition of theEuropean operations. One target market was the Italian market but the client had no experience of continental Europemarkets. Management Three (M3) was asked to support the client in the identification of opportunities and strategic optionsand in the organization of contacts with potential buyers. KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS • Mature market during recent years yet still • M3 was engaged thanks to its expertise and industry attractive: business models and efficiency knowledge of its partners in automotive aftermarket in performance play key roles Europe in general and Italy specifically • Competitors and distribution channel performance • As such M3’s role was to: with uneven performances. • Conduct an assessment of the HCV aftermarket value • Brand strategy definition and key success factors chain in Italy for gaining robust reputation on a new market • Analyse client business model and test its components against Italian market conditions • Transfer lesson learned to management, discuss alternatives and recommend action plan RESULTS• The assignment was carried out by producing a detailed picture of the Italian HCV market (distribution chain, players, regional/local specificities) and en evaluation of the market and growth potential for the client products• Evidence gathered via both desk and field research combining quantitative and qualitative approaches allowed to transfer to client’s management an adequately complete knowledge of the market, and form realistic expectations for the business case
OIL PRODUCTS RETAILER (ISRAEL)Italy Retail Study Tour SITUATIONThe client markets petroleum products and operates a chain of gas stations and convenience stores in Israel. In order toexpand knowledge and gain insight on current best practices across the international landscape the top management of theclient wanted to visit Italian retail outlets and arrange meetings with top managers of key companies in the gas retail andconvenience stores industries. M3 has been asked to set up the program for the tour and the meeting and documentation onItalian and international best practices and the rationale behind new store concepts KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS • Client needed to gain both first-hand experience and • M3 has been engaged for its specific automotive guided insights on a wide range of retail concepts expertise and its strong network of relationships with innovation examples industries and key people from related industries. • The client needed to have quick results with a • Thanks to its capabilities M3 was been able to provide the limited amount of time and effort that could be client with: invested in the project • A time-efficient delivery of the required scope of work • Commonalities and differences between Italian and • A thorough analysis of the store concept evolution in Israel markets and hints on the applicability of new Italy and the underlying strategic drivers retail concepts in Israel • Meetings with key people from leading international companies (Italian Headquartered MNC or MNC with a significant presence in Italy) active with store concept innovation RESULTS• Preparatory analysis conveyed a detailed overview of the Italian landscape, a description of current trends and latest innovations with a comparison with relevant international cases, all summed up in the final project documentation• The tour mixed together visits to retail outlets in Central and Northern Italy and a series of meeting with retail marketing managers and experts from leading companies to full satisfaction of client CEO and CMO that participated in the visit
Data gathering and quantitative analysis are an important foundation of ourfact based approach …*Note: This document is confidential and solely meant to represent Management3 capability and expertise. This document may not be reproducedtotally or partially without mentioning the source.
… as well as direct observation and interviews that are irreplaceable if you are willing to understand and challenge myths and superficial conclusions*Note: This document is confidential and solely meant to represent Management3 capability and expertise. This document may not be reproducedtotally or partially without mentioning the source.
Eyes, earsand brains in the market for our clients
Management3 srl Via Barnaba Tortolini, 5 00197 ROMA (Italy)Marco Bicocchi Pichi Neil Fryer www.management3.com