Effective Market Analysis for Innovative New Growth Business Submitted draft

Effective Market Analysis for Innovative New Growth Business:
The Hydrogen Fuelling System for Captured Forklift Trucks
Fleets in the UK.
A Dissertation Submitted in Part-Fulfilment of the Requirements
for the Degree of Master of Business Administration of the
University of Warwick
“This is to certify that the work I am submitting is my own. All external
references and sources are clearly acknowledged and identified within the
contents. I am aware of the University of Warwick regulation concerning
plagiarism and collusion.”
Colin Stewart
ID Number: 0660122
September 2009
Word Count:21,821

Effective Market Analysis for Innovative New Growth Business: The Hydrogen Fuelling System for
Captured Forklift Trucks Fleets in the UK.
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Contents
Contents ............................................................................................................................. 2
Chapter 1 ........................................................................................................................... 6
Executive Summary ....................................................................................................... 6
1.1 Introduction .............................................................................................................................6
1.2 Main Findings from the Review. .............................................................................................6
1.3 Value from the Study...............................................................................................................7
Chapter 2 ......................................................................................................................... 10
Introduction.................................................................................................................. 10
2.1 Overview of the Paper....................................................................................................................10
2.2 Company Background....................................................................................................................12
2.3 Hydrogen........................................................................................................................................13
2.4 The Hydrogen Business .................................................................................................................14
2.5 Objectives ......................................................................................................................................14
Chapter 3 ......................................................................................................................... 16
Literature Review......................................................................................................... 16
3.1 Introduction....................................................................................................................................16
3.2 Review of the Market Analysis Literature .....................................................................................18
3.3 Review of the Product Portfolio Management Literature. .............................................................25
3.4 Review of the Innovation Literature. .............................................................................................27
3.5 Disruptive New Growth Businesses...............................................................................................28
3.6 Environment for Innovation...........................................................................................................29
3.6.1 Strategy ..................................................................................................................................30
3.6.2 Processes ................................................................................................................................31
3.6.3 Structure.................................................................................................................................32
3.6.4 Skills.......................................................................................................................................33
3.7 Location .........................................................................................................................................33
3.8 Approaches to Innovation ..............................................................................................................34
3.9 Innovation Value Chain .................................................................................................................34
Chapter 4 ......................................................................................................................... 36
Methodology................................................................................................................. 36
4.1 Introduction....................................................................................................................................36
4.2 Method of Research .......................................................................................................................37
4.2.1 External Interviews ................................................................................................................37
4.2.2 External Customer Observations............................................................................................39
4.2.3 Internal Management Interviews............................................................................................40
4.2.4 Computer Databases & Industrial Organisations. ..................................................................40
4.2.5 Net Based Research & Archival Analysis..............................................................................41
4.2.6 Workshop. ..............................................................................................................................41

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Chapter 5 ......................................................................................................................... 42
Results and Analysis .................................................................................................... 42
5.1 Introduction....................................................................................................................................42
5.2 Forklift Trucks ...............................................................................................................................44
5.3 External Analysis...........................................................................................................................46
5.3.1 Threat of New Entrants ..........................................................................................................47
5.3.2 The Power of Suppliers..........................................................................................................49
5.3.3 The Power of Buyers..............................................................................................................52
5.3.4 The Threat of Substitutes .......................................................................................................53
5.3.5 Rivalry among existing Competitors:.....................................................................................54
5.3.6 Complementary Products and Services..................................................................................55
5.4 Main Inferences from Industry profitability and macro environment analysis. .............................58
5.5 SWOT Analysis .............................................................................................................................60
5.6 Competitors’ position proforma.....................................................................................................62
5.7 Establishing the size of the Market ................................................................................................65
5.8 Growth Share Matrix .....................................................................................................................68
5.9 Directional Policy Matrix (DPM) ..................................................................................................69
5.10 Innovation within BOC................................................................................................................70
5.10.1 Idea Generation ....................................................................................................................72
5.10.2 Idea Conversion....................................................................................................................73
5.10.2.1 Strategy.........................................................................................................................73
5.10.2.2 Structure .......................................................................................................................74
5.10.2.3 Processes ......................................................................................................................74
5.10.2.4 Skills.............................................................................................................................75
5.10.3 Idea Diffusion..................................................................................................................75
Chapter 6 ......................................................................................................................... 78
Discussion and Recommendations.............................................................................. 78
6.1 Introduction....................................................................................................................................78
6.2 Hydrogen as a By-Product .............................................................................................................78
6.3 Location Matters ............................................................................................................................79
6.4 Demonstration and Trial Hydrogen Fuelling Systems...................................................................79
6.5 ‘Green’ or ‘Black’ Hydrogen, a way forward. ...............................................................................80
6.6 Innovation ......................................................................................................................................81
6.6.1 Idea Generation ......................................................................................................................82
6.6.2 Idea Conversion......................................................................................................................82
6.6.3 Idea Diffusion.........................................................................................................................83
6.7 Discovery-Driven Planning............................................................................................................83
6.8 Complimentary Products................................................................................................................84
6.9 Customer Profiles...........................................................................................................................86
6.10 Product Portfolio..........................................................................................................................86
6.11 Market Analysis Models, Concepts and Frameworks..................................................................86
Chapter 7 ......................................................................................................................... 88
Conclusions.................................................................................................................. 88
7.1 Limitations of the Research ...........................................................................................................90
7.2 Future Research .............................................................................................................................91
Chapter 8 ......................................................................................................................... 94
References .................................................................................................................... 94

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Chapter 9 ....................................................................................................................... 100
Appendix 1.................................................................................................................. 100
1.1 The History of BOC.............................................................................................................100
1.2 The industrial gases business...............................................................................................101
1.3 BOC Hydrogen Business.....................................................................................................103
1.3.1 Hydrogen Applications for Industry.....................................................................................103
1.3.2 UK Compressor trailer production plants.............................................................................104
Appendix 2.................................................................................................................. 106
2.1 Process example of Linde Hydrogen Fuelling System for Forklift Trucks..................................106
2.2 Example of complete Hydrogen Refuelling System....................................................................107
2.3 Under the cover picture of GenDrive hydrogen fuel cell system from Plug Power.....................107
Appendix 3.................................................................................................................. 108
3.1 External Interviewees...................................................................................................................108
3.2 Internal Management Interviewees..............................................................................................109
Appendix 4.................................................................................................................. 114
4.1 Costing Model for Hydrogen Fuelling system.............................................................................114
Appendix 5.................................................................................................................. 116
5.1 Types of forklift trucks ................................................................................................................116
Appendix 6.................................................................................................................. 118
6.1 Observation Results .....................................................................................................................118
Appendix 7.................................................................................................................. 120
7.1 Industrial Gas Pricing Strategy ....................................................................................................120
7.2 Dynamic Pricing Rivalry .............................................................................................................121
7.3 Game Theory ...............................................................................................................................122
Appendix 8.................................................................................................................. 124
8.1 First method for calculating Multiple Retail Market size ............................................................124
8.2 Second method for calculating Multiple Retail Market size........................................................125
Appendix 9.................................................................................................................. 126
9.1 Diesel Refuelling System.............................................................................................................126
9.2 Electric Recharging System.........................................................................................................126
9.3 LPG Refuelling System ...............................................................................................................127
Appendix 10................................................................................................................ 128
10.1 How to carry out an effective SWOT Analysis..........................................................................128
Appendix 11................................................................................................................ 130
11.1 British Industrial Truck Association Statistical Data.................................................................130
Appendix 12................................................................................................................ 134
12.1 List of Questionnaire Respondent and their Position.................................................................134
12.2 Innovation Questionnaire (Hansen and Birkinshaw, 2007) .......................................................134
12.3 Tabulated results form Questionnaires.......................................................................................135
Appendix 13................................................................................................................ 138
13.1 Stage of Development of Current UK Projects..........................................................................138
13.2 Regional Analysis of Projects....................................................................................................138
13.3 Total Public Spending by region................................................................................................139

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Figure 1: Marketing Process Diagram – A-S-P.............................................................................................11
Figure 2: The marketing planning cycle......................................................................................................16
Figure 3: The Five Competitive Forces that Determine Industry Profitability.............................................19
Figure 4: ESTEMPLE Framework...............................................................................................................20
Figure 5: Impact Matrix................................................................................................................................21
Figure 6: SWOT analysis .............................................................................................................................21
Figure 7: Competitors Position Proforma.....................................................................................................22
Figure 8: The business buying decision process...........................................................................................24
Figure 9: Buying proforma B2B...................................................................................................................25
Figure 10: Directional Policy Matrix............................................................................................................26
Figure 11: Growth/Share Matrix. .................................................................................................................26
Figure 12: The impact of Sustaining and Disruptive Technological change................................................30
Figure 13: The Innovation Value Chain .......................................................................................................35
Figure 14: The Five Competitive Forces that Determine Industry Profitability...........................................46
Figure 15: Supply Chains for Hydrogen Forklift Truck, Refuelling System, and gas..................................50
Figure 16: UK Oil refineries hydrogen manufacturing capabilities, 2007....................................................51
Figure 17: Total Supply from Hydrogen Plants to UK Market. ...................................................................52
Figure 18: Hydrogen Tube Trailer Market Share. ........................................................................................54
Figure 19: ESTEMPLE Analysis of Hydrogen Fuel Macro Market. ...........................................................56
Figure 20: The Five Competitive Forces that Determine Industry Profitability...........................................57
Figure 21: Impact Matrix on BOC Hydrogen Fuelling System....................................................................58
Figure 22: Hydrogen fuelling system market SWOT analysis. ....................................................................61
Figure 23: FLT Refuelling System Competitors Position Proforma. ...........................................................62
Figure 24: Large Multiple retailer Buying proforma B2B............................................................................64
Figure 25: Market Share of Retail Supermarkets. ........................................................................................65
Figure 26: Estimate of Distribution Centres for Retail Supermarkets. .........................................................66
Figure 27: BOC Hydrogen portfolio Growth/Share Matrix..........................................................................68
Figure 28: Directional Policy Matrix............................................................................................................70
Figure 29: The Impact of Sustaining and Disruptive Technological Change: The hydrogen Fuelling System
and Fuel Cell Technology..............................................................................................................................70
Figure 30: Reinforcing effects of supplying Hydrogen with carbon footprint level instead of either ‘Black’
or ‘Green’ ......................................................................................................................................................81
Figure 31: Progression of Hydrogen fuelling system to product offering ....................................................84
Figure 32: Timeline of BOC........................................................................................................................101
Figure 33: The Five Competitive Forces that Determine Industry Profitability.........................................102
Figure 34: End Users for Industrial Gases...................................................................................................103
Figure 35: Monopolist cost curve................................................................................................................120
Figure 36: Typical Cost Curve for Oligopoly Market. ...............................................................................122
Table 1: Strengths and weaknesses of FLT's.................................................................................................54
Table 2: Fleets, fuelling stations and flows for the three FLT classes...........................................................67
Table 3: Results of Hansen and Birkinshaw (2007) Innovation Questionnaire when applied to BOC. ........72

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Chapter 1
Executive Summary
1.1 Introduction
The importance of marketing with regard to business performance really started to be
understood when Theordore Levitt published ‘Marketing Myopia’ in 1960. Many
academics have built on this work but the principles have remained the same. Through
analysis of the market, including identifying customers’ problems and finding their
solutions, companies can develop products that enable profitable growth. Through
analysing the hydrogen fuelling market in the UK I had a unique opportunity to firstly
identify market analysis models, concepts and frameworks and apply them to this market.
BOC, now a member of the Linde group are the largest industrial gas company in the
world. Along with many other industrial and special gas mixes BOC produce hydrogen.
The world hydrogen economy is growing as it becomes a more feasible fuel alternative to
oil, so it is important that opportunities to grow the business are investigated and
harnessed. An in-depth external analysis of the industry and the business environment
was carried out with respect to BOC in the UK hydrogen market. Data was gathered
from both quantitative (data bases, questionnaires, observations, industrial organisations)
and qualitative (internal and external interviews, workshop, archival analysis) methods,
applied to relevant market analysis models, concepts and frameworks and analysed
within a workshop with cross functional management teams.
1.2 Main Findings from the Review.
The study I carried out has attempted to apply market analysis models, concepts and
frameworks, to the area of new technology products. This has identified that new
technology is developed through carrying out innovation. Disruptive technology, which
leads to new growth businesses, often does not have an identifiable market which places
difficulty in analysing marketing techniques. The use of financial tools such as NPV and

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ROI restricts the capacity to develop new ideas particularly when potential markets do
not exist or are hard to measure. The stage-gate process used by BOC has flaws as to its
usefulness with regard to disruptive technology and it was identified that an alternative
product selection tool, discovery-driven planning would be more appropriate with regard
to the hydrogen fuelling system product.
The study identified the need to orchestrate the bundling of the products into a customer
solution. This process should share out the market analysis costs and results, improve the
solution offered and generate a higher profit to that of individually offered products.
1.3 Value from the Study
For BOC:
As a result of the study valuable market analysis has been provided which up to now was
limited in detail. The market analysis presented in this study should allow for the next
step in the marketing planning cycle, revision or formulation of marketing strategy,
figure 2. The following is a list of the key values that can be taken from the study.
• In depth market analysis to enable a marketing strategy to be developed.
• Highlight the limitations with core market analysis tools with regard to disruptive
technology
• Identify the importance innovation can have on developing new growth
businesses.
• Identify where BOC could improve to move towards an innovative enterprise.
For me:
The study allowed me to develop my knowledge of the hydrogen industry and develop
my skills learnt from my MBA, particularly with regard to marketing. I found that it is
not always straight forward to apply theoretical models to real life applications and skill
is required to be able to derive value from the model even when difficulty in obtaining
the relevant data was found.

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Reviewing the literature on innovation led me to develop a keen interest in the subject
area. From the study I believe that innovation is the link between market-orientation and
business performance as discussed by Han, Kim and Srivastava (1998).
For academia:
The study aims to contribute to the heavily researched area of marketing with the more up
and coming area on innovation, providing insight into the application of marketing tools
within the field of innovation. As companies search for new growth businesses, and to
differentiate themselves further from their competitors then both of these research areas
need to be developed further and for this reason the following recommendations are
made:
• Limitations of marketing tools within the field of innovation.
• Analysing markets where size cannot be easily estimated.
• Develop tools for management to assess the potential of new growth businesses.
• How to change to an innovative culture.

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Chapter 2
Introduction
2.1 Overview of the Paper
There is no such thing as a growth industry (Levitt, 1960). Industries grow and decline
and those organisations that base their growth on product-orientation instead of customer-
orientation often miss-define their industry, leading to failure to orientate themselves
towards their customers developing products that they try to sell, instead of identify
customer needs that they attempt to satisfy.
“Management must think of itself not as producing products but as providing
customer-creating value satisfactions. It must push this idea (and everything it
means and requires) in to every nook and cranny of the organization, it has to do
this continuously and with the kind of flair that excites and stimulates the people in
it. Otherwise the company will be merely a series of pigeonholed parts, with no
consolidating sense of purpose or direction” (Levitt, 1960:56)
Levitt identified the importance of being customer-oriented in 1960. More recently,
scholars have developed further work progressing customer-orientation to ‘Market-
orientation’ (Kotler, 2003; Doyle 2003; Dibb et al 2006). In order to be market-oriented
it is necessary for an organisation to have a marketing planning approach (Doyle and
Stern, 2006; Dibb et al 1996). Marketing planning is “a systematic process involving
assessing marketing opportunities and resources, determining marketing objectives, and
developing a plan for implementation and control” (Simkin, 1996:376). This can be
broken down into three clear stages, Analysis, Strategy, and Programmes, the A-S-P
approach as shown in figure 1.

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Figure 1: Marketing Process Diagram – A-S-P
Source (Dibb et al, 2006)
The organisation that I work for, BOC, a member of the Linde Group, arguably can be
seen as product-oriented although striving towards being truly market-oriented. It is
within the relatively new hydrogen fuel cell market BOC believe there is a customer need
it can satisfy using an existing product within the Linde group that had been developed to
satisfy the needs of customers in the US and German markets. This paper shall be
concentrating on the market analysis stage of the planning process identified in figure 1,
to enable management to decide if the opportunity to serve these customers should be
progressed into a strategy and then an implementation marketing programme.
The paper shall provide background information on BOC and its role within the Linde
group. It then focuses on the hydrogen business in particular the hydrogen fuelling
market. A thorough review of the academic literature available on market analysis and
more broadly on innovation is carried out identifying key models, concepts and
frameworks. A methodology is provided highlighting the data required to allow analysis
of the models, concepts and frameworks as well as describing the methods used to gather
and present the data.
CORPORATE GOALS/OBJECTIVES
IMPLEMENTATION MARKETING PROGRAMMES
• Products
• Pricing
• Place/Distribution
• Promotion
• People, Processes, Physical Environment
MARKETING ANALYSIS
• Customers
• Competition
• Trends/Marketing Environment
• Internal Capabilities
MARKETING STRATEGY
• Market Segments
• Target Market Priorities
• Brand Positioning
• Basis for Competing
CONTROLS
• Budgets and Schedules
• Personnel and Responsibilities
• Benchmarking and Monitoring Progress
The Strategic Marketing ProcessThe Strategic Marketing Process

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The “heart” of the paper shall be the presentation of the results attained through applying
the data collected to the identified models, concepts and frameworks. This is then
analysed and discussion provided before recommendations are given. These
recommendations shall be directed at BOC with respect to the market analysis as well as
providing insight to other organisations wishing to carry out market analysis in potential
innovative new growth markets. It shall also recommend areas for further research,
highlighting the benefits that could be achieved in so doing before finally drawing a
conclusion.
2.2 Company Background
BOC became a member of the Linde group in September 2006 creating a world-leading
industrial gas and engineering group with around 50,000 employees in 100 countries
achieving sales of 12.3 billion Euros in 2007. The Linde group strategy is geared towards
profitable growth, driven in particular by the expansion of their international business
with next-generation products and services. The organisation is split into three divisions,
Gases, Engineering, and Gist (logistics services). The Gases division is further split into
nine regional business units (RBU), two global business units, Healthcare, and Tonnage,
as well as three business areas, Bulk (liquefied gases), Packaged Gases and Products, and
Electronics.
The area of focus taken by this paper is the analysis of the hydrogen fuel cell fuelling
market within the Bulk Gases business. Appendix 1 provides a more detailed description
on the history of BOC, the industrial gases market, and more importantly the hydrogen
business. The RBU’s have identified five areas of strategic focus being, profitable
growth, business excellence, customer experience, performance, SHEQ
(safety/health/environment/quality), and people excellence. It could be argued that if
their strategic focus was just customer experience then by providing a positive customer
experience cost effectively, profitable growth and business excellence shall be achieved.
The customer experience would require its interaction with the
company/products/services to be a safe, healthy one that reflects quality and concerns

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with regard to the environment. This could only be achieved by the people skilled at
delivering this. Before a customers experience can be a positive one, the company must
be able to identify who their customers are and what are their needs/requirements. It is
within the field of market analysis that this information can be gained and that is the area
this paper concentrates on in more detail finally leading to analysis of the hydrogen
fuelling market.
2.3 Hydrogen
Hydrogen is the most plentiful gas in the universe, but it only exists in nature associated
with other elements from which it has to be extracted. So, like electricity, hydrogen is an
energy carrier. It must be produced from a primary source and transmitted to the
consumption place in order to deliver energy service (stationary, mobile, portable) using
fuel cells technology for higher efficiency. The National Research Council (NRC 2004)
identifies seven existing and potential ways in which hydrogen can be produced.
• Reformation of natural gas
• Conversion of coal
• Use of nuclear energy
• Electrolysis
• Use of wind power
• Use of biomass
• Solar energy.
The main process that BOC utilises for the production of hydrogen is steam reforming,
whereby a hydrocarbon feedstock is mixed with steam and heated in the presence of a
catalyst to produce a crude hydrogen stream which is then purified. Common
hydrocarbon feeds are natural gas, butane, propane, LPG and naphtha.

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2.4 The Hydrogen Business
The hydrogen business has been around for a long time but the use of hydrogen within
fuel cells to generate electrical power is relatively new. Appendix 2 provides a
description and illustration of the process that hydrogen undergoes to move from
production to the fuel cell, in the case of a hydrogen fuel cell fork lift truck system used
at Walmart in the USA. It is within the captured fleet, forklift truck market segment in
the UK that the paper carries out market analysis in order to identify opportunities for the
hydrogen fuelling business. In the USA and Germany, Linde group have developed
innovative products with regard to hydrogen fuel cell market and carried out
segmentation of these markets, and developed product service offerings, Appendix 2.
BOC must decide whether to introduce these products into the UK market place and
therefore a thorough market analysis is required.
2.5 Objectives
The objective of this paper is to draw from the literature stages the company must go
through in order to carry out effective market analysis, highlighting the core models,
concepts and frameworks that assist in this process. Data is then collected and applied to
these models, concepts and frameworks and analysis carried out. The results are then
presented and discussion and recommendation provided. A conclusion is then drawn
highlighting limitations found during the research, and recommending possible areas for
further research.
The findings from this work will hopefully assist BOC in carrying out future market
analysis, allowing them to clearly identify customer’s needs that they can satisfy cost
effectively using their key strengths. From a wider perspective any company willing to
capture growth by providing products and services required by customers will benefit
from this work. It shows how to carry out effective market analysis, and apply marketing

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concepts to produce product and service offerings that match the size and requirements of
the identified or new markets.

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Chapter 3
Literature Review
3.1 Introduction
With the view of identifying market analysis stages to progress through, we shall review
the theory, concepts, models and frameworks available in order to carry out effective
market analysis. A quick search of the academic literature on market analysis produces
numerous articles, papers and books on the subject area. In order to narrow the search
area down to a feasible but yet substantial number of papers a few of the leading experts
in the field have been identified (Levitt, 1969; Kotler, 1972, 2003; Porter, 1979, 2008;
Doyle, 2003). Although this list is by no means exhaustive it provides a basis to
highlight key stages in the analysis of markets and to identify further academic literature
which can be reviewed to support or critique the findings to allow the stages to be
implemented in this paper whilst being aware of their limitations.
Figure 2: The marketing planning cycle
Source Dibb et al (1996)
Development
or revision of
marketing
objectives
relative to
performance
Assessment
of marketing
opportunities
and resources
Revision or
formulation of
marketing
strategy
Development
or revision of
the plan for
implementation
Implementation
of the
marketing plan
Focus of
this paper

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A customer-oriented business seeks to identify target markets, research these markets,
develop products that the customers want within the target markets, decide on the
marketing mix, and finally monitor the customers. This approach has been referred to as
the marketing process (Kotler, 2003), strategic marketing planning (Doyle, 2003) and
marketing planning (Dibb et al 2006). Figure 2 illustrates the marketing planning cycle
and highlights the area of focus that this paper concentrates on.
Components of the marketing planning process can be affected by the external forces and
therefore it is important to analyse the environment in which the organisation operates.
This identifies the first model for review which is a seminal piece of work that has been
used continually by academics and practitioners alike, the ‘Porter’s five forces’ model
(Porter, 1979). Porter (2008) reaffirms updates and extends this classic piece of work
demonstrating that it has truly stood the test of time.
To analyse the external environment two further models are reviewed, the first is PEST
analysis, and the second addressing the competitive environment, is the competitive
positions proforma (Dibb et al, 2006). The impact matrix (Angwin et al, 2007) builds on
the findings from the PEST analysis identifying the impact the external forces have on
the organisation. SWOT analysis, a commonly used marketing model which identifies
organisations Strengths to build on, Weaknesses to rectify, Opportunities to consider and
Threats to be addressed, is then reviewed.
Having reviewed the internal and external forces affecting the organisation, the focus is
then on understanding the key customer values (Dibb et al, 1996), or customer perceived
value (Kotler, 2003), and how these link with customer needs and requirements. The use
of the organisational or business to business buying process model and business to
business buying proforma model (Dibb et al, 1996), provides insight into the factors that
influence the buying process, and how these link with the values, needs and requirements.
The attractiveness of the market against the business provides insight into the direction a
company may wish to follow with regard to investments. The growth share matrix

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(Porter, 1980; Doyle, 2003) developed by the Boston Consultancy group and the
company position industry attractiveness screen (Porter, 1980) identified with GE and
McKinsey are two approaches to portfolio management. A Variation of these matrices,
the directional policy matrix (Dibb et al, 1996) shall be reviewed highlighting limitations
and providing contrast to the others.
Finally the identification gained from the above mentioned matrices, of products to
divest, harvest, maintain, grow, or enter (Doyle, 2003) may in cases of truly disruptive
innovative products (Christensen, 1997), deter organisations from entering the market. It
is important that organisations understand innovation and the growth that can be achieved
from implementing it effectively. The final part of the chapter draws on academic
literature in the innovation field and provides insight into problems associated with its
implementation. It describes the possible drawbacks of conventional marketing concepts
highlighted above and throughout marketing planning as well the benefits that can be
achieved.
The objective at the end of this chapter is to identify key stages to progress through, each
with models, concepts and frameworks that can be applied and analysed in order to carry
out core analysis of the hydrogen fuelling market.
3.2 Review of the Market Analysis Literature
Michael Porter (1979) argued that competition is often viewed too narrowly or
pessimistically. Organisations competitors are not manifested only in the other
organisations that are competing for market share, but in forces that exist well beyond
these. Porter (1979) went on to identify these other forces as customers, suppliers,
potential entrants, and substitute products.
“The strongest competitive force or forces determine the profitability of an industry
and so are of great importance in strategy formulation” (Porter, 1979:138)

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From this work Porter (1979) developed a model to identify how these forces govern
competition in an industry, which has become to be known as ‘Porter’s five forces’
illustrated below. An in-depth understanding of these forces enables a company to better
understand its environment and react to, or influence it, to their own advantage.
Figure 3: The Five Competitive Forces that Determine Industry Profitability
Source (Porter, 1980:4)
One of these frameworks that can be built around Porter’s Five Forces is PEST analysis
which stands for Political (legal/Regulatory), Economic, Socio-cultural, and
Technological. PEST analysis is a framework that helps to identify how forces in the
macro-environment change over time and not just providing a snapshot view (Angwin et
al, 2008). There have been many acronyms of this framework, PESTLE, PESTEL and
STEEPLE. This is due to the other macro-environmental forces being acknowledged
since PEST inception. One such acronym is ESTEMPLE (Agwin et al, 2008) which
includes Ecological, Ethical, and Media forces, illustrated in figure 4, along with insights
into each of the forces.
Suppliers
Potential
Entrants
Substitutes
Buyers
Industry
Competitors
Rivalry Among
Existing Firms
Threat of Substitute
Products or Services
Bargaining
Power
of Buyers
Bargaining
Power
of Suppliers
Threat of
New Entrants

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Figure 4: ESTEMPLE Framework
Source (Angwin et al, 2008:7)
An impact matrix (Angwin et al, 2008) can be used to take the key macro-influencers and
provide a probability and impact scoring to highlight the overall potential of the threat or
opportunity. The impact scoring is from 1 to 5 for impact with 1 being low and 5 high
impact and + or – to represent a positive or negative one. Multiplying this by probability
factors provides an overall number for potential positive or negative impact. Although all
potential threats or opportunities are important to identify, the use of this matrix identifies
outliers, threats or opportunities that have a greater impact then the others.
Economic
Social
Technological
Ecological
Media
Political
Legal
Ethical
Health and direction of the economy(ies) in which the firm competes.
Relevant variables: GDP levels, inflation, interest rates, money
supply, unemployment, disposable income. Scan linked economies;
monitor currency fluctuations and exchange rates.
Demographic variables: Population size, age structure, geographic
distribution, ethnic mix, and income distribution. It also includes
tastes, fashions, attitudes, and values. These are the cornerstone of
society and often drive all the other macro-categories
Primarily new products, processes, and materials. Includes the
institutions and activities involved in creating new knowledge and
translating it into outputs, products, processes, and materials.
Government support and initiatives can be very influential.
Reflects concern the sustainability of the physical environment.
Issues include: greenhouse effect, CO2 emissions, genetic
engineering. Factors for consideration include environmental
policies, waste disposal, and energy consumption.
An increasingly important influence on business, politics and society
as opinion former and shaper. The media is affecting outcomes in
ways inscribable to other macro-drivers.
Issues: government stability, alignment at the international level,
taxation and fiscal policies, foreign trade regulation, social welfare
policies, attitudes towards competition and state ownership. All
governments’ policies are to further their own country’s interests.
Factors include employment law, health and safety, product safety,
monopolies and mergers legislation
Codes are rising in importance and affect the way businesses
operate internationally. They have directly affected the financial
performance of many international businesses.

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Figure 5: Impact Matrix
Source (Angwin, 2008)
SWOT analysis is a common analysis tool carried out by organisations with the aim
being to, “summarise the business’s strengths and weaknesses in relation to the
competition and highlight external factors which are impacting upon the market’s
performance” (Dibb et al, 1996:30).
Figure 6: SWOT analysis
Source (Dibb et al, 1986:35)
Ethical
Legal
Political
Media
Ecological
Technological
Social
Economic
Potential impactProbabilityImpactEnvironmental drivers
Ethical
Legal
Political
Media
Ecological
Technological
Social
Economic
Potential impactProbabilityImpactEnvironmental drivers
Strengths
ThreatsOpportunities
Weaknesses
What are the core implications from these issues?
• Rank (list) points in order of importance
• Only include key points/issues
• Have evidence to support these points
•Strengths and weaknesses should be relative to main competitors
•Strengths and Weaknesses are internal issues
•Opportunities and Threats are external competitive and marketing environment issues

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The strengths and weaknesses can come from analysing the internal marketing functions,
engineering and product development, operations, people, management, and resources,
where the opportunities and threats can come from analysing the external environment
such as Porter’s five forces framework and PEST analysis. The SWOT analysis is a very
simple format to follow, illustrated in figure 6, but is often carried out poorly, containing
manager’s hunches and does not focus on the most crucial issues or be relative to the
strongest competitors in the particular market (Dibb et al, 1996).
In order for organisations to distinguish themselves from their competitors they must be
able to identify not only who their competitors are but their future goals, current strategy,
assumptions, and capabilities (Porter, 1985). An understanding of the above allows an
informed competitor response profile to be developed. Dibb et al (2006) identifies
competitor’s market share, key customer values, weaknesses, and differential advantage
as areas where a competitor profile can be generated. This information can be analysed
in the below framework which is the competitor positions proforma.
Figure 7: Competitors Position Proforma
Competitive Position
Market Leader
• Market share
change
• KCVs Offered
• DA (if any)
(Segment description)
Challenger 1
• Market share
change
• KCVs Offered
• DA (if any)
Challenger 2
• Market share
change
• KCVs Offered
• DA (if any)
Fast Mover
• Market share
change
• KCVs Offered
• DA (if any)
Follower
• Market share
change
• KCVs Offered
• DA (if any)
Nicher
• Market share
change
• KCVs Offered
• DA (if any)
Competitive Position
Market Leader
• Market share
change
• KCVs Offered
• DA (if any)
(Segment description)
Challenger 1
• Market share
change
• KCVs Offered
• DA (if any)
Challenger 2
• Market share
change
• KCVs Offered
• DA (if any)
Fast Mover
• Market share
change
• KCVs Offered
• DA (if any)
Follower
• Market share
change
• KCVs Offered
• DA (if any)
Nicher
• Market share
change
• KCVs Offered
• DA (if any)

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The basis of this technique is built on warfare analogy, and one particular Chinese
warrior Sun Tzu. Many academics apply Sun Tzu war analogies to business operations
on the premise that the market place can be construed as a battlefield. In order to win or
avoid the battle then it is necessary for companies to obtain the key success factors
(KSF). By companies “scanning internal and external environments, maintaining
swiftness, adaptability, and deceptiveness in strategy implementation, while using
strategic control with security and intelligence, they will obtain the KSF’s – such as
production, marketing, and delivery ability” (Wu et al, 2004:406).
Sun Tzu advocates in his work The Art of War;
He who knows the enemy and himself will never in a hundred battles be at risk; He
who does not know the enemy but knows himself will sometimes win and sometimes
lose; He who knows neither the enemy nor himself will be at risk in every battle”
(Ames, 1993:113)
It is important that key customer values (KCVs) are understood as well the buying
process of customers’. This involves understanding the customers overall experience in
learning about a product, making brand choices, using the product and disposing of it
(Kotler, 2003). Along with quality, price, service support levels, and on-going
commitment an integral part of the product proposition is the motivation, attitude and
passion for assisting the customer (Dibb et al, 2006). A useful framework to identify the
influencing factors and the decision process the customer follows is the business buying
decision process framework illustrated in figure 8.

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Figure 8: The business buying decision process
The application of this framework in later chapters along with the identification of key
customer values and factors which influence customer buying enables the business to
business buyer proforma, illustrated in figure 9, to be completed. The framework
highlights the behavioural characteristics enabling organisations to distinguish between
the varying customer groups highlighting where there may be opportunities to provide a
differential advantage over rivals. The understanding of the buying process for business
to business products and services is somewhat different to that of final consumer.
Environmental
• Laws
• Regulations
• Economic conditions
• Competitive forces
• Technological changes
Organisational
• Objectives
• Purchasing policies
• Resources
• Buying centre structure
Interpersonal
• Co-operation
• Conflict
• Power relationships
Individual
• Age
• Education level
• Job status
• Personality
• Income
Possible Influencing Factors
Recognise problem
Develop product
specification to solve
problem
Search for products
and suppliers
Evaluate products
and suppliers relative
to specifications
Select and order most
appropriate products
Evaluate product and
supplier performance
Decision process
Feedback

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Figure 9: Buying proforma B2B
3.3 Review of the Product Portfolio Management Literature.
As investment resources are not finite then management needs to decide on the potential
of projects before agreeing funding. The directional policy matrix (Dibb et al, 1996)
allows comparison of various markets attractiveness against business strengths to be
made. This matrix has been developed from the well established growth share matrix
(Porter, 1980; Doyle, 2003) developed by the Boston Consultancy group and the
company position industry attractiveness screen (Porter, 1980) identified with GE and
McKinsey.
Customer Profile
KCVs
Buying Process Influencers

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Figure 10: Directional Policy Matrix
Source (Day, 1986)
This matrix not only provides management with comparison with other markets but also
identifies markets that are Stars, Dogs, Cash Cows, or Question marks (Porter, 1980),
highlighting whether the company should invest/grow, selectivity/earnings, or
harvest/divest (Kotler, 2003).
Figure 11: Growth/Share Matrix.
Source (Porter, 1980)
High
LowHigh
Low
Business Position
Marketattractiveness
Medium
Medium
STAR
Modest
+ or –
Cash Flow
Cash Cow
Large
Positive
Cash Flow
Dog
Modest
+ or –
Cash Flow
Question Mark
Large
Negative
Cash Flow
High
LowHigh
Low
Relative Market Share
(Cash Generation)
Growth
(Cash use)

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It has been argued earlier in section 2.1 that in order to improve business performance a
company must strive to be market-oriented. By including innovation in the link between
market-orientation and business performance the relationship is established more robustly
(Han et al, 1998). It is important to understand how to carry out innovation effectively
and the effects that innovation models, concepts and frameworks have on the above
market analysis ones.
3.4 Review of the Innovation Literature.
The final part of this chapter draws on the field of innovation and the importance that it
claims organisation can gain by carrying out innovation effectively. The action of
innovating is “the introduction of novelties; the alteration of what is established by the
introduction of new elements or forms.” (OED, 1989).
Organisations attempt to innovate to differentiate their products from their competitors,
or create new products and services that enable market growth to be achieved in existing
or new markets. Christensen (1997:xiii) identifies technology as the “processes by which
an organization transforms labour, capital, materials, and information into products and
services of greater value.” He then goes onto identify innovation as a change to one of
these technologies. Christensen (1997) identifies two types of technologies, sustaining,
and disruptive. Sustaining technologies “improve the performance of established
products, along the dimensions of performance that mainstream customers in major
markets have historically valued……… Disruptive technologies bring to a market a very
different proposition than had been available previously” (Christensen, 1997:xv).
Sorescu and Spanjol (2008) refer to these two types of innovation as incremental
innovation and breakthrough innovation. They put forward the argument that
technological breakthrough innovation, “insufficiently capture the scope of innovation in
industries in which marketing innovations may well be more prevalent than their
technological counterparts.” (Sorescu and Spanjol, 2008:115). Christensen (1997:xiii)
did however state that the concept of technology “extends beyond engineering and
manufacturing to encompass a range of marketing, investment, and managerial

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processes.” The general concept of disruptive technology has been readily accepted
terminology in the study of innovation, (Anthony et al, 2006; Charitou et al, 2003; Bower
and Christensen, 1995; Andrew and Sirkin, 2003), and therefore shall be the terminology
used within this paper.
3.5 Disruptive New Growth Businesses
With reference to figure 12, it is important to understand that companies wishing to
launch new growth businesses to achieve continual growth must ensure that these
businesses are truly disruptive ones. Within existing markets sustainable technology
continually improves the existing products, eventually surpassing the customer’s needs.
This then enables technologies that are often not as good as the existing ones to enter the
market and then improve to satisfy customer requirements. Profit margins generally
increase as companies stretch their products up market, or at least do so more than
stretching downwards. This then follows that when new entrants attack the less
profitable customers at the lower end of the market they inevitably are motivated to
stretch upwards to more profitable customers. Innovations, that assists companies
stretching upwards, “by selling better products to their best customers are sustaining, not
disruptive. Sustaining innovations comprise of both simple, incremental engineering
improvements as well as break-through leaps up the trajectory of performance
improvements.” (Christensen et al, 2002:23).
Whether new entrants are first to market or not with sustaining innovation, the
incumbents usually win back the market as they have the resources and incentive to win.
However with disruptive innovation new entrants that attack the low end less profitable
customers often win as incumbents are more likely to utilise their resources on the more
profitable customers, residing in larger markets.
Chistensen et al (2002) identifies two ways to seek new disruptive technology. The first
way is with customer nonconsumption, customers who are not buying at all. In order to

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disrupt with new market developments that attract these customers Christensen et al
(2002) developed three test questions as follows;
1. Does the innovation target customers who in the past haven’t been able to “do it
themselves” for lack of money or skills?
2. Is the innovation aimed at customers who will welcome a simple product?
3. Will the innovation help customers do more easily and effectively what they are
already doing?
If the innovative product does not pass the above set of tests it does not necessarily mean
it is not disruptive. Instead of targeting nonconsumption the second way is to target least-
demanding tiers of markets were products are so good they “overserve” the customers,
but this must be done using a disruptive business model that allows profitable
competition, even with deep discounts. Christensen et al (2002) again developed a set of
test questions to identify this second approach to disruptive technology which are;
1. Are prevailing products more than good enough?
2. Can you create a different business model?
What is easily forgotten is that “every major, attractive market that exists today was at its
inception small and poorly defined – just as the major growth markets of tomorrow are
small and poorly defined today.” (Christensen et al, 2002:24). Therefore companies who
wish to create new growth business should seek disruptive opportunities. This does not
just apply to new start-ups but every company right up to the cash rich giants.
3.6 Environment for Innovation
In order for companies to innovate it is necessary to understand “the importance of
relieving potential innovators of bureaucratic constraints so they can run with their ideas”
(Kanter, 2006:74). As organisations have a finite amount of investment capital, then
decisions at board level on which projects to finance need to be made in order to achieve
returns on investment expected by shareholders. “Using metrics such as net present value
(NPV) or return on investment (ROI) is fine. Using them as rank-ordering tools to make

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decisions is counterproductive.” (Anthony et al, 2006:110). The reason for this is that in
the search for disruptive innovation more often than not the markets do not exist or if
they do they are small and difficult to measure. The disruptive technology will more
often than not offer worse product performance at least in the near term. Christensen
(1997:xvi) illustrates this in figure 12.
Figure 12: The impact of Sustaining and Disruptive Technological change
Source (Christensen, 1997:xvi)
Constraining the innovative projects to financial metrics will often cause the project to be
shelved whilst sustainable technology, whose markets already exist, are often quite large
and can be measured accurately through conventional marketing analysis, providing an
accurate analysis of the potential NPV or ROI, shall be chosen instead. Kanter (2006)
goes on to identify other bureaucratic constraints such as company strategy, process,
structure, and skills.
3.6.1 Strategy
Company executives quite often set strategy to search for the blockbuster innovation, in
order to achieve high returns and in doing so miss the smaller opportunities that may have
the potential to achieve large growth. One problem is the strategy applies the use of
conventional market research, as a measure to test the idea. When it is difficult or
impossible to apply such metrics then the idea is often discarded. By applying other
Progress due to
sustaining technologies
Performance
demanded at the high
end of the market
Disruptive
technological
innovation
Performance
demanded at the low
end of the market
ProductPerformance
Time

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metrics such as discovery driven planning, discussed later, more ideas can be developed
increasing the chances of new innovative products. A lot of these new ideas may fail but
“to get more success you must be willing to risk more failures” (Kanter, 2006:76).
Strategy should not just reside around product innovation but should include other
functions such as production, marketing, finance, and distribution. Innovative ideas in
any of these can enable a differentiation to be gained and competitive advantage
achieved. Care must be taken however not to dissipate the innovation energy over to
many small projects many of which are often just product variations, which can lead to
brand dilution (Kanter, 2008).
3.6.2 Processes
Applying the same controls from the main organisation can constrain innovation. Stage-
gate process, which is often used to assess the development of projects at key stages to
ascertain if they should proceed or be shelved, has two flaws (Christensen et al, 2008).
The first is that it is quite easy to tweak the figures in order to present to the gatekeepers
that the project is on course, and should pass to the next stage. The second is that it is
assumed that the strategy is right from the start and if the product fails, which is more
often the case especially with disruptive innovation, then the project is shelved. As
discussed earlier with disruptive innovation the market is not known beforehand so the
strategy cannot be guaranteed and more than likely will need to be altered before success
is achieved. This does throw up a dilemma to managers that the current thinking with
regard to business strategy and processes will not work with disruptive technologies and
if these processes are enforced on the innovators then more often than not the project will
fall short of their projections, in some cases where heavy investment was injected, can
cause the collapse of the organisation as seen time after time particularly within the
computer hard drive industry. A solution to managers is discovery-driven planning
(McGrath and MacMillan, 1995). “Discovery driven planning systematically converts
assumptions into knowledge as a strategic venture unfolds. When new data are
uncovered, they are incorporated into the evolving plan.” (McGrath and MacMillan,
1995:44). By this McGrath and MacMillan (1995) work through five steps that enable

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new information to be included as it arises. Firstly as it may be impossible to identify the
size of the market a reverse income statement is carried out where required profits are
backed worked to identify unit sales and costs per units. Secondly the activities required
to run the venture are outlined and assumption made where necessary. Thirdly the
assumptions are tracked. Fourthly the reverse income statement can be revised and
finally milestones set out where assumptions can be tested. Milestone planning (Block
and MacMillan, 1993) is a familiar technique for monitoring the progress of new ventures
and could prove a good alternative to the stage-gate process with regard to innovative
idea development.
3.6.3 Structure
If the two entities, the innovators and the mainstream organisation, have different
processes applied to them then the “companies must be careful how they structure the
two entities, to avoid a clash of cultures or conflicting agendas” (Kanter, 2006:77). If
disruptive innovation often leads to failure, but failure is the way to success then this
approach requires a different culture to the mainstream business where sustained
innovation cannot fail as it is required to maintain the profit returns expected. Managers
who back a project that quite probably will initially fail will fear a blemish on their
abilities and will tend to shy away from such projects pursuing the more guaranteed
successful sustaining ones. O'Reilly and Tushman (2004:76) identify the ambidextrous
organisation organise their innovation through “structurally independent units, each
having its own processes, structures, and cultures, but integrated into the existing senior
management team.” When looking at functional design, completely integrated into
existing structure, cross-functional design, groups operating within the established
organisation but outside of the existing management hierarchy, unsupported teams,
independent units set up outside the established organisation and management hierarchy,
found that sustained innovation was more successful in the ambidextrous organisation
whilst disruptive innovation was successful in both the ambidextrous and functional
design structure. O'Reilly and Tushman (2004:77) go onto state that the reason for the

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success is that the “the structure of ambidextrous organizations allows cross-fertilization
among units while preventing cross-contamination.”
3.6.4 Skills
It is important to put the right people in charge of innovation. The understanding of the
human side is essential and can be argued is one of the most important aspects of
business, where change is required the management of people to achieve change is
essential in successful implementation of strategy. Along with the selection of the right
manager “groups that are convened without attention to interpersonal skills find it
difficult to embrace collective goals, take advantage of the different strengths various
members bring, or communicate well enough to share the tacit knowledge that is still
unformed and hard to document while an innovation is under development.” (Kanter,
2006:78). Research carried out by Ralph Katz, highlighted by Sutton (2002:87) identifies
that “during research and development teams’ first two years, the number of ideas is high,
but after about three to four years, the creative output peaks and declines.” Kanter
(2006:78) identifies that “MIT researchers have found that for R&D team members to be
truly productive, they have to have been on board for at least two years.”
3.7 Location
The review of the literature on innovation identifies that location can have an effect on
the success of developing disruptive innovation or just improving the innovation process;
“Though innovation is often serendipitous and internal project management has an
important impact on success, opportunities for effectively developing new products,
processes and services arise by locating in countries (and regions within countries)
with a favourable common innovation infrastructure and strong clusters in their
field.” (Porter and Stern, 2001:34).

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Care must be taken that locating in such an area is not enough and “companies must
proactively invest to tap into the strengths of their local environment. This involves such
things as active participation in industry associations, investing to build deep
relationships with local universities, cultivating and assisting programmes that train
skilled personnel and paying particular attention to the most sophisticated local
customers.” (Porter and Stern, 2001:36).
3.8 Approaches to Innovation
Andrew and Sirkin (2003) identify three approaches to innovation allowing companies to
best align resources to areas of strength with regard to innovation and possibly source
expertise outside of the company for areas of weakness. They identify the three
approaches as the Integrator, the Orchestrator and Licensor. “Most organizations are
integrators: They manage all the steps needed to take a product to market. Organizations
can also choose to be orchestrators: They focus on some part of the commercialization
process and depend on partners to manage the rest. Finally, companies can be licensors:
They sell or license a new product to another organization that handles the rest of the
commercialization process.” (Andrew and Sirkin, 2003:78)
3.9 Innovation Value Chain
Michael Porter (1985) developed a model to illustrate the integrated flow of transforming
raw materials into products, ‘The Value Chain’. Andrew and Sirkin (2003) refer to an
integrators approach to innovation, where the company carries out all the steps to turn
ideas into profits, and refers to this as the ‘innovation-to-cash-chain’. Hansen and
Birkinshaw (2007) use a similar approach to the field of innovation by viewing the
transformation of ideas into commercial outputs, ‘the innovation value chain’. “The
innovation value chain view presents innovation as a sequential, three-phase process that
involves idea generation, idea development, and the diffusion of developed concepts”
(Hansen and Birkinshaw, 2007:122). Across these three phases are six critical activities,

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internal sourcing, cross-unit sourcing and external sourcing, selection, development and
company wide spread of the idea. Hansen and Birkinshaw (2007) identify that a
company’s innovation ability is only as good as its weakest link. Although there are
many concepts and models available to identify how successful innovation can be
achieved, Hansen and Birkinshaw (2007) view that the adoption of all of these concepts
and models may be wasteful or even harmful and what is really needed is to ascertain the
weak links in the innovation value chain and address these.
Figure 13: The Innovation Value Chain
Source (Hansen and Birkinshaw, 2007)

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Chapter 4
Methodology
4.1 Introduction
In order to address the question of how to carry out an effective market analysis of the
hydrogen fuelling system market within the UK, I developed a strategy to enable me to
follow a path that covers the literature around the subject area, methodology of acquiring
the data and analysis and review of the applied models, concepts and frameworks.
However Mintzberg (1987) argued that there is no such thing as a deliberate strategy or
an emergent one. He argued that it would be impossible to know everything up front and
likewise it would be foolish to leave everything to happenstance. The strategy had to be
flexible enough at the start to allow for modifications to be made as difficulties not
anticipated at the start were encountered, so progress could continue.
The purpose of the research is mainly descriptive but also involves analytical research
(Collis and Hussy, 2003). The descriptive research enables information to be gathered to
understand the characteristics of the models, frameworks and concepts highlighted.
Explanatory research then builds on the descriptive research by “discovering and
measuring casual relations” (Collis and Hussy, 2003:11) between them. A mix of
phenomenological paradigm and a positivist approach is followed. There are difficulties
in mixing these paradigms as it is “difficult to argue simultaneously that you believe that
social reality is separate and external and that it is merely a construction of the mind!”
(Collis and Hussy, 2003:77). The approach does however enable methodological
triangulation (Easterby-Smith, Thorpe and Lowe 1991). “Triangulation has vital
strengths and encourages productive research. It heightens qualitative methods to their
deserved prominence and, at the same time, demonstrates that quantitative methods can
and should be utilized in complementary fashion” (Jick, 1979:610). It should be noted
that triangulation strategy has its shortcomings such as difficulty to replicate, particularly
with quantitative methods. It is also not claiming to be the dominant strategy, and should
only be applied if appropriate to the question (Jick, 1979). The data collection methods

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used within this paper include field based research in the form of interviews, observation
as well as non-field based methods such as statistical and historical analysis along with
company reports made available by BOC.
4.2 Method of Research
In order to collect data that can be used to apply to the models, concepts and frameworks
identified in earlier chapters, a variety of methods were used.
• External interviews
• External customer observations
• Internal management interviews
• Archival analysis
• Computer databases
• Industrial organisations
• Net based research
• Workshops
4.2.1 External Interviews
The aim of the external interviews were five-fold
1) Understand Key Customer Values (KCVs)
2) The environmental forces impacting them
3) Understand the organisation (objectives, purchasing polices, resources, buying
centre structure
4) Type of customer (Location bidder, Basic service, Inside Sales, Ongoing-
support, Wants-it-all, Solution provider).
5) Understand performance, time, cost and safety constraints of existing forklift
fuelling processes.

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The information gained from the above five areas will allow for the development of the
models, concepts and frameworks identified.
The customers were selected taking the basics of the captured fleet customer
segmentation, that was carried out in the US and Germany and applying it to the UK
market as discussed earlier. Potential customers were in the retail and logistics industries.
The customers selected either already had an account with BOC for industrial gases other
than hydrogen, or were contacts that were made available through existing relationships
between BOC employees and the company.
Semi-structured interviews were carried out to enable open discovery, to ask more
complex questions, and follow up questions when required. This method also provides a
higher level of confidence in the answers, allowing for the attitude and behaviour of the
interviewee to be taken into account. Nevertheless it is important that the problems with
semi-structured interviews are understood such as, problems with recording answers,
controlling the range of topics, and the fact that issues raised may well change from one
interview to the next. Understanding of the effects that the sex of the interviewer and
interviewee may have, for example on the way questions are asked, or body language,
(Rosenthal, 1966). Take into account the ‘hat’ the interviewee may be wearing if for
instance they are a director of a company and a trade unionist. Which hat are they
wearing when answering the particular question? Is the answer given on the basics that
the interviewee believes it is the right or acceptable answer?
Although the problems identified above are difficult to be eliminated, they have been
attempted to be reduced by tape recording the interviews with interviewee’s permission.
The common questions for each interview have been asked in the same order with an
attempt to achieve stimulus equivalence (Collis, 2003). The first 15 minutes were spent
building a rapport with the interviewee, to relax and settle them, and increasing the depth
of the interview when the answer given is believed to be the right or acceptable one
(Collis, 2003). Finally a clear indication that the interview is concluding is provided and

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this conclusion is brought by the offering of any further points that the interviewee may
wish to make.
The semi-structured interview questions and the list of individuals interviewed are
provided in Appendix 3.
4.2.2 External Customer Observations.
The customer observed utilised battery and LPG powered forklift trucks. The ‘refuelling’
of which is carried out by driving the forklift truck to a maintenance area where the
existing battery is removed and put on charge and a previously charged battery is fitted,
or to the LPG cylinder storage area where the cylinder is replaced with a full one. The
forklift then commences its duties. This exercise would be replaced if the hydrogen
fuelling system were adopted. Therefore observation of this exercise was carried out to
determine the following;
• Time taken from arriving at refuelling area to leaving fully fuelled.
• Number of personnel require in carrying out the exercise.
• Difficulties and safety issues associated with the exercise.
• Effects a nearly discharged battery has on performance
All observations were made in a natural setting. This does limit the control of variables,
and consideration to ethics, objectivity, visibility, needs to be made. The impact the
observer may have on those observed, as well as distractions that may lead to the
observer missing certain details needs to be understood as well as observer bias (Collis,
2003). Taking the above into consideration the observations were carried out with the
full understanding of those being observed. Although the variables could not be
controlled comparisons were drawn between observations.
From the observations, time and cost savings along with safety could be analysed to
identify strengths and weaknesses of the hydrogen fuelling system over existing
technologies.

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4.2.3 Internal Management Interviews
As the market does not exist at present for hydrogen powered forklift trucks in the UK, a
vast majority of information resides within the management team focused on evaluating
the market for opportunities to introduce such technology. The management team
included the following;
• The packaged energy manager - Linde group.
• Product manager, Bulk carbon dioxide and hydrogen - BOC
• Business development manager – Innovation – BOC
• Product manager on-sites – BOC
• New business development & innovation manager – BOC
Semi-structured interviews were carried out with each of the above. A number of the
questions were kept the same but each interview had questions tailored specifically
towards their area of expertise.
4.2.4 Computer Databases & Industrial Organisations.
A number of the models, concepts and frameworks identified require macro economic
analysis. Computer data bases such as OECD, provided general economic data where
industrial and government organisations enabled more industry macro economic data to
be obtained. These organisations sourced were British Industrial Truck Association
(BITA), and the department of energy and climate change. This research provided both
quantitative and qualitative data which enabled identification of past, present and possible
future macro economic forces that have, are or going to impact on the hydrogen fuelling
market.

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4.2.5 Net Based Research & Archival Analysis.
The internet today provides huge amounts of data and the problem is not with identifying,
but of selecting the appropriate data in a time efficient manner. The net based research
has enabled the identification of academic papers focusing on the hydrogen economy,
including fuelling systems, infrastructure, generation, and supply. It provided
quantitative data with regard to the areas above and qualitative data with regard to macro
environment. Data was also collected from the BOC/Linde intranet which provided both
quantitative and qualitative data directly associated with hydrogen. This was of particular
use as Linde group is a global organisation and countries that Linde operate in such as the
USA and Germany have already implemented hydrogen fuelling systems into their
geographic locations lending to valuable resources of information.
4.2.6 Workshop.
BOC are investigating the hydrogen fuelling market concurrently as this paper is being
written. The employees assigned to the hydrogen market development have built up
knowledge of the market and the associated products and therefore can provide a wealth
of knowledge either directly or through their marketing information capture and storage
databases. For this reason a workshop was run where the internal management team,
who were previously interviewed and the addition of the Product manager for Packaged
fuel gas, worked through ESTEMPLE, SWOT, Competitor proforma and the buying
proforma models and frameworks as well as assisting with identification of market forces
that impact on BOC as highlighted in Porters five force model described in earlier
chapter. All of the models were addressed in the workshop and data collected
appropriately when provided.

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Chapter 5
Results and Analysis
5.1 Introduction
The information and data gathered through the various methods identified in the
Methodology chapter were applied to the theoretical models, frameworks and concepts
highlighted in the literature review. The models were applied in a sequential manner,
although cross analysis between models is carried out where casual relationships have
been discovered. Many of the models, concepts and frameworks overlap each other,
reinforcing the credibility of the results. Although the market exists for powering forklift
truck fleets, the entry into the market of hydrogen fuelling systems does not yet exist in
the UK. This increases the difficulty of using core market analysis models identified in
the literature review, particularly with regard to existing competitive rivalry. However
where limitations exist it has been highlighted in the paper and assumptions and
modifications where possible have been made to the models, concepts and frameworks,
to retain the core benefits of using such models but allow it to be more appropriate to this
application.
The market segment BOC have identified is the captured fleet forklift truck market within
the UK. The business development manager for innovation at BOC expressed the
following with regard to the target segment.
“The market entry segment BOC have identified is forklift truck fleets in
excess of 50+ trucks at one site. This identifies multiple retailers as potential
customers in this segment. One of these customers BOC have started
discussion with is Tesco. The reason being that the size of the prize is more
likely to be closer to the high infrastructure costs expected to implement an
operational system”
The reason for this further segmentation is that BOC’s main process for generating
hydrogen is through natural gas reformation. This is carried out at key geographic
locations, Appendix 1, which are detailed later in the analysis. This means that to supply

43 of 141
potential customers BOC must then transport the hydrogen in high pressure tube trailers
to the customers and leave there as storage. Due to the cost involved with this and the
further equipment and installation costs anticipated it is believed that at present it could
not be financially viable for customers operating less than 50+ forklift trucks. When
further questioned with regard to how this number came about the Business development
manager for Innovation added
“As part of the analysis to understand cost and cost savings for customers a
need for customer test sites has been identified in order to understand forklift
truck performance, hydrogen storage requirements and fuelling system
capabilities. The findings from such test cases may well reduce or extend the
envelope of potential customers within this segment.”
The product manager for on-sites developed a costing model, Appendix 4, to determine at
what cost hydrogen needs to be sold for in order to make the whole offering financially
viable from the customers perspective. The figure or £6/kg hydrogen could only be
achieved when additional time savings on existing recharging could be achieved. This
resulted in operations where the customer operated the FLT 24 hours a day 7 days a
week. The larger the volumes of hydrogen supplied allows for reduction in supply price
as the cost of filling the high pressure tube trailers, delivery to site and infrastructure
costs can be spread over gas supply cost. Thus the result was captured FLT fleets in
excess of 50+ operating on a 24 hour basis.
There are other methods of generating hydrogen mentioned earlier in the paper, chapter
2.3, such as electrolysis. Such a method could possibly be used on-site but it is believed
that the constant high pressure supply required for hydrogen fuel cells could not be
achieved with a fleet in excess of 50 trucks and could only be aimed at the smaller forklift
truck fleets. Offsetting the high capital cost of such equipment against a low gas supply
does not appear to be financially viable. It is also possible for natural gas reformation to
be generated on a customer’s site but this would require high capital expenditure on
equipment and infrastructure.

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The above options are identified in the paper and analysis carried out or further
investigation recommended. This is important as with disruptive innovation
(Christensen, 1997) figure 12, the products such as on-site electrolysis could develop
their technology to compete directly with off-site natural gas reformation type delivery
systems.
5.2 Forklift Trucks
Appendix 5 has identified various types of forklift trucks along with a brief explanation
of their uses, advantages and disadvantages. The GIST Project manager for Materials
Handling segmented the forklifts into three groups being;
• Powered pallet trucks (PPT)/order pickers
• Reach Trucks
• Counterbalance
Generally the PPT are electrically powered and are small trucks which have their
batteries recharged directly to charger instead of removing the battery. Reach trucks are
the more common warehouse truck again electrically powered and used for high racking
application with narrow isles. The batteries are removed for charging by rolling off the
truck onto a rolling bed charger unit. The counterbalance trucks are often diesel or LPG
and are for more general purpose operations as they are two big for narrow isle
warehouse applications. The weight of the truck offsets the lifting capability. About
20% of the trucks used at Carlsberg UK by GIST are electric and these are very awkward
as the batteries are very large and often require lifting devices in order to remove for
charging.
From all interviews it is agreed that batteries often have enough charge for an 8 to 10
hour shift with a lifecycle of 5 years. However it was indicated by the GIST project
manager for materials handling that;
“Batteries not properly managed in terms of when to recharge and for how long can
reduce the lifecycle to as little as 2 years”.

45 of 141
(Recharging batteries – Observation result can be found in Appendix 6).
Through observation at British Airways warehouse, Colnbrook, run by GIST the average
time for carrying out the steps involved in recharging a reach truck and a LPG truck were
6 and 7 minutes respectively. If this is applied to the costing model, Appendix 4, where a
time of 10 minutes had been given the Net Annual savings change from a positive to a
negative
Battery
changing time
minutes
ECE2
FLT Net
annual savings
£
ESE2
FLT Net
annual savings
£
ERE2
FLT
Net annual
savings £
ETV2
FLT
Net annual
savings £
10 +678 1
+634 1
+634 1
-680 1
7 +114 1
+70 1
+70 1
-1905 1
6 -74 1
-118 1
-118 1
-2,314 1
1
Based on hydrogen price of £6/kg.
2
ECE, ESE, ERE & ETV are Jungheinrich type forklift trucks.
This indicates that a small incremental change in battery changing time has a direct
influence to the net annual savings. The costing model does not appear to take into
consideration the sunk costs of the existing batteries, chargers, off-loaders etc. The price
of the hydrogen has a direct affect on the net annual savings and by decreasing this from
£6/kg to £5/kg improves the net annual savings as shown below.
Battery
changing time
minutes
ECE2
FLT Net
annual savings
£
ESE2
FLT Net
annual savings
£
ERE2
FLT
Net annual
savings £
ETV2
FLT
Net annual
savings £
10 +1,009 1
+901 1
+901 1
+316 1
7 +445 1
+337 1
+337 1
-909 1
6 +257 1
+149 1
+149 1
-1,317 1
1
Based on hydrogen price of £5/kg.
2
ECE, ESE, ERE & ETV are Jungheinrich type forklift trucks.
The Product Manager for Bulk CO2/H2 UK, expressed that these prices could be achieved
depending on the volumes required. If a customer base required a certain volume then it
could be possible to supply at a price which provides the customer with annual savings.
For this reason it is important to attempt to measure the size of the market to enable
estimates of hydrogen volumes to be gained.

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5.3 External Analysis
Figure 14 applies BOC with regard to the hydrogen fuelling market to the five forces
(Porter, 1979). The information was gathered from internal and external interviews, and
the workshop.
Figure 14: The Five Competitive Forces that Determine Industry Profitability
Source (Porter, 1980:4)
Bargaining Power of
Suppliers
Potential Entrants
Bargaining Power of
BuyersIndustry
Competitors
50+ Forklift truck fleet: BOC, Air
Products, Air Liquide
<50 Forklift truck fleets: ITM Power
All of the above are in a position to enter
the market within the next 12 – 18 months.
Air Products ready now.
Medium/high barriers to entry
Multiple Retail operators –
e.g Tesco, Marks & Spencer.
Size of buyers enables high
buyer power. Multiple retail
market is highly competitive
so any cost saving option is
followed.
No current direct
competition.
Competition exists
through substitute
products
Large volume hydrogen
supplies only from BOC,
Air Products or Air Liquide.
High refuelling system
costs.
Limited supplier options
leading to high supplier
power.
Substitute
Electric battery charging system
LPG gas cylinder
Diesel refuelling station
Batteries
Combustion engine

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5.3.1 Threat of New Entrants
At present no companies are supplying hydrogen fuelling systems to forklift truck fleets
in the UK. What is clear from the external analysis is that the major industrial gas
companies are all preparing to enter this market. At present only BOC and Air Products
have natural gas reformation plants in the UK, Appendix 1, enabling them to supply the
hydrogen gas to the hydrogen fuelling systems. Air Liquide who are slowly increasing
their market share of industrial gas in the UK presently purchase hydrogen from Ineos-
Chlor who have hydrogen available as a by-product from their Chlorine manufacturing
plant. Analysis of these competitors although not already in the market place would
provide useful insight into possible future competition.
The threat of new entrants will depend on the height of the entry barriers. Initially once
entry has been achieved through a multiple retailer then it would be fair to argue that the
retailer would roll out the same refuelling systems throughout its distribution centres
enabling the economies of scale that would be achieved by the supplier to drive down the
product offering cost. The infrastructure cost would be relatively high making switching
between competitors by the retailer quite difficult. This would create high entry barriers.
For this reason it could be argued that first to market would quite clearly provide an
advantage over capturing market share. The market has a low threat of entry due to
supply side economies of scale achieved through the hydrogen fuelling system suppliers
owning the hydrogen manufacturing plants. New entrants would either have to build
their own hydrogen plants in order to compete competitively on hydrogen gas price, with
the risk of the investment being sunk if they failed to win market share. The other option
is the one Air Liquide has taken which is to purchase hydrogen as a by-product from a
Chlorine manufacturer.
There are demand side benefits of scale that exist. The brand image that the main two
industrial gas suppliers, Air Products and BOC, offer along with proven track records and
expertise with supply of industrial gases would favour them over smaller entrants. The
movement of large multiple distributors such as Tesco and Sainsbury’s to hydrogen

Effective Market Analysis for Innovative New Growth Business Submitted draft

Effective Market Analysis for Innovative New Growth Business Submitted draft

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