Case Statement:
Our client is a Japanese company manufacturing radiator for the construction equipment. They are the market leaders in Japan and planning to enter the Indian markets. Suggest a market plan for the same.
C: Okay, can I know more about the functionality a radiator performs in the construction equipment?
I: Yes, so a radiator is used to dissipate heat generated during heavy duty work performed by construction equipment used in mining, digging, or carrying load.
C: Got it, and what exactly are our plans after entering in the Indian market. Do we have any targets in mind or any benchmarks to assess our performance?
I: So, we are looking forward to selling 10000 radiators in 3 years.
C: Sure, here I would like to divide my analysis into two segments. One is the market entry and second is the market growth for our client. First, I would like to focus on the market entry part where I would like to analyze different factors like competitive scenario, barriers to entry, market size and market growth rate
I: Please go ahead.
C: What is the competitive scenario? Are there any major players in the market or is the market fragmented?
I: Good question, so, the market share is divided among 4 major players with 2 of them occupying 60% of the share and the other 2, 30%. Rest is the fragmented market among many players.
C: Interesting. Are there any barriers to enter in the new market? Any government regulations, market hostility, or the media channels?
I: There is no barrier as such for now.
C: Okay, now, do we have any data regarding the current market size and growth rate for the radiators in India or we must figure that out?
I: We have the data regarding the total number of radiators sold in the Indian market which are 100000. Also, the growth rate can be taken around 7-8%.
C: Got it. So, we are targeting to achieve approximately 10% of the market share in 3 years. The growth rate seems to be healthy too. The data tells me that we are going for an aggressive push in the market. Also, radiator being an integral part for a construction equipment, buyers are looking for quality rather than the price of such products in the market. Are these correct assumptions?
I: Yes, that seems fair.
C: Got it. Now I would like to shift my focus to the market growth part of the plan. We can either look for an organic growth or an inorganic growth or we can go for a mixed one. Since we are pushing for an aggressive expansion it must be inorganic for first three years. Here I can think of mergers, acquisitions, and joint ventures. Before choosing any one of these I would like to know the unique selling points of our radiator. What are the differentiating points in terms of cost and performance?
I: Great question. So, our radiators have higher heat dissipation rate that helps them cool faster which prolongs their life. They are also smaller in size and weight. Overall, this makes them more fuel efficient. In terms of cost, all of this comes at a price which is higher than the market standard. Also, our product design is patented so there can be no duplication in the market.
C: And how big a difference in cost are we talking about here. Is there any chance that long-term contracting can help bringing down the costs or we can provide some discounts on the earlier purchase?
I: So, we are not inclined to provide discounts but contracting can bring down the cost to about 1% higher than the market standard.
C: Interesting, finally I would like to analyze the risks associated with the product. Are we providing any coverage regarding the same?
I: Yes, so there is a risk of an explosion if the radiators do not perform as required. In our case it is significantly reduced due to superior design. Also, we provide product warranty of 5 years.
C: And what is the life of our product?
I: It is 10 years.
C: I would like to synthesize my analysis there. According to the market entry perspective, I would like to recommend entering in the market due to following three reasons:
Healthy market growth rate of 7-8% over 100000 units sold per year
Low barrier to market entry
Buyers looking for quality over price as it is a long-term investment thus the bargaining power remains in the hands of the supplier
As per the market growth perspective, I would recommend going for acquisition of the 10% fragmented market because of the following reasons:
Using the established market channels from the fragmented players will not only help us gain the 10% market share in a short span of 3 years but also help our organic growth in future by spreading the name.
The individual suppliers will be willing to sell our product because of its superiority in terms of cost, efficiency and risk reduction
Our design is patented and thus the rights to sell the product always remains in our hands giving us an upper hand in decision making
I: Great, we can close the case here!
Background Information:
Client: Japanese company manufacturing radiator for construction equipment like JCBs.
Competitors: Market leader in Japan. Planning to enter in India. Indian market having 4 major players with 2 occupying 60% of the market share and the other 2, 20%. Rest of the market is fragmented.
Consumers: Construction company equipment manufacturers working on heavy duty projects.
Product: Radiator used to dissipate heat generated during the heavy-duty work. Ours is compact, weighs less, cools faster, and has a higher heat dissipation rate hence is more fuel efficient.
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The case began with an introduction to the candidate and a few BQs.
