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A leading controls manufacturer was at a strategic crossroads, as its top customer had recently changed its procurement strategy, opting to purchase more integrated systems and fewer individual components. The Client was concerned that other customers may also be offloading purchasing decisions to system integrators, with whom the Client lacked meaningful business relationships.

The Client contracted RSR Marketing Solutions (RSR) to help them determine whether more of their best OEM customers were moving towards system integrators, and how to adapt to that change. They also wanted guidance on how they could better leverage their traditional market strengths (products, technical expertise, and OEM relationships) and whether the situation called for a new or adapted business model. The RSR engagement began with an extensive discovery process, in which the following problems were identified:

  • Client was a leading component supplier, but the supply chain appeared to be evolving toward procurement of more highly integrated systems. Major OEMs, however, appeared to have inconsistent visions relative to the kind and amount of system integration they were seeking.
  • Key Client strengths, particularly OEM relationships, were in danger of becoming irrelevant if more OEMs migrated to systems-based procurement. The competitive landscape was being transformed, and it was unclear which current and potential competitors were best positioned for growth.
  • The market was under intense economic pressure, with depressed demand, price deterioration, and some attrition of both customers and competitors.
  • Client lacked reliable, objective, third-party market intelligence to assess the situation, identify strategic options, and determine the best strategy to succeed in a rapidly changing market.

RSR Approach and Methodology

  1. Evaluate current and future customer needs – RSR conducted in-depth interviews with key executives of the major OEMs to determine their commitment to purchasing integrated systems versus components on future programs. RSR interviews were designed to identify the key factors driving their businesses, and how these factors were affecting their purchasing behavior.
  2. Project market demand trends – RSR interviewed the major product and system companies to quantify market size, shares, segmentation, and other critical measures. From this framework, RSR could identify the products, systems, and segments that offered the most attractive growth opportunities for the Client.
  3. Benchmark competitors’ business strategies – RSR evaluated the business models and strategies of various component and system suppliers.

Results

Reports, both written and oral, detailing procurement strategies by major customers, specific customer business drivers, supplier selection criteria, and the Client’s prospects for success with each customer.

Market analysis detailing the total market, product available market, served market, and accessible market for the controls and systems areas of interest.

Specific strategic recommendations for the Client to pursue in the anticipated future market environment. A variety of options were considered, including harvesting the current business, investing in the current business model, diversifying into complementary components, and offering more highly integrated systems.

As a result of the RSR engagement, the Client is pursuing joint ventures with related product and service companies to offer bundled solutions and systems competitive with the offerings of the anticipated Tier 1 suppliers.

 

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