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MAGNET is the Manufacturing Advocacy & Growth Network

MAGNET is a consulting firm focused on providing services which result in productivity improvements and enhanced growth for manufacturers.

MAGNET is part of the Manufacturing Extension Partnership Program, which is funded in part by the Dept. of Commerce and part of the Edison Technology Centers network, which is funded in part by the State of Ohio

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Productivity Services Lean for Manufacturing Lean for Office Quality Six Sigma Workforce

Development Sustainable

Manufacturing Rapid Innovation

Growth Services Market Diversification Strategic Planning Product Design &

Development Ideation Product Differentiation

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Ken Walker, Sr. Business Consultant

Program Manager- Market Diversification

With MAGNET since 2006

Background – Various Marketing Management positions with ConAgra, Caterpillar Lift Trucks, Allied Signal Bendix, Roadway Express and Matco Tools

Expertise – Developing and launching new products and services into current and new markets.

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What is Market Diversification?

According to BusinessDictionary.com, Market Diversification is a practice under which a firm enters an industry or market different from its core business.

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WHY DIVERSIFY?

To Grow

To Stabilize your Revenue

To Survive

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HOW DO YOU DIVERSIFY?– New Products -New Markets (Industry or

Geographic)• High Risk; High Return; Longest Development Time

– New Products – Existing Markets • Moderate Risk; High Return; Longer Development Time

– Existing Products – New Markets (Industry or Geographic)

• Moderate Risk; Moderate to High Return; Shorter Development Time

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WHERE DO YOU DIVERSIFY?Adjacent/Similar Markets– Automotive to Heavy Duty Truck– Home furnishings to Office furnishings– Professional Tools to Do It Yourself Tools

Dissimilar Markets with Growth Potential– Aerospace; Alternative Energy; Medical; Military

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MAGNET’S Market Diversification Program will deliver a plan, within 90 days, to position a manufacturer to enter new, stable and/or growing markets. Primary Target Markets include:– Aerospace– Alternative Energy

• Wind; Nuclear; Solar; Geo-Thermal; BioMass; Fuel Cells

– Medical– Military/Government

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WHY THESE MARKETS? Aviation/Aerospace - $125 Billion in the U.S.

– Expected to grow 5% annually

Alternative Energy – Wind & Solar biggest segments– Wind - $60 billion in U.S.; 29% Growth– Solar - $37 billion Worldwide; 11% growth

Medical - $4.5 Trillion Worldwide expenditures– Expected to grow 5-7% annually

Military/Govt . - $641 billion annual budget– $104.2 billion in procurements – 5% growth

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Definition(D1)

Discovery(D2)

Development(D3)

Delivery(D4)

Current BusinessSituational Analysis

MarketResearch

Marketing PlanDevelopment

On as needed basis;Additional Services:Product DevelopmentEureka Winning WaysWeb Site Development

Our Approach

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Current Business Situational Analysis (D1)– Review and assess

• Culture• Sales• Finance• Marketing• Product Mix• Manufacturing Operations• Core Competencies• Value Proposition

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Current Business Situational Analysis– Review and assess

Core Competencies (D1)• What does your company do best?• What are your strengths and weaknesses?• How does this translate into value for your

customer?• How is this a point of differentiation between

your organization and your competition?

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Current Business Situational Analysis– Review and assess

Value Proposition (D1)• Why do your customers buy from you today?• Why will they keep buying from you tomorrow?• Why will new customers want to buy from you?• How are you communicating your value

proposition?

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Current Business Situational Analysis

Know Thyself An Ohio manufacturer of saw blades saw an

opportunity to diversify their customer base by expanding from their traditional industrial users to steel centers. They researched the steel center market and found out who the key players were and decided they would hire salesmen from their target competitors to help them be successful in the new market.

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Current Business Situational Analysis

When they began selling into the steel center market, they found out they were having huge quality issues with saw blades which were not lasting as per the market’s norm. This lead to wholesale rejection of sales lots and jeopardized the inroads they had made into the market. They discovered while their quality system worked fine for their current market it was insufficient for their new market which had much more exacting standards.

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Market Research (D2)– Determine key information in targeted market segments

including:– Key Competitors– Key Customers– Product Definition– Trends– Pricing– Value Chain– Opportunity in $ and Units– Gaps-Technology; Infrastructure

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Market Research– Eeny, meeny, miney, mo…to which market should

you go?– An international conglomerate with a Northeast Ohio location,

had developed a new product using emerging technology, which was not a good fit for their traditional markets. They had approached 1 or 2 new markets they thought had potential for the product but did not get any traction. They commissioned a market study to determine possible markets the new product might be successful in. They were looking for markets which would justify a $1 million tooling cost and generate between $5-10MM in annual revenue.

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Market Research– Eeny, meeny, miney, mo…to which market

should you go?

Results:– The market survey yielded four major markets and

approximately 5 segments within each market that met their parameters. It was also determined, however, there were gaps in the technology of the new product which needed to be addressed prior to market introduction.

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Marketing Plan Development (D3)– Devise comprehensive plan for market entry covering

• Product/Brand Positioning• Price Positioning• Communications Strategy• Sales Strategy• Future products/services• Marketing Budget

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Marketing Plan Development “I love it when a Plan comes together!” –Hannibal of the

“A” Team An Ohio company, in the automotive business, which is a

division of a Fortune 500 company had a mandate for growth. To achieve their targets, they identified an adjacent market, Heavy Duty Trucks and a dissimilar market, Aerospace, to diversify in order to grow. Their research showed their current distribution model would be insufficient to make significant inroads into these markets.

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Marketing Plan Development “I love it when a Plan comes together!” –Hannibal of the “A-

team In their marketing plan, they established two separate sales

forces to sell to these markets direct, in addition to their distribution. For the aerospace market they became even more specialized, since a good match for their core competencies was associated with military/air force bases. So their sales force for the aerospace segment were ex-military personnel. They also hired a Channel marketing manager to spearhead their penetration in this market. Their first year results were about 3% of their $250 million in annual revenue.

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Delivery (D4)– On an as needed basis can provide additional support in:

• Innovation• Product Development/Differentiation• Web site development• Marketing Communications strategy and

implementation• Quality management plan

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TODAY’S MATERIALS

To request materials from today’s presentation send an e-mail to linda.birch@magnetwork.org.

In return for these materials, you are agreeing to estimate the benefits this information had on your business.

You will be asked to report these benefits through participation in a short survey 6-12 months from today.

Reporting these benefits will help MAGNET meet its responsibilities to its public stakeholders and allow us to provide more of this informational programming to Manufacturers.