Identification of New Business Opportunities for Diversification for a Precision Engineering Company

Client Challenge

The client was a leader in Disc Springs & Assemblies and end to end Mass finishing solutions. It is also focusing on developing assemblies & equipments in emerging areas of Energy and Environmental Solutions. As a strategic decision, the company was evaluating business diversification strategy through inorganic growth options with players in India or Northern Europe

The top management hired UC Strategy to identify new opportunities in line with management expectations of value creation and internally defined criteria

 

Our Approach

In order to identify suitable business opportunities, UC Strategy used the following approach:

  • As a part of the assignment spoke to more than 70 respondents across various segments
  • Met and discussed with top management and understood their perspective on diversification philosophy
    • Addressable opportunity
    • Key target markets
    • Investment, revenue and profitability expectations
    • Management bandwidth to support diversification
    • Expectations on operating model: Mfg., Assembly, Distribution/ Licensing
    • Product/ industry type
    • Internally decided negative factors which may eliminate a sector/ industry focus
    • Extent of technological play
  • Gained insights into strategic initiatives already taken in non-core businesses
  • Examined data on other product opportunities already analysed by the management
  • Conducted workshop with the management to brainstorm and identify sectors which are likely to see huge growth opportunities in India
  • Identified sectors/ themes based on:
    • Internally defined criteria by the management. E.g. Extent of fragmentation in the industry
    • Growth engines, business patterns and potential changes in industry structure
      • E.g. Disintermediation of entities which may revolutionize the structure and result in opportunities for the organized sector
  • Determined opportunities based upon parameters like:
    • Criticality in the industry
    • Market size/ % share in the industry
    • Extent of differentiation/ technological requirement
    • Value/ brand creating opportunities
    • Nature and type of equipment as per management’s requirements. E.g. Assembly/ capital equipment in B2B space
  • Discussed and finalised the list with the management for further in depth analysis
  • Examined market landscape
    • Conducted in-depth domestic market analysis for the shortlisted opportunities
      • Overall industry structure
      • Market size and forecasts for the next 5 years
      • Key demand rivers, substitution trends and growth inhibitors
      • Key customer segments
      • Competitive analysis
        • Share of organized vs. unorganized, level of fragmentation (H-index), presence of MNC players
        • n and built up capacities
        • Overall competitive intensity and market share of key players
    • Overall demand-supply situation
    • Profit pool
    • Pricing trends and average realizations
    • Relevant regulatory issues, etc.
    • Technology play
    • Duty structure. Trends in protection for domestic industry
    • Analysed operating margins for the products
      • Key cost heads and associated risks. Raw material % and implications on commodity prices
    • Determined scale of investments required, return on investment and payback period
  • Prepared an opportunity assessment framework and relative comparison of business opportunities

 

Our Impact

Shortlisted 19 opportunities for proposed investment. The client was handed over the details of each opportunity to further facilitate decision making and finalisation of opportunity for investment and growth.

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