BUS 225 Project One Branden Jackson PDF

Preview

Summary

Project One...

Description

BUS 225 Milestone One Template Executive Summary January 24, 2021 Description of Problem Due to cyclical challenges faced by the automotive industry, it is necessary for our company to diversify its operations in order to maximize revenue and hedge against risk. In this summary I will be presenting both qualitative and quantitative data. Qualitative data will consist of industry reports on the automotive industry and specifically, engine manufacturing. Quantitative data will consist of verified historical data on the automotive industry and estimates and projections for future operations. Description of the Current U.S. Automotive Industry The U.S. automotive manufacturing industry had a 2019 value of $210 billion. With the rise in popularity of hybrid and electric vehicles (EV), the automotive industry has remained stagnant specifically in regard to engine manufacturing. Other factors such as increased reliability and efficiency of engines have reduced the need for more frequent purchases by consumers. Although hybrid and EV sales have steadily increased, the dominant sector is truck manufacturing with 75.1% of market share. (Marketline, 2019) Additionally, the outsourcing of production to free trade partners such as Mexico has had a significant impact on U.S. manufacturing figures. Current Automotive Market Trends The U.S. automotive market is expected to expand by 8.5% by the year 2024 (Marketline, 2019). Although the past year has seen sluggish growth in part due to the COVID-19 pandemic and historically low energy costs, industry experts expect the industry to recover as conditions normalize. While EV manufacturing has experienced the largest growth in the past few years, traditional gasoline and diesel engines continue to dominate the market. New competitors are not expected in the near future due to high entrance barriers into the automotive manufacturing industry. Commodity prices for sources such as steel and aluminum present the biggest costs and impact on profit. Fuel economy and safety regulations combined with the amount consumers are willing to spend on a vehicle present other leading challenges the industry faces in the future. Description of the New Industry Internal combustion engines have practical uses outside of the automobile industry. One of the biggest products for combustion engines relates to power generation. Power generators have a broad spectrum of use in both commercial and personal or residential applications. While the atmosphere around fossil fuels as a source of fuel has become more contentious due to political and environmental concerns, fossil fuel power generation remains the most reliable source of power generation in the U.S. This is of particular concern to critical infrastructure such as hospitals and emergency services providers that must have a dedicated source of electricity at all times. Although solar, wind and other renewable energy sources are up and coming methods of primary electricity production, fossil fuels still hold a dominant market share of 63.9% for primary electricity production (Business Wire, 2017). Current gas and diesel engines can be easily modified to be suitable for such applications. A leading competitor, Cummins Engines, already has a substantial footprint in this industry and would likely be the largest competitor. Current Market Trends in the New Industry Backup power generation is expected to grow by 3.5% by 2025. This growth is driven by the want or need for continuous power supply by both commercial and residential end users as well as the

affordability of such systems. This is especially important to areas prone to natural disasters such as areas that receive heavy snowfall, thunderstorms, and areas susceptible to hurricane conditions. Cost to operate standby power systems is relatively inexpensive and is mostly dependent on fuel prices. However due to the minimal anticipated usage of such systems, the cost of operation is negligible. The market for backup power generation is highly fragmented with no large players controlling a majority of the industry. Appendix A Explanation from Porter’s Five Forces Analysis of the New Industry The overall risk in the backup power systems industry is regarded as low. Competition in the industry is very fragmented with no companies controlling a significant market share in the industry. Due to the highly fragmented market and number of competitors, brand loyalty is not a significant factor when entering this industry. While the engines that power these systems remain relatively unmodified from their original intended use, the entirety of the system requires additional expertise and expansion of capabilities. Many components will be the same from the automotive industry to the backup power systems industry, with the major difference being developing plans to create a power generation, delivery and storage capability in an enclosed system. Appendix B Summary of Findings from Porter’s Five Forces Analysis Comparing Both Industries As previously stated, the backup power system industry is highly fragmented. Alternatively, the market for automotive manufacturing supply of engines is controlled by a select few companies in the U.S. The likelihood of new entrants to both of these industries is weak due to the complexity of operations. Alternative uses for automotive engines are primarily focused on production of engines for motorcycles and commercial/industrial uses. Most manufacturers of backup power system engines are already present in the automotive industry and have expanded their operations for alternative products. Key inputs for both of these industries are commodity items such as metals and components. Most manufacturers do not fabricate all of their own components and are reliant on suppliers outside of the U.S. for end-use components (Marketline, 2019).

2

Appendix A

(Pall Corporation, 2021) Appendix B

3

(Business Wire, 2017) References

https://www.pall.com/en/industrial-manufacturing/automotive.html https://advantage-marketline-com.ezproxy.snhu.edu/Analysis/ViewasPDF/united-states-automotivemanufacturing-89691 https://my-ibisworld-com.ezproxy.snhu.edu/us/en/industry/33611a/operating-conditions https://www.businesswire.com/news/home/20170926005865/en/Top-5-Vendors-in-the-Global-BackupPower-Systems-Market-for-Oil-and-Gas-Industry-Technavio https://www.bloomberg.com/press-releases/2020-09-08/research-report-residential-backup-powermarket-2020-2024-growing-use-of-batteries-for-power-back-up-to-boost-market-growth • Worldwide - car sales by fuel technology 2030 | Statista

4

Bloomberg. (2020, September 7). Research Report: Residential Backup Power Market (20202024). Retrieved February 08, 2021, from https://www.bloomberg.com/pressreleases/2020-09-08/research-report-residential-backup-power-market-2020-2024growing-use-of-batteries-for-power-back-up-to-boost-market-growth BusinessWire. (2017, September 26). Top 5 vendors in the Global backup power systems market for oil and gas Industry: Technavio. Retrieved February 08, 2021, from https://www.businesswire.com/news/home/20170926005865/en/Top-5-Vendors-in-theGlobal-Backup-Power-Systems-Market-for-Oil-and-Gas-Industry-Technavio Egan, S. (2020, October). Car & Automobile Manufacturing in the US. Retrieved February 07, 2021, from https://my-ibisworld-com.ezproxy.snhu.edu/us/en/industry/33611a/operatingconditions MarketLine. (2019, October). Automotive manufacturing in the United States. Retrieved February 08, 2021, from https://advantagemarketline.com.ezproxy.snhu.edu/analysis/viewaspdf//united-statesautomotive-manufacturing-89691 Pall Corporation. (2021). Automotive - industrial manufacturing: Pall corporation. Retrieved February 08, 2021, from https://www.pall.com/en/industrialmanufacturing/automotive.html Wagner, I. (2020, October 06). Worldwide - car sales by fuel TECHNOLOGY 2030. Retrieved February 08, 2021, from https://www.statista.com/statistics/827460/global-car-sales-byfuel-technology/

5...