BUS 225 Milestone One Template
Scenario
You are the sales department manager for a U.S.-based company that builds engines for the
automotive manufacturing industry. Your company is considering diversifying into other
business opportunities where your motors can be sold in order to bolster the company's portfolio
and increase revenue. Based on your knowledge of the national sales landscape, your manager
would like you to conduct preliminary research and prepare a presentation with your
recommendation for an opportunity in a new industry to diversify through a new sales division
and increased sales. You have been asked to make your presentation at the next stakeholder
meeting, where you will address internal stakeholders from across the company as well as
external stakeholders such as customers, investors, and suppliers.
As a preliminary step in developing this presentation, your manager would like to see an
executive summary of your research findings and evaluate your decision modeling.
Executive Summary
July 17, 2021
Even as the current year continues to register an increase in sales as the country
transitions into the post-COVID period, it is imperative that effective planning take place to
prepare the company for such adverse changes. The purpose of this report will be to provide a
way forward for the company even as it adapts to a more favorable period (Manzi, 2021). The
report will provide comprehensive information on how to diversify its business approach in order
to maximize its current yield. The core focus of the report will be on expanding the business to
determine new approaches which entail the provision of machinery to other related businesses
other than the automotive sector.
Description of Problem
One of the aspects that are made apparent concerning market trends is their enhanced
sensitivity to sudden shifts that often have adverse effects on desired outcomes. The most notable
market shift that took place within the past five years is the COVID-19 outbreak, which caused
paralysis in business systems across the globe (Kanwar, 2020). As businesses were forced to shut
down and potential clients were forced to adhere to stringent safety measures, business owners
and hierarchy were forced to rethink strategic approaches to survive the pandemic and continue
to bear with the negative effects. In order to survive such drastic changes, a number of policies
were immediately implemented, with the automobile industry being no exception to the trend.
According to statistics collected for sales revenue for 2020, there was a 14.9% decrease in units
sold. Prompting new changes from various players in the industry.
Description of the Current U.S. Automotive Industry
Before we examine some potentially lucrative segments of the economy which the
company can capitalize on to increase its sales revenues, there needs to be an in-depth
examination of the current trends in the automotive industry (Jones, 2019). Since the inception of
the industry in the 1890s, the automotive industry is considered one of the largest globally as it
can have approximately 17.2 million units sold annually. The automotive industry owes its
increased yield in manufacturing and supply to the enhanced levels of production and a robust
domestic market that consistently moves to attain the best quality of vehicles that serve a host of
client needs.
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Despite the positive changes that took place since its inception, there have been periods in which
the automotive industry has undergone turbulence. A notable example is during the Great
Depression, when the number of independent car markers declined considerably, leaving larger,
more established companies to exist, such as Ford Motors and General motors. In addition,
governmental regulations have also placed an impact on production, with the Vehicle Air Act of
1965 being a clear example as it led to the reduction of the use of Gasoline in the 1970s. Since
then, the automobile industry had experienced exponential growth until 2020, when production
levels, as well as sales, reduced as a result of the economic paralysis experienced during the
pandemic.
Current Automotive Market Trends
Considering the current demand levels that are in the market, certain trends have been
manifest in the industry. For example, the largest demand for automobile products comes from
the light-Truck segment. The pandemic was able to produce a total of 11 million units for 2020,
even though the pandemic was rife during the same year (I.Wagner, 2021).In the same period,
the number of units sold for other categories of cars reduced considerably from 11.4 million to
an estimated 3.4 million cars, with sudden demand shifts. Even with the fuel prices remaining
relatively lower than current world prices, the U.S. market continues to show a preference for
alternative sources of fuel, an aspect that drives the current market trends towards E.V. vehicles
from companies such as Tesla, which specifically caters to a high-end market base. An estimated
300,000 EV vehicles were sold in 2020, making it an emergent trend for companies looking to
capitalize on technological advancements that coincide with a societal focus on environmental
awareness.
Description of the New Industry
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With the company specializing in the assembly and manufacture of Direct Current (D.C.)
motors as a result of its vested focus on car-making, there is the potential capitalization in the
Heating, Ventilation, and Air conditioning (HVAC) industry (Grand View Research, 2021). Both
automotive and HVAC industries utilize D.C. motors for different purposes (Grand View
Research, 2017). Thus, the company can tap into the HVAC market to produce products that are
more suited for a wider market, with revenues set to increase as a result of the move. In line with
the prospective approach, there a new HVAC division would need to be established to work in
tandem with the automobile faculty in producing products that are more efficient for the current
market.
Current Market Trends in the News Industry
With the desired expansion being focused on the HVAC industry, an analysis of the
current trends in the industry must be examined. The market is currently valued at$15.16 billion,
with projections showing a high probability of increased demand at a 6% growth rate from 2021
to 2028. The projected increase in demand is largely due to the extreme weather conditions that
are being considered as a result of climate change, coupled with the need to enhance construction
by having air conditioning facilities (Grand View Research, 2021). Even though the market was
affected by the pandemic, there has been an increase in the sales revenue in 2020, especially as
more people would find the need to work from isolated facilities as a result of the COVID-19
facilities. The height of the interest being generated in the HVAC industry also comes from its
diverse application, which includes having A.C. provisions in medical facilities. Another notable
development that is the HVAC industry is the tax benefits that it enjoys as a result of revised
policies that support its existence (Grand View Research, 2021). The Bipartisan Budget Act of
2018 that allows exemptions for renewable energy products used in residential facilities caters
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also extends to the HVAC appliances, giving any exploration into the industry new advantages
that would play a role in increasing total revenue.
Appendix A
Explanation from Porter's Five Forces Analysis of the New Industry
The application of Porter's five forces into the HVAC industry shows key aspects that
would prove to be instrumental for the company as it considers exploring such interests. The
industry has no few players, especially within the country, despite the high demand. An apparent
trend within the industry is to form partnerships with serve to strategically place the companies
in a position where they could be able to accomplish key organizational objectives. A notable
example is a move by EMCOR Group Inc. to acquire Batchelor & Kimball Inc., a company is
that is known for its high-quality products within the construction industry, specializing in the
HVAC provisions.
A consideration of the bargaining power of the suppliers shows that the production is
mainly focused on making products that are centered on customization depending on the diverse
needs of each client. Companies such as J&J conditioning and Southland conditioning majorly
focus on the overall construction of facilities with added installations for air conditioning (Grand
View Research, 2021). Given that most of the companies are focused on providing HVAC
installation and maintenance as part of the overall construction, the products have minimal
variation, with a specific focus on Smart HVAC being the defining factor in the production.
A subsequent threat of subsequent products could arise from the technological
advancements of companies such as EMCOR and Batchelor & Kimball, who have specific
interests in developing Smart appliances that detect client preferences and modify A.C. based on
ambient conditions.
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Appendix B
Summary of Findings from Porter's Five Forces Analysis Comparing Both Industries
From the market analysis, it is clear that the company should explore positioning itself as
a manufacturer for construction firms, where the main focus is on creating products that are
energy efficient. Also, the products need to incorporate smart technology with a high level of
customization to fit the specific needs of each consumer. Perhaps the company could consider
forming strategic partnerships with producers to enable better market reception.
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References
College of Engineering. (2021, July 17). Common Industrial Motor Types. Retrieved from
Oregon State University: https://eec.oregonstate.edu/common-industrial-motor-types
Collins, M. (2015, August 24). The Argument For Market Diversification In Manufacturing.
Retrieved from Forbes: https://www.forbes.com/sites/mikecollins/2015/08/24/theargument-for-market-diversification-in-manufacturing/?sh=146518ee524e
Grand View Research. (2017, August 10). Electric DC Motors Market Worth $34.25 Billion By
2025 | CAGR: 6.1%. Retrieved from Grand View Research:
https://www.grandviewresearch.com/press-release/global-electric-dc-motor-market
Grand View Research. (2021, April 7). U.S. HVAC Systems Market Size, Share & Trends
Analysis Report By Product (Heating, Ventilation, Cooling), By End-use (Residential,
Commercial, Industrial), By Region, And Segment Forecasts, 2021 - 2028. Retrieved
from Grand View Research: https://www.grandviewresearch.com/industry-analysis/ushvac-systems-market
I.Wagner. (2021, April 27). Automotive industry in the United States - statistics & facts.
Retrieved from Statista.com: https://www.statista.com/topics/1721/us-automotiveindustry/#topicHeader__wrapper
International Trade Administration. (n.d.). The Automotive Industry in the United States.
Retrieved from Select USA: https://www.selectusa.gov/automotive-industry-united-states
Jones, D. (2019, August 22). Diversification—and Survival—in the Auto Industry. Retrieved
from Trade and Industry Development:
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https://www.tradeandindustrydev.com/industry/automotive/diversification%E2%80%94a
nd-survival%E2%80%94-auto-industry-15685
Kanwar, N. (2020, April 7). To survive and thrive, it’s time for the automotive sector to diversify
its supply chain. Retrieved from The Manufacturer:
https://www.themanufacturer.com/articles/to-survive-and-thrive-its-time-for-theautomotive-sector-to-diversify-its-supply-chain/
Manzi, P. (2021, April 4). NADA Market Beat: March New Light-Vehicle Auto Sales Incredibly
Strong. Retrieved from NADA: https://blog.nada.org/2021/04/05/nada-market-beatmarch-new-light-vehicle-auto-sales-incredibly-strong/
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