This is a complex business involving long term product development and leading edge technology. It is also based on long-term personal relationships with the distribution channel and customers and founded on a strong product with market presence and product line depth. Customer engagements extend over long periods developing the applications and implementation schedules before orders are placed.
The client has been a leader in this market since it began nearly 20 years ago. The order input trend has begun to taper off in recent years due to competitive entry and customers moving to new solutions.
This chart displays the client's total order input for the last 4 years. The change in trend line occurs approximately 5 to 6 quarters ago.
This chart is interactive. Use to tools in the upper right hand corner to scroll, magnify, highlight and reset.
The product is essential to the customer core business or its operations. Customers rely on local support from the dealer/partner and long term reliability and product development from the vendor. The product installed life is between 5 and 10 years with continuing spares and service revenues.
The state of the art is a moving target for both capability and manufacturing cost. Continuous engineering development is required resulting in a product life cycle of between 3 and 6 years. Long term maintenance and spares requirements are 10 years.
The long-term market is price elastic due to competitive entry, increasing performance and decreasing cost curves. The short-term pricing is volatile due to the customer perceived value of service and support, competitive offers, dealer/partner urgency to close an order and the product life cycle. Price in the short-term is a transactional consideration.
The distribution channel is by dealer/partners whose expertise is qualified by vendor training and class membership programs. The higher classes offer higher discounts. The partners maintain their own customer relationships with support by the client in sales, engineering, technical and project management. The partners maintain their own installation and project management teams and are the primary contact with the customer.
There are no territory protections but the earliest registrant of a customer receives highest vendor priority and first opportunity for vendor pricing support. The vendor does not circumvent the partner except in special cases and then fees/commissions are paid to the registering partner.
New competition from domestic and international sources is entering the client domestic market. The entry began approximately 4 to 6 quarters ago. Both established international vendors and newly formed venture capital supported companies are expecting to take market share before the next expected growth stage market life cycle.
The competition for dealer/partners in the distribution channel is becoming fierce. Pricing is potentially under pressure and of major concern. The client has long been a dominant force in the historical market but the rapidly growing new applications are open for any competitor.
The market is loosely coupled to general economic conditions in the near-term. New orders result from long-term project budgeting and planning that are subject to long lead times of at least 1 year and are more tightly coupled with funds being available from the customer operations or debt/equity markets. The customer purchasing activity tends to lag the general economic activity by 1 to 2 years.
The market has definite life cycles of rise and decline for specific classes of product. These life cycles are approximately 3 to 6 years. This is partially due to the project implementation schedules that favor different product classes during the market life cycle. For example, concrete is in demand during the housing land development and then shingles/siding is in demand at the closing. During the stability phase the vendor is developing new products for the next life cycle. The client suspects that the market for this product is entering the late-maturity phase of its life cycle. New applications for the client's technology are emerging and are expected to fuel a new growth market life cycle.
We believe that understanding the business is as important as understanding the analytics. This condensed business description is derived from the client's business plans and interviews when available.