A European developer of a new hull technology needed to enter the U.S. market in sports boating, as the first geographical market of a broader global strategy. The complexity of achieving the strategic objective laid in several aspects of the situation. The industry was earning an average return on assets of 5% compared to an average cost of capital of 9%. This condition was driving consolidation and bankruptcies. The U.S. and Europe represented the largest markets, both characterized by slow growth. Competitors were global and rivalry intense as companies were competing to stay in business.
Developed a market entry strategy through licensing the new hull technology to the strongest boat manufacturers. The rationale for licensing in entering a market with poor economics was to adopt a participation strategy, leveraging strategic alliances with the strongest competitors in the market.
Identified the following U.S. market segments:
- Sport boats (inboards up to 30ft in length): 1625 units, segment size of $86 million
- Sport cruisers (inboards 31 to 39 ft in length): 140 units, segment size of $42 million
- Sport yachts (inboards 40 to 50 ft in length): 30 units, segment size of $18 million
Identified and screened the following partner candidates by market segment:
- U.S. sport boat segment
- 1st choice candidates: Regal and Chapparal
- 2nd choice candidates: Mastercraft and Nautique
- U.S. sport cruiser market
- 1st choice candidates: Regal and Chapparal
- 2nd choice candidates: Rinker and SeaRay
- U.S. sport yacht market
- 1st choice candidates: Regal, Princess, and Sessa
- 2nd choice candidates: Azimut, Riva, Sea Ray, and Fiart
The company was able to start rounds of discussion with several firms, putting them in competition with each other by nature of an auction to achieve the best terms in the negotiation.
The market for medium to large-size boats is global in nature as manufacturers compete on the world stage. As a result, we conducted an in-depth analysis of the U.S. market, as well as the global market, the distribution channels, and the competition.
- Estimated total market size and historical growth
- Segmented the boat market by type of engine (inboard, stern) and by region of the world
- Conducted a finer segmentation of the applicable boat market (inboards) by length of boat, resulting in three segments
- Sport boats, up to 30 ft
- Sport cruisers, 30 to 39 ft
- Sport yachts, 40 to 50 ft
Estimated the addressable market potential by segment as follows:
Sport Boat Addressable Market
- Global market potential estimated at about 2,200 units per year, of which 1,625 units in the U.S.
- Global distribution, fragmented at about 400 dealers worldwide, with largest concentration in the U.S.
- Elastic demand affected by ‘per capita disposable income,’ and ‘consumer credit growth,’ and closely correlated to light vehicle sales
- Following a sales decline of -20% per year from 2006 through 2009, growth had recovered and was forecasted at approximately 8% per year over the next 5 years
Sport Cruiser Addressable Market
- Global market potential estimated at about 280 units per year, of which 140 units in the U.S.
- Global distribution, fragmented at about 2,400 dealers worldwide, with largest concentration in the U.S.
- Demand affected by ‘per capita disposable income,’ and ‘consumer credit growth,’ and closely correlated to new-home sales
- Following a sales decline of – 26% per year from 2006 through 2009, growth recovered and forecasted at approximately 3.5% per year for the next 5 years
Sport Yacht Addressable Market
- Global market potential was estimated at roughly 105 units per year, of which 30 units in the U.S.
- Global distribution, fragmented at about 1,700 dealers worldwide, with largest concentration in Europe
- Demand affected largely by ‘per capita disposable income,’ ‘consumer credit growth,’ and ‘change in oil price’. It is closely correlated to housing starts
- Following decline in sales of -17% per year from 2005 through 2009, and slow growth thereafter, growth forecasted at approximately 2% per year over the next 5 years
Analyzed the distribution of the U.S market and the global market for each boat type, including the following:
- Breadth of channels, i.e., U.S. geographical coverage (number of states)
- Depth of channels, i.e. U.S. number of dealers in each state
- Breadth of channels, i.e., geographical coverage (number of countries)
- Depth of channels, i.e. number of dealers in each country
Performed in-depth analysis of the competitors in each market segment, including the following dimensions:
- Strategic capability
– channel share
– brand strength (by relative pricing power)
– R&D and access to latest technology
– proximity to key markets
– product competitiveness
- Financial condition
- Financial structure
- Company size