2. ABC Filters is an oil and air filter manufacturer which comes under the umbrella of its parent
company which is basically an auto parts manufacturer. It has presence with considerable
market share all over the world i.e. Europe, Middle East, Africa, North America, Latin America
and Rest of Asia. Through research ABC filters realised the importance of clean air in natural gas
production technology. Air filter technology plays a crucial role in power generation industry
due to the requirement of clean and contaminant free air.
ABC filters aims to provide a comprehensive world class filtration products and services and
emerge as a filtration solution provider. ABC strives to deliver value to customers by providing
cutting edge filtration solution for better lives. Keeping this is in mind ABC filters have developed
world’s first grade gas turbine filter with self-cleansing mechanism – E10. This breakthrough
product will minimise loss by efficiently generating electricity in harsh weather conditions
through reduced turbine cleaning downtime.
ABC filters is looking forward to introduce the revolutionary product as well as provide associated
services to natural gas power generation market, through it’s long filter servicing expertise.
Since natural gas electricity generation is a huge, constantly growing market (high CAGR), the
company wants to gauge the market size of its filters globally. ABC Filters also wants to analyse
the market attractiveness of cartridge synthetic GT filters to develop strategy for its new and
better entrant i.e. E10. Since industrial filter derives its demand from other related industries,
the demand is easily affected by local and global economic and business trends. Taking all the
macro and micro factors into consideration, ABC Filters wants to develop a sound, efficient,
sustainable and practical strategy for tapping lucrative markets which promise high growth.
Executive Summary
3. Market Overview
World Market
32.87 % of natural gas is
used for electricity
generation i.e. 30862.3
Billion Cubic Feet
Equivalent Amount of
Power Generated in one
year using natural gas =
1062787 MW
Average Number of filters
(panel +cartridge) per MW
of power generated per
year = 11.75
Therefore size of gas
turbine filter market =
12487748 filters per year
Addressable market for the
client’s product (cartridge
synthetic filter sub segment)
= 2391947 filters per year
The calculation has been
made taking into
consideration the filter
lifetime for the sub segment
is 24 months
Subsegment
Total amount of
natural gas
consumed in the
world = 93892
Billion Cubic Feet
Conversion
Factors used:
• 1 Billion Cubic
Feet = 1.03
Trillion BTU
• 1kilowatt hour =
3412.14163 BTU
Natural Gas Consumption
Building
25%
Industrial
39%Transport
3%
Power
33%
4. Market Attractiveness
Market Prioritization
High CAGR : The market has high
growth potential
Low BDI : Low market share,
untapped market
Arid Climate : High Value
Proposition
Target Market : Therefore Middle
East and Africa are attractive
markets as the market potential is
good but the market coverage is
still low (Low BDI, High CAGR)
Decision Variables
Brand
Development
Index (BDI) =
Priority Market 5-Year
CAGR
10-Year
CAGR
BDI Climate
5 Europe 2.4% 1.1% 4.1 Marine
1 Middle East 8.1% 4.7% 0.3 Arid
3 Rest of Asia 5.2% 4.5% 0.9 Mixed
2 Africa 7.3% 5.0% 0.3 Arid
6 North America 0.4% 0.4% 0.6 Mixed
4 Latin America
4.3% 3.8% 2.1
Humid
Subtropical
Decision Matrix
Middle
East,
Africa
Latin
America,
Rest of
Asia
North
America
Europe
Low
BDI
High
BDI
High CAGR
Low CAGR
(Percentage of total
sales in market)
(Percentage of
demand in market)
5. Macro Trends
Positive
International Energy Agency forecast : Natural Gas
is the only fossil fuel whose energy mix is expected
to grow from 21% in 2010 to 25% in 2035
Demand : Energy demand growth in China,
displacement of coal-fired and nuclear power, and
the displacement of some oil products in
transportation
Negative
A slow growth in GDP for China may adversely
impact trade flows, aid and investment flows as
China is a crucial economic partner for Gas
business
Rivalry from new supplies of energy e.g.
conventional, unconventional, liquid natural gas,
gas to liquid
Technological
breakthrough for
alternative/renewable
energy resulting in the
generation of cost-
competitive non-fossil
fuels
Mega-project
investment
requirements may limit
opportunities for smaller
players; mega-projects
also frequently subject to
delays and cost over-runs
so prospect of being
limited to big players
only is high
Supply : Unconventional
gas boom and the growing
role of liquefied natural gas
(LNG)
Massive increase in use of
natural gas for
transportation coupled
with slower growth in
global nuclear power
(please refer the graph)
The introduction of new
unconventional energy
supply has increased
estimated resource life to
more than 200 years from
50 to 60 years worth of gas
a decade ago
6. Micro TrendsPositive
African gas reserves are about 7.5% of the world’s total. Technically recoverable
reserves of natural gas in Africa are substantially higher, estimated to be about 74
trillion cubic metre, almost 10% of the world’s total
Gas consumption in Africa has been growing at a rate of about 6% per year since
2000 with the figure expected to rise to 9% with the emergence of South Africa as
one of the leading economies of the world (Graph 1)
Negative
Both the regions of Africa and Middle-East are
characterized by political instability, failure to
develop fair and stable fiscal/legal regimes, and
poor investor’s perception about business culture
There is a need for long-term contracts to underpin
massive investment in a gas project, but increasing
reluctance of buyers to do in unstable economic
and political scenarios particularly after “Arab
Spring” resulted in a dichotomous situation
Gas production in the Middle
East and North Africa has
increased considerably in the
last 10 years, in contrast to oil
production. For some
countries (Saudi Arabia,
United Arab Emirates and
Iran), this increase has been
focused solely on meeting
strong growth in local
demand, whilst for others
(Qatar, Algeria and Egypt), it
has been a matter of boosting
gas exports
Increasing population, higher
standards of living,
accelerated growth of energy-
intensive industries (cement,
aluminium, petrochemicals,
etc.) and highly-subsidise
energy prices have led Middle
Eastern demand for gas
almost doubling (Graph 2 & 3)
Based on a survey by EY the degree to
which investors face punitive and/or
unpredictable taxation in Africa and
Middle-East are particularly high
compared to other parts of the world
Graph 1
Graph 2
Graph 3
7. Value Proposition
Benefit Cost
*Assumptions
• E9 – cartridge synthetic, E12 – Panel synthetic (based
on the filter price)
• Mean Turbine Capacity is 170 MW
Values*
Cost E9 E10 E12
Meanturbine capacity(inMW) 170 170 170
Noof Filters reqd(perannum) 5 5 15
Price inUSD($) 300 330 100
Total CostinUSD($) 1500 1650 1500
Benefit #1 E9 E10 E12
Downtime (in hrs per year) 60 20 300
Capacity 170 170 170
Loss (in MW) 3.4 1.7 6.8
Loss (in kWh) 27763763.42 13881881.71 55527526.84
Loss in USD ($) per year 1665825.805 832912.9025 3331651.61
Benefit #2
E9 (cartridge+
synthetic)
E10 (cartridge+
synthetic)
E12 (panel+
synthetic)
Uptime 98 99 96
Climate
Marine 5% 5% 2%
Arid 2% 2% 5%
Humid 4% 4% 4%
Marine 8.33 8.415 3.264
Arid 3.332 3.366 8.16
Humid 6.664 6.732 6.528
Marine 40812732.22 41229188.68 15991927.73
Arid 16325092.89 16491675.47 39979819.32
Humid 32650185.78 32983350.94 31983855.46
Average
loss in
power
Loss in
MW
Loss in
USD ($)
Operational Continuity
Efficiency The Price is highest for E10 in
comparison to E9 & E12
But the price difference is
compensated by the
operational continuity and
efficiency
The efficiency obtained is
maximum when the climate is
Arid, hence our target market
(Middle East & Africa)
Value = Benefit - Cost
8. GTM Africa
Pre - Launch
• Telescopic Marketing for derived demand
(developing Natural gas electricity
business which in turn consumes air filter
manufactured by ABC Ltd)
• Host a conference on ‘Africa’s future
energy needs’ with an objective to
create an economical affixation between
the individuals responsible for any
business to prosper. So, invite:
• Key players in the natural gas
energy production business
• Investors likely to invest in such
related industries
• Advantages:
• Understanding the future customers
• Enhancing brand visibility
Strategy employed: Strategic Alliance
• In areas of high risk and low initial
penetration, association with
competitors (which actually forms
48% of sales by customer type)
and/or partners will be planned
• Personal Selling to create awareness
about the prospect, benefit and
usages of natural gas in untapped
areas
• Act as an energy consultant in areas
like Beaufort West in South-Africa or
Papua New Guinea where prospect
of natural gas is immense but lack of
awareness and policy paralysis has
prevented utilization of it to the
maximum level
• In the electricity generation from natural
gas business, 60% of the cost of
electricity generated is contributed by
the raw material itself(natural gas)
• Therefore we can show case our value
proposition: E9 has the minimum loss in
the specific African climate (arid)
• Outsourcing filter-servicing and Gas
turbine maintenance*
• Customer retention is equally important
as customer creation. So, filter- servicing
and Gas turbine maintenance (which is
6% of Client 2012 sales by customer
type) would be outsourced to some
company of expertise and repute
High Risk, High
Growth
High Growth Market
• The projected 5-year
CAGR is 7.3% Y-O-Y
growth
• Brand Development
Index (BDI) is 0.3 –
untapped potential
High Risk Market
• Approx. 1% od ABC
Ltd’s sales comes from
Africa: not yet
penetrated, underlying
risk cannot be
underplayed
* Filter servicing and
Maintenance is
outsourced to nullify the
advantage competitors
have.
Launch
Post Launch
9. GTM Middle East
ABC as a brand has already got presence in middle east
Middle East : Fragmented Market
Contributes 30.1% of 60-120 MW generation capacity wrt the total world
market
Contributes 41.4% of 120-180 MW generation capacity wrt the total world
market
In developed economies 58.1% of turbine installations are over 180 MW
(e.g. North America)
Moderate Risk, High
Growth
High Growth Market
• The projected 5-year
CAGR is 8.1% Y-O-Y
growth
• Brand Development
Index (BDI) is 0.3 –
untapped potential
High Risk Market
• As ABC Ltd. already
has an existing market
capitalization of 8%
hence it is considered to
be moderately risky
Fragmented Market
The best strategy to tap into a fragmented market is through an efficient distributor
network
Personal selling and direct marketing is not economically feasible when large
number of small exists
Finding a channel partner
― Proper channel research conducted by a qualified agency with a local presence is
critical if investment in product development, promotions and pricing strategy is
not to be wasted
― When it comes to international expansion, nothing is as important as getting the
channel right, and channel research therefore plays a crucial role in helping
companies to take the right decisions on their distribution channel strategies
Facilitating the Channel Partners
― As for efficient functioning and smooth operation of distributors, company
involvement is crucial hence we plan to provide free training to distributor sales
force to keep the constantly involved in the penetration and growth process
Strategy Employed
10. Connecting the Dots
High CAGR,
Low BDI
• Not considering North America (slow growth 0.4%)
• Not considering Europe & Latin America – saturated market (high BDI)
• High switching cost : new product for growing market
Arid Climate
• Average loss in power generation
• Arid (2%),
• Marine (5%)
• Humid (4%)
Macro/Micro
Trends
•Macro : Natural Gas - Only fossil fuel grow at 4%l which is expected in 25 years
•Micro
•Africa’s natural gas reserve is 74 trillion cubic metre (10% of world’s natural gas reserves
•Middle East : Gas production increased (wrt oil) in last 10 years
Value
Proposition
• High cost but
• low downtime
• low replacement rate (wrt E12)
Target
Market
• Middle East
• Fragmented market : Distribution Network
• Africa
• New Market : Strategic Alliance
11. • Slide 3 : Market Overview
– To size the market according to ABC’s presence, we calculated natural gas consumption of each
of the regions mentioned in the case study and based our calculations on their total aggregate
consumption of 93892 Billion cubic feet (as mentioned in the slide)
– Conversion Factor for Billion cubic feet to BTU (British Thermal Unit):
• 1 Billion cubic feet = 1.3 Trillion BTU
– Conversion Factor for BTU to kWh :
• 1 BTU = 0.00029307106944 kWh
– To change kWh (unit of energy) to kW (unit of power) we divided annual energy consumption
kWh by 8765.81277 (total number of hours in a year)
– 32.87 % of total natural gas consumption is used for electricity generation*, which gave us the
natural gas consumption for electricity generation for each region e.g. for Europe :
• Natural Gas Consumption = 18909 Billion Cubic Feet = 651158.25 MW
• Natural Gas Consumption for electricity = 32.87 % of total natural gas consumption = 214035.72 MW
– Average No. of filters per MW of power generated = Average (10,15,12,10) = 11.75
filters/MW/Year
– Thus the number of yearly filters requirement for Europe = 2514919.66 (12487748 filters per
annum for the world)
– Given, install base for cartridge synthetic (target subsegment) GT filter for Europe is 20% of
the total filters required for Europe
– Thus Average annual cartridge synthetic filter required for Europe = 502984
– Similarly cartridge synthetic filter requirement for each region is calculated and the total
requirement is calculated (4783893.5 filters)
– Since the filter lifetime is 24 months, the annual requirement is 2391947 filters
Appendix (1/8)
*http://www.eia.gov/
12. Region
Natural Gas
consumption in
Billion Cubic Feet
Energy equivalent
in kWh
Power
generated in
MW/year
Electricity
generated
from natural
gas per year
(in MW)
No. of filters
required
% Cartridge
Synthetic Turbine
Total
cartridge
synthetic
filters
Europe 18909 5707931277602.19 651158.2471 214035.7158 2514919.661 20% 502983.9322
Middle East 14096 4255063688671.03 485415.7624 159556.1611 1874784.893 60% 1124870.936
Rest of Asia 22000 6640990433510.40 757601.2183 249023.5204 2926026.365 30% 877807.9095
Africa 3781 1141344764959.22 130204.1003 42798.08776 502877.5312 30% 150863.2594
North America 29913 9029633947163.48 1030096.602 338592.753 3978464.848 50% 1989232.424
Latin America 5193 1567575605509.98 178828.3239 58780.87007 690675.2234 20% 138135.0447
Total (world) 93892 28342539717416.30 3233304.254 1062787.108 12487748.52 4783893.506
Appendix (2/8)
Complete Calculation
For Slide 3 : Market Overview
13. Source : U.S. Energy Information Administration
Production Imports Exports Consumption
Middle East 17780.07842 1146.60742 5212.84715 14096.47666
Iran 5360.817 373.98585 319.60075 5415.2021
Saudi Arabia 3258.1619 0 0 3258.1619
United Arab Emirates 1847.25702 615.8936 182.9317 2662.85695
Qatar 4705.0175 0 4015.3155 689.70195
Oman 936.5538 68.86425 385.99295 619.4251
Kuwait 477.9179 24.29672 0 502.21462
Bahrain 445.6753 0 0 445.6753
Syria 277.92905 8.82875 0 286.7578
Israel 91.819 25.4268 0 117.2458
Jordan 8.12245 29.31145 0 37.4339
Iraq 31.0772 0 0 31.0772
Yemen 339.7303 0 309.00625 30.72405
Table: Natural Gas Overview 2011 (Billion Cubic Feet)
MIDDLEEAST Appendix (3/8)
For Slide 3 : Market Overview
15. • Slide 4 : Market Attractiveness
– CAGR : Compounded Annual Growth Rate
– BDI (Brand Development Index) =
(Percentage of total sales in market)
(Percentage of demand in market)
– BDI Calculation (Example : Europe)
• Percentage of total sale in market = 43% (from the case study)
• Percentage demand in the market =
– Demand of cartridge synthetic filters in Europe / Demand of cartridge synthetic filters in the
world = 502984 / 4783893 (from Appendix 2/8) = 11%
• BDI = 43% / 11% = 4.1
Appendix (5/8)
CAGR 5 years CAGR 10 years
Sales (in
%)
Total cartridge
synthetic GT filter
demand
Demand
(In %)
BDI
(Sales/Demand)
Europe 2.4% 1.1% 43% 502983.9322 11% 4.089741393
Middle East 8.1% 4.7% 8% 1124870.936 24% 0.340227015
Rest of Asia 5.2% 4.5% 16% 877807.9095 18% 0.871970909
Africa 7.3% 5.0% 1% 150863.2594 3% 0.317101296
North America 0.4% 0.4% 24% 1989232.424 42% 0.577174606
Latin America 4.3% 3.8% 6% 138135.0447 3% 2.077920277
Total 4783893.506 100%
16. • Slide 7 : Value Proposition
– As E9, E10, E12 are compared under High Efficiency Filter segment,
assumption has been made that they are filters under same category i.e.
synthetic filters
– Now based on the Average price given we made the following
assumptions:
• E9 and E10 are of cartridge synthetic type
• E12 is of panel synthetic type
Appendix (6/8)
E9 E10 E12
Market status
Available Testing Available
Filter price $300 $330 $100
High Efficiency Filter consideration set
Cell Synth Cell Synth
No. of filters per MW of power
generated 10 15 12 10
Filter lifetime (months) 8 12 12 24
Avg. Price 80 100 100 300
Key Filter Statistics
Panel Cartridge
17. • References
– http://www.b2binternational.com/publications/articles/distributor-research/
– http://www.b2binternational.com/publications/articles/market-intelligence-for-international-
organisations/
– http://www.b2binternational.com/publications/white-papers/alliances-joint-ventures/
– http://www.booz.com/media/file/New_B2B_Marketing_Imperative.pdf
– http://www.misrc.umn.edu/workshops/2003/spring/Dai_013103.pdf
– http://www.thecasecentre.org
– Natural gas in Africa: the frontiers of the Golden Age - an EY initiative
– Panorama 2012 : a look at the oil and gas producing countries of North Africa and Middle East
– www.eia.gov
– http://www.cedigaz.org/surveys/annual_surveys.html
– http://www.indexmundi.com/g/g.aspx?c=in&v=137
– http://www.hilliardcorp.com/products/hilco/filter-cartridges.aspx
– http://www.ccithermal.com/productDocumentation/Natural_Gas_Brochure.pdf
– http://www.clarkreliance.com/site/anderson_filtrationelem.asp
– http://www.clarkreliance.com/site/products_filtra_elem.asp
– http://www.gravertech.com/markets_power_04.html
– http://www.precisionfiltration.com/products/gas-filter.asp
– http://www.di550.sandvik.com/?page_id=226
– http://www.metronco.gr/projects/en/natural-gas-projects/hp-network/grs-for-power-
plants/natural-gas-high-pressure-filtering-regulating-station-for-power-generation-unit/
Appendix (7/8)
