Viessmann Group to Devise Growth Strategy for Boiler Business ...

Case Type: add capacity, growth.
Consulting Firm: Siemens Management Consulting second round job interview.
Industry Coverage: industrial equipment; energy industry.

Case Interview Question #00515: The Viessmann Group is an international heating systems manufacturer headquartered in Allendorf (Eder), Germany. The company controls 23 production and project management divisions in 11 countries around the world. As of 2011 the company employs 9,600 people and reports annual sales of ?1.86 billion. Viessmann Group provides an extensive range of HVAC (heating, ventilation, and air conditioning) products, including combined heat and power generation (CHP), heat pumps, sU.olar thermal systems, ventilation and air-conditioning equipment, etc.

You?ve been approached by the boiler division of Viessmann Group and they want you to help them devise a growth strategy. Their main goal is to increase sales and preferably profits too. How would you go about the case? What recommendations would you give to the boiler division?

Possible Answer:

Candidate: So the client is the boiler division of a large company and wants us to help develop a growth strategy to increase its sales and profits. Are there any other goals I should be aware of?

Interviewer: No, that would be all.

Candidate: Before we take a look at the company specific information, I would like to know more about the industry ? current trends, any new technological advances, nature of competition etc.

Interviewer: Boiler companies typically have a line of products based on capacity and fuel used. There are no new advances in recent times. 80% of the market is organized and the main customers are the thermal power plants.

Candidate: Hmmm. A company can grow either by expanding market share in its existing market, entering new geographical markets, coming out with new products or by acquiring another company. I would like to know more about the client company. Can you please tell me:

• What this company?s products are
• Who are its customers are
• Where does it operate
• Its access to cash/financing resources
• Its competitors

Interviewer: It?s a medium size firm ? about Euro ?200 Million in annual sales, operates primarily in Germany. It?s the biggest player in the organized segment which is approximately 80% of total market. Its main customers are thermal power plants, etc. Products can be classified on the basis of capacity and fuel for the boilers. It doesn?t have much cash or technology. It?s a midget compared to global players in the same industry.

Candidate: Well, not being cash-rich restricts the firm from exploring various growth options. For instance, new product development seems to be out of question given no access to technology advances.

Similarly, exploring new geographical markets, even overseas markets, would be out of reach presently as there is dearth of capital. Acquiring another company is a possibility if synergies exist that can to offer significant benefits out of the merged entity. But, we also must keep in mind the results realization lag in case of a merger. Again, M&A activity presently does not seem feasible.

Interviewer: Sounds reasonable.

Candidate: Now that we have eliminated some of the options, I would like to focus on current market and consolidation of the existing product line. Specifically, I would like to know the individual products on offer, margins to be made on each of them and their individual growth potential.

Interviewer: It is a fair point. Our client presently offers boilers based on its capacity and fuel type. Typically, they get a maintenance contract for a specified time period as well. As far as the growth potential is concerned, there are quite a few captive power plants being developed currently in Germany. Additionally, there are a couple of really big power plants announced by our big customers. Margins are negotiable and depend to a great extent on the customer in question.

Candidate: I see. Given these facts, I would look at the mix of products on offer. To that effect, I would like to know the share of each of the individual product type in the sales. Post that, I would like to map each product with its growth potential, its current market share in its category and the margins to be retained.

Interviewer: I think you have figured it out. What would you like to suggest to the client company?

Candidate: In my opinion, our client should focus on the products which promise growth and also offer higher margins. Possibly, they are currently providing a standard capacity type or a fuel type to most of the customers. They should rather look at the individual customer needs and design their offer accordingly. This benefit to customer would also enable them to command a greater margin on each product sold. Sales force incentives could also be aligned with customer-centricity in terms of correct product requirement assessment and supply. In short, focusing on the right product is the key for growth for our client.

Interviewer: Great. I think the analysis is sufficiently thorough. We can stop here. Thank you.

Candidate?s Notes: I also talked about cyclic goods, i.e. boilers and other such heavy industrial goods are highly cyclic in nature, meaning that if GDP grows by an ?x? percent, the sales of these goods would go up by 5x percent, and if GDP goes down by x%, their sales would also go down by 5x%. The interviewer agreed but reminded me that there?s a lag in between GDP growth and growth of heavy industries.

Comments: One can also explore profitability of operations, possible efficiency measures, credit policies, sales force incentives.

Source: http://www.consultingcase101.com/viessmann-group-to-devise-growth-strategy-for-boiler-business/

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