International Traders of Iowa | Growing Business in a Changing World

© 2014 Blue Canyon Partners, Inc.

ATLEE VALENTINE POPE

APRIL 17, 2014

Growing a Business in a Changing World

International Traders of Iowa


Sea Change in the Sources of Global Growth

As recently as 2002, North America and

Europe were the world’s growth drivers,

accounting for 70% of global market

growth.

As recently as 1992, Asian developing

countries accounted for less of global

market growth than Japan alone.

The past 5 years have seen developing Asia

account for 60% of all the market growth

in the world, nearly 40% of it in China

alone.

Regions not shown in the chart now

account for about 30% of global growth,

three times as high as in the 90’s and

higher even than during the oil crises

of the 70’s.

Sources: World Bank, WDI, Blue Canyon analysis

Percentage of 5-Year Global GDP Growth

Accounted for by Selected Regions

2


Asian Emerging Markets Still Lead,

Frontier Markets Have Emerged

With some exceptions such as Argentina and Vietnam, the Frontier markets are outside the mainstream of prior rapid growth: Asia and Latin America.

With global growth faltering over the past 5 years, the Middle East and Africa were home to some substantial growth. The old adage of the developing world getting pneumonia when the US and Europe catch cold seems quite outdated now.

The reasons can be debated, but the demands on the world’s resources created by explosive growth by China are a factor.

Even with a substantial slowdown in China from this level of growth, China will still outweigh the importance of all the Frontier group for some time to come. But positioning for the future requires attention.


Percentage of 5-Year Global GDP Growth

Accounted for by Selected Regions

3


China Dominates in Scale ….

….Growth Slowdown Makes for Shocking Headlines

“Slowdown” scenarios to below 8% must

be seen in context of less than 2.5%

growth in the US and Europe

China’s policymakers are determined to

build a more balanced economy:

▫ Services vs manufacturing

▫ Personal consumer choice vs

government spending

▫ Interior regions vs coastal

▫ Environment vs growth


China’s Real Annual GDP Growth

4


Underlying Economics

Will the future sustain this global growth?

Which countries will prosper?

Priorities for Success

Which countries are most attractive to you and why?

Do these opportunities fit with your company’s strategic goals and outlook?

How can you capture these rewards?

Global Growth - Options and Opportunities

5


Methodology

6


Global Growth Opportunities

Define Your Current Served Market

Defining the current market…

What are you selling?...

Services/products

Who are you selling it to?...

Customers/markets

Where and how is it being used?...

Application

Common challenges of defining current served

market…

Too broad:

Overlook attractive opportunities that are right

in front of you

Too narrow:

Leave possibly attractive opportunities out of your

market universe

7


Opportunity-Fit

Opportunity

Size: Is this country large enough to make an important contribution to us?

Growth: Does this country offer the potential for sustained growth?

Market Share: Are you positioned to make significant financial returns in this country?

Fit

Business Drivers: Does this country help play to your strengths -- with product lines, logistics, relationships and other resources?

Competitor Intensity: What is the competitive landscape in this country and how would this challenge you?

Purchase Decision Factors: Do customers in this market offer rewards to suppliers in terms of either a price premium, a share premium, or scale economies that drop to the bottom line?

8


Opportunity-Fit Scoring

Option Size Growth Market

Share

Opportunity

Score

Competitor

Intensity

Purchase

Decision

Factors

Business

Drivers

Probability

of Success

Score

Composite

Score

China 9 9 8 26 7 6 9 22 48

Brazil 4 8 7 19 8 6 7 21 40

UK 7 6 8 21 7 5 4 16 37

Spain 6 6 5 16 5 6 7 18 34

Etc.

After the various metrics are developed and quantified for each country,

scores are developed for each country under consideration

ILLUSTRATIVE

9


Metro Area Market Opportunity and Internal Considerations Assessment

Internal Considerations

Mar

ket

Op

po

rtu

nit

y

StrongerWeaker

Hig

her

Lo

wer

Higher if…

Larger market

Faster growth

Higher value add opportunity

etc.

Lower if…

Smaller market

Slower growth

Minimal value add opportunity

etc.

Country A

Country B

Country C

Op

po

rtu

nit

y

Strong Weak

Lo

w

Hig

h

Fit

Weaker if…

Poor product match

Higher competitive

intensity

etc.

Stronger if…

Good product match

Lower competitive

intensity

etc.

Opportunity-Fit Assessment

10


Metro Area Market Opportunity and Internal Considerations Assessment

Internal Considerations

Mar

ket

Op

po

rtu

nit

y

StrongerWeaker

Hig

her

Lo

wer

Country A

Country B

Country C

Strong Weak

Lo

w

Hig

h

Fit

Selecting Countries

Some segments will be chosen based on High Degree of Market Opportunity and Strong Fit

Some segments will be chosen based on “Easy Wins” (e.g., strong fit)

11

Op

po

rtu

nit

y

Some countries will be chosen based on High Market Opportunity assuming gaps can be addressed (e.g., partnership, acquisition)


Case Studies

12


Beverage

Multi-pack Packaging

Follow the Customer

Case Study 1

13


Beverage Packaging

Opportunity

Metrics Weight

Packaging Value 100%

Metrics Weight

Margins 100%

Metrics Weight

Forecasted 5-Year

CAGR Percentage 50%

Forecasted 5-Year

New Incremental

Dollars

50%

OPPORTUNITY

SCORE

33.3%

SCALE

33.3%

GROWTH

33.3%

PROFITABILITY

14


Beverage Packaging

Fit

15

Metrics Weight

Vehicles Per Household 25%

Weekly Shopping

Frequency 25%

Variety of Beverages 25%

Percent Households with

Refrigerator 25%

FIT

SCORE

20%

Demo-

graphics

20%

Brand

Owner

Activities

20%

Trade /

Channel

Activities

20%

Consumer /

Lifestyle

20%

Competitive

Intensity

Example: Refer to slides 16-19 for details.


Consumer / Lifestyle: Vehicles Per Household

Definition: The number of vehicles per household for each country

Measurement: Quantitative, later transformed into a 0-10 index

Rationale: Segments with higher numbers of vehicles per household are

more able to transport multi-packs of packaged beverages home from

point-of-purchase. Therefore, they represent larger short- and long-term

opportunities for XYZ

Sources: World Bank and Blue Canyon sources

Fit Dimension

16


Consumer / Lifestyle: Weekly Shopping Frequency

Definition: The average number of shopping trips per household per

week for each country (an inverse metric–fewer is better)


Rationale: Segments that shop less frequently per week purchase more

per incident and therefore are more likely to purchase multi-packs.

Therefore, they represent larger short- and long-term opportunities for XYZ

Sources: XYZ Country Subject Matter Experts (SMEs) by country

Fit Dimension

17


Consumer / Lifestyle: Variety of Beverages

Definition: The total number of beverage brands in the market by country


Rationale: Segments that have more brands have higher competition and

thus more need to differentiate through packaging [‘Billboarding’].

Therefore, they represent larger short- and long-term opportunities for XYZ

Sources: Euromonitor

Fit Dimension

18


Consumer / Lifestyle: Percent of Households with Refrigerators

Definition: The percentage of households with refrigerators by country


Rationale: Segments in which households are able to refrigerate

packaged beverages play to XYZ’s paperboard ‘wet strength’ and

FridgeMaster®, and thus represent larger short- and long-term

opportunities for XYZ

Sources: Euromonitor 2003

Fit Dimension

19


Op

po

rtu

nit

y A

sse

ssm

ent

Lim

ite

d A

ttra

ctiv

en

ess

Str

on

g A

ttra

ctiv

en

ess

Limited Fit Strong FitFit Assessment

China

Mexico

Brazil Russia

South

Africa

Indonesia

IndiaUkraine

Turkey

China

Sources: Blue Canyon analysis of data from the

CIA World Factbook, The World Bank, Euromonitor, and XYZ SMEs 20


Case Study 2

21

Commercial Vehicles

Roads & Highways

European Expansion


Opportunity

PROFITABILITY

Metrics Wt.

Margins 60%

Competitive

Intensity (Inverse) 20%

Strength of

Competition

(Inverse)

20%

GROWTH

Metrics Wt.

Forecasted New

Vehicle Demand

Growth Rate

70%

Historical New

Vehicle Demand

Growth Rate

30%

SCALE

Metrics Wt.

Annual New

Vehicle Unit

Demand

70%

Size of Potential

Customer Base 30%

40%

30% 30%

22


Fit

PURCHASE DECISION FACTORS

Metrics Wt.

Importance of greater hopper

capacity 15%

Importance of vehicle

maneuverability 15%

Importance of strong service and

parts capabilities (inverse scoring) 15%

Loyalty to local or long-time dealer

(inverse scoring) 15%

Importance of costs to switch

vehicle OEMs (inverse scoring) 10%

Importance of ease of equipment

operation 10%

Preference for national or local

brands (inverse scoring) 10%

Importance of dust suppression


Importance of noise suppression


35%

25% 40%

23

Example


UK

FR

IT

DE

ES

RU

TR

UA PT

CZ

HR HU

PL

EE

Limited Fit Strong Fit

Fit Assessment

Op

po

rtu

nit

y A

ssessm

en

t

Lim

ite

d A

ttra

cti

ve

ne

ss

Ve

ry A

ttra

cti

ve

Opportunity Fit Map – By Country

Source: Blue Canyon Opportunity-Fit Model 24

0 - 10%

10 - 20%

20 - 30%

30 - 50%

over 50%

Market Share UNITS

Croatia HR 10

Czech Republic CZ 23

Estonia EE 5

France FR 371

Germany DE 199

Hungary HU 8

Italy IT 374

Poland PL 6

Portugal PT 34

Russia RU 80

Spain ES 157

Turkey TR 80

Ukraine UA 50

United Kingdom UK 400

COUNTRY


Lessons Learned

25

Unbundle the Complex

Be strategic

Fact-based


Atlee Valentine Pope, President and CEO

Atlee Valentine Pope

Current Responsibilities

Atlee Valentine Pope is president and chief executive officer of Blue Canyon Partners, Inc., and the co-

author of the growth strategy book CoDestiny: Overcome Your Growth Challenges By Helping Your

Customers Overcome Theirs. In addition to overseeing Blue Canyon’s operations, Atlee works directly

with a number of clients to produce market-driven answers and actions plans that foster profitable growth.

More recently, Atlee’s work has included helping clients in areas such as channel management, strategy

implementation, pricing strategies and adjacencies.

PRESIDENT AND CEO

T (847) 967-0288

E [email protected]

Experience

Atlee’s work has covered numerous business-to-business issues across myriad industries.

A representative sample of Atlee’s deep experience includes:

Identifying global growth opportunities for multiple U.S. manufacturers

Advising clients on how to solve pressing growth problems in their toughest, most competitive markets

Bringing new business models to clients uncertain about how to use data analytics to create value for

their customers

Helping clients understand how to motivate their customers to focus on value rather than price

Before building Blue Canyon, Atlee served in leadership roles in several start-up ventures and was a vice

president in global corporate finance with First Chicago.

Education and Affiliations

Atlee earned a BA from the University of the South in Sewanee, Tennessee, and an MBA from

Northwestern University’s Kellogg Graduate School of Management.

Thought Leadership

In addition to CoDestiny, Atlee has co-authored more than 40 papers and has been a guest speaker at

numerous business events on topics ranging from market-driven strategy, best-in-class strategy

implementation practices, business-to-business growth, and many more.

International Traders of Iowa | Growing Business in a Changing World

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