Proving the feasibility of a strategic investment to secure and improve the positioning in the European market
A subsidiary of a European steel producer approached RCG with the idea to invest into their mill to increase the productivity as well as to extend the product portfolio. RCG was tasked with evaluating the idea from market point of view and to validate the feasibility.
By working closely with the client´s management and the involved departments as well as RCGs vast market knowledge and network of industry experts, the feasibility of the investment could be validated. The resulting feasibility study with defined market sizes by end using segment, dimensions as well as potential sales volumes and revenues convinced the management to go on with the investment.
The full story
The client had a brownfield investment idea to increase the productivity as well as enhance the current product portfolio to enter higher value-added market segments and to substitute a further downstream product. The in-depth market knowledge to correctly assess and validate the feasibility of the investment was provided by RCG.
Prior to the start RCG and the client defined the exact scope of the project including countries in scope, the product types under review, their properties (dimensions, grades, etc.) as well as the assignment of potential target end-using segments.
Based on this our team started with the feasibility study in close cooperation with the client using RCGs structured approach:
1. Understanding the current market positioning of the client
- Analysis of the current sales of the client according to the defined parameters
- Definition of market shares
2. Market analysis
- Analysis of the general market sizes for products in scope
- Breakdown of the market sizes by country
- Division into the demand by end-using segments
- Split into the defined product types, dimensions and grades
3. Competitor analysis
- Analysis of the current competitive landscape
- Evaluation of the impact of investments of the competitors
4. Market potential definition
- Elaboration of scenarios for the future development of the end-using segments for the products in scope with a 7-year horizon
- Evaluation of the substitution potential of product B and the impact on the client’s product A sales
- Assessment of the future sales and revenues potentials
This four-step approach enabled us to give our client a clear overview of the current and future market potential and the feasibility of the investment.
With the new insides provided by RCGs feasibility study and the detailed information about the market sizes for each product, the resulting market and revenue potential included therein, our client was able to convince the management board of the parent company and received the required financial funding to upgrade the mill according to the future market demands.