MARKET PROFILE: FUEL CELLS

MARKET PROFILE

Business 30 Oct 2006

" ... I don’t believe so as it is a critical sector that is poised to deliver important technologies and solutions to our global energy challenges. However, I do see certain companies rising to the top and others falling out as natural selection does its work...."

Scott Alan Pearson, 41, is president and chief executive of fuel cell company Protonex Technology. He has spent over 15 years leading technology-based companies, including UPS provider Powerware Corporation. Mr Pearson explains why fuel cells are in... read more...

Tech Tags: Business newspaper Markets

Marketing trends: Buzztracking

Buzztracking

"What’s being said about me? Why is nobody talking about me? These are becoming core issues for every company. With the advent of ever better tracking tools for online conversations, it’s becoming indispensable to listen into those conversations, be it to monitor bad things happening out there so you can jump in and call corporate 911, or to find out that nobody really cares about you (which is actually even worse). "

To see the whole article, visit Top Ten Trends in Marketing Innovation
by: Stefan Kolle

AY: An interesting article on marketing innovation. It applies to the business in general, including IT (well IT is everywhere). But my point is to see how these principles relate to material handling equipment industry. Just for fun… Some points in the article might be very arguable, some seems witty.. Another point in view is to find one company (brand) that is tightly associated with the trend. Usually it sticks immediately when you read the trend. If it doesn’t then it probably true.

buzztracking marketing innovations

Technology news: Hydrogen and Business

Doubts remain as Ballard diversifies

BY EMILY MATHIEU Financial Post emathieu@nationalpost.com

"Vancouver fuel-cell maker BallardPower Systems Inc. continues to make good onits promise to expand into markets beyond the automotive industry.
“We have a number of near-term markets, in the non-automotive space, that we are seeing very positive traction on,” said David Smith, chief financial officer, after the release of the company’s third quarter results yesterday.

While the automotive market holds the most potential for growth for Ballard, other areas of focus include the residential co-generation of power in the Japanese market, backup power systems aimed at the wireless telecom market and forklift batteries, he said.


This month, Ballard announced that Vancouver-based General Hydrogen Corp., a company that produces forklift batteries using fuel-cell technology, had ordered 2,900 of the company’s units for US$22-million. General Hydrogen was created by the founders of Ballard.


“This is not a demonstration market. We are making real sales to real customers for real money,” said Frank Trotter, General Hydrogen’s CEO.

General Hydrogen counts Bridgestone/Firestone, Mitsubishi, Caterpillar, Nissan and the U.S. Army among the list of clients who have already purchased batteries with renewable fuel cells.

Analysts are unconvinced the size of the contract is proof that a market for fuel cells actually exists.

“To my mind, the forklift market is a demonstration market. It’s very difficult to project whether Ballard will be able to drive down its costs,” said Jon Hykawy, an technology analyst at Research Capital in Toronto.

The current cost of fuel cells makes cheaper, though less-effective, lead-acid batteries imported from China a more practical choice for forklift companies right now, he said. “So providing [similar] features at a higher cost is not a great strategy in that market.”

Research and development could lead to an eventual reduction in costs, but that’s not likely, he said.

Mr. Hykawy said Ballard’s best prospect is backup power, because the market is less price sensitive, but the company needs a distributor.

“We are a long way away from being profitable.”"

New technologies: interesting sites

FUTURELAB.

A very interesting mix of strategy, innovations, blogs and many other crazy things. Thumbs up for interesting stuff.

P.S. just one of my favorites (in addition to Techcrunch , Red Herring and and TechWeb )

This is possibly my 'idea fix' - to bridge the gap between the 'boredom' of old and inattractive industries such as a material handling and the geekdom of web2.0.

When the industry people would get a kick from working in the business and the word 'cool' will become a norm in the boredom.

Technology news: Hydrogen and Marketing

A very interesting article The Death of Hydrogen? Fuel Cells, Marketing and the Future.

As everybody is poccessed with the hydrogen and possible benefits, a very cautious look into the matter using the 'devils advocate' point of view.

The point is: "... The problem is the love-affair with marketing a technology before its effects are well-understood... "

I am curious if even for auto business this seems to be an overevaluation proble, what about other industries? Material handling ... too early .. too soon ...

hydrogen cell

Industry news: direct sale vs. dealers sale

Mitsubishi competitors reject factory-direct salesBRISBANE, AustraliaThursday, 19 October 2006
Forkliftaction.com reported that Mitsubishi Caterpillar Forklift America Inc (MCFA) dealers were unhappy about a website offering factory-direct forklift sales, initiated by an MCFA-owned dealership.Forkliftaction.com News contacted several materials handling professionals to get their views on factory-direct forklift sales. The professionals, none of whom wanted to be named, are involved in the Japanese, European and South American forklift markets.The marketing & international business director of a North American OEM’s former Brazilian subsidiary said using the internet for factory-direct forklift sales as a “support tool” could be understood in the current forklift market.“Competition has been growing more in today’s global markets and OEMs must be increasingly more creative and innovative in getting their products across to end-users. “Forklift dealers do not always share the same interest as the OEMs they represent. They often have other product lines in their business, such as construction equipment, that carry more added value per unit and hence attract their priority, to the detriment of forklifts.”He had proposed to his boss in the US, in 1999, a “distribution channel basket” consisting of factory-direct forklift sales, a dealer network and a dealer-run authorised service network.The percentage (of distribution channels) assigned to each channel could change over time and was a corporate decision, he said.“It is rather difficult for an OEM to sell 100 per cent factory direct because of cost factors, the peculiarities of diversified markets, cultural differences and geographic implications in global markets.“However, the 100 per cent classical dealer distribution network does not properly respond to the needs of today’s markets for OEMs and end-users,” he said.

A sales & marketing manager for a Mitsubishi competitor in the European market did not think selling factory-direct forklifts on the internet was a good idea.“… unless you have no other choice. One thing is for sure, we will never do this,” he said. “This is absolutely ridiculous towards your dealer network. (what about if your dealers interests and OEM have slightly different views? The dealer's network was created a long time ago. Things have changed including OEMs strategy and their market place, Dealers need to change too, if one side does't want to change, someone should go) “This will definitely be an opportunity for newcomers to have good dealers, like the Chinese brands for instance, which are all trying to set up dealer networks in Europe. (it is coming.LOL. it is called globalization.)


AY: excellent feedback. In my case analysis earlier, I stated the same - dealers and OEMs are not the same. Second - in a commodity market (some types of forklifts are commodity) - business model has to be a low cost, and the direct online sale and distribution is within this model. Third - dealers should concentrate on service more, as sales of commoditiezed products will eventually erode from their portfolio.

Congrats to Mitsi for changing the status quo. Thums up!!!

New developments: forklifts and online media

Well, this is the most controversial combinations. Forklift equipment is one of the most conventional and mature industries that require face to face interactions. As in all old industries an advertising is done predominantly in the magazines and yellow pages. The newest development for the forklift business is company’s websites. Well, com’n it is already 21st century. It is not even funny. The advertising seems to concentrate on the websites and the Google with its pay per clock model is the king of advertising. From one side- big companies, from other side – even bigger Google. The only thing that is missing is a small opinion of the ordinary people that stuck between colossus. Does anybody believe much to the manufacturers websites. Well, …probably only naïve ones. The newest trends on the web such as blogging are far far away from the industry development. Why…well the industry is not attractive enough; and someone says - it does require face to face interactions. It is true; and as a matter of fact blogs are interactions. In most cases they are much more intense and deep than face to face. These are in fact, very personal, way more personal that in reality; and allows you to express everything you want and to anybody. You can virtually argue with the company official statements. I am still wandering why are there so little material handling equipment blogs on the net. How many??? – probably a dozen. (today is October, 17th, 2006) But this dozen of blogs is being read by far relatively more people that other topics such as floristic or picture making. Any manufacturer who first starts to work ( doesn’t have to be cooperate , it can be even fights and arguing, anything but ignorance) will get way greater exposure as the regular mass media channels. And, no surprise, there are already several platform that allows such interactions – blogger publishing is as easy as never. Tracking, tagging, syndication. Whatever you want. Even advertisers can reach masses with blog advertising. It’s never been so easier and more precise. The only thing is missing is the desire of the equipment manufacturers to explore new niche markets (bloggers); or possibly even ability to do so is already gone. There might be some new people needed. To shake the boat. Let’s see what happens in a year or so…

Case analysis #17: Summary of the alternatives

2.4.4. Summary of alternatives:

Scenario 1: ATRAC restructures into two independent divisions (Figure 10), so that one spin-off division operates in the WE segment and pursues a differentiation strategy, and the second division operates in the LT segment and follows a pure cost business model. Both divisions will be operating as independent companies and will further be indicated as a company differentiator and company with a cost strategy. In this scenario, the WE segment will be served by the company differentiator, and the LT segment will be served by a low cost company.

The WE segment will have greater efficiency due to a “pure play” differentiation strategy, and the LT segment will operate without requiring any hidden cost centres such as “customer relationship level” or premium level of service, which will improve its cost performance.

Figure 10: Summary of company’s first alternative

Scenario 2: Instead of using cost or differentiation models separately, ATRAC follows a strategy that allows “pure” differentiation in both segments (Figure 11). The WE segment will maintain differentiation that will allow ATRAC to compete against Johnston Equipment. LT will create differentiation by eliminating bad brands and improving other differentiating factors that will allow ATRAC to compete against low-cost leaders in LT using the Mason Lift approach. The potential threat is that prices will be higher than Toyota’s. However, ATRAC has a potential for lowering costs as Nissan’s products have recently demonstrated a tendency toward lower prices (discussed above), and because the improved efficiency suggests more sales and consequently better volume discount rates from Nissan.

This alternative doesn’t require company restructuring. The challenge for the company is finding the right leverage of the differentiation levels needed in both segments.

The differentiation in WE could require more effort from the company than the differentiation in LT, and in addition, pay rates in both markets would need to be addressed to avoid compromising the differentiation in WE market.

Figure 11: Summary of company’s second alternative.

Executability analysis of both alternatives will be presented in the following Chapter.

case analysis forklift industry
strategy

Case analysis #16: Key success factors - lift truck segment

2.4.3. General use LT equipment segment

The competition in LT industry segment is relatively intense. In addition to ATRAC (Nissan, Heli) there are eight major players - Mason Lift (Toyota), Williams Machinery (Linde, Clark, Daewoo), Leavitt Machinery (Mitsubishi, Caterpillar, Jungheinrich), Wajax (Hyster), Harding (Yale), BC Conveying (Komatsu), Attica Equipment (Kalmar) and several small service companies operating in BC. Except for Wajax, all the companies are private. All the companies, except for ATRAC, can be described as “pure play” companies, as their existing WE product lines represent probably less than 5 to 10 percent of total sales revenue. ATRAC is also the “youngest” company as it entered the LT market only in the mid-1990s.

The direct competitors for ATRAC are Mason Lift (Toyota) and Williams Machinery (Linde, Clark, Daewoo). Williams Machinery is a company that applies a cost strategy to the cost-dominated market. Williams Machinery’s market share is approximately 15 percent for all its equipment lines together. Mason Lift is a company that applies differentiation, represents one brand, and also has approximately 15 percent of the market. ATRAC, with its Nissan and Heli brands, holds approximately 8 percent of the market share.

An analysis of the buyer’s power suggests price, equipment brand, equipment vendor’s reputation (customer relationships, expertise) and service as the most important factors. Maximum importance, marked with 5 points, is given to the price factor. The relative importance of the brand factor is 2 points. The remaining factors are at the minimum (one point) level.

Summaries of KSF and rivalry indexes are indicated inTable 2, which follows. The best performance in marked by 5 points on the 5-point scale. The best price factor performance is understood as the ability of the company to offer products with the lowest price (low price = high score).

2.4.3.1. Analysis of LT segment:

As the market tends to be cost-oriented, the company that offers the lowest price is usually the winner. This tendency is demonstrated by Williams Machinery, one of the best overall performers. The ability to provide low-cost products (see at the bottom) allows the company to pay less attention to other factors. As a result of its cost strategy, Williams Machinery has high employee turnover and relatively low sales and service expertise. The widespread presence of different brands creates a chaotic brand perception.

Table 2: Summary of rivalry intensity and companies’ performance

The second performer in the segment is Mason Lift. The company demonstrates that the differentiation model can work in LT cost markets if it is associated with reasonable costs. Mason Lift offers equipment at moderate prices. Most of its success is attributed to Toyota’s promotional efforts and a public groundswell of favourable word-of-mouth publicity, which allows offsetting the price at least to some extent. Mason Lift is able to maintain the best performance in the brand factor because of its association with the Toyota brand. Mason Lift’s sales expertise and customer relationship levels are the highest, due to

its longest-established presence in the LT segment and its relatively low employee turnover. In summary, moderately priced products, supported by strong performance in brand and other activities, allows Mason Lift to compete effectively against the cost leaders in the segment.

ATRAC’s major disadvantage is the high price of its products in a very cost-sensitive market. Its price disadvantage comes as a result of Nissan’s LT products. Nissan lift trucks tend to be very close to Toyota’s in regard to overall quality and reliability; however, Nissan’s prices are higher. Toyota has a much wider presence in the US and likely benefits from economies of scale while producing larger quantities of equipment. The “lean” manufacturing system developed by Toyota likely contributes further to Toyota’s low prices. Nissan Forklift sells less equipment and has a smaller manufacturing base; thus economies of scale are limited. Som

e Nissan products and parts are still imported from Japan; therefore, shipping costs are likely to further contribute to prices. The latest developments by Nissan Forklift (a new factory, new products, R&D and parts supply shared with other manufacturers) suggests that the cost situation will be improving in the near future.

ATRAC’s performance in other activities is average level. Nissan’s overall brand perception seems to be lower than Toyota’s, a perception that is likely affected by Nissan’s automotive image vs. Toyota’s. ATRAC’s second product line, Heli, which was added to enable the company to provide low-cost products, is regarded as a highly unreliable product, and therefore has led to sales problems. The poor performance of the Heli product line serves as a warning that low-cost products which are not accepted by the market, when added to the product line, cannot improve the cost factor, but because of poor quality, can compromise t

he brands of by-products. Heli’s low brand value further contributes to lowering ATRAC’s average brand performance. In summary, ATRAC’s high product prices, combined with average brand performance, makes it impossible to compete with the leaders.

Two interesting findings are revealed by the performance comparison table. By applying a cost strategy similar to that of Williams Machinery, ATRAC could double its market presence. By applying a differentiation approach similar to that of Mason Lift, ATRAC could grow its market by the same size as by using the low cost strategy. Even though ATRAC might not be able to match Toyota’s prices, the improved differentiation could lead to higher market share, meaning more sales and increased revenue.

Two alternatives are available to ATRAC:

Alternative 1: Applying a cost strategy within the LT segment. Adopting a low cost strategy requires launching more low-cost products and reducing sales, service and the customer relationship level. This alternative suggests unbundling the WE and LT operations into separate business entities.

Alternative 2: Improving differentiation (brand and other factors) that will allow the company to compete with the leaders. Differentiation could be achieved by dropping “weak” brands and improving sales and customer relationship level. This alternative doesn’t suggest a restructuring of the company. The potential challenge with this strategy is the likelihood of brand and other factors improving sufficiently to justify the price level.

---

1. Williams Machinery does have some high-priced products in its portfolio; however, the sales revenue from those products is extremely low and can be considered as irrelevant.

forklift industry analysis rivalry key success factors

Case analysis #16: Key success factors - warehousing equipment

2.4. Key success factors

Different market forces necessitate different key successful factors in the industry that are necessary for the company to achieve. As a result of the high fragmentation and differentiation in the WE segment, in addition to the price factor, all other factors, such as brand, customer relationships, sales expertise, service skills and project management, are important for success. In the LT segment, the existing market homogenization causes high importance to be placed on the price factor. The weak performance of some very cheap brands suggests that the brand is also relevant to the market. All other factors, such as the dealer’s reputation, customer relationships, sales and service skills level are far less important.

2.4.1. Key success factor analysis of competition

The key success factor analysis will be performed based on industry and value chain analysis. Two different segments that have significant differences in both market forces and structure of the value chain will be analysed separately. Every factor relevant to the industry segment KSF will be given a relative importance index using a scale from one to five, with one being the least important and five being most important. Both industry segments will be analysed among the three direct competitors, including ATRAC. Within every KSF, the competitors will be analysed by using the same five point scale, with one being the worst performance and five being the best. The total rivalry within the WE and LT segments will be summarized by using an aggregated rivalry index. The rivalry index is a multiple of the importance

index and the performance index. Every competitor will get a total score indicating how the company is doing against its competition.

2.4.2.Warehousing Equipment segment

The competition within the WE segment of the industry is of medium intensity. There are only two major players in the province - ATRAC (Crown Equipment) and Johnston Equipment (Raymond Equipment). Together they share more than 80 percent of the market. Other companies have only a nominal presence. The structure of ownership varies from corporate to family-owned. Most of the companies operate in both industry segments.

This section will look at two of major ATRAC’s competitors and will identify any visible strengths or weaknesses. The direct competitors for ATRAC in the WE segment are Johnston Equipment (Raymond Equipment Corp.) and Harding Equipment (Yale).

Johnston Equipment is chosen as the company that is the major competitor to ATRAC. Johnston Equipment is a “pure play” company that operates in the WE segment only. Harding Equipment is chosen as the third biggest WE equipment vendor operating in BC.

The analysis of the buyer’s power suggests price, equipment brand, equipment vendor’s reputation (customer relationships, expertise, and financial stability) and service, followed by the ability to supply complementary products (storage systems), as the mos

t important factors. Relationship and brand factors appear also in the barriers to entry section. The value chain suggests customer relationships and expertise (skills) level as being crucial in sales and service activities.

Summaries of KSF and rivalry indexes are indicated in Table 1, which follows. Maximum importance is marked with 5 points and given to price factor. The remaining factors are at the 4-point level. The best performance is marked by 5 points on a 5-point scale. The best price factor performance is understood as the ability of the company to offer produc

ts with the lowest price (low price = high score). The list of weaknesses or strengths will help to propose alternative strategies to improve performance.

Table 1: Summary of rivalry intensity and companies’ performance

2.4.3.2 Analysis of WE segment:

Johnston Equipment is the overall leader in the segment and represents approximately 50 per cent of all equipment sold in BC. The company offers medium-priced products, and has a solid brand reputation, extensive sales expertise and experience level. Johnston also possesses the most effective customer relationships in BC, as the personnel (likely because of higher pay rates) seem to stay with a company in the industry for a longer period of time, the assumption being that the longer the sales or service personnel are in touch with the client, the deeper the relationship level is. The company is a subsidiary of Raymond Equipment; thus financially the company appears to be stronger than the rest of the companies. The only weak point is the service personnel skills level of Johnston Equipment. The relatively low level of Johnston’s service personnel skills, compared to ATRAC’s, is mostly attributed to the Raymond brand. Raymond Equipment is highly reputable in the industry for its innovations. Innovations usually come at the cost of service, as the innovative design usually suffers in reliability in the initial stage. The higher rate of incidents requiring service by Raymond at the initial product implementation stage are perceived as a lower service personnel skill level compared to that of ATRAC-Crown. The Crown brand is highly reputable in the industry for its reliability; thus its service level is perceived to be higher.

The worst performer, Harding Forklift, has the lowest-priced products and services. Harding’s lift truck manufacturer, Yale, has an average industry brand rating. The level of sales force expertise, customer relationship and service coverage is considered to be the worst among all competitors as a result of high employee turnover. Harding Forklift is the only family-owned company among all three rivals and seems to be the weakest, as its access to external financial resources is limited.

At first glance, ATRAC’s major threat appears to be the cost factor. The price level of ATRAC is higher that Johnston’s, as products represented by ATRAC – Crown Equipment is usually pricier than those of Raymond Equipment (see at the bottom) and therefore are outside of the company’s control. The only competitive option available to ATRAC is to maintain needed differentiation, not allowing differentiating factors to be eroded. The real challenge could be when the WE operation are mixed in with lower-cost LT operations, so that the differentiation needed in WE can be easily eroded. The relatively weaker performance of ATRAC in these factors suggests the presence of this adverse effect. The strong performance of the “pure play” company, Johnston Equipment, seems further to bolster this observation. Every activity ATRAC performs worse than its major rival-differentiator Johnston Equipment becomes a potential threat to the business. Those potential weaknesses are the customer relationship level and the sales expertise level. ATRAC’s strength against competition is the quality of its service.

Analysis of the table suggests that the total company score is directly correlated with size of market share. ATRAC’s missing differentiation costs the company approximately 20 percent of market share (compared to Johnston Equipment’s share). By improving differentiation, ATRAC is likely to increase its market size. By lowering differentiation, ATRAC will lose market presence. Thus, the only available option for ATRAC in the WE segment is to follow a differentiation strategy. This differentiation can be enhanced by following one of two alternatives:

Alternative 1: To increase differentiation by unbundling the WE and LT operations, so that WE will not be affected by the cost pressures associated with LT.

Alternative 2: To further differentiation by adopting similar differentiation strategies in both the WE and LT segments within one company. The possibility of applying the differentiation strategy to the LT segment will be explored in the following LT market rivalry analysis.

The only available course for ATRAC is to differentiate. Differentiation in WE could be achieved by either separating from the LT division or by adopting similar differentiation strategies for both market segments within the one company

Bottom notes: The price difference between two brands is likely due to the fact that most (80 percent) of the CROWN equipment is assembled in-house, and these in-house operations are performed in high labour cost countries such as USA and Ireland. Only 20 percent of Raymond Equipment’s products are built in-house; the rest are outsourced around the world, thus giving the Raymond company a clear advantage in pricing.

forklift industry analysis rivalry key success factors

Case analysis #15: The Value Chain - summary

2.3.7. Summary of industry value chain

Major contributors to the value chain in the WE segment are R&D, sales and marketing, manufacturing and service activities; these represent major activities where most value is created and shape all the key success factors. The R&D and marketing activities address the brand factor, while sales and service address the dealer’s reputation and service factors. These three factors have extreme importance, as they allow countering price pressure from price-sensitive customers. Sales activity involving a high degree of customization takes place before the manufacturing process begins.

Major contributors to the value chain in the LT segment are sales, manufacturing and service. Sales activities to push commodity-like products are still a very important contributor to the value chain. The most value is created in the manufacturing, as it addresses the cost factor. The importance of manufacturing activities to lower the costs is greater than any other activities, and as a result manufacturing priorities (economies of scale) dictate that some of the sales activities take place after manufacturing. From the dealer’s perspective, the proper selection of manufacturers on the price-versus-quality continuum becomes extremely important.

2.3.8. Summary of rivalry:

The two segments in the industry have different market forces. The WE segment is the more attractive industry as it has low intensity, except of buyer’s power forces.

The LT segment is the less attractive industry as it has strong levels of threats in all market forces. The less attractive LT industry suggests lower profit margins compared to those of the WE segment.

case analysis forklift industry value chain

Robotic Nation Evidence: Autonomous forklift

Robotic Nation Evidence: Autonomous forklift

This is cool and might be depressing for some. Robots that will replace human driven equipment. All the money spent on making forklifts be more comfortable with more visibility, are in fact 'sunk' costs. The robot is a frame, brain and the hydraulics.

Does the robot needs comfortable platform...? nope
.... suspended floor? nope
.... wide angle visibility? nope
.... smooth steering? nope
.... accelleration? likely not.
.... joysticks? go to hell
.... floor space? hell, no as there is no seat :-)
.... overhead guard? to do what?

All in fact, features that every forklift manufacturer is proud of, are 'useless' in robotics... How ironic is that ...

What does it mean for business in general... Well, possibly in a few years we will see absolutely 'brand new' players on a market. Those who are not burdened by extensive R&D into developing current 'human driven concept' of material handling equipment and maintaining huge manufacturing facilities...As business rule says those who spent years and millions into existing models, will be the last ones to shake the status quo. Or, at least they will try to buy 'rebels' with their ideas. Otherwise, rebels will buy them to get the clientele (read - market share).

P.S. By the way... good job by STILL by investing into new technology. Thumbs up.

new ideas forklift industry business strategy robots

Case analysis #14: The Value Chain - After-Sales Service

2.3.6 After-sales service:
Because the end users of equipment are business accounts that are geographically dispersed, service has to be performed by companies located locally to the end users. Predominantly, service is provided by equipment dealers “in-house”, as they have knowledge of a customer and his working applications that determines the proper use of equipment. Service is usually done on the customer’s site. Service personnel are equipped with mobile service vans. To provide quality service, the equipment vendor needs trained personnel and a parts stock. Having the stock parts could be disadvantageous in periods of low demand for service that generally correlate with low economic activity in the region.

Applicability to ATRAC: The differences existing between WE and LT segments suggests that the loss of personnel in the WE segment due to lower LT pay rates represent a greater threat to dealer’s operation, as most of the much-needed knowledge leaves with the personnel. In case of ATRAC, the “mix” strategy could lead to replacement of skilled service personnel with less-skilled LT service staff that could, in turn, downgrade the existing differentiation strategy in WE.

2.3.6.1 Efficiencies

WE segment: In the WE segment, parts stock is a source of differentiation, as parts can’t easily and speedy be acquired from other sources. Because of the product complexity and more demanding customer’s applications (such as high-performance warehouses and high-storage applications), the typical service technician has to be better trained and equipped with more sophisticated equipment.

LT segment: In the LT segment, parts are widely available from other sources, such as Lordco and other automotive parts suppliers. As the equipment can be easily cross-serviced, and there is a risk that the customer will change suppliers, the equipment distributors usually carry only minimum parts in stock. As an example, none of the service providers in LT segment have equipment tires in stock, since they can be easily purchased and delivered from other sources

Applicability to ATRAC: The majority of equipment vendors, including ATRAC, usually compete in all segments of the industry. This “all-market presence” has an adverse effect on service efficiency. The typical service technician covers all clients within his assigned territory. This “geographical principle” requires the service tech to service all equipment within area, without segregating the WE and LT industry segments. Even though there is some sort of specialization among the service people, in general the service tech has to deal with all sorts of equipment. Not differentiating between the clients in WE and LT represents an immediate loss of efficiency. Any time the service personnel who is trained for WE market, with its higher skills and higher overheads, has to service the LT segment, characterized by lower skills and less overhead, the service provider loses money. The opposite is also true. Lower-skilled LT service could undermine the company’s “differentiator” reputation and relationships with a customer in the WE segment.
The next problem arises when, by maintaining a pay structure that supports the LT market, the company loses the most qualified personnel that is one of the KSF (service factor) in WE. The lost personnel also, in turn, brings about the loss of the customer relationships (dealer’s reputation factor) with the client, which is another important factor in WE.

2.3.6.2 Service outsourcing



The segments in the equipment industry have some differences in service activities. The WE market segment, due to its complexity, significant differences in design and technical components, is serviced predominantly by original equipment authorized dealers. A developed service network allows the equipment vendor to charge higher premiums to price-sensitive customers, since service in the WE segment is one of the important factors.
Service in the LT market with its simpler, commodity-like equipment and more price-sensitive clients is perceived as being of less importance to customers. The lower importance of service doesn’t allow dealers to use outstanding service to justify the price; as a result, some services are outsourced to third parties - low-cost service providers. Low-cost service providers usually do not sell new equipment; their personnel consist of ex-employees of OEM vendors. Low-cost service providers do not usually have parts in stock, their response time is usually longer than that of original equipment dealers, and the quality of their service personnel is usually low as their personnel do not receive up-to-date factory training.

2.3.6.3 Summary of Service:
In summary, service in the material handling equipment industry is one of the activities where most of the value is created. The revenue from sales is comparable to the service revenue. In the WE segment, a highly developed service network allows addressing the customer’s demand for quality services (service factor). Service is one of the factors that are important to the customer, and is one of the major industry activities where value is created.

In the general LT segment, the importance of service is far less because the service is perceived as significantly less important than price.
From the dealer’s point of view, the separation of the industry segments while performing service activities becomes an important factor. By allowing mixing of the market segments, first, the company can’t retain the most skilled personnel needed in WE, and second, the use of lower skilled LT service personnel applied to WE undermines most of the factors crucial for WE.

forklift industry analysis value chain service

Case analysis #13: The Value Chain - Manufacturing

2.3.5 Manufacturing:


LT segment: Manufacturing in the material handling equipment industry is similar to that in the automotive industry. The trend towards homogenization of the product brings price pressure on manufacturers. To withstand the pressure, most manufacturers have gone through consolidations. The result is cross-manufacturing, in which one manufacturing brand produces lift trucks for other brands and acquires products from other brands (see below). Industry consolidation seems to have brought more brand confusion to the industry, which has led to a further commoditization of the products.

WE segment: the segment experiences fewer cases of cross-manufacturing. Crown Equipment is an example of a “pure play” manufacturer. Crown Equipment still produces 85 percent of its trucks in-house, which seems to be the highest vertical integration in the industry. By building most of its products in-house, Crown Equipment has full control of the quality (brand and service factors).

In summary, the WE segment manufacturing process is a crucial activity where most of the value is created. The manufacturing process directly addresses the factors most important to the customer: price and brand (though these are important to a lesser degree than in LT).


Toyota makes their Class I products in Indiana and at Cesab in Italy. Their Class II products are built by Prime Mover (also known as BT Prime Mover) and Raymond Corp (owned by BT, which is owned by Toyota). Toyota’s Class III products are built by Raymond Corp and by Prime Mover. Linde North America (NA) - Class I and II are built by Linde in South Carolina and Germany. The Class III product is built in the old Baker facility in South Carolina. Jungheinrich North America (NA) - Class I & II products are built in Germany. The Class III products are built by Multiton/MIC in Germany and France which is owned by Jungheinrich. Hyster/Yale (NACCO) - Class I, II, & III products are built by NACCO at various locations. Mitsubishi/Caterpillar (MCFA) - Class I products are built by MCFA. Class II products are built by either Raymond (stockpickers) or Rocla & Lift Tech (reach trucks) and assembled by MCFA. Class III products are currently built by Raymond and soon to be built by Jungheinrich/ Multiton. Nissan – Class I sit-down products are built by Nissan and the stand-up counterbalance built by Schaeff. Class II products are built by BT Prime Mover. Class III products are built by Barrett which is owned by Nissan.

forklift industry analysis value chain manufacturing