During the period from February to July 1994, the Australian combustion engineering market was the subject of an extensive case study, designed to provide industry insights and to develop a marketing strategy for Hauck Manufacturing, a United States based company looking to re-establish their position in the global market. The other primary objectives of this report are the development of an appropriate research method for investigation of South East Asian markets for Hauck products, and appropriate methods of research for related combustion products in Australia.
The research methodology utilised in this report is exploratory - a hybrid research design consisting of analysis of available secondary data, literature reviews and depth interviews. This method was selected due to the small size and resources of the Australian based representative, the limited degree to which the problem had already been investigated, and the limited amount of secondary data available.
The theoretical basis of the report's industry study is the "Structure-Conduct-Performance" model, derived from industrial economic thought, and Michael Porter's Competitive Forces model. The development of strategy is based upon the current managerial paradigm of strategic marketing management. This includes analysis of market size and segments, customers, competitors, and external environmental factors.
The major findings of these analyses were:
• That the Australian market is small, estimates decreasing in July 1993-May 1994 to 3376 units from the July 1992-June 1993 figure of 4752 units.
• The major markets geographically are based in Victoria and New South Wales.
• The major target segments identified were the Australian Asphalt, Heat Treatment and Mineral industries (Nickel, Aluminium. Copper, Lead and Zinc).
• Customer purchasing patterns were affected dramatically by external factors in the Asphalt and Mineral industries, such as government funding and commodity prices.
• The Heat Treatment industry is still using very outdated technology.
• Competitors within the combustion engineering industry are primarily overseas based producers, who are represented in Australia by combustion engineering firms. The necessary Research and Development carried out by these companies is not justified in Australia by the market returns.
• Economic recovery is likely to lead to increased investment in capital equipment by Australian based firms.
• The regulatory environment which has not made any significant impact on operations thus far is likely to change in respect of emission and noise levels.
Key marketing issues identified were:
• The re-Iaunch of the Hauck products and brand name into the Australian market. This is necessary because no company has provided direct representation for Hauck in recent years, resulting in a loss of confidence in the brand name, as well as loss of virtually all market share to other competitors.
• The objective of the re-Iaunch is to overcome the poor reputation for service which remains from the previous representatives, and to introduce the new recently appointed representatives.
• Establishment of a local distribution network. Distributors are only based in New South Wales and Queensland. A more widespread distribution network allows easier access to customers outside of these areas. The primary objective to be achieved through distribution is to dramatically increase the contact with final users throughout the market, to pull the product through OEM's.
• Establishing the Price/Technology tradeoff. The objective is to adequately inform all potential new customers of the longer term benefits, through quantifying the value which is created by the products.
• Sales personnel. The objective of the sales force evaluation is to establish closer ties with existing and potential customers.
• Use of existing customers and contacts. The objective is to use as many referees as possible. Such information may have a powerful effect on customers, and is an invaluable promotional tool.
• Market Expansion through a long term view toward overseas market development. Market penetration is the only product based strategy available in Australia.
The final strategy recommendations were:
• Customer focus. This entails close working relationships over the long term, analysis of customer purchasing patterns, analysis of customers' market demand and growth, and formation of alliances with customers.
• Product positioning. It is necessary to determine the appropriate product range and positioning using pricing and promotional strategies in the short term, as the customer focus strategy will require long term implementation.
• Structuring for manufacturing. Despite a few potential problems, manufacturing under license is more attractive, at least for the regularly supplied products which would provide rapid payback on investment.
• Related diversification. This strategy becomes evident by analysing the very high level of value added to the core Hauck products. Such manufactured products sold for a major project are worth probably $100,000 - $200,000, but with the knowledge which is marketed in the form of mineral extraction technology, the various ancillary equipment (which is outsourced), spare parts, installation and supervision, invariably project value will be increased to millions of dollars.
• Service strategy. The emphasis of the service strategy is on maintenance of installations to optimise efficiency of operation. The long term approach entails fixed price contracts and service guarantees. In addition, internal marketing to sales staff and engineering is vital in implementing service strategy.
• Feedback, monitoring and control. Customer feedback forms the basis of monitoring and control, and offers an indication of the level of success of strategies such as product pricing and positioning. In addition, on an ongoing basis, evaluation by engineers of the standards produced by network manufacturing partners is critical.