On-the-Ground, At-the-Site Feasibility Study in China

A multi-national manufacturer of needlepunched nonwovens determined that there might be an important opportunity for a new plant located in China to serve the infrastructure building market. In particular, a municipality in western China was in the process of greatly increasing its expenditures on infrastructure projects of various kinds. The multi-national company wanted an appraisal of the market and an assessment of its competitive status in an environment that tended to favor those companies having strong connections with local public officials.

How did IMS help?

Through its affiliate in Shanghai, IMS conducted a feasibility study concerning the likelihood of success for the client’s prospective investment in a needlepunched nonwovens plant. The study focused on the market’s potential. Although there would be plenty of infrastructure building activity in Chongqing to sustain the market for some time, the potential investment faced serious obstacles.

Based on lengthy interviews and conferences with public officials in the municipality, as well as data extracted from government agencies, universities and research organizations, business newspapers and periodicals, IMS confirmed that companies and individuals with established ties to public officials had a clear advantage in the bidding process. A significant marketing/lobbying effort at the local, provincial, and even national level would be necessary to level the playing field. Moreover, the predominant geosynthetic used in infrastructure construction was geogrids. While the use of geogrids results in construction which falls apart or degrades in a relatively short period of time, in contrast to needlepunched material, geogrids are 8%-10% cheaper. Anticipating the municipal government would simply spend for repairs as structures degraded, construction companies might not be open to a superior material. Again, the need to lobby up the governmental ladder would probably be necessary

Thus, the contemplated investment, while feasible, was also risky and would certainly require a very intensive marketing/lobbying effort to get a fair hearing in the bidding process. IMS’s thorough, on-the-ground research and analysis of the situation clearly spelled out the critical obstacles the investment faced. This enabled the client’s executive leadership to make a decision, as to whether or not to proceed, with a full appreciation of the risk-return framework that faced them.

An International Competitive Assessment: United States vs. Japan

A major, U.S. multi-industry manufacturing company with worldscale operations in many industries had two questions:

• Why are Japanese companies seemingly so much more efficient than their U.S. counterparts? And,
• Could we build our export capacity to Japan and other Asian countries?

Clearly, both questions revolved around the relative competitiveness of Asian vs. U.S.-based manufacturing.

How did IMS help?

IMS initiated a study effort organized in three parts:
1. Development of an industry-level data base related to costs, productivity and market growth;
2. Creation of a unique structure for industry-level data that allowed a rigorous comparison of costs and productivity between the United States and Japan;
3. Drew conclusions for...

• Why Japanese and other Asian products were able to penetrate U.S. markets;
• What it would take to build an export business to Japan and other Asian countries;
• Specifically, where the best product opportunities for export would lie.

IMS worked closely with the project head from the company, as well as the research arm of a Wall Street brokerage. (The effort also involved an extensive fact-finding trip to Japan.) The result was a comprehensive report that became one of the principal documents guiding company corporate strategy.

International Market Research and Supply Chain Options

A large multi-product textile company wanted to expand domestic capacity and sell initial excess capacity internationally, with a focus on Latin America. This “seeding of the market” would precede a phase-two investigation of possible manufacturing facilities in a targeted international market, with an extensive review of supply chain options.

How did IMS help?

At the direction of the client company, IMS completed a regional review of the targeted market for potential customers and an analysis of critical competitive issues. The client and IMS identified specific customer “targets” and IMS completed a study that provided more detailed information on each “target” (e.g., owners/decision makers). This information included products and quantities used by each potential customer, where the firm was currently buying product, the firm’s (and current suppliers’) competitive strengths and weaknesses, and the important product applications involved. Finally, IMS also completed a supply chain study (where to purchase raw materials) for the client in anticipation of phase two of the project.

Links between Industry, Government, and Research Institutions

A mid-size high end technology company had developed laser technology that could cut diamonds to near perfection in a 10th of the time it traditionally takes. The company was committed to adding value to South Africa’s raw materials such as diamonds, gold, and platinum in the form of jewelry. Further research was needed to develop technology for the rapid production of jewelry. Design was also a weak area as South Africa did not have a pool of designers who could be resourced in designing this jewelry.

How did IMS help?

A senior IMS consultant was part of the executive team that created links with government and private research institutions in South Africa to co-ordinate the further commercialization of “rapid-prototyping” jewelry technology. This project was funded by the South African Department of Arts and Culture, Science and Technology for an initial amount of $3.5 million. IMS also coordinated the development of the jewelry design component at higher education institutions for design training in South Africa. Trips to Italy were also undertaken, linking to internationally renowned designers and manufacturers to the project. The net outcome was the successful development of ground breaking technology in the manufacture of fine jewelry, as well as the development of new marketing concepts and unique designs for international markets.

International Training Program: Stabilizing a Bank’s Financial Transactions.

A major international bank with offices in virtually every country in the world had a big problem. Chaos reigned in the bank’s international security transactions business because of misuse of the critical computer system that processed and managed the enormous volume of institutional securities transactions and positions. The system had core capabilities that should have been performed in the same way by all the global offices. Many host country offices had, however, created their own individual processes used in the securities trading system. Because no written record of procedures existed, there was instability and chaos involving vast amounts institutional transactions. This situation threatened to destabilize the transactions themselves as well as the custodizing, in each country, of the securities involved in the transactions.

How did IMS help?

An IMS corecomp executive needed to turn chaos into order while respecting each host country’s need to create country-specific procedures and processes. The IMS executive first conducted interviews with host-country managers, in conjunction with studying the system’s functionalities and technical specifications. Ultimately, a plethora of critical resources were created:

Most importantly, a written record of the correct way to use the core (not country-specific) system capabilities to process and manage institutional securities transactions and custodizing

• A training program that was to be used by managers in all countries to train employees in correct usage of the system’s capabilities
• A separate set of training materials for the employees themselves
• A procedures manual detailing every step involved in processing and managing global transactions
• A template for country-specific procedures plus instructions for the manager to create a written record of the correct way to perform country-specific processes.

The documentation and training effort resulted in effectively stabilizing the flow of transactions and positions in the bank’s global securities market and gave the bank a documentary basis upon which evolutionary changes in the system could be made.

Evaluation of a Proposed Fabric Mill in the United States

A major Japanese fiber and textile firm proposed to build a top-of-the-line textile plant in the United States. This mill would be equipped to solely produce a particular type of sheer polyester fabric that was widely used in apparel during the mid-to-late-70s. The question was, would there be a market for this product in the United States in present market conditions?

How did IMS help?

IMS was asked to evaluate the apparel market’s receptivity to the proposed fabric in order to evaluate the financial feasibility of the investment in the new mill (an investment on the order of $10 million).

In order to fulfill this assignment, IMS conducted over a dozen one-on-one, in-depth interviews with purchasing executives from major apparel houses. (Given the hectic pace and competitiveness of the apparel industry, such interviews were not easy to set up and carry out. IMS persisted, however, and was successful in getting extraordinarily insightful dialogues with key executives.) IMS presented to the U.S. management team of the Japanese company a full, detailed report covering both qualitative statements and quantified responses made by the interviewed executives.

The bottom line was that such a fabric product had virtually no fit in the apparel fashion world at that time, making the investment a highly risky, and most likely a money losing, enterprise.

Assessment of Vertical Marketing Strategy

A major Japanese fiber and textile company was running into stiff competition from other Asian manufacturers with the result that the company’s profits, for the first time in its history, were declining. The company came up with a vertical marketing strategy which was designed to take advantage of its superior technology, product quality, and production techniques. This strategy would call for upstream investment in apparel and other products, even to the point of opening retail outlets on a wide scale.

How did IMS help?

IMS was asked to analyze the marketing and procurement strategies of major U.S. apparel retailers, such as The Gap, popular brand name manufacturers, such as Tommy Hilfiger and Donna Karen, and department store chains, such as Macy’s and Dayton Hudson. These firms might serve as a business model for the vertical strategy.

Two basic points became very clear in the analysis: 1) None of the outlets were vertically integrated through to fiber and textile manufacturing; and 2) Virtually all had a history of significant swings in profits. If these companies were to be used as models for an investment in apparel retailing, the investment was highly likely to suffer the same kind of profit unpredictability and even losses, since it would be relying on high cost intra-company raw materials and fabrics.