Pipeline Manufacturer

Case Study Intro

The client is a pipeline manufacturer.

• The client is located in Eastern Europe and is the market leader in Europe. However, its sales have been flat for the past few years.
• Their facilities have 85% utilization.
• The current profit margin is 20%, equal to average profit margin of US players.
• The client has lower labor cost but the advantage will be offset by higher logistics expenses if going to the US market.
• The client is able to supply to the US market with products worth of $500Mn.
• Client has $1Bn in cash, and doesn’t know how to spend it.
• The US market has flat growth.

The US market has three distribution channels:

• Small shops (10% market share)
• DIYs – Do It Yourself (30% market share)
• Distributors (60% market share)

They are thinking about entering the US market and hired you to advise whether they should do that, and if so, how to enter.

How would you go about it?