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Market Entry

Business Challenge for The Maverick

Business situation Our client is an auto parts manufacturer and is seeking revenue growth opportunities for its struggling filters business. The filters business, named ABC Filters, currently sells oil and air filters for consumer and commercial vehicles. In addition to automotive filters, ABC historically invested in emerging air filter technologies for large, natural gas turbines (GT) used for power generation. The process of combusting natural gas for power generation requires a tremendous amount of air intake (~720,000 ft3 of air every minute of operation) and a turbine may need up to 1,000 intake filters to remove harmful contaminates that erode and foul the turbines function. ABCs R&D investment has recently developed a cartridge-shaped E10 synthetic filter with a self-cleaning mechanism that significantly reduces turbine cleaning downtime. Unlike other filters sold in the market, the E10 will allow turbine operators to efficiently generate electricity in harsh operating conditions (excessive heat, high humidity, high pollution, etc.). If launched successfully, ABC will be selling the first E10 grade gas turbine filter with a self-cleaning mechanism. ABC is also looking at utilizing its filters servicing expertise to provide associated services for E10 customers. Although our client has high expectations for this technology, they lack deep knowledge of the natural gas power generation filter market. The client has engaged your team to assess the attractiveness of this growth opportunity and provide a market entry strategy should they choose to proceed with the filter launch. The brief for your team involves 1. Market sizing Lay out an approach to size the gas turbine filter market. Calculate the size of the addressable market for the clients product (i.e., cartridge synthetic filter subsegment) and prioritize geographies based on market attractiveness. Identify macro/micro trends that could influence the gas turbine market in the future. Explain the effect of these trends on future market attractiveness. 2. Value proposition Develop a value proposition for the E10 filter that highlights advantages over the E9, E12 variants. 3. Go to market (GTM) Based on your research of the market environment and ABCs capabilities, what are the possible GTM options for ABC? Evaluate the options and provide a recommendation on the most suitable GTM approach for the client. Ground Rules Feel free to use external research sources and make logical assumptions where necessary. Please ensure that all external sources, data, and assumptions are captured explicitly in your deliverable. Please make all submissions in PowerPoint format, limiting the main deliverable to a maximum of eight slides (including one-slide executive summary). Appendix can be used to capture external research, assumptions, or any other references/analysis in detail.

Estimated growth rates of natural gas electricity generation 5-year CAGR Europe Middle East Rest of Asia Africa North America Latin America Total 2.4% 8.1% 5.2% 7.3% 0.4% 4.3% 3.3% 10-year CAGR 1.1% 4.7% 4.5% 5.0% 0.4% 3.8% 2.4% Europe Middle East Rest of Asia Africa North America Latin America World

Current installed GT distribution by region Distribution of Turbine Installations by generation capacity (measured in MW) 3060 29.3% 13.8% 24.6% 10.8% 4.6% 16.9% 100% 60120 5.4% 30.1% 17.2% 0.0% 43.0% 4.3% 100% Key filter statistics Climate Marine Arid Mixed Arid Mixed Humid subtropical No. of filters per MW of power generated Panel Cell 10 Synth 15 Cartridge Cell 12 12 $100 8% 4% 6% Synth 10 24 $300 5% 2% 4% 120180 6.9% 41.4% 16.1% 9.2% 16.1% 10.3% 100% >180 11.2% 12.9% 11.3% 0.0% 58.1% 6.5% 100%

Current install base of GT filters by type Panel Cell Europe Middle East Rest of Asia Africa North America Latin America 30% 10% 30% 25% 15% 25% Synth 40% 10% 20% 25% 25% 25% Cartridge Cell 10% 20% 20% 20% 10% 30% Synth 20% 60% 30% 30% 50% 20%

Filter lifetime (months) 8 12 Avg. Price $80 $100 Average loss in power generation (%) Marine 8% 2% Arid 6% 5% Humid sub-tropical 4% 4%

Note: Synth = Synthetic filter technology, Cell = Cellulose filter technology

Note: 1 gigawat (GW) = 1,000 megawatts ((MW)

High efficiency filter consideration set E9 Market status Available Filter price Filter replacement rate (months) Turbine wash time (hrs/year) Downtime for filter cleaning (hrs/year) Average turbine capacity Average turbine uptime Price of electricity $300 24 90 60 160 180MW 98% E10 Testing $330 24 120 20 150 190MW 99% E12 Available $100 12 180 300 160 180MW 96%
Turbine OEM 5% Agent 2% Other 1%

Competitor capabilities and sales Gas Filter Filter Filter Gas turbine Product turbine production installation servicing maintenance variant OEM Client Competitor A Competitor B Competitor C Competitor D X X X X X X X X X X X X X X X X E10 E12 E12 E9 E9

Turbine maintenance provider 6% Turbine Operator 10%

Latin America 6% Middle East 8%

Other 3%

$0.06 per kilowatt hour

Supply to competitors 48% Distributor 28%

Asia 16%

Europe 43%

North America 24%

Other Agent Turbine OEM

About Deloitte North America Turbine operator Europe Distributor Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and Supply to competitors independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright 2013 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

Turbine maintenance provider

Client 2012 sales by customer type

Other Latin America Middle East Asia

Client 2012 sales by region type