Commercial Due Diligence - B2B Market Research
SUMMARY
As part of a commercial due diligence, PMG recommended a B2B market research project focused on a supplier selection study to qualify potential suppliers and allow the company to provide a more system-based solution in the building products market. The study identified eleven potential suppliers and three supply scenarios that addressed potential risks and changing trends in consumer preference for the client to consider in their strategic decision making process. The company was able to favorably leverage future contract terms and negotiations based on the insight that resulted from the study.
SITUATION
A large building products manufacturer, well known in the industry for its high manufacturing and quality demands, decided it was time to reevaluate an existing contract with its current steel ceiling grid products supplier. The company determined that it would be beneficial to investigate the potential to partner with other suppliers and retained PMG to conduct a comprehensive market research study of the steel ceiling grid supplier industry, as well as locate other potential suppliers, evaluate their capabilities, and make specific recommendations about which direction the manufacturer should take.
PMG SOLUTION
PMG’s market research included preparing an overview of the steel ceiling grid product industry, summarizing key points and identifying potential long-term threats to the industry’s current supply chain. PMG also identified and evaluated substitute technologies, such as aluminum and plastic grid systems, as well as drywall ceilings that might compete against traditional steel ceiling grid products on the market. During the due diligence phase, PMG identified 11 companies that could be potential suppliers in four broad categories: steel grid manufacturers, aluminum converters, steel product manufacturers and importers. PMG then evaluated each of the suppliers to gauge their capabilities and interest level in a potential supplier partnership. PMG qualified each company based on their manufacturing capacity, current production levels, geographic locations, ability to manufacture products to a finished state, distribution capabilities and several other criteria. At the conclusion of the market research project, PMG presented the building products manufacturer three supply scenarios to assess, each with different potential partner suppliers. PMG derived the scenarios based on the possible strategic objectives that the building products company might have in place, and offered various ways to address potential financial and operational risk, including fluctuation in global steel prices, material availability and even changing trends in consumer preferences.
RESULTS
PMG’s three supply scenarios focused on: replacing the manufacturer’s current supplier, taking a hedge strategy/risk approach or planning for future growth (including the potential for future acquisitions). Based on PMG’s conclusions, including careful consideration of the suppliers that PMG profiled and recommended, the client ultimately decided to continue its relationship with its current supplier.
As a direct result of the B2B market research project, the company was able to convert their leverage into more favorable contract terms for future business. The PMG study also provided the manufacturer a wealth of industry information that produced substantial leverage for future negotiations.
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