Heavy Equipment Maker Business Plan

The construction machinery industry experienced sales of approximately $15.4 billion last year. Power cranes, draglines, and excavators, which are similar to TWM’s products, had a total sales of $3.2 billion. The construction machinery industry is a mature market with approximately five percent annual growth.

Customers within the market consist of commercial construction companies, equipment rental and leasing companies, general construction firms, and to a lesser degree, adjacent market segments such as mining, industrial, agricultural, forestry, and waste management companies. Of these, commercial construction companies will be the dominate consumers of TWM’s products as they have the deepest pockets, the greatest need for large orders of machinery, and the greatest need for precision controlled equipment.

The most rapidly growing sub-segment of the commercial construction segment is the small construction companies. These firms have relatively low entry/exit barriers to the market. However, these companies are not seen as a potentially large market for TWM since they have such low market capitalization.

The market is strongly effected by the current trends in the economy. Companies such as Caterpillar and Komatsu have seen recent decreases in sales due to a weakening global economy and decreasing consumer confidence. If recent downturns in the market prove to be long-lasting, then TWM may have a significantly more difficult time acquiring sales contracts and financing.

One of the more recent trends in the construction machinery industry is to create more and more specialized equipment for the various market segments and to focus research and development on providing multitask machinery that is attractive to the companies with less market capitalization. It is TWM’s goal to be the industry leader in focusing on these trends and being the first to market with innovative designs reflecting these changes.

4.1 Market Segmentation

TWM will focus on the large commercial construction companies with over $2 billion in annual revenue.  These companies are looking for heavy equipment machinery that will last for a long period of time, will do the job effectively and quickly, are easy to operate, are extremely precise in control of movement, and offer a high number of features including safety types of features to minimize liability and employee injury risks.  Typically these companies lean towards the Widget Deluxe or Widget Premium products.

Mid-size commercial construction companies are a secondary market for TWM.  These companies are more interested in the Widget Basic and Widget Deluxe.  Mid-size commercial construction companies range from $500 million to $2 billion in annual revenue.  Cost savings is more important to these companies, who are still in the growth stage of the business cycle.

4.2 Target Market Segment Strategy

TWM primarily focuses on its target market, the large commercial construction company, through direct selling via its various relationship and referral networks. In addition, a significant amount of investment will be made in advertising to promote product awareness. Direct selling is far more effective in closing sales as well as in terms of sales and marketing costs.

TWM uses the tool of product demonstrations at its site to close sales.  Potential clients’ travel costs to TWM’s site for product demonstrations is covered by TWM.  Product demonstrations are a critical step in the sales process.  This is the opportunity to prove the capabilities of our products, educate the potential client, and establish a relationship.

4.3 Market Needs

The volume of commercial construction activity has been steadily increasing since the mid-1980s.  Demand for heavy machinery equipment has been steadily increasing as new entrants come into the market and current participants grow their operations.

Modern complex designs, earthquake proofing, and other factors have increased demand for higher precision and accuracy in controls of heavy machinery equipment in commercial construction operations.

4.4 Competition and Buying Patterns

TWM faces approximately 55 major competitors nationally.  The top player is Caterpillar and has been in the market for 40 years.  Their name is very well known and their products are trusted.  Their products practically sell themselves.

Large commercial construction companies typically look for the most widely used equipment that has an established name and reputation for quality, durability, and versatility.  Product demonstrations are a critical part of the buying process, especially when a buyer is working with a smaller, less known company.

Similar competitors design, manufacture, and market power equipment that play a niche role in commercial construction and material movement. This segment’s products include skid-steer loaders, compact hydraulic excavators, industrial vehicles, pavers, and compactors, drilling equipment, and rough-terrain material handlers.