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Munroe Industries Diversification into Generators

NICANNE LAMOUREUX

BRYAN CHRISTIANSEN

Munroe Industries is a minor player in the automotive engine industry but has a lucrative edge by providing gas-powered engines to multiple United States-based specialty and custom motor vehicle manufacturers. While the company remains cash positive, it has been impacted by market changes such as the increased demand for hybrid and electric vehicles and the decrease in new car sales due to COVID-19 impacts on the supply chain, most specifically, the semiconductor shortage. For this reason, the company is looking to diversify with the aim of capturing market presence in the portable generator industry. Both qualitative and quantitative data has been analyzed to determine if this new industry is a viable next step for the company. This presentation reports the findings of research into the automotive and generator industries, and shows that diversification into the portable generator market would provide opportunities for increased revenues.

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U.S. New Car Sales Growth Continuing to Fall

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Hybrid/EV sales increase, but remain below 7% market share

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Main players in the auto industry

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Why Generators?

Image: Power Generator, by khesm

Source: DeviantArt (2014)

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Portable Generators Can Help People, Businesses, and Communities

Image: The aftermath of Hurricane Maria, Puerto Rico

Source: Cleveland.com (2017)

Power outages can range from minor inconveniences to severe impacts on entire communities. In 2011, I was a single mother with two small children living in a fourth-floor walk-up apartment in Connecticut. We lived in a large complex and were in the rearmost building, several miles from road access. October 2011 brought a Hurricane Snowstorm and we lost all water and power for over a week. No heat or water, no means for cooking, in freezing temperatures, with two small children, over three feet of snow that kept us trapped for seven days, and no generator. It was one of the most terrifying experiences of my life.

In September 2021, Hurricane Maria left 3.4 million residents in Puerto Rico without power. The hurricane impacted 80% of the state’s power grid and took 11 months to repair. It was the worst blackout in US history, and the second worst in the world. Residents, businesses, and the entire Puerto Rican community were severely impacted.

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Generators Keep Us Operational During Natural Disasters

Image: Statistics: Sharp Increase in Natural Disasters Over the Past 20 Years

Source: The Watchers (2020)

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Portable Generators are a $4.9B industry, and growing

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Fragmentation of the Generator Industry

Consolidated: Market is dominated by 1-5 major players

Fragmented: Market is highly competitive without dominant players

Portable Generator Market

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Residential leads segment demand for generators

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Raw materials for manufacturing generators continue to fall

The primary raw materials for the production of generators are iron, aluminum, and copper, along with steel and plastic components. Copper, aluminum, and iron are all traded commodities, so the market price is fairly consistent in response to supply and demand impacts on the commodities market, with a minor impact on price due to supplier rivalry (Yan, 2021). In the past 12 months, the cost of aluminum spiked in March 2022 at $3,849 but has dropped to $2,165.15, iron ore peaked at $161.85 in April 2022 but has dropped to $98.89, and copper reached a high of $10,729.85 in March 2022 but has fallen to $7,445.65 (Insider Inc, 2022), so all three of the main raw materials for production have decreased in the past six months, and experts predict that prices will continue to fall as mining and production activities return to normal through the remainder of the year.

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Diversification highlights

The portable generator industry is a $4.9B market, with projected U.S. market growth of 5.4% to 2028
Over 16M homes in the U.S. have a portable generator
Raw materials for generator manufacture are the same as our existing motor materials and have decreased in cost over the past six months, with prices continuing to fall
Munroe Industries has an established R&D department conducting research on use of alternative fuels for vehicles that can be transferred to generator motors

With almost $4B in portable generator sales alone in 2019, and projected growth of 5.2% to 2025 (Grand View Research, 2022), there is potential to add substantially to our revenues by diversifying into this space with minimal increased cost to the business. Over 16 million portable generators are in homes across the U.S., providing a large market to target with new technology and greener options for consumers' backup power needs, and consumer demand is set to increase as a growing number of companies embrace a hybrid or fully remote work culture.

Diversifying into generator production allows Munroe Industries to continue utilizing existing relationships and supply chains for sourcing raw materials, as well as leveraging our reputation for high-quality engines that has spanned several decades. Our current R&D team is already working on several initiatives to harness alternative fuel sources, the information from which is easily transferrable to the manufacture of generators, allowing us to provide alternatives for customers who do not want to purchase gasoline and diesel engines. This is a fragmented industry with projected growth and lowering raw material costs, which provides Munroe Industries with an opportunity to diversify in a way that leverages existing our expertise and reputation with minimal financial outlay.

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Diversification Benefits Everyone

Generators help individuals, families, businesses, and communities
Diversification will increase revenues for Munroe Industries:

We are committed to using 25% of increased profits to improve employee benefits and compensation packages
20% of increased profits will be used to expand our existing R&D programs for eco-friendly power alternatives

Diversification will increase jobs and improve the local economy
Munroe Industries remains committed to manufacturing practices that do not harm the environment

A diversification into the generator market brings opportunity for our employees, stakeholders, customers, and community. Projections show a potential increase in Munroe Industries’ sales revenues of 50% in the first year by adding generators to our product line. The Board has committed 25% of increased net profits to be reinvested into improving employee benefits and compensation, with our first priority being to decrease employee insurance premiums while maintaining existing coverage levels. Additionally, 20% of increased net profits will be funneled directly to our research and development team for faster development of generators running on alternative fuel solutions.

As we grow this product line, we expect to hire 50 staff at all levels of the company. In line with our internal policies, our existing employees will be encouraged and supported in applying for new roles within the business that are of interest to them. Growing and developing our current team of incredible employees is a key to our longer term success.

We also want to make clear that Munroe Industries remains committed to the protection of the environment, and follows manufacturing processes that do not harm the environment or local residents in any way. All existing environmental protection measures will continue to be utilized as we increase production.

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Questions?

20 minute open-forum Q&A
Email: ProjectGen@munroeindustries.com
Visit: www.munroeindustries.com/ProjectGen

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References

Alliance for Automotive Innovation. (2022). Reading the Meter. Retrieved September 26, 2022. https://www.autosinnovate.org/_default_upload_bucket/Reading%20the%20Meter%209-7-2022.pdf

Flynn, J. (2022). Remote work statistics [2022]: Facts, trends, and projections. Zippia. Retrieved September 17, 2022. https://www.zippia.com/advice/remote-work-statistics/

Grand View Research. (2022). Portable Generator Market Size, Share & Trends Analysis Report by Product (Diesel, Gaseous), By Power Range, By End Use (Commercial, Residential, Industrial), and Segment Forecasts, 2020-2025. Retrieved September 26, 2022. https://www.grandviewresearch.com/industry-analysis/portable-generators-market

Insider Inc. (2022). Commodities. Markets Insider. Retrieved September 26, 2022. https://markets.businessinsider.com/commodities

MarketLine. (2022). New Cars in the United States: January 2022. MarketLine Industry Profile. Retrieved September 26, 2022. https://advantage-marketline-com.ezproxy.snhu.edu/Analysis/ViewasPDF/united-states-new-cars-148003

MarketLine. (2022). New Cars in the United States: January 2022. MarketLine Industry Profile. Retrieved September 12, 2022. https://advantage-marketline-com.ezproxy.snhu.edu/Analysis/ViewasPDF/united-states-new-cars-148003

Mordor Intelligence. (2022). Portable Generator Market – Growth, Trends, COVID-19 Impact, and Forecasts (2022-2027). Retrieved September 26, 2022. https://mordorintelligence.com/industry-reports/portable-generator-market

National Automobile Dealers Association. (2021). NADA Data 2021: Annual Financial Profile of America’s Franchised New-Car Dealerships. Retrieved on September 26, 2022. https://www.nada.org/media/4695/download?inline

Pantalon, M. (2022). Automobile Engine & Parts Manufacturing in the US. IBIS World. Retrieved September 26, 2022. https://my-ibisworld-com.ezproxy.snhu.edu/us/en/industry/33631/about

Sanchez, G. (2022). Electric & Hybrid Cars – US – 2022. Mintel Group. Retrieved September 13, 2022. https://reports-mintel-com.ezproxy.snhu.edu/display/1099797/?fromSearch=%3Ffilters.category%3D105%26last_filter%3Dstrategic-topic

Yan, B. (2021). What will happen to the price of generator material? BoliPower. Retrieved September 18, 2022. https://bolipower.com/what-will-happen-to-the-price-of-generator-material/

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Images

Cleveland.com. (2017). The aftermath of Hurricane Maria: Puerto Rico. Retrieved October 15, 2022. https://www.cleveland.com/entertainment/2017/10/how_the_cleveland_indians_reac.html

khesm. (2014). Power Generator. DeviantArt. Retrieved October 15, 2022. https://www.deviantart.com/khesm/art/Power-Generator-474206116

The Watchers. (2020). Statistics: Sharp Increase in Natural Disasters Over the Past 20 Years. Retrieved October 15, 2022. https://watchers.news/2020/10/12/natural-disasters-statistics-2000-2019/