THE CHALLENGE - A leading overseas HVAC equipment supplier approached Frost & Sullivan's market research experts and consultants for help in understanding the North American building management technologies market. Among other issues, the client wanted to understand the total market size and forecasts by revenues and unit shipments, competitive analysis, distribution channel analysis, end-user analysis and purchasing behavior, barriers to entry, and investment opportunities.

THE PROCESS - Frost & Sullivan's consulting team tracks the Building Management Technologies industry on an ongoing basis and has the experience to analyze the market for these products and give our impressions of the total market. The consulting team conducted extensive research of the market and established a clear picture of the market for the required data points.

Frost & Sullivan found that any new competitor would face some challenges in establishing a significant presence in this market. The option of creating an entirely new competitor is not feasible because of the high level of market concentration among the largest competitors (88 percent) and the extreme fragmentation of the remaining market share.

THE SOLUTION - Based in our findings, Frost & Sullivan identified two primary alternatives for entry into this market.  The stronger of the two options was the acquisition of a significant market competitor that presented the following opportunities:

• The "target" competitor, unlike most other large competitors, is concentrated primarily in the products similar to the client's products
• Historically, the "target" reflected a cost base that was 5 to 8 percent below that of its competitors
• The "target" was conducting a significant stock buyback program, which could make acquisition easier