Industry Research: Capital Products Industry

Exec Summary

Capital goods can be described as mature industry with a exceptional opportunity for expansion and development in the growing markets. Although large, diversified conglomerates - the major market players -- have over loaded developed markets, population and city development in producing markets have increased with regard to food, normal resources, and infrastructure, thereby growing the demand for capital goods, with over 8. 1% expansion per year projected over the subsequent 5 years. Companies at the moment outside the market face substantial barriers to entry, which makes it unattractive for new entrants, and creating a solid competitive environment for the relatively few large and current sector players. Individual companies control specific groups of the capital goods marketplace. Rivalry can be high, while there is relatively little merchandise diversity inside the sector, and firms' principal opportunity for differentiation is in technological competence and value-add offerings including warranties and service. Provided these challenges, acquisition is a good growth technique. With above 250 mergers and acquisitions over the past 3 years, the capital goods markets is rapidly combining as large players gain more market share. In addition , acquisitions allow these kinds of large conglomerates to enter rising markets where long-term upcoming growth exists. In conclusion, capital goods is known as a moderately attractive industry due to these opportunities for growth.  

The capital goods industry is very broad and comprises two major groups: engines and global machines, which includes farming, construction, and mining machinery (Exhibit 1). The global machines industry is usually valued in $182. 4 billion, when engines adds another $12. 8 billion, representing a total capital items value of $195. 2 billion. Inside the global machinery market, development and commercial equipment include the largest share, with 46. 3% of market income ($84. 5b). The construction segment includes earthmoving, road, and concrete tools. Agricultural products makes up 40. 8% ($56. 1b) of market earnings, with items such as compact tractors, hay balers and combine harvesters. Mining may be the smallest section of the global machines segment; tools such as crushing, pulverizing and screening equipment, portable drilling rigs and parts, and plants and drills makeup 22. 9% of the marketplace. Engines (stationary, nonutility power generators) comprise a much more compact part of capital goods, at 6. 6% of the total capital products market earnings. The total 2010 market revenue stands for $12. eight billion. Capital goods is a mature sector in a high-capital business that is subject to the ebb and flow in the agricultural, building, and mining business periods. Subsequently, the players are large, well-researched conglomerates which may have diversified across a number of capital goods companies to mitigate the risks associated with this pattern (Exhibit 2). Many of these corporations also have expanded into loans to provide further services to customers. The administrative centre goods industry is also, unsurprisingly, positively correlated with the overall industry economy (Exhibit 3), and the recent economic downturn has influenced overall income. (Exhibit 4) The largest players in global capital items (and their specific GCG components) are Caterpillar (construction and exploration equipment, engines), Deere & Company (agricultural equipment, construction), Hyundai Large Industries (engines and machinery, construction equipment), and Volvo (construction gear, engines). In addition , other smaller sized, less diversified players as well contribute to the global capital products market, nonetheless they do not have the industry dominance of the firms above (Exhibit 5). While capital products companies are in most countries around the globe, a few huge conglomerates and thousands of smaller players characterize most created markets, and much of the progress takes...


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