Management Three Results & Execution Oriented

Business Strategy Consultants

July, 2011

Introduction to:

M3’s strategy is to focus on customers, channels and market strategies in the Automotive Aftermarket space, working for global or globalising clients

Results & Execution Oriented Business Strategy Consulting

Industry Focus: Automotive

Specialty: Aftermarket

Geographic Focus: Global Launched: March 2009

Growth 2010/2009: + 180%

Automotive AM Customers 2009-2011: 11

Countries in scope of projects: Europe (>10); India; Middle East

Marco Neil

Management3 Srl I.D.

Equity Partners

Management Three at a glance

Strategy Consulting

Automotive Industry

Innovation

Emerging Markets

Marketing

Information Technology

Automotive Aftermarket

IAM

OES

VM (Fiat Vice President)

Wide

&

Deep

Marco and Neil founded M3 based on a strong automotive aftermarket competence and started developing the firm as a “global born” start up

Neil Fryer

English La

ng

ua

ges

Italian

Marco Bicocchi Pichi

La

ng

ua

ges

Experience

Competence

Flexibility

Speed

Independent Judgment

Added Value

Automotive industry career holding senior positions in

Lucas, TRW, Bosal and Fiat Group Automobiles.

20+ years experience in delivery of results in

extremely competitive markets, often in adverse

conditions, culminated in involvement in the turn-

around of Fiat with Sergio Marchionne between 2004

and 2008.

Board member experience in large IAM distributor.

Held international and pan-European organization

responsibilities; strong capabilities of acting across

different cultures and in HQ to subsidiary dynamics;

excellent people skills; ability to develop the strong

working relationships needed to work successfully in

stressful situations.

B.A. in English, University of London (UK);

MBA, Warwick Business School (UK)

Started his management career in the Information

Technology and Services Industry with international

business roles up to Marketing Director in EDS

Electronic Data Systems, and VP Etnoteam where he

lead the start-up of Internet Consulting.

Management consultant with Ernst & Young working

on Global Automotive programs, Principal with Booz

Allen Hamilton Automotive and Information

Technology practice recipient of the Professional

Excellence Award , Chief Marketing Officer with

Unicoop, Associate Director with AT Kearney.

Marketing, Strategy, Organization and Information

Technology; held senior management marketing

positions in business to business and business to

consumer. Active Business Angel board member of

different start-ups.

M.Sc. in Economics & Commerce, University of Turin

(ITA); MBA, Nyenrode Business School (NL)

Founders Professional Profile

Automotive Companies where Management3 Founders have

project and management experience

M3 solid foundations are based on work done for automotive companies in the past, adding significant value in different aspects of their business

Experience includes working and living in Europe, North America and Emerging Markets

Founders Experience in the Automotive Industry

We believe in using a combination of quantitative and qualitative analysis techniques and that “go and see” is a must do to define market strategies

ENGAGEMENT ACTIVITIES

Data collection and analysis

• Primary Data Collection

• Secondary Data Collection

• Data analysis and reporting

In depth interviews

• Top Management

• Associations Leaders

• Management along Value Chain

APPROACH

Direct observation

• Car repair workshops

• Parts logistic centers

• VM Aftermarket

Primary and secondary data collection data analysis and

reporting to address quantitative and qualitative data

needs to satisfy engagement objectives. Extensive

library and web research has been performed including

last 15 years issues of auto magazines published in

India.

M3 Managing Partners personally performed a number of

relevant interviews with Top Management representatives

of Vehicle and Components Manufacturers, Large

Dealers, Independent Repair Workshops, Associations,

complemented by local partners activities.

M3 Managing Partners visited relevant sites to gain a first

hand view of different representative situations in term of

quality, approach and behaviors as far as the Parts and

Services value chain in India is concerned. A total of

about 100 interviews, visits and observations was

completed.

PROJECT EXAMPLE: INDIA

We work with a view on the big picture that influences the business of automotive aftermarket, but …

VEHICLE MANUFACTURERS

VEHICLES PARTS PARTS

MANUFACTURERS

VEHICLES SALES

PARTS SALES

VEHICLES BADGES & BRANDS

AUTHORIZED DEALERS

VEHICLES OWNERS & USERS

REPAIRS WORKSHOPS

PARTS DISTRIBUTORS

CAR INSURANCE COMPANIES

PARTS MANUFACTURING

PART MODULES ASSEMBLY

PARTS MANUFACTURING

VEHICLES ASSEMBLY

BANKS & FINANCIAL COMPANIES

OEM PARTS

OES PARTS

IAM PARTS

MAINTENANCE

REPAIR

CRASH

QUALITY

PLATFORMS / MODULES

ENGINEERING CHANGES

LIFE CYCLE

SERVICE INTERVALS DRIVEN KMS

WARRANTY

TECHNOLOGY

MARKETS GROWTH

RATES

COST OF LABOUR

COMMODITIES COST

CAPITAL COST

FINANCIAL MARKETS

SITUATION

CURRENCY EXCHANGES

ECONOMIC AND FINANCIAL DRIVERS

TRADE RESTRICTIONS

COMPETITION LAW

EMISSION REGULATIONS

SAFETY REGULATIONS

INSURANCE REGULATIONS

LABOUR REGULATIONS

REGULATORY ENVIRONMENT DRIVERS

GEOGRAPHIC LEGACY AND DECISIONS

MANUFACTURING FOOT PRINT

and CAPACITY

DISTRIBUTION FOOT PRINT

MACRO REGIONAL

FOCUS USA

NORTH AMERICA

EUROPE and EU

JAPAN and KOREA

CHINA

BRASIL

INDIA and ROW

Automotive Aftermarket Economic Environment

... we have also a pragmatic deep understanding of the complex aftermarket value chain and the multiple variables influencing one the other

Price

Time to delivery Fast(er) Slow(er)

High(er)

Low(er)

REPAIR BAY TECHNICIAN PARTS STOCK DELIVERY

INFRASTRUCTURE SPARE PARTS

AVAILABILITY of

LABOR COST (OPEX – Semi-Fixed)

WORKSHOP INVESTMENTS

(CAPEX)

SPARE PARTS STOCK

(WORKING CAPITAL)

PARTS COST (OPEX – Variable)

VOLUME (Economies of Scale)

RESOURCES SATURATION

SERVICE MIX

COSTS COST DRIVERS

CO

ST

to

S

ER

VE

Vehicle Brand Vehicle Age Parts Brand

Perceived Quality of Parts Customer Service Experience Perceived Quality of Labor

Timing Competition

Automotive Aftermarket Services Demand and Supply Variables Influencing Costs and Market Share along the value chain

Since M3 was founded several international clients have already engaged our company to deal with complex strategic issues

Market Entry Valuation

New Geography

AUTOMOTIVE AFTERMARKET STRATEGIES

Internationalisation Strategy

Market Entry Valuation OE to IAM

OES Market Strategy

Pan European Commercial

Strategy

Price Positioning Data Collection

Managers experience

Consulting approach

Primary Search

Field Interviews

Partners Delivered

Multifunctional view

Execution oriented

We deal with complex strategic issues …. with a pragmatic yet rigorous fact based approach

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• The client has undergone significant internal

changes in the last 15 years and has gained a

leading position in the European market that has to

be further developed and protected

• Intra-channel relationships within the distribution

chain have been reshaped by the rise of large

distributors and international buying groups

• Pricing model is perceived to be a key issue but has

to be investigated in its fundamental drivers and

dynamics in order to understand how to balance

decision making between HQ and branches

• M3 conducted an extensive assessment of client’s market

practices and internal processes, through desk research

and field interviews, in order to highlight and prioritize

needs for intervention.

• For this purpose M3 investigated:

• Pricing strategies and differentials across 32 national

markets and branches;

• Trade Marketing Promotion current practices,

discounts, bonuses and incentive programs

• Relationships within distribution chain, interviewing

client’s managers and customers

• Client’s competitive position in the European market

• Client have been provided with a fact based quantitative and qualitative comprehensive cross view of current situation

gained also trough field research in the eight major European markets visiting clients and client organization

• A fact based recommendation to implement a business transformation aimed at addressing the challenges of Pan-

European and International clients while managing a still relevant local domestic market of small players

SITUATION

The client is a global component manufacturer and a Fortune 500 company with a leading position in the European IAM

market willing to improve its commercial strategies, with particular reference to trade spending and pricing policies, for the

European market. M3 has been engaged thanks to its distinctive combination of automotive aftermarket industry and strategic

business consulting expertise to identify issues and propose solutions in a high-complexity and challenging environment.

GLOBAL COMPONENT MANUFACTURER

European Commercial Policy

LEADING BRAKE FRICTION MANUFACTURER

OES Strategy and Account Management

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• Changes in the OEM/OES paradigm

• Architectural best practices: modularity and

commonalities vs. proliferation of variants

• Service strategy models in the service business

(OES and IAM) and competition with VMs and other

actors to capture market share in the AM services

market (esp. for older vehicles)

• OE Brand equity vs. IAM manufacturer and mega-

distributors image

• Opportunities implied by emerging markets growth

• M3 has helped the customer in identifying and

understanding impact of changes in business model and

VM customer relationships

• As such M3’s role was to:

• Prepare and lead meetings with VM clients to discuss

market view and supplier role;

• Highlight the changes taking place in intra-channel

relationships, in both the parts distribution market and

the service market;

• Assess market environment changes: technology,

process, geography, regulatory, customers ..

• Provide client with a comprehensive framework of

strategic analysis tools to support decision-making

• M3 delivered a broad analysis focused on both industry and market global trends and customer’s core competencies from

which derived recommendations to approach the OES market within the changing scenario

• The assignment deliverables conveyed a wide range of tools and frameworks to support strategic thinking and address the

issues of alignment of organization, process and technology

SITUATION

The client is a leading friction materials manufacturer with a strong position in both OEM and OES markets but changes in

market practices are impacting its market position and needed to be understood and addressed with a conscious structured

strategic approach. The decoupling of OEM/OES sourcing was the main issue on the spot but other changes taking place in

the business model called to action. M3 has been engaged to support the client in the identification of key strategic dynamics

and success factors in order to align enterprise strategy to the on going changes and exploit areas of opportunities.

LEADING COMPONENTS MANUFACTURER

IAM European market expansion

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• Entry in new market/channel: from a OE-only

business to competing in the IAM market;

• Strong competition in a relatively small market due

to strong specialization and long lifecycle of

products. Impacts on economies of scale;

• Different possible production processes bearing

different cost and quality levels, with a direct relation

of volume to technology (different for OE and IAM);

• Future product and process innovations for

lightweight vehicles is expected to have significant

impact in product and processes (change in

materials and production technologies)

• M3 has been engaged thanks to its coverage of key

competence domains required to answer the client’s

request: a specific industry expertise combined with a

market strategy knowledge. The aim was to provide the

client with:

• A clear identification of all the drivers for decision-

making

• An assessment of revenues and profit potential of

alternative opportunities

• The definition of a set of strategic options (from pure

organic growth to M&A initiatives)

• A fact-based in-depth analysis of the market, the competition arena and the technology has been carried out so that the

client gained a deep insight on opportunities and threats

• The project highlighted the risks and complexities of an organic market entry and defined a framework to evaluate possible

targets for M&A as well as alternative growth strategies

SITUATION

The client is a market leader present in three continents, with a portfolio of several brands it is organized in two divisions

manufacturing and marketing distinct automotive components technologies. One division is present in the OE and IAM market

while the other is only operating as OE supplier. Having reacted in a positive way to the 2008 automotive market crisis and

observing an higher resilience of business of the division with an IAM presence, the client was willing to evaluate the IAM

market entry opportunity for the second division. Management Three (M3) was asked to evaluate the strategic options.

LEADING AUTOMOTIVE COMPONENTS MANUFACTURER

Market entry evaluation (India Aftermarket)

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• The target market was and still is growing at a quick

rate but players in the IAM distribution chain need

substantial improvements in standards and

performance;

• Competition from major players aiming at capturing

the service market is increasing: significant

investments are being made in the building of

organized IAM networks

• Approach and timing where decisive and the client

was looking for a professional and detailed

assessment in order to take an informed decision

• M3 was engaged thanks to the expertise and industry

knowledge of its managing partners in automotive

aftermarket and strategic marketing and was asked to

evaluate opportunities and challenges of India market

entry options focusing in particular on a potential JV:

• As such M3’s role was to:

Conduct a thorough assessment of the automotive aftermarket

value chain in India (including prices and costs);

Analyse client business model and test its components

against Indian market conditions;

Transfer lesson learned to management, discuss alternatives

and recommend action plan

SITUATION

The client, a component manufacturer, with a global footprint, was seeking business expansion opportunities. After

establishing more than a bridgehead in the Indian market by establishing strategic JVs with local manufacturing companies the

client was looking to develop the aftermarket business line. Management Three (M3) was asked to present a proposal to

support the international expansion strategy focusing on the Indian market potential opportunity and the evaluation of

alternative options.

• The assignment conclusions highlighted the opportunities and challenges to enter the market on a first-mover basis given

the projected development of the IAM in following years and the elapsed time required to built a credible operation

• M3 hands-on approach allowed the client to have a visual (photo diary) and factual (parts prices, car population size and

distribution by brand and model, market structure of repair shops ..) view of the market and take a well grounded decision

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• The client organization was stretched with important

development programs and the on going

international expansion initiatives;

• Client is a digital value chain service provider

focusing on providing data based services to the

automotive aftermarket value chain;

• The successful business model of the client is tuned

to the market conditions of the European domestic

market

• M3 was engaged because of the deep industry

knowledge of its partners in automotive aftermarket and

digital services strategies and asked to take over a

program management – back to back - role to define an

appropriate market entry strategy in India.

• As such M3’s role was to:

• Conduct a thorough assessment of the automotive

aftermarket value chain in India;

• Analyse client business model and test its components

against Indian market conditions

• Transfer lesson learned to management, discuss

alternatives and recommend action plan

• The assignment provided the client with a well researched and lively hands-on picture of the Indian Automotive Aftermarket

allowing for a fact based, reality rooted discussion on possible strategic options.

• The project approach based on a mix of desk and field direct observation allowed the client to realistically size the

opportunity and understand the challenges of current business model to succeed in the Indian market

SITUATION

The client, a European based service provider to the global automotive aftermarket value chain, is expanding internationally,

and has recently established a presence in North America and in China. Management Three (M3) was asked to present a

proposal to support the international expansion strategy focusing on the Indian market potential opportunity.

AFTERMARKET INFORMATION SERVICES PROVIDER

Indian Automotive Aftermarket Market Analysis

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• A market overview has been produced in the

previous assignment, and execution planning was

required as second step

• The target business model had to be defined and

fine-tuned based on the identified key success

factors

• Scope of service offering to be defined according to

drivers and criteria (content, delivery platforms, data

sources and formats) different when compared with

those adopted in Europe

• M3 performed extensive field research involving a series

of interviews to prospect partners on both supply and

demand side.

• Based on findings M3:

• Delivereda first proposal for the definition of service

offering and pricing strategy

• Highlighted level of awareness and willingness to

adopt client’s solutions of industry leaders

• Identified additional areas of intrinsic opportunities

related to Indian landscape (ITC platforms above all)

• The assignment conclusions showed a set of substantial opportunities to enter the market with a first-mover advantage and

a strong relationships with global and local market leaders with a favourable role of local ICT developing environment

• M3 offered three distinct layers for market entry execution, from a “full-speed” plan to a phased one, all aimed at fostering

the best opportunities for the client to achieve its strategic goals

SITUATION

The client, a European based service provider to the global automotive aftermarket value chain, was expanding internationally,

and had recently established a presence in North America and in China. Following a previous assignment to Management

Three (M3) to evaluate the market potential in a second step the client asked for an overall evaluation of possible market entry

strategies in the Indian market and to outline an execution plan.

AFTERMARKET INFORMATION SERVICES PROVIDER

Indian Automotive Aftermarket Market Entry Approach

LEADING BRAKE FRICTION MANUFACTURER

Indian Automotive Aftermarket Market Analysis

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• Strong and constant Indian vehicle park growth is

expected for coming years but a channel strategy

tailored for the client has to be assessed and

devised

• Indian market is still a relatively far environment

from EU/US standards and practices with a specific

regulatory system and a distinctive on-going

progressive process of transformation towards free-

market

• Complex evolutionary dynamics in the market

landscape for each possible target market: Cars,

LCV, HCV, 2- and 3-wheelers

• M3 leveraged its experience and knowledge of the Indian

market to deliver to the client a structured analysis

focused on:

• a fully detailed depiction of the Indian regulatory

environment;

• an Indian automotive aftermarket overview, focusing

on trends, distribution and customers’ and consumers’

behaviour;

• collecting and presenting a thorough assessment of

the brake friction market and its potential

• Extensive field research activities have been performed in

order to acquire and present first-hand evidence and

knowledge

• From field-gathered evidence and desk research key success factors for a coordinated and strategically sound market

entry and a subsequent sustainable growth have been identified

• A range of tools and strategic decision tools have been delivered to the client together with a set of recommendations and

indications for the development of a well-balanced entry strategy considering market size and price points of products

SITUATION

The client is a leading friction materials manufacturer with a strong position in both OEM and OES markets that is considering

an international expansion targeting the Indian market considering different alternative routes. M3 was asked to provide an

overall analysis of opportunities and success factors and to outline possible market entry strategies

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• Mature market during recent years yet still

attractive: business models and efficiency

performance play key roles

• Competitors and distribution channel performance

with uneven performances.

• Brand strategy definition and key success factors

for gaining robust reputation on a new market

• M3 was engaged thanks to its expertise and industry

knowledge of its partners in automotive aftermarket in

Europe in general and Italy specifically

• As such M3’s role was to:

• Conduct an assessment of the HCV aftermarket value

chain in Italy

• Analyse client business model and test its components

against Italian market conditions

• Transfer lesson learned to management, discuss

alternatives and recommend action plan

• The assignment was carried out by producing a detailed picture of the Italian HCV market (distribution chain, players,

regional/local specificities) and en evaluation of the market and growth potential for the client products

• Evidence gathered via both desk and field research combining quantitative and qualitative approaches allowed to transfer to

client’s management an adequately complete knowledge of the market, and form realistic expectations for the business case

SITUATION

The client is a global manufacturer of clutch and hydraulics components, with a core focus on the HCV market, active on both

OE and IAM channels with facilities in India, UK, USA, that was evaluating expansion opportunities after acquisition of the

European operations. One target market was the Italian market but the client had no experience of continental Europe

markets. Management Three (M3) was asked to support the client in the identification of opportunities and strategic options

and in the organization of contacts with potential buyers.

CLUTCH AND HYDRAULICS COMPONENTS MANUFACTURER

Market entry evaluation (Italy Aftermarket)

OIL PRODUCTS RETAILER (ISRAEL)

Italy Retail Study Tour

RESULTS

KEY ISSUES MANAGEMENT THREE CONTRIBUTIONS

• Client needed to gain both first-hand experience and

guided insights on a wide range of retail concepts

innovation examples

• The client needed to have quick results with a

limited amount of time and effort that could be

invested in the project

• Commonalities and differences between Italian and

Israel markets and hints on the applicability of new

retail concepts in Israel

• M3 has been engaged for its specific automotive

expertise and its strong network of relationships with

industries and key people from related industries.

• Thanks to its capabilities M3 was been able to provide the

client with:

• A time-efficient delivery of the required scope of work

• A thorough analysis of the store concept evolution in

Italy and the underlying strategic drivers

• Meetings with key people from leading international

companies (Italian Headquartered MNC or MNC with a

significant presence in Italy) active with store concept

innovation

• Preparatory analysis conveyed a detailed overview of the Italian landscape, a description of current trends and latest

innovations with a comparison with relevant international cases, all summed up in the final project documentation

• The tour mixed together visits to retail outlets in Central and Northern Italy and a series of meeting with retail marketing

managers and experts from leading companies to full satisfaction of client CEO and CMO that participated in the visit

SITUATION

The client markets petroleum products and operates a chain of gas stations and convenience stores in Israel. In order to

expand knowledge and gain insight on current best practices across the international landscape the top management of the

client wanted to visit Italian retail outlets and arrange meetings with top managers of key companies in the gas retail and

convenience stores industries. M3 has been asked to set up the program for the tour and the meeting and documentation on

Italian and international best practices and the rationale behind new store concepts

*Note: This document is confidential and solely meant to represent Management3 capability and expertise. This document may not be reproduced

totally or partially without mentioning the source.

Data gathering and quantitative analysis are an important foundation of our fact based approach …

*Note: This document is confidential and solely meant to represent Management3 capability and expertise. This document may not be reproduced

totally or partially without mentioning the source.

… as well as direct observation and interviews that are irreplaceable if you are willing to understand and challenge myths and superficial conclusions

Eyes, ears and brains in the market for our

clients

Management3 srl

Via Barnaba Tortolini, 5 00197 ROMA (Italy)

www.management3.com

Marco Bicocchi Pichi Neil Fryer