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SMWIA - SMACNA Partnership Conference Market Share Breakout Session March 4, 2002 Reasons for Contractors to Grow (1 of 2) Key employees career growth Best of the best employees Increased incentives Funds for improved systems, facilities, and equipment Satisfy customer needs

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SMWIA - SMACNAPartnership Conference

Market Share Breakout Session

March 4, 2002


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Reasons for Contractors to Grow (1 of 2)

  • Key employees career growth

  • Best of the best employees

  • Increased incentives

  • Funds for improved systems, facilities, and equipment

  • Satisfy customer needs


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Reasons for Contractors to Grow (2 of 2)

  • Improve competitive position

  • Improve services to new customers

  • Stimulate creativity

  • Improve the life for employees in the Sheet Metal Industry


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Reasons for Sheet Metal Locals to Grow (1 of 2)

  • Attract new entrants - More vibrant local union membership

    • Improve pension, health and welfare programs

    • Enhance benefits with more members

  • New market penetration

  • Union local - improve financial position with more members


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Reasons for Sheet Metal Locals to Grow (2 of 2)

  • Strengthen local union’s position in the community

  • Improve the quality of life for employees in the Sheet Metal Industry


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Understanding Growth

  • Measurement

    • Reference point

    • Managerial tool

    • Motivational tool

    • Communication vehicle

  • Which Measurement?

    • Market Share



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What Is Market Share?

  • Ratio

    • “Our Volume”/“Total Market Volume”

    • Usually expressed as a percent (e.g., “Johnson Sheet Metal has 40% of the duct market in East Timbuktu, North Dakota)

  • Volume basis

    • Dollars

    • Units (heads, pounds of metal installed)



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Important Considerations for Calculating Market Share

  • Defining the components

    • Numerator

      • What units should be used to define “our volume?”

      • Example: should we consider fabrication employees as well as installation employees?

    • Denominator

      • How do you define “Total Market Volume?”

      • Impact of how “Total Market Volume” is defined

        • Major influence on overall “market share” number

        • Can drive perception of results internally and externally


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Other Considerations

  • Proposed use of the data

  • Complexity vs. Cost

  • Precision vs. Accuracy

  • Absolute vs. Trend

  • Repeatability


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Method I

FMI Duct Market Opportunity Index


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Objectives

  • Estimate of Market Size Opportunity at the local level

  • Provide a quantitative assessment of local market success in accessing opportunities

  • Develop trends in the opportunity index


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Background

  • Three successive iterations of the model have yielded increasing refinements

    • May 1998, Duct Fabrication Survey

    • May 1999, Duct Fabrication Survey Update

    • May 2000, Best Practices Task Force

  • Trend data available, 1992 to 1999

  • Econometric forecasting and modeling, 2000 to 2005


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Opportunity Matrix Model

1. Construction

Put in Place

by Market Segment

4. Deduct for

Usage of Flex Duct

and Ductboard

7. Opportunity

Index

(Hours per $1,000

Opportunity)

2. Apply Model

Factors for Usage

by Segment

and Region

5. Local Duct

Opportunity

6. Local

Hours Reported

3. HVAC Duct

Installed Value


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Key Definitions

  • Constant Dollars — 1992 dollars without inflation are used to maintain year-to-year index consistency.

  • Put-in-Place Construction — The total value paid by the building owner (in constant dollars).

  • HVAC Duct Installed Value — The portion of Put-in-Place Construction represented by HVAC duct work including labor, overhead, and profit, and excluding HVAC equipment.

  • Local Duct Opportunity — HVAC Duct Installed Value adjusted down by the local market value of flex duct and ductboard.

  • Tons of Steel — Estimated tons of steel indicated by the Local Duct Opportunity. This is used by FMI to validate findings against available industry benchmarks.


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Interpretive Guidelines

  • The Index is based on privately owned construction only.

  • Residential construction is not included.

  • Anomalies in reported hours have been smoothed.

  • Hourly data is not adjusted for non-duct work (e.g., architectural metal).

  • Put-in-Place Construction is based on the local market trading area (MSA). Local data does not sum to regional data due to market coverage.

  • The Opportunity Index estimates hours per thousand dollars of opportunity. This is not market share.


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Method II

Best Practices Presentation/”Headcount” Method



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Establishing Market Trends

  • Determine local’s construction membership

    • Building Trades, Roofing, Residential

    • Journeymen, Apprentices Members, Apprentices

  • Determine total construction employment

    • Department of Labor database of all state unemployment contributions by specific business type matched to local jurisdiction, county by county


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Construction Employment

1992—43,845

1996—47,708

8.8% increase

1996—47,708

2001—66,381

39.1% increase

Building Trades Membership

1992—1,048

1996—718

31.5% decrease

1996—718

2001—857

19.4% increase

Total Construction Employment Versus Local X Membership


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Establishing Union Density

  • Density is the percentage of workers in a union

  • Union members

    • Building Trades, Roofing, Residential

    • Journeymen, Apprentice Members, Apprentices

  • Sheet metal workers

    • What percentage of workers in construction perform sheet metal work?



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Summary

  • Growth is vital

  • Managing growth demands measurement

  • Market share is a very basic component of measuring growth

  • Market share measurement can be a managerial tool, a motivational tool, and a communications tool

  • Go ahead and start measuring market share…but do it collaboratively!


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