Principles of opportunity management
Opportunity management, like risk management, forms a central part of the Company’s day-to-day management. In 2016, the aggregate opportunity position was largely unchanged compared with the previous year. Individual areas of opportunity are identified within the framework of the strategy process. Opportunities are determined and managed on a decentralised basis in line with the Group strategy.
There are monthly reports on the opportunity situation as part of the regular Group reporting process. As a result, the KION Group is in a position to ascertain at an early stage whether market trends, competitive trends or events within the Group require individual areas of opportunity to be re-evaluated. This may lead to reallocation of the budgets earmarked for the realisation of opportunities. Such decisions are made on the basis of the potential of the opportunity, drawing on empirical values. There is no management system for the evaluation of opportunities comparable to the system for risk management.
Categorisation of opportunities
By ‘opportunities’, we mean positive deviations from the expectations set out in the outlook relating to the economic situation and the KION Group’s position. Opportunities are divided into three categories:
- Market opportunities describe the potential resulting from trends in the market and competitive environment and from the regulatory situation.
- Strategic opportunities are based on implementation of the Group’s strategy. They may lead to positive effects that exceed planning assumptions.
- Business-performance opportunities arise in connection with operational activities along the value chain, such as restructuring or cost-cutting measures.
The economy as a whole may perform better than expected in 2017. In addition, circumstances may occur in the wider market at any time – such as quality problems at competitors or the effects of consolidation – that increase demand for products from the KION Group brands. New, unforeseen regulatory initiatives could be launched, for example the tightening of health and safety regulations or emissions standards, that would push up demand for products offered by the KION Group brands. Average prices for procuring commodities over the year may be cheaper than anticipated.
Medium- to long-term market opportunities are presented, in particular, by:
- growing demand for intralogistics products, solutions and services as a consequence of globalisation, industrialisation and fragmentation of supply chains, as well as the necessary efficiency enhancements due to limited storage space and changing consumer needs;
- high demand for replacement investments, especially in developed markets;
- the trend towards outsourcing service functions, particularly in the market for industrial trucks, and growth in demand for finance solutions;
- increased use of industrial and warehouse trucks powered by electric motors – one of the KION Group’s particular strengths;
- growing demand for automation solutions and fleet management solutions in connection with the rapidly expanding e-commerce sector, as well as the realisation of Industry 4.0 concepts.
The positive impact of strategic activities, such as the Strategy 2020, is already largely reflected in the expectations regarding the KION Group’s financial performance in 2017. Nevertheless, the individual activities could create positive effects that exceed expectations. There is also a possibility that new strategic opportunities that were not part of the planning may arise over the course of the year, for example in the form of acquisitions and strategic partnerships.
The KION Group’s medium- to long-term strategic opportunities in the Industrial Trucks & Services segment arise, in particular, from:
- a greater presence in the economy and volume price segments, particularly as a result of the systematic implementation of the groupwide platform strategy;
- strengthening of its market-leading position in core western European markets by boosting its technological expertise and making greater use of shared modules;
- expansion of the service portfolio, including financial services, at every stage of the product lifecycle, taking advantage of the high number of trucks in use.
The KION Group’s medium- to long-term strategic opportunities in the Supply Chain Solutions segment arise, in particular, from:
- further consolidation of its position in the market for intralogistics solutions based on the growing acceptance of automation concepts;
- the advancing digitalisation and automation of production and supply chains as part of Industry 4.0.
Business-performance opportunities primarily arise from ongoing activities to modernise and streamline the KION Group’s production facilities and from the worldwide integration of the production network. By investing in new locations, products can be assembled nearer to the markets in which they are to be sold, economies of scale can be achieved across the Group and synergies can be leveraged. Further development of the Group’s back-office services will also help to achieve these objectives.
The following may lead to an increase in profitability in the medium term:
- Ongoing efficiency increases at production sites may boost sales and improve the gross margin.
- Effective use of global development capacities may create synergies and economies of scale.