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Unsustainable
Global demand for HVAC equipment is projected to rise 6.1
percent per year through 2016 to $107 billion. North
America will achieve the fastest gains (US recovery in
construction). The Asia/Pacific region will post the second
fastest growth rate, led by India and Indonesia.
Who is responsible?
[
Business Threat
Sectors at greatest risk include the food and drink
Outline
HVAC Industry Overview
Porters Five
Manufacturing Trends
R-22 Phase-out Approaches
History Regulation
Assessing the Impact of Refrigerants
Example of Daikin
Lobbying Efforts
Patent of R-32
Industry Rivalry
Numerous equally balanced competitors
Highly competitive
Oversaturation
Overall maturity of the market
Largest manufacturers have come from Europe, Japan,
HVAC equipment
Barriers To Entry
High capital costs
Economies of scale
Growing niche markets are making participation in the
industry easier
Manufacturer-distributor channel
M&A activity has grown dramatically in recent years
Acquisitions the main method for firms to expand their HVAC
capabilities
Threat Of Substitutes
Cross Price Elasticity
Shift from price-sensitivity to total lifetime value
Trade Flow
Traditionally equipment produced in North America, Western
Risk = Opportunity
3. Growing the Business
History of Refrigerants
Traditionally, the focus of the HVAC industry was simply
on finding a refrigerant that would provide effective
cooling
Many of the early refrigerants such as sulfur dioxide,
methyl chloride and ammonia met that objective but
posed safety hazards due to their toxicity or high
flammability potential
History of Refrigerants
1930s
chlorofluorocarbon (CFC) refrigerants were introduced as safe
alternatives to the chemicals used before them
CFCs came to dominate first refrigeration and later HVAC because
of their safety and efficiency
1950s
Hydrochlorofluorocarbons (HCFCs) were added to the portfolio of
refrigerant alternatives
1970s
environmental concerns arise
Scientists discovered that CFCsand to a lesser extent HCFCs
were contributing to the depletion of the ozone layer.
ozone layer
The Montreal Protocol on Substances that Deplete the
ODP
GWP
Flammability
Toxicity
Cost
fluorocarbon units
Using ammonia in populated areas can bring about some
safety, systems in Europe have addressed these concerns with
the introduction of systems such as containment casings,
ammonia absorption systems and flameproof electrical panels;
this additional safety equipment adds cost
Ammonia systems around the world are facing more stringent
restrictions and demands to reduce the refrigerant charge
Daikins R-32
(Source: Daikin website)
Benefits of R-32
Less ozone depletion
Lower global warming impact compared to R22 and
R410a
Higher energy efficiency
Easier to recycle
Cheaper for developing countries
Strategic Questions
Legislation and Environmental Regulation:
Why didnt the markets naturally lead to more
efficient air conditioners?
Innovation
Is the move to a less harmful refrigerant really
innovation? What about refrigerant-less
technology?
References
https://www.gov.uk/government/uploads/system/uploads/attachment_
data/file/182590/fgas-rac8-hcfc-phase-out.pdf
http://businesstoday.intoday.in/story/case-study-daikin-turnaroundindustry-in-india-market/1/201092.html
http://www.trane.com/Commercial/Uploads/PDF/11612/Related_Litera
ture/Refrigerant/HVAC_Refrigerants.pdf
http://www.trane.com/commercial/uploads/pdf/cso/138/Refrigerants.p
df
http://e360.yale.edu/feature/cooling_a_warming_planet_a_global_air_
conditioning_surge/2550/
http://www.goshen.edu/physix/160/gco/6.7.sp.php
http://www.ieso.ca/imoweb/siteshared/images/One_KWh_Infographicweb.pdf
http://www.daikin.com/csr/feature/02_2.html
http://www.businessgreen.com/bg/news/2306617/how-a-start-up-ismaking-refrigerant-tracking-a-hot-commodity
http://eosclimate.com/refrigerant-revolution/
References
Shigeki Ichii, Susumu Hattori, and David Michael. How to Win in Emerging
Markets: Lessons From Japan. Harvard Business Review. May 2012.
http://hbr.org/2012/05/how-to-win-in-emerging-markets-lessons-from-japan/ar/1
Daikin Acquires Goodman for $3.7 Billion, achrnews.com, September 10 2012.
Website Accessed July 2013. http://www.achrnews.com/articles/120887
Hourahan, Glenn (VP Research and Technology Air Conditioning Contractors of
America). ACCA Website. An Outlook on the US HVAC Industry, Evolving
Contractor Response To Market Forces, August 2010 Website Accessed July
2013. http://www.hourahan.com/wp/wp-content/uploads/2010/08/Euroventfinal.pdf
Capstone Partners Investment Banking Firm. HVAC Products Coverage Report
Market Intelligence for Industry Players Quarter 4 2011. Website Accessed July
2013.
http://www.capstonellc.com/sites/default/files/Q4%20HVAC%20Coverage%20Re
port.pdf
Torpin, Joanna R. Manufacturers Predict Slow Growth in 2013. Achrnews.com.
March 18, 2013. Website accessed July 2013.
http://www.achrnews.com/articles/122763-manufacturers-predict-slow-growth-in2013
References
http://www.zdnet.com/panasonic-going-green-key-to-staying-in
the-black-7000006197/
http://www.huffingtonpost.com/jennifer-schwab/fortune-greenconsumers-w_b_3254512.html
http://www.epa.gov/ozone/title6/phaseout/22phaseout.html
http://businesstoday.intoday.in/story/case-study-daikinturnaround-industry-in-india-market/1/201092.html
Jacquelyn A. Ottman, Edwin R. Stafford, and Cathy L.
Hartman. Avoiding Green Marketing Myopia. June 2006.
Website accessed June 2013.
http://www.greenmarketing.com/files/StaffordMyopiaJune06.pdf
Daikin Corporate CSR Website.
http://www.daikin.com/csr/environment/production/06.html