Benchmarking Success: Building a Global Market Demand Indicator
Creating a new demand measure to enable a building material manufacturer to gauge its performance.
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In a globalised and rapidly evolving market landscape, benchmarks serve as essential tools for assessing performance, identifying strengths and weaknesses, and making informed strategic decisions. They provide a standardised method for comparing performance across diverse geographies and product lines, enabling companies to adapt to changing market conditions and stay competitive. Benchmarks also support data-driven decision-making, align strategies with market demands, and foster a culture of continuous improvement.
The Challenge
Our client, a major multinational manufacturer of building materials, wanted to develop a benchmark against which to assess its sales and how its market share had evolved. This was challenging as they sell their products to a wide range of industries in many countries. While our client has insights into construction sectors, they struggle to get a holistic view of other industries, hence are unable to measure total market size or their market share. This made it impossible for them to identify areas of strength and weakness across its geographies and product lines to inform strategic planning exercises and to set targets for incentive compensation. They sought Oxford Economics’ help in building a proxy indicator to measure market demand accurately.
The indicator of market demand is needed to cover the four product segments across more than 30 countries that our client serves so that it can be aggregated to regional and global totals. In addition, the client required the market demand indicator to be updated on a quarterly basis and reflective of broader economic conditions.
The Solution
We leveraged our modelling skills and detailed datasets to overcome the challenge of quantifying market dynamics in a highly specialised industry.
- Firstly, we identified the end-user industries for each product in the markets in which the client operated.
- We mapped the customer industries against data for the corresponding sectors in our Global Industry Model. This mapping process enabled us to integrate our validated data and conduct modelling for the client, ensuring the accuracy of our market sizing.
- We then compared the results with the company’s performance to show how changes in the client’s sales compared with the market demand indicator across each segment and geography.
Underpinned by verified data from official sources, rigorously vetted by our economists, the Global Industry Model is a unique resource that connects the economy with industry growth. By identifying and mapping the supply chain linkages between economic sectors within countries and across regions – and connecting them to the macroeconomic drivers of demand – it provides a rigorous and consistent representation of sector output and investment.
Throughout this engagement, we ensured consistent and open communication with the client to understand their requirements, target markets and business operations thoroughly. We provided the client with a clear understanding of our methodology for calculating the demand indicator for each product and market, followed by guidance on interpreting and applying them. Upon delivering the results, we sense checked with the client to ensure the indicator aligned with the company’s understanding of its market performance in the past. This collaborative approach facilitated informed consensus and secured buy-in from the client’s strategy department and C-suite.
The Result
The market demand indicator provides a globally consistent measure of market performance, updated quarterly as economic conditions change. It is now the accepted benchmark for assessing business performance across all departments.
In addition to its core role as a quantifiable market measure on which to base incentive compensation, it provided an objective third-party view of market demand that often confirmed — but sometimes challenged — market views held across the business units.
The client was very pleased with the project’s results. Although primarily intended as a benchmarking exercise, as the business units began to explore its use for informing future budgets and strategic planning decisions, the client asked Oxford Economics to make enhancements to adapt it to forward-looking purposes. These included incorporating high-frequency indicators of market conditions to better inform the near-term outlook and using alternative economic scenarios from our Global Scenarios Service to undertake stress testing exercises for risk management.
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