Businessmodel of Johnson Controls

Customer Segments

Johnson Controls serves a range of industrial and commercial clients through its two reportable business segments: Building Efficiency and Power Solutions. The Company’s Power Solutions segment primarily serves customers operating within the automotive sector, including original equipment manufacturers, the automotive replacement market and the battery aftermarket. The Company’s Building Efficiency segment provides solutions for both commercial buildings – including offices, retail spaces and hospitality facilities such as hotels and restaurants – and industrial facilities.

Johnson Controls includes a number of high-profile automotive companies among its customers, namely BMW, Chevrolet, Toyota, Volkswagen and Ford, as well as commercial and industrial operators such as Walmart, BP, Bristol Myers Squib, and Regeneron Pharmaceuticals.

Geographically, the US is Johnson Controls’s largest market, accounting for around 45% of the Company’s total sales in 2015. The Company also serves customers across Europe, Asia Pacific, Latin America and the Middle East; however, no other single country accounts for more than 10% of Johnson Controls’s total sales.

Value Propositions

Johnson Controls provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company being one of the largest and most established operators of its kind and the largest producer of lead-acid automotive batteries in the world, counting among its customers well-known brand names such as BMW, Ford and BP;
• Its expertise and experience, with the Company employing experienced industry executives and specialist personnel across its two business segments; and
• Its commitment to research and development, with the Company devoting a significant portion of its revenue to the development of new and innovative products and technologies. ### Channels

Johnson Controls operates a website at www.johnsoncontrols.com, through which it provides information to potential and existing customers on its various products, services and activities. The Company, however, does not operate an online sales channel.

Johnson Controls primarily makes sales through its own in-house sales team, organised by segment and geographic region. The Company’s Building Efficiency segment sells products and services through a global network of sales and service offices, while its Power Controls segment sells and distributes its products through around 61 wholly- and majority-owned manufacturing or assembly plants, distribution centres and sales offices in 22 countries worldwide.

The Company’s own sales channels are supported by a network of third-party distributors, independent sales agents, with some building controls, products and mechanical systems notably being sold to distributors of air- conditioning, refrigeration and commercial heating systems throughout the world.

Customer Relationships

Johnson Controls does not make any of its products, solutions and services available to customers on a self-service basis.

The vast majority of Johnson Controls’s sales are made through its direct sales teams, which consult with customers over a period of time in order to establish a detailed brief that fully covers the customer’s individual needs and requirements.

The Company seeks to establish longstanding relationships with its customers, encouraging recurring business, with many of its Building Efficiency segment’s relationships spanning entire building lifecycles.

Johnson Controls provides ongoing support to its customers, who are able to contact the Company directly with queries and concerns through an online contact form or over the phone. Customers can also interact directly with the Company through its social media accounts, including with Facebook, Twitter, YouTube, and LinkedIn.

Key Activities

Johnson Controls is a technology company. It provides products, services and solutions designed to optimise the energy and operational efficiency of commercial and industrial buildings, and produces lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles.

The Company operates in two business segments: Building Efficiency, comprising the design, production, marketing and installation of integrated heating, ventilating and air conditioning systems, building management systems, and security; and Power Solutions, which offers lead-acid automotive batteries for passenger cars, light trucks and utility vehicles, serving both automotive original equipment manufacturers and the general vehicle battery aftermarket. The Company also supplies advanced battery technologies to power start-stop, hybrid and electric vehicles.

Key Partners

Johnson Controls partners with a range of companies across multiple sectors throughout the design, production and implementation of its products and solutions. Its partners can be broadly categorised as follows:

• Channel Partners, comprising distributors, resellers and independent sales agents that help to extend the Company’s own in-house sales and marketing channels;
• Supplier Partners, comprising suppliers and vendors of tools, resources and materials that assist in the Company’s production processes; and
• Strategic and Alliance Partners, comprising manufacturing, technology and software companies, with which the Company collaborates on joint venture projects and shares resources and technology; Johnson Controls has recently launched a partnership with the University of Wisconsin to develop more fuel-efficient battery solutions for electric vehicles, with Cisco as part of the Digital Ceiling smart building initiative, and with Chicago’s Merchandise Mart to develop energy storage solutions.

Key Resources

Johnson Controls’s key resources are its technologies and intellectual properties, its design and research facilities, its supply chain, its manufacturing and logistics facilities, its sales and distribution network, its partnerships, and its personnel.

The Company owns numerous US and international patents, including patents that cover technologies and inventions used in, or in the manufacture of, its current portfolio of products and solutions. While the Company considers its patents to be important to its business operations, no single patent, or group of patents, is deemed to be critical to the success of the business.

Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in the name of Johnson Controls, including applications entitled ‘Bus bar carrier for lithium ion battery module’, ‘Battery cell separator’ and ‘Motor cooling method for a compressor’.

Cost Structure

Johnson Controls incurs costs in relation to the development of its products and solutions, the management of its supply chain, the operation of its manufacturing and logistics facilities, the operation of its sales and marketing networks, the management of its partnerships and the retention of its personnel.

Johnson Controls spends a significant portion of its revenue on research activities and product development activities, which amounted in 2015 to $733 million. The Company also accrues substantial general and administrative costs. As of 30th September 2015, Johnson Controls employed approximately 139,000 employees, representing costs in the form of salaries and benefits, and operated a broad international office network, accruing costs in the form of rent and utilities.

Revenue Streams

Johnson Controls generates revenue through its two operating segments:

• Building Efficiency, including revenue derived from technical services, and the replacement and upgrade of heating, ventilation and air conditioning controls and mechanical equipment, as well as the installation of controls and equipment during the construction of new buildings; and
• Power Solutions, including revenue derived from the development and sale of automotive power solutions, such as lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles. In 2015 Johnson Controls recorded $37.18 billion in total net sales for the year, down slightly on the $38.75 recorded in 2014. Of these total sales, the Company’s Building Efficiency segment accounted for around $10.51 billion, while the Power Solutions segment accounted for $6.59 billion. The remaining sales revenue was generated by the Company’s now former Automotive Experience segment.