CyberSpeed Technologies

Tarin
Punda
Pantharee
Panthida
 Agenda

Company Background
Situation Analysis
Issues and objectives
Recommendation
Financial Forecast
Key Success Factors
Conclusion
 Company Background

2 Product Lines
Motocam
CyberSpeed Technologies

• Eliminate blind spots

• 66% of revenue
• Target Market: 40-and-over age group
average income of $80,000

Rcam
• Built-in recording device
• 34% of revenue
• Target Market: Sport-and-dirt bike riders

Sold through:
•Dealers + Distributors = 90%
•Retailers + Direct Sales = 10%
 Situation Analysis
@ Present

Current Opportunities:
•Pioneer in US motorcycle market •Passenger Vehicles
•$52,000 in Sales •Commercial Vehicles
•120 sales units •International Markets
 Situation Analysis
@ Present Ultimate
Goal

Sell off the company at the highest

possible value within 5 years
 Situation Analysis
@ Present Ultimate
Goal

Issues To Be Considered
•Product Markets
•Geographical Markets
•Channel Selections
•Exit Strategy
 Strategy Overview
Product Opportunities
•Motorcycle
•Passenger Vehicles Focused Strategy

Proposed Strategies
•Commercial Vehicles I. Product Segment
Immediate - motorcycle
Market Opportunities
Term II. Domestic VS.
• U.S. International
• Asia
Strategies

- Domestic
• Europe
• Canada

Available Channels Channel Selection

Short-Term • OEMs
• Distributors Distributors
• Dealers
• Retailers

Exit Strategy
Exit Decision
Intermediate • How Much
Exit
Sell to OEMs
Term • To Whom
I. Focused
Strategy
 Strategy I: Focused Strategy
Geographical Product
Area Segment

Immediate
Term

Short-Term

Intermediate
Term
 Strategy I: Focused Strategy
Geographical Product
Area Segment
America International

Criteria
. Management Experience
 x
I. Choice of Channel All OEMs
II. Flexibility  x
V. Customer Preference
V. Borrowing Capacity


Europe & Japan
x
VI. Market Potential  
Implications: Unsuitable for Internationa
Future for Domestic market
Expansion
 Strategy I: Focused Strategy
Geographical Product
Area Segment
America International

Criteria
. Management Experience
 x
I. Choice of Channel All OEMs
II. Flexibility  x
V. Customer Preference  Europe & Japan
V. Borrowing Capacity  
VI. Market Potential  
Implications: High Probability Unsuitable for Internationa
of success Expansion
 Strategy I: Focused Strategy
Geographical Product
Area Segment

Immediate Prod
Term Crite uct M
r arke
ia t

Short-Term

Intermediate
Term

Motorcycle = Most Promising Segment

CyberSpeed

II. Channel
OEMs

Distributors
Selection
Dealers

Retailers
 Strategy II: Channel Selection
Alternatives of Distribution Channels:

CyberSpeedCyberSpeedCyberSpeedCyberSpeed

Immediate
Term

OEMs

Short-Term Upstream

Distributors •High Volume

•Low Margin

Intermediate
Term Dealers
Trade-off

Retailers •Low Volume

•High Margin
Downstream
 Strategy II: Channel Selection

Financial-related Firm-related
Criteria Criteria

Immediate • Margins
Term
• Expected Units

Short-Term

Intermediate
Term

Dealer and Distributor

generate highest gross profit
 Strategy II: Channel Selection

Financial-related Firm-related
Criteria Criteria

Immediate
•Possible Channel Conflict
Term •Company’s Variables

Combination of Channels?
CyberSpeedCyberSpeed
I. Selling directly to dealers
Short-Term  Impede distributors’ roles
 Create channel conflict
 Reduce channel efficiency

II. Motocam VS. Number of Contact

Intermediate Distributors Size Small
Term

X
Financial
Small
Capacity
Managerial Low
Expertise
Dealers Dealers Best to minimize number of contacts
 Strategy II: Channel Selection

Financial-related Firm-related
Criteria Criteria

Immediate
•Possible Channel Conflict
Term •Company’s Variables

Combination of Channels?
CyberSpeedCyberSpeed

Short-Term
I. Selling directly to dealers
- Create Channel Conflict

II. Evaluating Company’s Variables

- Minimize Number of Contacts
Intermediate Distributors
Term

X Favors Distributors
Dealers Dealers
 III. Exit
Strategy
 Strategy III: Exit Strategy
I. Potential Target: OEMs
II. Probability of Success

Immediate
Term

Short-Term

Intermediate
Term
Target Buyers: 2nd tier Motorcycle Companies
 Constantly looking for competitive edge to
become leaders

III. Expected Value (2008): $4 million

 Financial Justification

Activities 2004 2005 2006 2007 2008

Channel Selection

Operation
With subcontractor 24 subcontractor in Mexico
With
in Redmond

Marketing Activities
Low cost Press Media Advertising
Marketing + Demonstration at Retail
+
Demonstration
at Distributor
Exit
 Financial Justification

Average Annual Growth (CAGR)

Sales 62.17%
NI 65.23%

Net income (loss)

Revenue
600,000
$10,000,000
$9,324,293
$521,596
500,000
$8,000,000
400,000 $6,909,800
$379,658
$6,000,000
300,000
NPV = $2,774,456
$4,800,498
$262,676
$4,000,000
200,000 $2,964,521
$158,604
$2,000,000
100,000 $1,348,068
$69,981
- $0 $52,588
-$7,221
-100,000 20032003 2004F2004F 2005F
2005F 2006F
2006F 2007F
2007F 2008F
2008F
 Financial Justification

Estimated Cost
Channel Selection Marketing Expense
Trade $1,000,000
PR $500,000
Publication $1,000,000
Supplier contract $120,000
Contingencies $100,000
Total $2,720,000

Financing • Established Relationship

SME Loan • The rest would be financed by
$500,000 ineternally generated funds
 Key Success Factors

Prioritize Smart
Opportunities Channel
Selection

R&D
 Issues Are Solved
ssues To Be Considered Proposed Strategies Ultimate Goal:
Product Opportunities
•Motorcycle Focused Strategy
•Passenger Vehicles
•Commercial Vehicles
I. Product Segment
Market Opportunities “Motorcycle”
• U.S. II. Geographical Market
• Asia “U.S.”
• Europe
• Canada

Available Channels Channel Selection Sell off at the

• OEMs
Distributors
highest possible
• Distributors
• Dealers
value within 5 yr
• Retailers

Exit Strategy
Exit Decision
Exit
• How Much?
• To Whom? Sell to OEMs
Thank You
 Presentation Slides

Company Background
Situation Analysis
Issues To Be Solved
Strategy Overview
Strategy I: Focused Strategy
-Product Segment
-Geographical Area
Strategy II: Channel Selection
Strategy III: Exit Strategy
Key Success Factor
Issues are Solved
 Slide Navigator

SWOT Analysis
Market Analysis
Immediate Liquidation
Why Not Enter Asia Market
Margin Per Channel
Supporting Marketing Activities
Domestic Market Potential
Exit vs. No Exit
Countering competitors

Production Capacity
Sales Breakdown
Channel Market Share
Distributor Target
 4 P’s Analysis
Products
-Motocam
-Rcam
Place
-retailers
-distributors
-direct to end consumers
-website
Promotion
-trade show
Price
-Motocam: $600
-Rcam: $400
 SWOT analysis
• Strength
– Innovator in motorcycle market
– Distinctive product
• Variety of product enhancement
• Relatively low price
• Weakness
– Limited financial resources
– Lack of managerial experiences
– Lack of market presence /brand awareness
– Simple technology – easily imitated
• Opportunity
– Growing motorcycle segment
– Emerging international market
Firm value at year end

Year Value at year end

t=0 $2,774,456
2004 $3,183,103
2005 $3,492,625
2006 $3,738,104
2007 $3,895,423
2008 $3,934,401
 Why Not Enter Asia Market
Different Customer Characteristics
U.S. motorcyclists
- recreational oriented
- high chance of purchasing Motocam

Asian motorcyclists
- buy motorcycles for cheap transport
- Unlikely to buy motorcycle accessories

Domestic Market Potential

Motorcycle market growth averaging 15% a year
Market Size (units):
- Motocam 187,810
- Rcam 140,858
Current Sales
- Motocam 80
- Rcam 40
 Domestic Market Potential
Criteria
I. Management Experience
 x
II. Choice of Channel All OEMs
III. Flexibility  x
IV. Customer Preference  Europe & Japan
V. Borrowing Capacity  
VI. Market Potential  
Domestic Market Potential
Motorcycle market growth averaging 15% a year
Market Size (units):
- Motocam 187,810
- Rcam 140,858
Current Sales
- Motocam 80
- Rcam 40
Margin Per Channel
 Supporting Marketing Strategy

Early Stage
- Limited Budget
Low-Cost Marketing
- Public Relations
innovative new product
ability to attract press
Product Sample at Distributor
- Demonstration key factor
in purchase decision
Later Stage
Press Advertising
i.e. motorcyclist magazine
Product Sample At Retail Level
 Exit vs. No Exit

Not Exit Exit

• Competitors likely to enter • Take Advantage of being first-mover
market in the near future • Build customer base to increase brand
• Product relatively low-tech value when competitors enter market
• Attractive to OEMs
• Easy for Competitors to Imitate
-Motorcycle manufacturing leaders likely
to introduce similar product in the near
future
-Those fall behind (3rd & 4rd manufacturers)
Lose to well-funded competitors want finished products instead of in-house
manufacturing
 Counter Competitors In The Short-term

Immediate Action: Patent

Main Strategy:
Take advantage of being pioneer in the market
Build customer base before competitors enter

Continuously invest in R&D

 Expense Assumption
Assumption
subcontracting (% of sales) -11.72%
Compensation 0.00%
Insurance 0.00%
Selling and Advertising -10.00%
Research & Development -5.21%
General & Administration -10.00%
State Tax 1.07%
Income Tax -13.37%
Interest expense -2.77%
 Why issue debt only $500,000

2004F 2005F 2006F 2007F 2008F

Total marketing cost of this project - 2,470,443
incremental marketing cost each year - 121,952 - 161,645 - 183,598 - 210,930 - 241,449
Short cash (NI-ads exp) - 113,616 - 52,326 21,227 379,658
Total debt issued for mkting exp - 287,894
Suplier contract 120,000
Contigencies 100,000
Total debt issued for mkting exp 507,894
 Profitability

Profitability Historical Forecasted

GPM 41.46% 31.92%
NPM -13.73% 5.42%
 US sales of new vehicles
US sales on new vehicles
figure in 1000s

Year Motorcycles Growth Cars Light trucks

1995 309 8687 6089
1996 330 7% 8527 6521
1997 356 8% 8273 6797
1998 432 21% 8142 7297
1999 546 26% 8697 8072
2000 710 30% 8852 8387
2001 850 20% 8422 8607
2002 936 10% 8102 8708
2003 996 6% 7615 9025
CAGR 15.8% -1.6% 5.0%
 Income Statement
Income Statement Forecast
2003 2004F 2005F 2006F 2007F 2008F
Revenue $52,588 1,348,068 2,964,521 4,800,498 6,909,800 9,324,293
COGS -$30,783 917,826 2,018,380 3,268,395 4,704,503 6,348,399
Gross profit (loss) $21,805 $430,242 $946,141 $1,532,103 $2,205,297 $2,975,894
Expenses
Subcontracting -$6,162 -6,162 -6,162 -6,162 -6,162 -6,162
Compensation $0 0 0 0 0 0
Insurance $0 0 0 0 0 0
Depreciation $0 -1,443 -8,743 -13,143 -21,143 -21,143
Amortization $0 0 0 0 0 0
Selling and Advertising -$12,855 -134,807 -296,452 -480,050 -690,980 -932,429
Research and development -$2,741 -70,264 -154,517 -250,212 -360,154 -486,002
General and Administration -$7,391 -134,807 -296,452 -480,050 -690,980 -932,429
Total expenses -$29,149 -347,483 -762,327 -1,229,617 -1,769,419 -2,378,166
EBIT -$7,344 82,759 183,814 302,486 435,878 597,728
Interest -$890 -2,960 -2,960 -2,960 -2,960 -2,960
EBT -$8,234 79,799 180,854 299,526 432,918 594,768
State taxes -$88 853 1,933 3,201 4,627 6,357
Income Tax $1,101 -10,670 -24,183 -40,051 -57,887 -79,529
Net income (loss) -$7,221 69,981 158,604 262,676 379,658 521,596
 Production Capacity and Location

Total Unit 4,915 10,808 17,502 25,192 33,995

Unit per month 410 901 1,458 2,099 2,833

Supplier Choice Redmond Redmond Mexican Mexican Mexican

Unit Cost 225 225 200 200 200
Weight Cost 11.97 26.32 37.88 54.52 73.57
Motocam COGS 204.25
RCAM COGS 163.40

COGS Moto 573,641 1,261,487 2,042,747 2,940,314 3,967,749

COGS RCAM 344,185 756,892 1,225,648 1,764,189 2,380,650
Total COGS 917,826 2,018,380 3,268,395 4,704,503 6,348,399

• Cost of RCAM is 20% lower than MOTOCAM

• Production exceeds 1,000 Units per month  Subcontract to Mexican Facility to realize
cost benefit

• Cost is based on the weighted method for simplicity

 Sales Breakdown
Motocam % 2004 2005 2006 2007 2008
Retailers 0% - - - - -
Dealer 0% - - - - -
Distributor 100% 842,543 1,852,826 3,000,311 4,318,625 5,827,683
OEM 0% - - - - -
Total 100% 842,543 1,852,826 3,000,311 4,318,625 5,827,683
Unit MOTOCAM 2,808 6,176 10,001 14,395 19,426

Perpertual Growth
RCAM % 2,004 2,005 2,006 2,007 2,008
Retailers 0% - - - - -
Dealer 0% - - - - -
Distributor 100% 505,526 1,111,695 1,800,187 2,591,175 3,496,610
OEM 0% - - - - -
Total 100% 505,526 1,111,695 1,800,187 2,591,175 3,496,610

Both Sales 1,348,068 2,964,521 4,800,498 6,909,800 9,324,293

Motocam 57%
RCAM 43%

• Growth after 2008 is conservatively set at 1% annually

 Channel Market Share Assumption

MOTOCAM
Retail Dealer Distribution OEM
Year Target Mkt # Mkt Share # of unit Mkt Share Unit Mkt Share Unit Mkt Share Unit
2003 187,810 1% 1,878.10 3.9% 7,325 6.8% 12771 9.71% 18,236
2004 206,506 0.2% 413.01 0.78% 1,611 1.4% 2,808 1.9% 4,010
2005 227,062 0.4% 908.25 1.56% 3,542 2.7% 6,176 3.9% 8,819
2006 245,123 0.6% 1,470.74 2.34% 5,736 4.1% 10,001 5.8% 14,281
2007 264,622 0.8% 2,116.97 3.12% 8,256 5.4% 14,395 7.8% 20,556
2008 285,671 1.0% 2,856.71 3.90% 11,141 6.8% 19,426 9.7% 27,739
• OEM  Kawasaki’s Market share in US

• The rest of the Market share assumptions are proportionately assigned

• Estimate to grow to reach the Channel’s market share gradually

RCAM
Year Sport Mkt Size Retailer Mkt share Retailer Dealer Distributor OEM
2004 154,879 0.20% 309.76 1,208.06 2,106.36 3,007.75
2005 170,296 0.40% 681.19 2,656.63 4,632.06 6,614.32
2006 183,843 0.60% 1,103.06 4,301.92 7,500.78 10,710.67
2007 198,466 0.80% 1,587.73 6,192.15 10,796.56 15,416.86
2008 214,253 1.00% 2,142.53 8,355.87 14,569.21 20,803.97
 Number of Distributor Target

MOTOCAM
Retail Dealer Distribution OEM
Year Target Mkt # Mkt Share # of unit Mkt Share Unit Mkt Share Unit Mkt Share Unit
2003 187,810 1% 1,878.10 3.9% 7,325 6.8% 12771 9.71% 18,236
2004 206,506 0.2% 413.01 0.78% 1,611 1.4% 2,808 1.9% 4,010
2005 227,062 0.4% 908.25 1.56% 3,542 2.7% 6,176 3.9% 8,819
2006 245,123 0.6% 1,470.74 2.34% 5,736 4.1% 10,001 5.8% 14,281
2007 264,622 0.8% 2,116.97 3.12% 8,256 5.4% 14,395 7.8% 20,556
2008 285,671 1.0% 2,856.71 3.90% 11,141 6.8% 19,426 9.7% 27,739

• OUR 2003 Market share in the MOTOCAM in terms of unit: 0.04% with 5
Retailers

• OEM share of 9.71% come from KAWAZAKI Market share

• Distribution : Retail = 1: 6.8

• SO IF WE PURSUE 5 DISTRIBUTORS, WE SHOULD GET 6.8*0.04% = 0.29%

• To get 1.4% Distribution share = (1.4%/0.29%) * 5 = 24 Distributors

Target Distributors : 24 Per year

•Assume MOTOCAM Distributor also distributes RCAM
• Similar concept also applies to RCAM calculation
 Target Market Derivation: Qualitative

• Highway Motorcycle – 62% of Motorcycle Market

• Cruiser Motorcycle – 54% of Highway Motorcycle

- Target market estimated at 50% of Cruiser Motorcycle

- Target market growth within the Cruiser market is

at 6% per year  in 2001 the target market represents
over 43% of Cruiser Segment

• Sport Motorcycle – 21% of Highway Motorcycle

- RCAM fits potentially ALL motorcycle in this segment