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BUSINESS PLAN
GROUP 5

XUANTONG YANG

EMRAH CILOGLU

BOOM CHANG

ROBERTO MIGNINI

REVENCO DIANA

2010
1. Executive summary
In a high competitive economy companies struggle to take the leadership and try to sell the
product at any cost. They set up business activities without enough knowledge of the
marketplace. We learned from their mistake and got ready with a Business plan, which is a
draft of our goals and the means to attain these goals.

We promote an offer, but at the same time a deal for the parent company. It is an offer
because it is not all about money. We enjoyed finding out new things about TEUCO and
TOKYO so that we offer our involvement. It is also a deal which refers two winners. We win
because TEUCO is likely to be a profitable business with high earnings and promising
future. The parent company is a winner because it has the chance to be recognized
outside Europe, where Tokyo is only a starting point.

Our business idea didn’t come overnight; it is a result of team brainstorming and deep
analysis of the business potentials.

Every business implies profits and losses, but if there are losses it is better to cease the
operations. A venture means risks, and if we venture we make it till the end. We were
encouraged by positive financial situation that TEUCO JAPAN may bring in the next 5
years. Only with confidence and reliable data evidence, we can convince the investors that
TECUO will have success in Japan.

Since we deal with a remote country where to invest in, there are big disparities between
our culture, language and demand preferences. These factors imply additional costs and
risks. We already know that Japanese are sensible towards quality and design. They are
ready to pay for this quality, and they can afford this quality. We also know that their
dwellings are smaller than European or American ones, and therefore we selected
particular models to be sold. They are more compact. TEUCO Japan will offer
customization for the features which compose the bathtubs and the shower enclosures. In
the next years we plan to customize even the size by making special orders to Italian
manufacturer. This will happen only if Japanese are not satisfied with the product
dimension.

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TEUCO JAPAN will be successful only in case of good knowledge of the business from the
beginning and for a couple of years ahead.

1. Introduction
“A PROJECT INSPIRED BY WATER” is the outcome of the work of 5 people, which are a
combination of 5 different cultures and experiences. We were united by the same goal – to
work on a business plan, to impart ideas and to share them with others.
Our team is represented by:

 Boom Chang is from India, with an Engineering background;

 Emrah Ciloglu is from Turkey, with a Linguistics background;
 Diana Revenco is from Republic of Moldova, with an Economics and Finance
background;
 Roberto is from Italy, with a Political Science background;
 Xuantong Yang is from China, with a Public Management background.

Our project contains the following parts:

1. General information (introduction, objectives and goals, summary)

2. Market analysis (competitors, competitive advantages, customers’ value proposition,
marketing strategies and opportunities )
3. Financial analysis (funding plan, balance sheet, ROI)
4. Plan development (operations, timetable and milestones, team management and
business model and mechanics of deal)

Luxury and Italy have a lot in common. Luxury industry attracted us and inspired our minds.
TEUCO bath tubs and showers are just meeting these words.

Our mission is to represent as good as possible the Italian company and to establish a
profitable business. If we manage to obtain investment, we will find future motivation in
repaying the parent company and inspire credibility in front of our investors and creditors.
No doubt, we will seek efficient solutions to make the business flourish. Successful stories
of foreign companies investing in Japan encouraged us to venture.

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Company profile

TEUCO Guzzini Spa is a subsidiary of Fimag-Gruppo Guzzini. The Italian company was
set up in 1972 by Virgilio Guzzini and boasts excellence in fields including manufacture of
whirlpool bathtubs, multifunctional shower cubicles, shower enclosures and mini-pools.
Headquartered in Montelupone, Macerata, Italy, this global company has operations
worldwide. Its innovative and well-designed products are sold through an extensive
network of branches that have been operating for years in Germany, France, Spain, Great
Britain and Russia, as well as through agents, distributors and importers in many other
countries.

To be aware of the business we are planning to undertake, it is essential to get ready with
a business overview that will be useful in taking future steps and discover market
potentials.

Business overview

Our business idea is to promote Teuco in Tokyo market by establishing a local subsidiary,
a showroom and a warehouse to keep our goods. In this strategic manner we tend to reach
our customers directly.

The Italian manufacturer will direct its Japanese operations from its local subsidiary which
is the best marketing entry strategy considering the market complexity and the insufficient
operational experience in Asian countries. With this decentralization the management will
be more efficient. We think that without a direct sales and support route we will have
difficulty in increasing our name recognition and there will be limits to the growth of our
business.

For a company of such size and performance and for a market of such dimension and
potential it is absolutely essential to open a store exclusively dedicated to its own product
line to create the expression of its design and creativity. The showroom will give the
possibility to better discover the world of Teuco.

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Localization is an especially important part of the services we provide to Japanese
customers. We consider that there is potential to grow Tokyo into a valuable market indeed
for the parent company.

The logistics will be arranged in the following manner. Our products are entirely
manufactured in Italy, and we will keep this generic. Japan is an island and is situated far
away from Italy; therefore the delivery will take place by shipping the goods via ocean. The
route comprises land and ocean transport and we shall assume the corresponding risks.

2. Objectives
The main objective of our business idea is to develop a new market for an already existing
product. We talk about Tokyo and not about Japan because of its demographic dimension,
so that it is considered a gate for foreign investors to enter Asia’s markets.

To conquer ground in Tokyo we have to make use of all industry key success factors,
which are the brand image, customization, design and quality.

Our goal consists in extending Teuco’s brand name identity and make Japanese people
aware of Italian style. If Tokyo stands for Japan it is possible to imagine a growing
presence of Teuco in the whole country. Tokyo is undoubtedly deemed a mature market,
but there is still room for innovations.

Teuco’s Duralight bathtubs are the expression of the constant process of innovation
pursued by the company, and it will be a medium through which to find a niche in Tokyo
market. Our aim will be to target our products to refined customers which are ready to
accept elevated prices in turn of a worthy acquisition.

A good advertising campaign will be customized according to Japanese culture and to fail
this objective will cause the fail of our business in no time.

Experienced salespersons will stand for the company’s image and will be trained no to sell
the product, but to make the customer impossible to leave without a tub. We aim at selling
an entire experience and not only a mere product.

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We will focus also on after sales services to gain ground in front of our competitors. The
quality of installation is essential for keeping the customer satisfied for a long period of
time. If our clients will be pleased with our products and services, they won’t hesitate to
recommend the tub or the shower enclosure to their friends or neighbors.

To find a niche in market, maintain it and extend the market share make part of the long
term strategy. We will tend to run a financially stable business by taking total control over
the possible risks.

If efficiently implementing each component of the marketing mix, we won’t compromise the
company’s image. We will put effort in every single detail and will be “repaid” for it. Our
team will work for the business, and after that, the business will work for us.

3. Business Idea

Why JAPAN?

The world’s second-largest economy only after the US and Asia’s largest economy, Japan
is a powerful country. Japan's rapid economic growth continued since the nation's
modernization began in the last half of the nineteenth century and gained the world's
attention. Economic growth has not always been steady, however; on a number of
occasions, Japan had to overcome major economic hardships. Now that the nation's
economy generally is prospering in quantitative terms, the focus has turned to the
improvement of the quality of people's lives.

Why TOKYO?

As for the beginning we are planning to enter Japanese market through Kanton region, the
biggest island of Japan, which holds also Tokyo, the capital, in it.

Tokyo was particularly affected by an economic boom in Japan in the 1980s when the
country emerged as a global financial center rivaling Europe and the United States.
Economically, Tokyo comprises one third of Japan's major industrial region, the other two-
thirds are Kawasaki and Yokohama in which we are also planning to make business if
everything goes well as planned. According to a new survey by the Swiss banking giant
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UBS that uses the "Big Mac", residents of Tokyo have the highest purchasing power in the
world, edging out people in Los Angeles, Sydney, London and Toronto. Also the wages in
Tokyo are the highest in the world. And consequently, this fact affects our potential
Japanese customers’ purchase power in a positive way.

Residents of Tokyo have the highest purchasing power in the world, edging out people in
Los Angeles, Sydney, London and Toronto, according to a new survey by the Swiss
banking giant UBS that uses the "Big Mac" as its benchmark.

The bank calculated the "weighted net hourly wage in 14 professions" and divided it into
the local price of "a globally available product," for which it chose McDonald's flagship
hamburger. Prices across the U.S. vary but average about $2.50. "On a global average, 35
minutes of work buys a Big Mac," it said. "But the disparities are huge: in Nairobi, 1.5
hours' work is needed to buy the burger with the net hourly wage there. In the U.S. cities of
Los Angeles, New York, Chicago and Miami, a maximum of 13 minutes' labor is needed."
In Tokyo, it takes a mere 10 minutes. Bogota, Colombia, came in last among the 70 cities
surveyed at 97 minutes.

Why bathtubs?

Taking a bath in Japan is serious business. The Japanese bathtub, known as ofuro in
Japanese, plays a role in three distinct aspects of Japanese culture: the private home, the
public Japanese bath house, and onsen hot spring resorts. In each case the Japanese
bath experience amounts too much more than simply washing off. Many Japanese people
view sitting in their ofuro soaking tubs as a must-do daily ritual similar to eating or
sleeping. For those individuals bathing is something that they must do to feel healthy and
happy. Other Japanese people look at bathing as a social activity. Many parents bathe
with their children, enjoying the experience and feeling it builds better relationships
between family members. Even co-workers might bathe together when they go to an
onsen resort on a company junket, or when they visit a hotel's sento public bath during a
business trip.

There are several differences between the Japanese bath and Western ones, Japanese
soaking tubs are generally much deeper, so someone sitting in the tub can easily sink

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down with the water at chin level however more and more tubs are westernized today in
Japan due to their quality, comfort and wide range of products offering to customers.

Having mentioned the importance of bath and the bathing culture in Japan above, gives us
a clear idea why we are eager to take action particularly in this market and right at this
point, we consider Teuco Guzzini Spa the best partner to work with.

Geographic composition

Market penetration by high-end brands can also been seen in a single shopping district,
where our company may open a showroom. Tokyo’s Ginza has become a world class
fashion district rivaling New York’s Fifth Avenue and the Champs-Élysées in Paris. With its
beautiful cityscape of department stores, Japanese shops of old standing and multi-tenant
buildings. Ginza also boasts numerous restaurants, movie theatres and other leisure
establishments. The area is thronged not only with Japanese shoppers but also with
tourists from throughout Asia, who come to shop among Ginza’s many attractions. Against
the content-rich environment, we will establish in Ginza a showroom in a building dedicated
exclusively to our own brand. It will offer product lines comparable to that offered in
showrooms in our home market.

Some brands use their Japan stores to refine their latest innovations. Hermes, for example,
set up its first café at one of its Tokyo stores. Taking into account its distinctive
characteristics Teuco will take maximum advantage of opening a showroom in Ginza
where the broad range of its products will be sold by knowledgeable sales staff and where
it will face the opportunity of promoting its latest breakthroughs.

Teuco has already established a strong brand. In order to maintain the image and make it
recognized in Tokyo it is necessary to open a showroom in a prominent shopping district.
Showrooms are considered as high social and economic status. For a company of such
scale it is unreasonable to save costs on space and location. We will market our goods in
building exclusively dedicated to our own products.

The showroom will be designed in a stylish manner and will rend the exact atmosphere
which the company is pretending – a space where the costumer will discover the pleasure
of water and will experience a new sensation.

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4. Customer Value proposition

A value proposition represents the whole cluster of benefits promised to be delivered to

customers to meet their unsatisfied needs. And great value propositions appeal to solving
pain or achieving dreams. The value either solves a "pain" the customer has in a way they
can't do without your product/services or it allows them to live a "dream" and do something
wonderful that they wouldn't be able to do without your product/service.

“There is only one boss. The customer, and he can fire everybody in the company from the
chairman on down, simply by spending his money somewhere else.” __Samuel Walton

Agreeing on the quote by Walton above, our first and the only priority is customer and their
needs.

Why would people buy our products?

From the point of view mentioned before, Teuco’s objective is to satisfy desires of its
customers, gratify them emotionally and arouse intense emotions. In this situation, Teuco
asserts itself once more with its unique ability to design not only products but new
environments and scenarios linked to the sensory and emotional experience of water.

“A bath is what you need and more than what you need is what Teuco offers” could
summarize Teuco’s philosophy and its customer value proposition.

Through our subsidiary which will be strongly connected to the principals of Teuco and the
showrooms that are going to reflect the true Italian image, quality and style will help us to
reach our customers and spread the brand Teuco in Tokyo market.

Also despite Teuco’s being larger and having more experienced, we also will try our best to
destroy the popular belief, which is the parent company’s being larger or more powerful
entity than a subsidiary, and will play first for Tokyo then Japan and finally for whole Asian
market leadership and make our subsidiary as successful as mother company.

Therefore, any buyer evaluates the product in view of function, communication concept,
distribution, brand and value/prize equation would be fully satisfied what Teuco provides.
Take the level of your bathing culture much higher, and experience it with a different
perspective, luxury.
10 
 
5. Intellectual Property issues
It is generally advisable to ensure that patents, models, designs and trademarks are
registered and protected under Japanese law when doing business in Japan.

Japan is a member of several international bodies relating to worldwide IP protection and a

signatory to the international treaties facilitating multi – territory registration and protection.

We will submit for patent protection, to protect the technological creativity of our products.
Patent Law protects the inventions for 20 year form the day the application is filed.

In order to avoid the imitation of our products, it is better to protect the industrial designs
and the trademark as well.

Under the Design Law, we manage to cover the share, the pattern, color and other design
characteristics of our product. Design Law protects the design for 15 years from the date of
registration of its establishment.

Trademarks include letters, diagrams, color and other identification elements associated
with the product or service.

Trademark Law protects trademarks for 10 years from the date of registration and such
term may be renewable for ten years from the very end of the term.

In order to avoid law suits and other legal problems and to protect our brand name we will
register our patents, trademark and design.

6. Market opportunity
Teuco has always shown a strong international presence in the well-being market, but in
order to determine if the company’s products meet the needs of the chosen market and if it
is able to be better than its competitors we have to analyze the market opportunities.

In this business our team will follow several principles that will serve us to stay on the right
track.

We keep in mind that “It is important to be in the right place at the right moment”, this is
one of the principles we tend to respect. To perceive whether the marketplace is or not
suitable for running our business activities a SWOT analysis should be drawn.
11 
 
 SWOT analysis

Strengths Weaknesses
 One of the world’s largest wellness  Reduced performance indicators in the last
product manufacturers; years;
 Corporate reputation for quality and  Relatively high level of stocks, which incur
innovation; additional costs;
 Uniform image of quality and service for  Lower revenue from goods and services
global costumers; rendered in 2008 in comparison with 2007;
 Environmentally responsible  Seasonality of the business.
manufacturing: practice of high quality
standards guaranteed by ISO 9001
certification attained in 1998 and the
IMQ quality mark;
 Continuous development of innovative
and technological solutions;
 The usage of exclusive patents which
make Teuco’s products impossible to
imitate;
 High mark up generated by luxury goods;
 Broad international experience and
ability to manage the presence abroad;
 Highly skilled and creative product
development team;
 Strong credibility in front of creditors
and suppliers;
 Focus on Costumer value-added.

Opportunities Threats
 Expansion of market share;  Strong competitors’ presence;
 Reachable target market;  New comers might be attracted by the
 Risk reduction by sharing it among multiple profitability of this industrial sector;
markets;  Decrease in overall demand may be offset by
 Possibility to access financial aid from new product introductions;
various international financial support  Energy, freight and raw materials costs may
organizations (SIMEST, JETRO etc.); escalate;
 Availability of trained and high educated  High business costs: taxation, transportation,
human resources ; labor;

12 
 
  Steady commercial activity due to secure,  Big losses in the first years and the risk of
transparent and attractive business indebtedness;
environment;  Language disparities;
 Very low country risk;  Complexity of the administrative procedures;
 Developed transport and logistics  Handling: increased complexity, due to the
infrastructure; need to adjust handling practices regarding
 Information and communication infrastructure different regulations across Japan;
at low charges;  Extended transit times;
 Low psychological distance;  Transportation breakdowns;
 Decreased currency exchange risk (Yen is  Particularity of the market – closed market;
very steady);  Lack and cost of land – real estate.
 No need to radically adapt the products;
 The products succeeding in the Japanese
market will have better chance of success in
other markets around the world.
Source: Japan attractiveness survey 2008 made by JETRO.

By matching strengths and opportunities and by minimizing weaknesses and threats we

can find competitive advantages for Teuco entering the Japanese market, more precisely
the Tokyo market.

Japan – A market of enormous potential

Japan is an enormous market, one of the world’s largest in terms of economic of scale. The
scale of the economies of the country’s individual regions rivals that of some countries.

13 
 
 GDP comparison of Japan’s regions with some countries (US $ billions)

Kanto region has a GDP of US $ 1,724 billion that is higher than that of both Canada and
India. Tokyo's gross domestic product is the largest of any city in the world. This
performance indicator proves the market attractiveness and the extensive business
opportunities of Tokyo, which is part of Kanto region, as a marketplace to invest in.

Retail in Japan, more precisely Tokyo

Japan boosts the world’s second largest retail market with a value exceeding US $1,124
billion (135 trillion yen, 2007). For retailers the Japanese market, in particular Tokyo, offers
an abundance of diverse opportunities to sell products and services that offer luxury, style,
convenience and high value. In this way the luxury bathtubs and shower cabins will be
targeted into an attractive sector.

Tokyo is a mature market, yet it hums with dynamic development of new businesses, urban
renewal, local city development, home and non-residential constructions, presenting a
broad range of possibilities for Teuco entry.

14 
 
Sophisticated consumers with high purchasing power and discerning tastes

In addition to possessing high purchasing power, Japanese consumers are early adapters
and prefer to stay on the cutting edge of the latest technologies.

“Japanese costumers are very well educated, so they understand the difference between a
product that’s high-performance and low-cost rather than the opposite”

- Lars Petersson, President and CEO, IKEA Japan.

Population’s well-being has encouraged active investment into more fulfilling lifestyles.
Teuco products will be well placed for growth and success in the Tokyo market as they can
offer a new perspective of life that is in line with health consciousness. Japanese
consumers are known to place significant value on quality and on health and safety, facts
that the Italian company has completely achieved.

Japan’s 120 million citizens hold personal assets of

approximately 1,500 trillion yen, adding up to
considerable potential buying power. In Tokyo
there are 364,8 automobiles per 1000 persons,
meaning that every third person holds an
automobile.

Japan’s figures for final household consumption

expenditure are among the highest for the major
developed nations. The level of discretionary
expenditure is high and consumer demand is
substantial, with a significant share occurring in the
areas of education and entertainment, transport and
communications.

For the 17 years between 1992 and 2009 Tokyo was rated at the city with the highest cost
of living in the world.

15 
 
Rank 2009 Rank 2008 City Country Index 2009 Index 2008

1 2 Tokyo Japan 143.7 127

2 11 Osaka Japan 119.2 110

3 1 Moscow Russia 115.4 142.4

4 8 Geneva Switzerland 109.2 115.8

5 6 Hong Kong Hong Kong 108.7 117.6

These market characteristics increase the size of the company’s potential reachable target
market and market share.

Japanese culture is highly influenced by European and American culture. Japanese people
are aware of the European style and easily accept the European brands by expressing low
differences in customer characteristics. In this way Teuco will take benefit of the
standardization of its broad range of products. This means cost savings, uniform image
and service for global costumers, easier coordination and control.

A predictable, business friendly environment

Tokyo industrial structure and business environment are similar to those of Europe and the
US, and this makes it simpler for foreign companies to establish here and to expand their
business in a city than it is in other Asian cities. Tokyo offers a mature and stable business
environment that makes it ideal as a base for global business.

Laws for the protection of intellectual property are essential to the development of value-
added business, and Japan has an established system of such laws. The nation has set in
place a system of investment rules nearly equal to those established in other advanced
countries.

Japan has an extremely high rate of progression to higher education. There is growing
potential for our local subsidiary entering into the Tokyo market to make use of superior
personnel.

16 
 
Japan also possesses a highly developed infrastructure with costs that are comparatively
low. Ratio of major roads paved represents 98% and ratio of local roads paved equals
87%. Ratio of households covered by piped water supply system is 99,6%.

Foreign companies finally can take advantage of currency exchange rates that make their
products cheaper than comparable Japanese ones.

In Japan the minimum share capital requirement for a subsidiary was reduced from ¥10m
was to ¥1 under the new Corporation Law.

Japan is ranked 15 out of 183 economies. Singapore is the top ranked economy in the
Ease of Doing Business.

Japan - Compared to global good practice economy as well as selected economies:

Ease of Doing business – Global Rank

140 129 133

120
120

100 89

80

60 51

40
15 19
20
1
0

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 Japan’s ranking in doing business 2010

Rank Doing Business 2010

Ease of doing business 15

Starting a business 91

Dealing with Construction permits 45

Employing Workers 40

Registering Property 54

Getting Credit 15

Protecting Investors 16

Paying Taxes 123

Trading Across Borders 17

Enforcing Contracts 20

Closing a Business 1

Summary of indicators – Japan

Starting a business Procedures (number) 8

Time (days) 23

Cost (%of income per capita) 7.5

Min. capital (%of income per capita) 0.0

Dealing with Construction permits Procedures (number) 15

Time (days) 187

Cost (%of income per capita) 19.3

Employing workers Difficulty of hiring index (0-100) 11

Rigidity of hours index (0-100) 7

Difficulty of redundancy index (0-10) 30

Rigidity of employment index (0-100) 16

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 Redundancy costs (weeks of salary) 4

Registering property Procedures (number) 6

Time (days) 14

Cost (% of property value) 5.0

Getting Credit Strength of legal rights index (0-10) 7

Depth of credit information index (0-6) 6

Public registry coverage (% of adults) 0.0

Private bureau coverage (% of adults) 76.2

Protecting investors Extent of disclosure index (0-10) 7

Extent of director liability index (0-10) 6

Ease of shareholders suits index (0-10) 8

Strength of investor protection index (0-10) 7.0

Paying taxes Payments (number per year) 13

Time (hours per year) 355

Profit tax (%) 27.7

Labor tax and contributions (%) 16.5

Other taxes (%) 12.0

Total tax rate (% profit) 55.7

Trading across Borders Documents to export (number) 4

Time to export (days) 10

Cost to export (US $ per container) 989

Documents to import (number) 5

Time to import (days) 11

Cost to import (US$ per container) 1047

Enforcing contracts Procedures (number) 30

Time (days) 360

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 Cost (% of claim) 22.7

Closing a business Recovery rate (cents on the dollar) 92.5

Time (years) 0.6

Cost (% of estate 4

According to the above mentioned indicators Japan is a favorable destination to start a

business, register property, hire staff, protect investors and close a business. Nonetheless,
paying taxes and enforcing contracts are still a burden for the foreign investors.

A secure, comfortable living environment

The Global Peace Index 2008, shows that Japan is among the world’s safest and most
peaceful countries, with the lowest murder rate and the lowest potential for terrorist
incidents of any developed nation, in addition to a comparatively stable political situation
and a high level of education. These results explain the very low country risk.

Foreign companies expanding business in Tokyo

The value of foreign direct investment in Tokyo has grown steadily in recent years, and a
large number of foreign companies successfully entered Tokyo market.

The following is a selection of comments made by representatives of leading foreign

companies doing business in Tokyo.

About Tokyo Market

“Tokyo consumers value brand-name products and do not hesitate to buy them. The size
of Tokyo’s economy and market and the purchasing power of its citizens are considerable.
These are important factors to our decision to enter the Tokyo market.” (Shopping center
developer)

20 
 
About Tokyo’s business environment

“Doing business with Tokyo people we have never had a bad debt. We also think that we
can develop a product that’s suitable for Japan and market it in the correct manner, we can
boost our sales by several tens of percent.” (Pharmaceutical company)

Investor’s satisfaction with Japan on location criteria tends to increase once they have
experience in the country.

Impediments to Business in Japan (Tokyo)

On the other hand there are some obstacles to Business in Japan that Teuco may deal
with. The following difficulties were identified by more than half of the responding
companies: “the difficulty in securing personnel” (66.2%), “high business costs” (60.2%),
“the closed character and particularity of the Japanese market” (50.6%) and “complexity of
the administrative procedures”(20.9%). Nonetheless, the proportions of companies citing
these disadvantages have declined compared to those in 1995.

High business costs and uncompetitive taxes may cause troubles even for an already well
established company. Japan is the least attractive location for labor costs and corporate
income tax among its regional Asian competitors (China, India, Vietnam, etc.). But in the
luxury industry there is a higher focus on profit maximization by selling in a limited market
willing to pay a high price, than on profit maximization by lowering the costs. Having an
extended available market we forecast to have high sales and the contribution margins of
the units sold will be used for covering the costs. In this way, we bear the business costs in
Tokyo by increasing the total volume of sales (economy of scale) and by optimizing the
general cost structure.

Extended transit times and transport breakdowns may cause problems. Our product is
designed to be up to date and any late delivery can incur incredible losses, as we risk to be
outrun by our local competitors (mainly Jacuzzi). But this aspect will be solved by
immediate risk readiness. The best solutions are to raise the inventory as a cushion and to
reduce the logistics lead time. The orders will be collected and fulfilled promptly due to
efficient supply chain management.

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Another imminent threat is the strong competitor’s presence and the new comers’
entrance. Tokyo market is very competitive and leading bathroom making companies have
already opened their exclusive stores in the most attractive districts. More than that,
Japanese market in general and Tokyo market in particular remain to be a significant
source of revenue for high-end retailers. Premium international bathroom and shower
retailer brands continue to enter the market and expand their store networks within Tokyo.
In order to minimize this threat, Teuco has to take into account the feedback from highly
discerning Japanese consumers, to offer competitive advantage and technological
solutions to anticipate domestic trends and to attract the potential buyers.

Company’s strengths (key success factors)

Teuco is a very reputed company not only in Italy, but also throughout the Europe, and
other parts of the world.

The company’s competitive profile is based on its success factors, such as: quality, image,
service, that form the components of the perceived value for the market.

Teuco is focused on costumer value-added, expressed by: tailored services, reliability in

front of its costumers and responsiveness to the latest trends and to consumer’s needs.

It offers a wide product line of different types, shapes, colors, sizes and materials. The
company exclusivity is due to its technological systems represented by: hydro silence,
hydro sonic, Turkish bath, cromotherapy, water massage, next series and automatic
disinfection which cater a highly defined audience.

In recent years, Teuco has invested heavily in research and development and has used
increasingly more user-friendly technologies and exclusive patents that make Teuco’s
products impossible to imitate.

In addition, Teuco pays considerable attention to the costumers’ service. It is deeply aware
that its most valuable assets are its customers. Therefore the image of the company was
“knitted” by the selected sale force which is every time ready to offer the best treatment
and the best product representation.

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Due to its innovations, service, quality and image, the company manages to retain its best
costumers and maximize the effectiveness of every customer interaction.

Industry weaknesses

Demand for our products is influenced by new home starts, remodeling and non-residential
construction activity. Accordingly, many external factors affect our business such as
weather and the impact of the broader economy on our end markets. Weather is an
important variable for us as it significantly impacts construction. Severe winters, prolonged
periods of rain could delay or halt constructions and remodeling activity and as a result
magnify seasonal decline in our net sales and earnings during these periods of the year.

In spite of the seasonality of our business, in Tokyo weather is enjoyable every season of
the year. In winter the weather is usually sunny and dry, in summer it is hot and humid, in
autumn is warm, but not humid anymore and in spring the weather is pleasantly mild. In
this way, Tokyo weather conditions are proper all year round for home starts and non-
residential construction activity.

If we are aware of the investment risks and in advance take all the possible measures to
minimize them our business will flourish on a long term.

In order to design a marketing mix that precisely matches the expectations of costumers in
the targeted segment we have to define clearly identifiable segments having similar needs,
wants, or demand characteristics. By breaking down the total demand into segments we
can easily choose the one or the few the company is best equipped to handle.

First of all we drew the market segmentation by age groups.

23 
 
 The segmentation of Tokyo population by 17 age groups

Age group 2010

Total 13 010 279

0–4 432 079

5–9 489 084

10 – 14 439 381

15 – 19 495 134

20 – 24 745 525
25 – 29 860 634

30 – 34 1 232 681
35 – 39 1 200 312

40 – 44 1 071 328

45 – 49 701 660

50 – 54 620 359

55 – 59 1 049 202

60 – 64 897 146

65 – 69 760 937

70 – 74 743 685

75 – 79 583 159

80 – and over 687 973

Teuco is offering living spaces attuned to various styles and it will cater to Japanese
consumers demanding a higher quality of life.

In order to identify our target market we also have to estimate the number of persons that
possess high incomes. For this calculation statistical data is lacking, therefore we made an
assumption, based on the number of people involved in primary, secondary and tertiary
sector of the economy.
24 
 
 The segmentation of Tokyo population by sectors of economy

Sector of the economy The ratio,% The number of workers in each

sector of the economy

All the sectors 5,767,644.675

Primary sector 0,44 25,377.63657

Secondary sector 18,7 1,078,549.554

Tertiary sector 77,4 4,464,156.979

The reference market addressed by the project is interesting for two reasons: it is
represented by Tokyo people that are very sensible to technological and quality products,
which are meant to relax the body and the spirit, and that possess very high purchasing
power.

On the other hand, Japanese consumers’ household consumption expenditure comprises a

little share for household durable goods, only 0.9% out of total living expenditures.

Our target market represents the persons from Tokyo aged 25 – 74 years old with high
incomes, hotels with 4 and more stars and also non-traditional style bath houses.
Considering that Teuco is located in “status symbol” or luxury industry sector, the market is
not willing to accept a low value, and the target market of such sector are the rich that are
less sensible to the demand price elasticity.

According to the above mentioned indicators we can make an assumption of our reachable
market, namely of the total number of persons with high incomes.

Tokyo is a major international finance sector and the largest part of the population is
employed in the tertiary sector, whereas the primary sector occupies a minor part in
Tokyo’s economic activities. We take as a base for further calculations the number of
persons that have a job. At the same time this people are included into the age category of
25 – 65 years old. In Tokyo the tertiary sector, or otherwise the service industry, provides
high salaries and wages, which means the major part of people working in this sector has
high incomes. On the other hand, the primary sector provides lower salaries and the
25 
 
persons with high incomes could be considered only the people working in the
administration. Taking into account all these factors we can assume that 15% of workers
form the primary sector, 30% of workers from the secondary sector, and 60% of workers
from the tertiary sector possess high incomes.

Segmentation of Tokyo population with high incomes by sectors of economy

Sector of the economy The number of workers in each The percentage of The number of
sector of the economy the persons with persons with high
high incomes,% incomes

All the sectors 5,568,085 3,005,866

Primary sector 25,378 15 3,807

Secondary sector 1,078,550 30 323,565

Tertiary sector 4,464,157 60 2,678,494

Besides the employed persons with high income, our target market is the wealthy persons
aged 65 -74 years old. We assumed that out of total number of persons from this age
category 10% possess high incomes. Our assumption is based on the fact that the welfare
of this aged people results from the fortune they have been accumulated over their life or
from the business they are running.

Segmentation of Tokyo population aged 65 – 74 years old with high incomes

Age group Number of persons The percentage of the The number of persons
persons with high with high incomes
incomes,%

65 – 74 1 504 622 150 462.2

65 – 69 760 937+ 10 76 093.7

70 – 74 743 685+ 10 74 368,5

26 
 
Tokyo has 189 hotels and half of them host rich tourists from all over the world offering
high standards of accommodation and convenient facilities to make the stay a grand
experience. Out of the total number of hotels 73 are 4, 4 and a half and 5 star hotels. There
are 11 hotels featured with Hot tub / whirlpool / Jacuzzi.

In Japan public baths, called sento, are not only a place for recreation, but also a holy
place where Japanese clean their bodies and spirits. Now there are nearly 23 sento in
Tokyo. Each sento features several indoor and outdoor baths and showers. Out of 23
public baths, there are several called onsen, as they derive their bath water from naturally
heated hot springs.

Some bath houses emphasize their tradition, and run traditionally-designed bath houses to
appeal to clients seeking lost Japan.

Other bath houses try to offer a wider variety of services beyond the standard two or three
bathtubs. They may include a variety of saunas, reintroduce steam baths, and include
Jacuzzis. Some of these modern facilities are more similar with a western style water
amusement park than a sento. We consider that modern bath houses, or 20% out of the
total amount of bath houses located in Tokyo, will be interested in our product.

Public bath in Japan (Sento)

27 
 
Further on, it is possible and relevant to calculate the total amount of persons aged 25 – 74
years old that possess high incomes, the total number of the luxury hotels, which have 4; 4
and a half and 5 stars and the total number of public baths. We have included the total
amount of workers of 25 – 65 years old and the total amount of persons of 65 – 74 years
old in a category named “First consumers”. The total number of hotels and public baths are
included in the category “Second consumers”. Considering the average number of
members per private household and the total number of persons with high incomes, we
have estimated the number of wealthy families (as they are rich they certainly possess
dwellings with bathrooms.

Market segmentation of the target consumers

Name of the Number of The percentage of Total number of The average The total
category workers/hotel workers with high persons with high number of number of
s/public incomes/luxury incomes/luxury members wealthy
baths hotels/modern hotels/modern per private households/
public baths % public baths household luxury
hotels/modern
public baths

First consumers 5,568,085 3,156,328 2,13 1,481,844

People employed 25,378 15 3,807

in the primary
sector

People employed 1,078,550 30 323,565

in the secondary
sector

People employed 4,464,157 60 2,678,494

in the tertiary
sector

People aged 65 – 1 504 622 10 150 462

74 years old

Second 212 78 78
consumers

28 
 
Luxury hotels 189 ‐ 73 73

4 stars hotels 41 ‐ 41

4 and a half stars 4 ‐ 4

hotels

5 stars hotels 28 ‐ 28

Public baths 23 20 5 5

According to the figures, our reachable segment in Tokyo market represents 1, 481, 844
households, 73 hotels, and 5 public bath houses, or 24, 2% out of total households of
Tokyo, 38, 6% out of total number of hotels from Tokyo and 20% out of total number of
Tokyo public baths.

The challenge of Teuco Japan is to achieve presence 10,347 bathrooms in the next 5
years of operation, with a market penetration of 15%.

All the assumptions we made are based on a pessimistic scenario which is the best way to
diagnose the market situation and to be aware of the possible risks of our business.

If the company shows competitive performance in relation to the criteria adopted by the
market in making the purchase decision (quality, service, image, etc.) it will increase its
pertinent market in the long term perspective.

7. Competitive advantage

For a successful competition it is better to practice competitor profiling, which is able to

give a good idea of the next move that our opponent in a chess match will make. The next
principle our team will follow is “Superior knowledge of rivals’ offers a source of competitive
advantage”.

Tokyo presents high opportunities to market products that offer high value and health
consciousness. Bathtub manufactures find Tokyo an attractive sector to retail their
products. Teuco will face one indirect and two direct competitors. Kanzaki.inc, Jacuzzi and
Sundance Spas are already present on the market. We compete in the market based on
29 
 
product design, quality of products and services, product performance, distribution and
price.

Jacuzzi Brands Inc. is a global producer of whirlpool baths, spas,

showers, sanitary ware, including sinks and toilet and bathtubs for the construction and
remodeling markets. Its bath products are sold in U.S, Canada, Mexico, Europe, Asia,
Africa, The Caribbean, Central and South America. The headquarters are established in
Valvasone (PN) Italy – Chino Hills, CA. The company distributes these products through
home centers, wholesalers and specialty kitchen and bath retailers. In Tokyo it operates
through a specialty bath store.

Jacuzzi’s major competitive advantage is represented by the strong brand image

worldwide. It is the most widely recognized name in whirlpool and hot tub hydrotherapy. Its
integrated design allowed easy installation and portability. Aside from this, the company
takes benefit from the national competitive advantages of the countries where its
operational activities are located. The whirlpool bath manufacturing is located in California
(USA) – the Sundance Spas plant. The plant has the capability of producing up to 300 spas
per day for the domestic and export business needs. The warehouses are located in Italy,
Canada, USA (California, Georgia, Pennsylvania and Texas). Te offices are located in
Brazil, Chile, USA (California, Texas, Florida, Pennsylvania and North Carolina) and
engineering and sourcing – in China. Showrooms are established in England and Chile.

Jacuzzi offers well-designed bathtubs for high and middle-end consumers available in 3
collections: luxury, comfort and ESPREE.

“Getting exactly what you want in a bath – that’s luxury” is what Jacuzzi brings to its
customer and keeps its promise. Luxury collection is available in all bath shapes
(rectangle, walk-in, and corner) and is featured with electronic control panels, rapid heat,
cromotherapy lighting system, highly-gloss, non-porous acrylic finish. There are 16 models
in this collection.

Comfort collection allows to get furnished with a Jacuzzi bathtub with less money, but with
the same high quality. The only differences between luxury and comfort collection is the
30 
 
lack of cromotherapy lighting system and the rapid heat. This collection comprises 15
different models.

ESPREE collection is based on the same hydrotherapy system, but it is designed with
diverse features such as: manual controls with adjustable air flow, integral armrests, 10
jets. All in all there are 6 models in this collection.

The company’s product variety expanded with models as hot tubs, whirlpool baths, or both.
These models could be installed indoors and outdoors

Jacuzzi delivers a full spectrum of showers from shower panels and towers (3 models),
bases and systems (5 models) to shower heads (4 models).

The company produces a wide variety of bathroom facilities which enables to make a
100% designed Jacuzzi bathroom. Aside from bathtubs and shower enclosures, Jacuzzi
produces bathroom furniture, shower kits, bathroom accessories, basin and pedestal,
counter port basins, vanity basins, toilets and bidets, bathroom mirrors, taps and mixers.

Jacuzzi price range fits different budgets, as one can find bathtubs starting from 2350 euro
and ending with 16 300 euro. The shower cabins prices rang from 2600 euro to 9500 euro.
Besides, the company offers bathroom products with optional features at an extra cost.

Jacuzzi branded hot tubs, baths, showers, toilets, sinks, and accessories are commonly
found in residential homes, hotels, and aboard cruise ships and have become popular in
high-end spas around the world.

31 
 
 Sundance Spas is a subsidiary of Jacuzzi Brands Inc.
which was found in 1979. Sundance Spas can be found in more than 750 retail locations in
more than 60 countries worldwide. Its manufacturing facility is established in Costa Mesa,
California.

The company designs and develops acrylic spa shells, heating and filtration systems, water
purification and programming/control systems. The company’s line of products comes with
models engineered both for interior spaces and backyards. One can chose between 880,
780 and 680 series according to his budget and tastes. 880 series comprises portable hot
tubs which feature the new, advanced Micro Clean PLUS Filtration System for pure water,
24 hours a day. There are 8 optional models in this series. 6 models of outdoor hot tubs
are available in 780 series and they are designed with hydro massage, from the trademark
Soothing Muscle Therapy or SMT jets and seating. The 680 Series is affordable luxury
which comprises 3 models. The distinctive shape of these spas was developed to fit into
smaller gardens or decks while providing many of the hydrotherapy elements of a larger
spa.

Sundance Spas is the largest spa manufacturer in the world. Its main competitive
advantage is the broad spectrum of spas that fit perfectly almost any backyard, side yard,
patio, even the deck on a five – story loft. The spas ensure high quality of water and were
proved to be energy efficient. The new Micro Clean Plus™ Filtration System provides
Clearwater with low maintenance and lower chemical usage. It works with the Dynamic
Flow Circulation System™ and the Sentry Smart™ Heater to purify and heat the water
continuously. The models are designed with quality features: powerful jets, ergonomically
designed seating, easy-to-use controls, built-in-stereo and coordinating bar and stools.
These features are customized at costumer’s will.

The company’s innovative approach consists of hydrotherapy, aromatherapy, health

benefits and alternative therapies such as: massage, chromatherapy, reflexology and
watsu. Aromatherapy uses air instead of liquid to infuse aromatic bubbles into the water.

Sundance Spa is highly valued in Japan for watsu technology which combines water with
Shiatsu, a form of Japanese "finger pressure" massage applied to the body zones defined
by chi, or the body's energy channels.
32 
 
The portable and in-ground hot tubs are complemented by a complete line of hot tub
accessories from elegant gazebos to towels; outdoor steps to sturdy cups and shirts.

In Tokyo Sundance Spa operates through a local dealer – Hasumi that sells the same
variety of spas and accessories as in its home country. The dealers and technicians are
trained the world over to prepare knowledgeable professionals.

A simple Sundance spa can be acquired at a price of 8774 euro, whereas a highly
performed bathtub costs 15 400 euro.

Kanzaki.inc is the only Japanese company among the competitors we are going to deal
with in Tokyo. The company started to manufacture wooden bathtub in 1868. At the
moment it has an amount of gross sale equal to 4,038,953 Euro (446,471,092 Yen) and 28
employees. The headquarters are established in Mino city, Osaka prefecture, Japan. It has
a very large business content primarily related to the sale and installation operation all of
residential-related equipment, such as: bathtub, kitchen, interior, rest room, home
equipments and the like. More than that, Kanzaki.inc is involved in the sale and installation
operation of gas instrument (hot water supply vessel air conditioning equipment cooking
instrument, etc.), sale and lease of nursing care articles, design operation of gas piping.
This is only a part of their business activities.

Wooden bathtub is pure Japanese style and obviously is highly appreciated in Japan.
Kanzaki offers both ready-made and custom-made wooden bathtubs for hotels, car

33 
 
facilities and homes. Kanzaki bathtubs are made from Japanese black pine material and
the Japanese cypress material.

The company’s competitive advantages are the Japanese-style bathtub, which are attuned
with the home interior and Japanese culture. In addition, black pine material is very strong
in the water, and the cypress material is good as for the fragrance. Kanzaki offers a wide
variety of selections available. The bathtubs are available in different shapes: box shape,
round shape, and oval shape. Their prices vary depending on the model, shape, size and
type of wood.

The bathtub with box shape, standard model and made from Japanese cypress costs from
3039 euro to 7145 euro. The same bathtub, but Deluxe model costs from 7145 euro to
14546 euro.

Umbrella pine bathtub, standard model costs starting from 1620 euro to 5230 euro.
Umbrella pine bathtub, deluxe model costs from 3040 euro to 11635 euro.

Bathtubs in round shape are more expensive than those in box shape. Round shape has a
price starting from 9300 euro to 15632 euro.

Bathtubs in oval shape made from Japanese umbrella pine cost 7140 euro.

Kanzaki products cater to a large segment of consumers with medium and high incomes,
and to those that value Japanese traditions and style. Kanzaki message for the buyer is
“How great to soak in the Japanese culture!”

In order to determine the overall performance of our competitors in Tokyo market and we
will build up a two dimensional matrix – competitors.

34 
 
 Min Max Inputs

1 10 Formulas

1 10

1 10

1 10

1 10

1 10

KSF and Relevance for the

Market Competitor A Competitor B Competitor C

price 10% 4.63 3.70 2.96

quality 10% 10 7 9

brand image 19% 9 7 9

variety/range 10% 10 6 5

customization 17% 9 5 1

Design 17% 8 6 5

Tradition 17% 2 4 10

perceived value 100% 7.40 5.55 6.13

PRICE in EURO 12500 10000 8000

Value/Price Ratios 100 6.62 5.55 6.85 19.02

Market Share in (%) 34.81 29.18 36.01 100.00

Min 3000
Elasticity Indicator 0.5 Price range in the industry
Max 30000

35 
 
According to our model the most relevant key success factor for the luxury sector is
represented by the “brand image” with 19%, followed by the “design”, “customization” with
17% each. Tradition is a key element for the Japanese costumers’ demand criteria, and
therefore its relevance for our industry is 17%.

Our elasticity indicator is 0.5, as the demand for luxury goods is less sensible to the price
changes. Luxury goods, or otherwise named Veblen goods, characterize the social status
of a person, and as the prices rise the demand fells with a lower rate, or doesn’t alter at all.

To each key success factor we attributed a score, from 1 to 10 points, based on deep
market research and competitor’s analysis.

The perceived value is calculated as the weighted average between the relevance and the
competitor’s scores. As the demand sensibility to price is low, the perceived value has an
important influence on the market share. According to our model the highest market share
is achieved by Kanzaki inc. with 36.01%. This result is explained by its traditional wooden
bathtubs, which play a sentimental value for the Japanese.

On the other hand, Jacuzzi obtained a market share of 34.81%, being less competitive
than Kanzaki inc. in Tokyo market. In spite of the strong brand image and high level of
customization, Jacuzzi is legging at tradition value factor.

Find the Excel sheet attachment of this MODEL.

8. Competitive Advantage

There are already some companies that are selling luxury bathtub and shower facilities in
Japanese market but Teuco offers a differentiation and it has a competitive advantage over
its competitors. The company has one direct and two indirect competitors in Japanese
market.

One of these two indirect competitors, Jacuzzi, is also from Italy so Teuco cannot use its
Italian and European origin but over other two competitors Teuco has a big advantage as it
has the Italian image which is identified with fashion and luxury. This is only one of Teuco’s
competitive advantages.

36 
 
Another competitive advantage of Teuco would be its experience, as the company has
always shown a strong international presence since its foundation in 1972, not only in Italy
but also in France, Spain, Britain, Germany and Russia with an extensive network of
agents, distributors and importers worldwide.

Ever since Teuco was established, the company has made market focus, innovation, know
-how and design its fundamental values that are synonymous with quality and reliability
guaranteed by the ISO 9001 certification attained in 1998 and the IMQ quality mark. Also
Teuco products are stylistically innovative and technologically unique. For instance, Virgilio
Guzzini, the founder of Teuco, was the first person to apply the Teuco Guzzini SPA group’s
experience in the treatment of plastic materials and especially acrylic to the world of well-
being and water. With his know-how and a natural predisposition for innovation, he brought
Teuco awards, patents and a position as market leader right from the very beginning. This
same spirit of innovation has been passed on to his son and grandson.

In recent years, Teuco has invested heavily in research and development and used
increasingly more user-friendly technologies and exclusive patents that make Teuco’s
products impossible to imitate. There is Hydrosonic, the only whirlpool bathtub in the world
with ultrasound and Hydrosilence, the first noiseless whirlpool. There is also Duralight, the
Solid Surface made exclusively by Teuco, innovative material that can be shaped with no
limits in form, size or color to give maximum expression to design and creativity. These
innovations, as well as working with top designers, have helped the company to launch
innovative projects on the market that express a new concept of well-being that is
increasingly more attuned to contemporary lifestyle.

Teuco’s strongly focuses on changing markets and new business which are also the
company’s concrete steps that were taken with regard to strategy and organization. It
created a contract division to meet the increasingly important needs of the world of design.
This is also an important period for strengthening the company’s policy of expanding
international markets with the acquisition of the British company, Spaform SPA., which has
increased its know-how and range in the mini-pool sector, with this cooperation Teuco
shows its eagerness for expanding its technology and investment to different sectors that
are also related with water, well-being and luxury.

37 
 
In brief, all this technology, know-how and the passion for sustainable innovation are
undoubtedly some other strong and important advantages of Teuco over its competitors.

9. Development Plan, Operations, timetable and milestones

This part of the business plan explains the sequence of actions that Teuco has to develop
in order to pursue its objectives. The possible deadline it is settled in 14 to 16 weeks.

Specialized advisors will help us to handle many aspects of setting up the business in
Japan. As new entrants, without local partners, we will seek consultancy from registering
the company to paying taxes.

The required procedures for a startup are briefly presented in a timetable which will enable
to follow the steps in the right order.

The corporation will be established according to the Japanese Corporate Law. A subsidiary
is a separate legal entity and the shareholders liabilities are limited to the amount of their
investment.

The company should firstly check with the Legal Affairs Bureau that the name they require
is available, and confirm that whether the business is an industry that requires prior
notification to the Bank of Japan. The company should than prepare a notarized affidavit
containing details of the parent company and signature of the representative of the parent
company.

The company will consider the Articles of Incorporation for the subsidiary. These generally
include: total shares issued and classification; amount of paid in capital; name of director;
business objectives; location of head office, method of public notice. These articles will be
notarized by a Japanese notary. Before the registration is submitted the company must be
able to show that the required share capital has been remitted to Japan. In order to do so
the company should make a request to the bank to take custody of share capital and remit
the capital to the bank. The bank will issue a capital custody certificate. It is also necessary
to hold a shareholders’ meeting to appoint the directors, statutory auditors and issue the
share capital.

38 
 
 Within two weeks of the shareholder meeting, the company will submit the notarized
articles, capital custody certificate, the “Application for Registration of Incorporation of a
“Joint Stock Company” and the “Application for Certified/Extract Copy” of commercial
register.
It will generally take around four to six weeks to receive the incorporation certificate and
company seal registration certificate.
The subsidiary is required to notify the Bank of Japan of the registration within 15 days.
Other authorities who will require notification include:

 National and local tax offices (including the relevant office dealing with payroll)
 Labor Standards Inspection office
 Public Employment Security office
 Social Insurance office.

The company will also accomplish all the necessary procedures for opening a warehouse
and a showroom. Complete personnel recruitment will last 10 weeks.

Find the Excel sheet attachment of the OVERALL PLAN OF ACTIVITIES

Procedures for register a trademark, to profit from trademark protection in Japan, are
described below.

39 
 
 40 
 
10. Team management

A team building success is when your team can accomplish something much bigger and
work more effectively than a group of the same individuals working on their own. Based on
this affirmation, Teuco Japan will have a manager that will motivate each employee to use
its strengths in full, and will create a strong synergy of individual contributions.

"Leaders do the right things, while managers do things right." Leadership involves setting
directions, communicating that vision passionately to those they work with and helping the
people they lead commit to that vision. In this manner the team efforts will be directed to
the same goals. A cozy, pleasant working atmosphere will confer more passion and
implication in the day to day activity.

Teuco Japan will try to hire its management team through experienced consultancy firms
who specializes in startups so as to save time and reduce cost by employing experienced
Japanese, professional leaders in their fields. Italian workers will be hired as well.

The management team will consist of:

 General Director
 Marketing Director
 Marketing analyst
 Logistics and distribution manager
 Financial manager
 Accountant
 Statutory auditor
 Computer programmer
 Designer.

A strong focus on recruiting and developing its employees will help Teuco remain a major
player in a highly competitive market. The business prides itself on attracting motivated,
talented and involved employees. Once people are recruited, it will fully utilize the breadth
and depth of their available talent.

41 
 
Since Teuco is an Italian company and aims at preserving its Italian concept and at being
responsive to Japanese needs, the stuff will be a mix of Japanese and Italian employees
so that the business benefits from different perspectives and cultures.

Each position will be appointed with the following tasks.

Under the Japanese Corporate Law a subsidiary (Kabushiki Kaisha) must have at least
one director. The representative director must be a resident in Japan.

General Manager will be from Japan, so as to act as an expert person of Japanese way of
doing business. He will monitor and head the stuff, and will report to on regular intervals to
the Teuco’s head office in Italy.

Marketing manager and marketing analyst will be involved in marketing researches on the
actual and potential marketplaces. They will forecast sales and market trends and will
provide reliable information about the product volumes which have to be ordered. The
efficiency of their activity will be expressed by the accuracy of the stock level forecasts and
the reduction of time between production and delivery.

Logistics and distribution manager will handle processes involved in the supply chain,
liaising with a lot of parties, manufacturers, retailers and consumers. As a distributor he will
be responsible for the transportation, stock control and warehousing. The efficiency of his
activity will be expressed by the reduction of the delivery time and transport costs.

Financial manager will be responsible for providing financial advice and support to its
colleagues. He will cope with financial risks and will report factors influencing business
performance.

Accountant will keep books and records.

Besides the director and the shareholders, the affairs of the company will be controlled by
the statutory auditor. The statutory auditor is entitled to request reports and examine the
operations of the company.

The designer will play a significant role in engineering spaces with the best bathtub or
shower cabin in tune with the home interior. Moreover, he will create catalogues and

42 
 
design the showroom space which will make the customers be impressed and want to by a
bathtub or a shower cabin at any cost.

The computer programmer will be in charge with the web site, will make financial
programs.

11. Marketing strategy and 4 P’s of marketing

Why marketing strategies are important?

Marketing is more than just selling and advertising. It is a process that allows a firm to
profitably meet customers’ needs better than its competitors.

With successful marketing often comes a successful business venture. This is because
marketing is not only selling, but involves the design of the product, how it reaches the
customer how it is priced and the image the product holds in the minds of the customer.
Many companies see their product as saleable item but consumers see them as style
statement or luxury. Understanding the perception that consumers have of your product is
an essential part of marketing, and success is often based on how you use this knowledge
in improving your business strategies. This is why we conducted market research.

Since a planned marketing strategy provides us with facts to achieve marketing results, we
emphasize on effective marketing strategy to become the market leader.

The components of our marketing strategy are:

Market Research – You hear a lot about the ongoing financial crisis, how companies are
losing money and shedding jobs. But take a look at the bigger picture and we see
something unexpectedly encouraging. Even though many companies in Japan are
struggling in these hard economic times, a large minority continues to flourish.

Japan's Situation - Lean Economic Time

During each of the three “economic crises” to hit Japan, somewhere between 28.00% to
32.00% companies continued to see rising sales as well as rising profits. The chart here
shows this unlikely outcome. Even factoring in the weak performers -- a steady 5.7% of
43 
 
firms that suffer falling sales during the downturns yet still seek out increased profits, and
another group of firms that sees sales increase while profits fall -- the economic crisis no
longer look so one-sided. All of this reminding us that in any market there will be
companies that respond faster and rise to the top. These are the truly built-to-last
companies

Despite all the bad news, today’s economic crisis is no different from previous downturns.
Teuco will try to diversify and listen to consumers needs to preserve a market share.

Although the recession has made Japanese consumers more cost conscious, the people
still want high quality. Quality is measured in both product quality and service quality. The
Japanese demands prompt delivery and servicing of quality products, and they're not afraid
to spend for it. Because of space constraints, the Japanese will probably always prefer
quality to quantity. Japanese houses are only 60 percent as large as the typical American
home and in Tokyo many of the old office buildings are converted for residential purpose
which requires new bathrooms and kitchens to be built.

We were able to identify the characteristics of various market segments as a result of our
market research. We designed a marketing mix to specify our product, placement,
promotion and pricing.

44 
 
Product

Products are designed to fulfill customer’s needs and Japanese customers look for quality
products. Teuco’s primary strategy is providing better quality of life through everyday
pleasure. Teuco will emphasize

On its Duralight range of bathtubs which are light, solid and extremely easy to install. The
Duralight ranges of bathtubs are designed to blend in with a multitude of settings and
different sized projects. Teuco has in its inventory varied range of products such as
showers, hydro spas, shower trays etc. which are characteristic of luxury and wellness.

Placement

Teuco will sell its products through its showroom located in the commercial centre of Ginza
through direct sales with Italian ambience. The showroom will have displays where the
customers can see and experience the products first hand, functional showers and sprays
will be fitted so that customers view the components as well as hear and feel the spray – a
multi-sensory experience that lets them more effectively evaluate the product’s
performance. Without it, customers are limited to style and price comparisons only. The
best way to reach the customers is to maximize their involvement in the process and we
will establish an enjoyable, experiential environment that inspires shoppers to try – and to
buy. A value-added experience will definitely increases the odds that customers will buy
and, more importantly, stay and complete the purchase. It will employ only local Japanese
personnel with sales experience and impart extensive product training to its sales team.
Emphasis will be continuously focused on the needs of the customer. Every customer will
be briefed about the product and the installation process at the time of sale. Importance will
be paid to logistics so that tasks are carried out efficiently and so as to minimize cost and
the benefits passed on to the customers so as to maintain a competitive advantage.

Promotion

Television is by far the most important advertising medium in Japan, with a huge, devoted
audience. The number of televisions households is 46.3 million and average viewing time
is 4 hours and 29 minutes daily -- the highest in the world. Also by March 2004 24.7 million
households had cable and another 12.0 million subscribed to pub caster NHK's broadcast
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satellite service. Since TV is a popular medium for public information among Japanese,
Teuco will approach its potential customers through primetime ads. Even if TV ads
represent a hard buy for all but the biggest companies, a luxury product requires the best
way of promotion, and the cost is less important.

Tokyo is an overcrowded city where a lot of flashy shops try to withstand the competition.
Since the competition will be aggressive we will combine the promotion methods. Digital
signage is a form of electronic display that shows information and advertising. Teuco will
deliver targeted messages to specific locations at specific times. A screen display in the
showroom will increase the dwell time on the store premises and will enhance the
environment. To promote the brand and build a brand identity Teuco will also have screen
displays located outside.

Digital signage can offer superior return on investment compared to temporary and/or
promotional signs

By the end of 2004 79.5 million Japanese above the age of six -- 62.3% of the population --
were using the Internet, while the household diffusion rate was 86.8%. Also, by March of
last year, mobile phone contracts numbered 81.52 million, with 69.73 million including
Internet connections. Dentsu Communication Institute has estimated that Internet ad
revenues will grow from Y181 billion ($1.5 billion) in 2004 to Y556 billion ($4.6 billion) in
2009.

Engine search will be another form for advertising our products. Based on the statistics, the
most common type of search by a user after being exposed to a display ad is a brand
search.

A brand search is a search for your company name, a misspelling of your company name,
or a type of your company name that leads a consumer to click on your sponsored listing
(your PPC ad). It will serve as a path in leading the users straight to Teuco web site.
Teuco Japan will create a web site completely in Japanese where there will be hosted
photos and flash ads with the product line and the upcoming breakthroughs. A web site is a
way to get in touch with the customers and to create a relationship with the brand. More
consumers are feeling greater buying confidence due to access to information over the
Internet.
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12. Business models –deal’s mechanics

The business model that Teuco wants apply in this market is based on selling its products
through strong commercial relations with high end customers, owners of dwellings, hotels,
chains of SPA and public baths.

So the business model seems to be very simple. In reality the difficulties that Teuco will
face in Tokyo could be very harsh.

First of all, to produce in Italy and to sell in Japan makes difficult to obtain a good margin.
On the other hand the parent company forwards us the product at their production cost,
and as luxury goods have high contribution margins we will be able to get a net profit in the
second year of activity. The parent company will be the shareholder with 90% of total
shares, and it will be compensated by yearly dividends, starting with the third year of
activity. The parent company will possess the power of decision and general control.

We will sell our goods directly and will run the supply chain management by our own.
Teuco plans to operate through a business model that it is equally based on a marketing
approach as well as on efficient management of logistic and services.

The meaning of this approach can be understood starting from the analysis of the
complexity of the Tokyo’s market and of the great opportunities hidden in it.

The ability to successfully attract the customers, to sell 100% “Made in Italy” and to bring
added value through good merchandising, will enable Teuco Japan to survive among
competitors and to extend its market share.

In the first operational year Tokyo will be considered as a new market in which to sell the
existing products. This goal will be achieved by making people aware of the brand identity

To sum up, if the mechanic of deal our business is quite simple, the basic activities from
which to start are more complex.

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14 – 15. Funding Plan and Financials

In order to objectively estimate the profitability of Teuco Japan in the new market we took
into consideration mainly the pessimistic scenario. All the Data and Assumptions are
derived from Tokyo and Japan Statistical reports.

Tokyo is a mega polis where costumers are characterized by demanding purchase

requirements and we do believe this is a condition for Teuco to find a market niche in
Tokyo.

According to our analysis our available market represents 1,375,998 households, hotels
and bath houses, which mean Tokyo is a good market to host the sale of luxury goods. The
pertinent market is even greater and we plan to reach it in the next future.

We assumed that out of total potential luxury bathtubs and shower cabins purchased by
Tokyo costumers within a 5 year span, our sales volume will compose 12.00%, or 49,62,65
products. This potential volume is enough for obtaining a cash flow payback period of 3
years.

The sales are distributed unequally according to the type, number and design interior of the
dwellings, so that the major part of our sales will cater the households that live in detached
houses, followed by the households from the apartment houses, as per their big quantity,
and the owners of luxury hotels, as per their high purchase power.

In our assumptions, bathtubs and shower cabins range in different potential sale volumes,
namely one forth out of total sales constitutes the bathtubs, due to the city’s building
architecture, whose bathrooms are more suitable for the shower cabins.

The prices were fixed according to the price range existing in our competitive market;
where the prices vary from 3,000 to 30,000 euro. The higher the price the more performed
is the level of customization.

According to the calculations Teuco products have high operating margins; the average
operating margin is 89.00%. This is explained by very high revenues in comparison with
lower prime unit costs.

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Our company will undertake the operational costs required to import the goods from Italy,
establish a subsidiary, a showroom and a warehouse in Tokyo. We really hope our
estimations will be ever useful for the parent company.

The production costs were derived from Teuco Guzzini spa Balance sheet and Income
statement as per 2008. We import the goods at their prime cost plus the import taxes
imposed by the Japanese authorities.

Set up costs will be backed up by both, equity and borrowed capital. The share equity is
divided between three shareholders represented by the parent company, the Japanese
manager and the Italian marketing manager. By taking a long term bank loan we aim at
paying back the installments and the interest over a longer time span, so that to spread the
financial costs.

The debt ratio is situated within the limits of the solvency (less than 100%), the total debt
being 75.00% out of total assets.

As expected, Teuco will be able to efficiently use its assets in generating the sales
revenue, so that starting with the second operational year the turnover on assets will
exceed 1 unit (100%).

As per the new Corporate Law, a subsidiary with less than 2.5 million euro paid in capital is
not liable to have a Board of Directors, so we have the possibility to save money on annual
Board of directors’ fee.

Investments are made in the first year to cover the costs of startup capital, which comprise
both intangible and tangible assets. Depreciation and amortization expenses are
distributed as per the asset life span.

In the first year we will be record a negative net cash flow generated by the high level of
operation expenses. The cash inflows generated in the next year won’t cover the losses
from the first year therefore the net cash flow will be positive only in the third year.

The net profit will be barred by the high level of taxation, which as an average overall tax
rate on EBT is 55.00%. However, the estimated return on investment at the end of the
period will be double 40.67%.

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We will tend to keep a balance between current and fixed assets, so that we cover the
current and noncurrent expenses. The reasonable degree of liquidity during 5 years span
will allow us to preserve this balance.

According to our dividend and investment policy we agreed on not giving dividends in the
first 3 years. The reason is explained by the character of the luxury industry. It requires
high level of investments to keep up the brand name recognition. That is why the dividends
will be conferred in the fourth and fifth year, at an equal rate of 15% of total net profit. The
dividends will be distributed in conformity with the value of share of each shareholder, so
that the parent company will get the highest value.

Find the Excel sheet attachment of The FINANCIAL PLAN.

16. ROI & ROE

We calculate Return on investment to evaluate the efficiency of our investment.

It is calculated as a percentage as per the following formula:

Return on investment = Net Income / Total assets x 100%

We considered the best and the worst scenario for this indicator.

In the best possible scenario, which is the one we plan to undertake, the company will get
34.77%, 42.45% and 40.67% return on investment in the last three years. So, at the end of
the period total estimated return on investment will be 40.67%.

In the worst scenario, hereinafter zero net profit in the second year, less one million net
incomes in the next 3 years and less 2 million euro in the 5th year (due to the level of
market saturation) , the company is at stake. The return on investment is 10.66%, 24.60%
and 23.72% consequently.

Cash payback period refers to the period of time required for the return on the investment
costs to repay the sum of the original investment.

In the first two years cumulative cash flows are negative, the amount of positive net cash
flow from the second years is not able to cover the negative amount recorded in the first
year. However, the cumulative cash flow is repaid in the third year with 13,121.47 euro.
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Return on equity is used to evaluate the amount of income which the shareholders will
receive as a return of their equities. It is calculated as a percentage according to the
following formula:
Return on equity = Net Income / Shareholders’ equity x 100%
According to the best scenario, the shareholders will get 74.40%, 87.70% and 75.20%, in
the third, fourth and fifth year respectively. So, according to our estimations, at the end of
the period shareholders will get 75.20% of the invested equity.

In case of zero net profit in the second year, less one million euro net income in the next 3
years, less 2 million euro net income in the 5th year, and higher equities invested to cover
the financial gap, we risk to realize the worst scenario for the stakeholders. In this case the
dividends will represent 21.70%, 49.04% and 42.78% in the third, fourth and fifth year
respectively.

However, we believe to realize the planed revenues, to optimize the costs, so that the
shareholders get the best outcome.

17. Why invest in my venture?

Everyone is confused at the beginning about how to structure its seed investment and
where to get money from. With this bad thought the business idea is a dead road. An
entrepreneur should have courage to venture and to accept failures if any. Our team
believes the business success lies in agile mind, good luck, and bright thinking.

What seems to be unaffordable is absolutely affordable. The first problem in a business

venture is the source of capital and the proper level of guarantee of repayment.

In our business, besides expected collateral, like the expected revenue from sales, we will
use bank accounts, short term financial investments and, in the last three years, long term
financial investment, as backups for our bank debt.

As we have to pay back the long term debt with the bank, we have the opportunity to pay
back the loan installments within 4 years. In addition, the advantage of such loan term is
the lower financial burden undertaken each year and the possibility to transform our assets
into liquidities in case of default.

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Our business idea is based on shared passion for Teuco bathtubs and strong belief in
obtaining funding for our foreign investment. We hope our positive thinking combined with
a detailed panorama of our venture will serve as a hint for the parent company to invest in
Teuco Japan. As per our calculations we need a startup financial capital of more than 3
million euro.

To maintain solvability we estimated the possible amount of bank loan of 1,346, 441. We
can afford to fully pay it back within 4 years, using our net profits and other assets.

18. Summary

A business needs startup capital, but to get it, there is need to demonstrate how successful
could be our idea.

We do believe that Teuco Guzzini Spa will benefit from our business in Tokyo. Our
subsidiary requires good knowledge of Tokyo market, Japanese regulations and laws and
of course professional staff.

To take the leadership is one of our long term objectives, but it is not the most important
goal. We want to bring Teuco experience outside Europe and to make Japanese aware of
our presence in Tokyo.

Japan is a very complex country that had to be analyzed in depth. It requires good
preparation before running business there. We take into account the risks we can cope
with and set measures for minimizing them. Japanese carry about their costumes and
about their bathing tradition in a cozy wooden bathtub. On the other hand, Japanese are
highly influenced by American culture, which also means modern interiors, perfectly in tune
with our products.

Our assumptions were based on pessimistic scenario in order to get prepared for the worst
possible situation. There could be major deviations between our analysis and the reality.

We think in Tokyo we already have our clients and that our product will be in tune with
market demands.

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 “A project inspired by water”- this is our slogan which will be translated in Japanese as
well. It was selected based on the target message we intend to transmit. In addition, it
doesn’t contradict Japanese national traditions and preferences.

We will meet strong competitors, which are both foreign and local investors. Their
advantage above us is that they have experience in operating in such a complex country.

A luxury product needs a good promotion, well prepared salespersons, a good placement
and positioning. Our major investments will be directed namely in these particular spheres.
Users in Japan will be especially pleased with the websites and printed materials
explaining the latest technologies in their native language.

The market complexity requires professional approach and therefore the Manager has to
be Japanese.

Through its forward-thinking, our company will tend to be one step ahead of market trends
and will offer its clients the latest innovative solutions.

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