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2009 Key analyses for determining the business opportunity for XXX.

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Presentation on theme: "2009 Key analyses for determining the business opportunity for XXX."— Presentation transcript:

1 2009 Key analyses for determining the business opportunity for XXX

2 1 Example of a problem statement and core sub-issues to be solved What is the business opportunity for our new product, xxx? Market/ competitor analysis and novelina positioning Product and customer value proposition Business-model organization and processes required Management team skills and capabilities required Financial opportunity and returns analysis Risks and mitigation activities Implementation road map Problem statementSub issues to be solved

3 2 Example of a problem statement and core sub-issues to be solved What is the business opportunity for our new product, xxx? Market/ competitor analysis and Novelina positioning Product and customer value proposition Business-model organization and processes required Management team skills and capabilities required Financial opportunity and returns analysis Risks and mitigation activities Implementation road map Problem statementSub issues to be solved

4 ,000 4,000 7,000 11, SIZE OF XXXXX MARKET millions (E) *Compound average growth rate Source: … CAGR = 16.7%

5 4 XXXX DISTRIBUTION CHANNELS, 2006 % Source: … Retail outlets Catalogs Superstores Currently no novelina are sold online, but experience from foars (15% online sales and growing rapidly ) indicates future online sales potential

6 5 DEVELOPMENT OF MARKET SHARE OF XXXXXX Source:… % Basic product Improved product Even better product Our novelina

7 6 % of population currently owning XXXXX Like MARKET RESEARCH FINDINGS – POTENTIAL CUSTOMER NEEDS % *Quotations from customer interviews Source: … % of population liking their XXXXX Don't like Indifferent Potential needs of novelina users* 'Wish my XXX could …' 'Wish it had more …' 'Need help getting my XXX to …' 'Wish I could buy more XXX within my budget...' Own Dont own

8 7 MARKET RESEARCH FINDINGS – IMPROVEMENT OPPORTUNITIES Source:… Potential customer needs 'Wish my novelina could …' Improvement opportunities Improve novelina ability to do A, B, C 'Wish it had more …' Add options X, Y, Z 'Need help getting my novelina to …' Better instructions Toll-free number 24-hour service 'Wish I could buy more novelina within my budget...' Scaled down, low-price novelina Cut price on existing novelina Volume discounts

9 8 Yes WILLINGNESS TO SWITCH TO AN IMPROVED XXXX % of respondents No … at a higher price? YesNo … at the same price? YesNo … at a lower price? Source:… Would you switch to a nnovelina with improved features...

10 9 KEY FACTORS DRIVING CUSTOMER BUYING DECISION Source:… Options Price Customer service... Option lovers Value seekers Service seekers Unimportant Important 0505 Customer segment Rating

11 10 DEMOGRAPHICS OF TARGET CUSTOMER SEGMENTS % Source:… Demographics Age Education level Buying behavior Option loversValue seekersService seekers > 50 High Medium Low Catalogs Superstore Retail Older customers with medium education level shop in superstores and retail outlets Young customers with high education level prefer shopping through catalogs and superstores Mid-aged customers with average education level strongly prefer shopping in retail outlets

12 11 XXXX INDUSTRY FORCES AT WORK Source:… Industry structure and economics Small number of competitors R&D and manufacturing scale effects create barriers to entry Industry profitable Market growing Consumer demand Consumer willing to trade up Demand consistently growing No substitutes for novelinas Competitive conduct Competitors crowded out as others upgrade product No price competition Innovation difficult and costly External factors Strong overall economic growth fuels consumer spending Expected legislation changes in 2003 could additional fuel consumer demand XXX market is an attractive business opportunity

13 12 MARKET SHARE OF XXXXX COMPANIES, 2006 % Trinity novelina Source:… John's novelina Co. Wonaby novelina Kings novelina Co. Significant barriers for entry into novelina market: high research and development costs and scale requirements XXX companies with old product (e.g., Kings novelina Company) were quickly crowded out of market

14 13 ANALYSIS OF COMPETITORS EFC's competitors generally are not expected to innovate in the near future Trinity novelina has the highest capability to innovate in the medium future, all other competitors have only low to medium ability to improve their products in response to EFC's novelina Company Trinity novelina Johns novelina Co. Wonaby novelina Kings novelina Co. Current market share 40% 30% 25% 5% Years since last novelina innovation Innovation expected Possible No ? No Capability to innovate Source:…

15 14 COMPETITIVE POSITION EFC vs. COMPETITORS EFC Ability for low-cost production Extensive experience with foar production Skills Novelina patent Well-established brand name for foars Strategic assets Existing relationship with some large national retailers Special relationship High Low Johns novelina Co. Very good management resources as part of the Johns conglomerate Strong brand name Patent for enhanced novelina Preferred supplier of medium-sized supermarkets Kings novelina Co. New CEO Beginning turnaround Old production facilities (cannot be upgraded) De-listed from Wesko supermarket two months ago Trinity novelina Cost leader in current novelina production Patent for enhanced novelina Novelina retail chain Wonaby novelina CEO left six months ago to Kings novelina Co. Partnership with novelina research lab License to produce enhanced novelina Experimenting with selling novelina online Source:

16 15 Threats Competitive reaction to market entry of EFC, including possibility of price war Competitors leveraging relation- ship to existing distribution channel to block EFC's market entry novelina competitors attacking EFC on its home territory with entry into the foar market Product innovation through Trinity novelina SWOT ANALYSIS FOR EFC XXXS FUTURE BUSINESS Strengths Low-cost production capability Patent for faster novelina Well-established brand name for foars Weaknesses Currently no experience with online selling No own retail activities No relationship with medium-sized supermarkets Opportunities Fast-growing market: CAGR : 9.5% Profitable market: industry-wide ROS 2005: 15% Customers' openness to innovation of novelina in the past: market share of even- better novelina in 2005: 90% Customers' willingness to switch to fast novelina in the future: 90% EFC Novelina Business Source:

17 16 Example of a problem statement and core sub-issues to be solved What is the business opportunity for our new product,novelina? Market/ competitor analysis and novelina positioning Product and customer value proposition Business-model organization and processes required Management team skills and capabilities required Financial opportunity and returns analysis Risks and mitigation activities Implementation road map Problem statementSub issues to be solved

18 17 More options Better performance Lots of service Value for money Customer need Product characteristics Emotional styling novelina with –Many new options –Enhanced performance EFC value added 24-hour customer service for novelina customers Leveraging experience as low-cost producer of foars to offer novelina at today's market price NOVELINA VALUE PROPOSITION Value proposition A better product with more options and an innovative styling at the same price as regular novelina, plus 24-hour customer service Source:

19 Service seekers ESTIMATED CUSTOMER SEGMENT DEVELOPMENT, ' Value seekers Option lovers 7,000 7,840 8,780 9,830 11, CAGR*, % 15 6 *Compound average growth rate Source: 6

20 19 Example of a problem statement and core sub-issues to be solved What is the business opportunity for our new product, novelina? Market/ competitor analysis and novelina positioning Product and customer value proposition Business-model organization and processes required Management team skills and capabilities required Financial opportunity and returns analysis Risks and mitigation activities Implementation road map Problem statementSub issues to be solved

21 20 ORGANIZATIONAL STRUCTURE OF EUROPEAN NOVELINA COMPANY Proposed new business unit CEO CFOCOO Head of corp. center Novelina SBU* Great foar SBU * Strategic business unit Source:

22 21 ORGANIZATIONAL STRUCTURE OF NOVELINA BUSINESS UNIT Novelina SBU Manufacturing Sales and marketing Customer service Systems support/ back office Source:

23 22 Key activities Research and develop product innovations Understand customer needs Test/pilot new product innovations Develop product Produce product Purchase raw materials Operate plant Control quality of output Improve production flow Package product Ship product Develop package design Package product Develop innovative promotion format Control quality of output Store bulk product Load transport vehicles Track orders and shipments CORE PROCESSES – MANUFACTURING *Total quality management Source: Skills Strong R&D, tied to marketing TQM* Purchasing Cost control Efficient plant operations Cost control Quality control Efficient packaging/ loading Transport deployment Staffing FTEs 23410

24 23 CORE PROCESSES – SALES AND MARKETING Key activities Perform market research –Surveys –Question- naires –Sales rep feedback Understand customer needs Develop marketing strategy Gain in-depth consumer understanding Define product positioning Develop ad/promotions strategy and implementation concept Develop sales strategy Sell to customers Bill customers Prioritize potential outlets Develop account plans Negotiate sales with retailers Conduct pricing analysis Close contracts Send bills Process payments * Including 35 field sales managers Source: Skills Quantitative/ analytic analysis of data Communi- cation Advertising expertise Marketing expertise Sales expertise Customer relations Communi- cation Negotiation Pricing analysis Sales experience Accounting skills Staffing No. of FTEs 25537*4

25 24 Key activities Select accounts to focus on Develop account plans Schedule account visits Visit/call on accounts Maintain account relationships Operate phone center Schedule 24-hour shifts Train operators Monitor calls Respond to customer concerns Advise over phone Send service reps to customer Operate in-house service center CORE PROCESSES – CUSTOMER SERVICE Source: Skills Account planning Customer relationship management Communication Technical knowledge Operations efficiency Communication Technical knowledge Repair and maintenance know-how Staffing No. of FTEs 5890

26 25 Key activities Understand needs of manufacturing, sales, and customer service areas Design support systems to meet their needs Design systems Operate systems Run day-to-day computer systems Run help desk Advise with technical support Service systems Provide back- office support Service malfunctioning systems Repair equipment Provide secretarial support to manufacturing, sales, and customer service Provide legal advice Provide accounting services* CORE PROCESSES – SYSTEMS SUPPORT/BACK OFFICE * Partly outsourced Source: Skills Systems expertise Software design Programming skills Technical skills Communication Equipment repair Secretarial skills Legal Accounting Staffing No. of FTEs 55410

27 26 NOVELINA BUSINESS UNIT STAFF POSITIONS Head of novelina SBU (1) SVP of manufacturing (1) SVP of sales and marketing (1) SVP of customer services (1) SVP of systems/ back office (1) R&D specialists (2) Plant personnel (50) Quality control engineers (4) Sales reps (35) Advertising and marketing specialists (12) Market researchers (2) Billing coordinators (4) Major account reps (5) Service mechanics (90) Phone reps (8) Information technology (14) Human resources (6) Legal (2)Finance (2) FTE ( ) Source:

28 27 Example of a problem statement and core sub-issues to be solved What is the business opportunity for our new product, novelina? Market/ competitor analysis and novelina positioning Product and customer value proposition Business-model organization and processes required Management team skills and capabilities required Financial opportunity and returns analysis Risks and mitigation activities Implementation road map Problem statementSub issues to be solved

29 28 DEVELOPMENT OF KEY FINANCIALS, RevenueEBIT ROSRONA % millions BASE CASE , ,847 6, Source:

30 29 FIVE-YEAR PROJECTION OF PROFIT AND LOSS STATEMENT millions BASE CASE Revenue Expenses % of revenues Cost of goods sold % of revenues Marketing and sales % of revenues Administration % of revenues R&D % of revenues EBIT % of revenues Interest Taxes Net income % of revenues ,847 1, , ,887 3, , ,785 5, , , Source:

31 30 FIVE-YEAR PROJECTION OF CASH FLOW STATEMENT millions BASE CASE Cash year in Sources of cash Net income: + Depreciation (amortization) Increase/decrease in + Trade and other payables + Employee benefit liabilities + Deferred tax liabilities + Long-term debt and loans Total sources of cash Use of cash Increase/decrease in: Trade and other receivables + Inventories + Fixed assets + Interest Total use of cash Increase/decrease in cash + Financing (increase of equity) Cash years out , Source:

32 31 FIVE-YEAR PROJECTION OF BALANCE SHEET – ASSETS millions BASE CASE Current assets Liquid assets + Trade and other receivables + Inventories Total current assets , ,744 Fixed assets Gross value – Accumulated depreciation Total fixed assets Total assets Source:

33 32 FIVE-YEAR PROJECTION BALANCE SHEET – LIABILITIES AND EQUITY millions Current liabilities Trade and other payables + Employee benefit liabilities + Deferred tax liabilities Total current liabilities Long-term liabilities Long-term debt and loans Total long-term liabilities Total liabilities Equity Share capital + Retained earnings Total equity Total liabilities and equity ,316 1,744 BASE CASE Source:

34 33 PROJECTION OF EBIT, ROS, AND RONA, ROS % RONA % EBIT millions BASE CASE Source:

35 34 BUSINESS EVALUATION THROUGH DCF* METHOD , Residual value** Discounting rate % NPV of free cash flows is 4,653 million BASE CASE *Discounted cash-flow analysis **Last years cash flow with yearly growth rate of 2.5% discounted by 15.5% Source: millions 8,938

36 35 DESCRIPTION OF CASES Base case Development as expected Worst case Competitors (Trinity novelina, Wonaby novelina) developing novelina in two to three years Market growth limited (3%) Price war driving down market price by 10%-15% Best case Market exit of Kings novelina company Market growth exceeding expectations (15%-20%) mainly driven by introduction of novelina Price discrimination for option levers by 10% Source:

37 ,162 2,014 COMPARISON OF EBIT, ROS, AND RONA BETWEEN CASES Worst case EBIT millions Base caseBest case ROS % RONA % Source:

38 37 BUSINESS EVALUATION THROUGH WEIGHTING CASES Base caseWorst caseBest case DCF millions 4,653 6, Probability % Value of EFC's novelina SBU 4,008 million Source:

39 38 Example of a problem statement and core sub-issues to be solved What is the business opportunity for our new product,novelina? Market/ competitor analysis and novelina positioning Product and customer value proposition Business-model organization and processes required Management team skills and capabilities required Financial opportunity and returns analysis Risks and mitigation activities Implementation road map Problem statementSub issues to be solved

40 39 IMPLEMENTATION ACTION PLAN AND TIMELINE Finish final product development Set up business unit Hire new staff Train new staff Begin production Develop marketing strategy/ads campaign Begin ads campaign/ sales rep visits Roll out novelina Start up customer service phone center Send out account reps Follow up surveys with early customers Fine-tune product JFMAMJJASONDActivity Month Source:


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