Segway Final Powerpoint (1)

8/11/2019 Segway Final Powerpoint (1)

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Segway Human Transporter

Segway Final PresentationCan Segway Enter the Tornado?

Management 266AProduct Strategy in the Digital Economy

Charles Chen

Miro CuracAntonio Gomez

Dwight Huang

Len Tiso


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IntroductionMotor-scooter like device

Powered by electric motors

Movement by shifting

weight, turning wrist

Turning radius of zero

Designed by inventor Dean

Kamen (150 patents)


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Strategic Assessment: Crossing the Chasm Segway in infancy stage of TALC

Discontinuous innovation

Substitute for walking

Value proposition (business and consumer)

Technology enthusiasts

Amazon.com auction - $100,000 bids

Visionaries

Amazon.com - first customer


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Strategic Assessment: In the Bowling Alley Whole product solutions to niche segments

Pick on someone your own size

Enlist the support of the economic buyer

Government services

Post office, police departments

Businesses with warehouses Amazon.com, Michelin, GE Plastics


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Stakeholders Consumers

Businesses

Government Services

Regulatory Authorities

Environmental Interests

Electric Industry Petroleum Industry

Manufacturing Partners


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Stakeholders: Consumers & Businesses

Stakeholder Groups Parties Interests

Consumers Individuals

Urban commuters

Local shoppers

Recreational users

Pleasure

Increased mobility

Social acceptance

Businesses Warehouses

Plants

Manufacturing facilities

Increased productivity


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Stakeholders: Government and Regulation


Government Services Post officePolice departments

Park service

Better public serviceIncreased productivity

Regulatory Authorities Federal, state and municipal authoritiesDepartment of Motor Vehicles

Public safety


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Stakeholders: Petroleum and Manufacturing


Petroleum Industry Automobile, motorcycle and scootermanufacturers

Petroleum exporters

Market demand for petroleumproducts

Manufacturing Partners Suppliers of Segway Corporate profitability


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Critical Issues Analysis Highlight key issue for each area

Political - Regulatory approval Behavioral - Consumer utility

Economic - Segmentation

Social - Fad or revolution? Technological - Segway imitators


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Bayesian Network


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Bayesian Network Analysis Base scenario

Tornado viability = 12.10% Reasons for low percentage

Harder to enter Tornado than Bowling Alley

Regulatory hurdles

Consumer value key

Ability to supply

Competitive threats


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Sensitivity Analysis: Primary Branch NodesMarket Demand Probability Viability Difference

Base Scenario High Demand 20.81% 12.10%

Sensitivity Analysis High Demand 100.00% 46.50% 34.40%

Sensitivity Analysis High Demand 0.00% 3.06% -9.04%

Ability to Supply

Base Scenario Adequate Supply 56.60% 12.10%

Sensitivity Analysis Adequate Supply 100.00% 16.27% 4.17%

Sensitivity Analysis Adequate Supply 0.00% 6.67% -5.43%

Competitive Threats

Base Scenario Low Competition 46.51% 12.10%

Sensitivity Analysis Low Competition 100.00% 16.58% 4.48%

Sensitivity Analysis Low Competition 0.00% 8.20% -3.90%


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Sensitivity Analysis: Regulatory IssuesRegulatory Issues Probability Viability Difference

Base Scenario - Favorable Regulations 26.74% 12.10%

Sensitivity Analysis - Favorable Regulations 100.00% 20.12% 8.02%

Sensitivity Analysis - Favorable Regulations 0.00% 9.17% -2.93%

Federal Approval

Base Scenario - Expedited Approval 95.00% 12.10%

Sensitivity Analysis - Expedited Approval 100.00% 12.20% 0.10%

Sensitivity Analysis - Expedited Approval 0.00% 10.23% -1.87%

State Approval

Base Scenario - Expedited Approval 60.00% 12.10%Sensitivity Analysis - Expedited Approval 100.00% 13.68% 1.58%


Municipal Approval

Base Scenario - Expedited Approval 40.00% 12.10%

Sensitivity Analysis - Expedited Approval 100.00% 15.88% 3.78%



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Sensitivity Analysis: Customer Value

Customer Value Probability Viability Difference

Base Scenario - High Customer Value 39.62% 12.10%

Sensitivity Analysis High Customer Value 100.00% 19.64% 7.54%

Sensitivity Analysis High Customer Value 0.00% 7.15% -4.95%

Consumer Value

Base Scenario - High Consumer Value 66.68% 12.10%

Sensitivity Analysis High Consumer Value 100.00% 14.15% 2.05%

Sensitivity Analysis High Consumer Value 0.00% 8.01% -4.09%


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Sensitivity Analysis: Ability to Supply

Distribution Channels Probability Viability Difference

Base Scenario Sufficient Channels 60.00% 12.10%

Sensitivity Analysis Sufficient Channels 100.00% 13.33% 1.23%Sensitivity Analysis Sufficient Channels 0.00% 10.25% -1.85%

Production Capacity

Base Scenario Adequate Capacity 68.36% 12.10%

Sensitivity Analysis Adequate Capacity 100.00% 13.77% 1.67%

Sensitivity Analysis Adequate Capacity 0.00% 8.48% -3.62%


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Sensitivity Analysis: Competitive Threats

Existing Transportation Probability Viability Difference

Base Scenario - Effective Substitute 20.00% 12.10%

Sensitivity Analysis - Effective Substitute 100.00% 11.30% -0.80%

Sensitivity Analysis - Effective Substitute 0.00% 12.30% 0.20%

Alternative Electric Transportation

Base Scenario - High Threat 62.22% 12.10%

Sensitivity Analysis - High Threat 100.00% 10.55% -1.55%

Sensitivity Analysis - High Threat 0.00% 14.65% 2.55%


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Market Valuation (all units in 000s)Comparable Industry: Motorcycle and Bicycle Manufacturing Tornado

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Unit Sales Price (000s) $3.0 $2.5 $2.0 $1.5 $1.0 $0.3 $0.3

% of Target Production 2% 10% 30% 40% 100% 500% 5000%

Units Produced per Year (000s) 9.6 48 144 192 480 2,400 24,000

Revenue 28,800$ 120,000$ 288,000$ 288,000$ 480,000$ 720,000$ 7,200,000$COGS 19,987$ 83,280$ 199,872$ 199,872$ 333,120$ 499,680$ 4,996,800$

Gross Margin 8,813$ 36,720$ 88,128$ 88,128$ 146,880$ 220,320$ 2,203,200$

Operating Expenses 6,624$ 27,600$ 66,240$ 66,240$ 110,400$ 165,600$ 1,656,000$

Operating Income/EBITDA 2,189$ 9,120$ 21,888$ 21,888$ 36,480$ 54,720$ 547,200$

Depreciation/Amortization -$ 500$ 1,100$ 1,820$ 2,684$ 3,721$ 4,965$

EBIT 2,189$ 8,620$ 20,788$ 20,068$ 33,796$ 50,999$ 542,235$

Interest Expense -$ -$ -$ -$ -$ -$ -$

EBT 2,189$ 8,620$ 20,788$ 20,068$ 33,796$ 50,999$ 542,235$

Income Taxes 766$ 3,017$ 7,276$ 7,024$ 11,829$ 17,850$ 189,782$Net Income 1,423$ 5,603$ 13,512$ 13,044$ 21,967$ 33,149$ 352,453$

Capital Expenditures 5,000$ 6,000$ 7,200$ 8,640$ 10,368$ 12,442$ 14,930$

FCF (3,577)$ 103$ 7,412$ 6,224$ 14,283$ 24,429$ 342,488$

Discounted FCF (3,111)$ 78$ 4,874$ 3,559$ 7,101$ 10,561$ 128,754$

Preliminary Valuation $2,984,401


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Sensitivity Analysis - Expected Valuation

Probability ExpectedScenario of Viability Valuation ($M)

Base case 12.10% 361$

Hi Market Demand 46.50% 1,387$

Lo Market Demand 3.06% 91$

Adequate Ability to Supply 16.27% 485$Inadequate Ability to Supply 6.67% 199$

Weak Competition 16.58% 494$

Strong Competition 8.20% 245$

Preliminary valuation = $2.98 billion


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Strategic Implications and Recommendations

Continue expanding production capacity

Hypergrowth demands rapid scalability

Continue conservative patent protection policy

Barrier to entry in a new market

Alternative electric transportation threat


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Segway Final Powerpoint (1)

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