To: Mr. Frank Chan, CEO of samvo.com. From: Mr. Michel Bortolini, Business Strategy Manager. Subject: Strategic Planning and Execution

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1 To: Mr. Frank Chan, CEO of samvo.com From: Mr. Michel Bortolini, Business Strategy Manager Subject: Strategic Planning and Execution Date: 19 August Introduction The environment under which Samvo Entertainment is operating is changing rapidly at present, and it is very likely to change significantly faster in the coming years. Since it was founded in 2004, Samvo migrated from a software development company to a bookmarker operating in the British commercial gambling industry, considered to be one of Europe s most competitive and regulated sectors. Regulated by the UK Gambling Commission, the non-remote British gambling industry generated during April 2014 March 2015 a gross gambling yield equivalent (GGY) of 5.4bn. This represents an increase of 2% or 112m when compared to the previous year. Over the same period, the remote British gambling industry had a gross gambling yield (GGY) equivalent of 2.2bn, representing a considerable GGY increase across the National Lottery and non-remote betting and casinos in (Exhibit 1). 1 The non-remote betting industry is made up of both on-course and off-course betting operators. As of 30 September 2015, there were 277 operators licensed for the activity non-remote general betting standard (off-course). This is a decrease of 22 from 31 March During the same period, there were 548 operators licensed for the activity non-remote general betting limited (on-course), a decrease of 19 from 31 March As of 30 September 2015, four operators (William Hill, Ladbrokes, Gala Coral Group, Betfred) dominate the betting industry in Great Britain, their estates accounted for 87% of all betting shops (Exhibit 2). The British gambling industry today has developed into a multi-billion pound market. Arguably, one of the main reasons for the extraordinaire growth has been the Internet that added a twist into the online gambling industry and high street bookmakers. Samvo offers its services to both remote and non-remote segments of the market, and for that reason, the company needs to understand and balance its values, capabilities and opportunities, so it can develop a viable and sustainable strategy. 2. Strategy Formulation Samvo Entertainment has adopted the War Room Strategic formulation to represent the management team collective perception of the business, and from which the company s strategy plan was developed. (See the Exhibit 3: Samvo Strategic Plan Formulation). The War room led by a facilitator enabled the management team to prioritize information, to set direction and establish goals for their areas of responsibilities. The war room workshop began with information on the company's current situation, brand and image research and insights from market trends and perspectives. The information 1 UK Gambling Commission - Industry Statistics Report 2016

2 helped the management team to reflect on the future of the company based on the company s values, opportunities and capabilities. The main objective was to build a strategic plan to improve the position and expand market share in the short and medium term, and to ensure the prosperity of the company and brand value in the long term. Exhibit 3: Samvo Strategic Plan Formulation The business reason for the company s formulation approach was based in the following principles. Using manager s knowledge of the business and different expertise to get input from diverse perspectives; Using manager s empowerment to take the initiative based on their own mission and insights; Focus on stakeholders interests and vision, and evaluate the organization s performance and capability; In collaboration, improve organizations capabilities that increase performance. 3. Strategy analysis During the war room workshop the management team map out 5 main strategy options that were segmented in two different groups, the growth strategy (A and B), and the growth enablers (C, D and E). (See the Exhibit 4: Samvo Strategic Options). When strategies fail, it is always because reality turns out to be different than we thought it would be: customer don t want a new offering, a firm can t execute it, partners don t like it, or competitors copy it quickly. Hypothesis testing focuses on identifying the make or break elements of a strategy choice. (Harris, 2013)

3 Exhibits 4: Samvo Strategic Options In order for the company to pursue these options successfully, there would be necessary that some of the following conditions could be true or created for each to succeed. A. Strengthen the "Core": Do we have a business model that ensures a competitive advantage? Can we develop a competitive intelligence process that supports the business model? B. Geographical and Services Expansion: Can we withstand an ambitious growth plan in new territories and services? C. Efficiency Product Development: Could we implement a management excellence model that ensures standardization, discipline and monitoring? D. Human Resources and Business Management: Do we have the necessary skills and talents to successful deliver the strategy? Can we create a talent management and development process? Do we have a culture aligned to the strategy? Can we develop a holistic and successful communication plan to help deliver the strategy? E. Innovation and Social Responsibility Do we believe social responsibility can integrated as a business strategy? Can we create and implement an innovation model aligned to the strategy? The value test: The gambling industry today has developed into a multi-billion pound worldwide market. The main reason for the extraordinaire growth has been the Internet that added a twist into the gambling industry and high street bookmakers. With the development of new technologies and the constant development of new software s, the gambling segment seems to present a strategic reasoning, as it is still in the growth phase of the dynamic environment. As the uncertainty over the concept of gambling decreases, it potentially leads to an increase in the demand for new products and services, therefore increasing the options to drive more revenue to the company.

4 The execution test: Samvo Entertainment is a multinational company and is current based in two different locations, China and the United Kingdom. Our Chinese office is where we hold the software development side of the company. There we have approximately 100 employees specialized in the development of gambling software. The reason for keeping this side of the business in China is economically important to the strategy, as employees, materials and manufactures services costs are low comparing to the United Kingdom. The scale test: The remote gambling has a great global integration as it allows extending its services for almost the entire globe, even though it is operating from one single location. This is due to the Internet as a tool to break geographical barriers and delivery services to almost everywhere. It is important to notice that as international regulatory scrutiny increases over offshore gambling providers, the prospect of offshore gambling operators offering services to a specific location without a local gambling license will decrease, therefore potentially increasing the operational cost to provide services on those locations. The defensibility test: As an online and retail provider, Samvo Entertainment competes with big gambling provider such as William Hill, Ladbrokes and Betfair. They control the majority of market share and are the ones we benchmark against to ensure we always deliver the highest standards of service, therefore influencing some of our strategic decisions. In instances of a successful strategy implementation and executions by Samvo there is a probability that others may follow. Samvo s current portfolio of products sectors are the following: Remote Gambling Non-remote Gambling Software Development By analyzing the portfolio relative market share, we can use data to collect empirical evidence that the strategy can be executable. (See the Exhibit 5: Samvo's Relative Market Share). On the relative market share analysis, we can identify that our product sectors have a low market share, and although the software development part of the business generate much higher revenue, comparing to our remote gambling service, its industry value is much higher, therefore resulting in a lower relative market share. The non-remote gambling activity, launched in 2013, consists of only three betting shops in different areas of London, and although, it has low market share in this sector, the company can explore this opportunity to develop a non-remote business model with the concept of betting shops cafés. This model can revolutionize the industry and help create a competitive advantage and brand recognition in the long term. The following steps to successful execute the growth strategy (A and B) will be to develop actions plans to deliver is objective to strengthen the core and expand its services and geographically with the betting shops cafés concept. The growth enablers strategy (C, D and E) will be crucial to support the growth strategy in fulfilling its objectives.

5 4. Strategy implementation A recent survey of more than 400 global CEOs found that executional excellence was the number one challenge facing corporate leaders in Asia, Europe, and the United States, heading a list of some 80 issues, including innovation, geopolitical instability, and top-line growth. (Donald Sull, 2015) In order to evaluate and determine what is required for Samvo strategy execution and identify the most critical aspects and practices that can drive Samvo s performance, we will use the 4A model. (See the Exhibit 6: The 4A Model). The 4A model details the need to build the ability and architecture factors as sources of the human and organizational potential that determine the company s capacity to execute. At the same time, the need to foster alignment and agility as sources of energy that drives the company into action. Exhibit 6: The 4A Model By evaluating the 4A model, we understand that Samvo need to achieve internal and external alignment through consistency of perspective and efforts towards a common goal, by successful communicating to all employees and stakeholder the strategic intents. In terms of ability, the company should create a process to identify and develop talents, and quickly position the required skills on key strategic positions; this should help deliver the strategic objectives. Moreover, the current internal development process and business management skills needs to improve considerably in order to provide Samvo with a stable structure to build the new business model, which should drive forward de company s expansion of the betting cafés concept.

6 5. Conclusion Samvo Entertainment use the War room to help the management team collaboratively identify future opportunities and establish goals for their areas of responsibilities. The war room used the manager s knowledge of the business and different expertise to get input on strategy from diverse perspectives, moreover, it intended to use the manager s empowerment to take the initiative based on their own mission and insights, focusing on stakeholder s interests and vision, to evaluate the organization s performance and capability. During the war room workshop the management team map out 5 main strategy options that were segmented in two different groups, the growth strategy and the growth enablers. The options were submit thought the hypothesis testing in order to identify the strong or weak elements of the strategy choice. The testing identified that the gambling industry is evolving, and, although the company s non-remote gambling activity consists of only three betting shops in different areas of London, with a low market share, the company can explore this opportunity to develop an innovative model with the concept of betting shops cafés. This model can revolutionize the industry and help create a competitive advantage and brand recognition in the long term. As the uncertainty over the concept of betting cafés decreases, it potentially leads to an increase in the demand. In order for the company achieve its strategic objectives, there is a need to achieve internal and external alignment by successful communicating to all employees and stakeholder the strategic intents. The company s ability to execute the strategy also needs to improve, as there will be required specific skills on key strategic positions in order to deliver the strategic objectives. Moreover, effective management leadership behaviors will directly related to successful strategy implementation. Employees and stakeholder needs to understand and agree with the company's strategic plan and most likely have a higher commitment to the company's success.

7 Exhibit 1: GGY comparisons GGY ( m) Apr 2013-Mar Apr 2014-Mar Non-remote sector 5, , Arcades Betting 3, , Bingo Casinos 1, , Remote betting, bingo and casino gambling 1, , National Lottery (remote and non-remote) 3, , Lotteries (remote and non-remote) Exhibit 2: Number of betting shops (non-remote) by operator Organisation at 31 Mar 2014 at 31 Mar 2015 at 30 Sep 2015 William Hill 2,382 2,308 2,312 Ladbrokes 2,271 2,190 2,166 Gala Coral Group 1,812 1,838 1,850 Betfred 1,383 1,375 1,375 Other operators 1,270 1,241 1,116 Total 9,118 8,952 8,819 Exhibit 5: Samvo's Relative Market Share Product Sectors Remote Non-remote Software Development Market Growth -1.00% 1.00% 2.00% Market Size 715mil 3bil 300bil Largest Competitor Sales 350mil 1,2bil 50bil Our Sales 1.2mil 0.5mil 50mil Relative Market Share % % %

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