January Marcopolo KYLE JANSEN MICHAEL PETER ALEX BILL BAILEY GLENN

Transcription

1 January 2014 Marcopolo ALEX BILL BAILEY GLENN KYLE JANSEN MICHAEL PETER

2 Our Decision Making Process Global leader in bus bodies Marke6ng Supply Chain Human Resources Services Crowdsourcing Build Passenger Demand Produc6on Distribu6on New Talent Buyback R&D

3 Takeaways Recommenda6on Implementa6on Addi6onal Considera6ons

4 Agenda Current Situa6on Analysis Alterna6ves Recommenda6on Implementa6on Metrics Addi6onal Considera6ons Q & A

5 The QuesIons at Hand How should we grow? Should we move into emerging markets Should we move into mature markets How can we exceed our revenue and profitability growth in the next decade?

6 Bus Market Emerging Markets Global Produc6on of Busses Growing Less regula6on Limited highway infrastructure 24.30% 49.40% Mature Markets 10.80% Stable Saturated transporta6on industry 15.50% China India Brazil Other

7 CompeIIon Bus Body Manufacturing Other Industries US $1 Million China: intense market consolida6on 100 (2005) to 10 (2012) Low- cost air travel Trains Subways Automobile Bicycle Innova6on Lighter Fuel efficient Easy to maintain Safer

8 Buying Busses Customer City Administra6ons Municipali6es Airports Charter Companies Use of Bus School transport Public transport Intercity travel Luxury coaches Cri6cal Buying Factors Safety Passenger comfort Elegance Cost Delivery 6me Financing Energy consump6on Maintenance Ease of opera6ons

9 PopulaIon & Industry Needs 2050 world popula6on >9 Billion 66% in ci6es Passengers want wireless connec6vity Smartphone Rising adop6ons rates Primary access to internet Bandwidth limita6ons of wifi Industry needs Safety Sustainability Light & recycle Emissions Chassis

10 Changing Cost Structure Changing Fossil Fuel Prices Natural Gas: Hydraulic Fracking Oil: Price could drop if U.S. opens up domes6c extrac6on Would lower produc6on and manufacturing costs Automa6on Decreases employees required (US down 35% since 2003) Increases produc6vity (US up 40% since 2003) 3D Prin6ng Reduce inventory costs Digital download

11 Brazil Highly price sensi6ve passengers Populist demonstra6ons over fare increase from 3 to 3.2 Reals (US $.08) World Cup (2014) Summer Olympics (2016)

12 RevisiIng the QuesIons How should we grow? Should we move into emerging markets Should we move into mature markets Reality Check: Do we currently have the How can we exceed our revenue and profitability growth in the next decade? resources to be a global leader in bus bodies?

13 What do we do? Wholly manufactured bus bodies Complete buses NOT an integral manufacturer Auto parts Components Research & Development Service maintenance

14 How much do we build? 30,000 buses Leader in Brazil 55% produc6on is sourced out of Brazil

15 Our Global Presence 16 Plants across the world 4 in Brazil 3 in Australia 2 in Argen6na 2 in India Colombia, Egypt, South Africa, Mexico, China Cannot compete in Europe

16 SWOT Analysis Strengths Weaknesses Opportuni6es Threats

17 SWOT Analysis STRENGTHS Lowest lead 6mes in the industry Highly innova6ve bus bodies Customiza6on capabili6es Customer service Rela6onship with TaTa WEAKNESSES Small market share (7% of global market) Limited presence in mature markets Europe

18 SWOT Analysis OPPORTUNITIES Focus on service- oriented sales Develop more sustainable buses Possible decrease in gas prices could decrease public transit costs THREATS Difficulty opera6ng with a global value chain Compe66on forming joint ventures with our partners Domes6c and interna6onal poli6cal strife Domes6c strikes against rising bus prices

19 Who is our customer? Automo6ve companies Private companies Governments End customer

20 Do we meet the customers needs? Cri/cal Buying Factors Controllable What we do well Safety X Passenger Comfort X X Elegance X X Cost X Lead Times X X Fuel Consump6on X X Maintenance X X

21 Decision Makers vs End Consumers Decision Makers Other companies Governments End Consumers Passengers

22 Customer Service Can provide maintenance within 36 hours globally Lowest lead 6mes in the world Many customiza6on op6ons Created 100 patents between Superior Customiza6on and Speed

23 Our CompeIIve Advantages Customiza6on and Innova6on Farmers Pilgrims to Mecca Gender segregated vehicles in India Company Culture Great dedica6on to staff JVs and partnerships for long run Global Value Chain All over the world

24 Who are we really compeing against? Direct Compe66on Other bus body producers Smaller specialty producers Large integral manufacturers Indirect compe66on Other modes of transporta/on Trains Planes

25 Comparison within the Industry Revenue per Employee (USD) Marcopolo 74,000 Daimler 326,000 Volvo 377,000 However Volvo is losing money on its bus opera6ons Opera6ng income of - $285,000,000 Daimler s bus division has very small margins 3% return on sales, while Daimler Group as a whole has 7.4% net profit margin

26 Our Margins Currently all produc6on is focused on completed buses Have to source the chassis from a supplier No in- house produc6on Greatest part of our sales margin comes from our body

27 Cost Review 12% COGS Chassis $200,000 - $300,000 Body $50,000 - $250,000 Other Op. Ex. 88% Percent of Key Costs 100% 50% 80% 20% 55% 45% 0% Low End High End Chassis Body

28 Revenue ( 000s) Op. Revenue $1,773,836 $1,812,393 $1,863,562 $1,562,472 $1,656,220 $1,755,594 $1,860,929 $1,972,585 $2,090,940 COGS $1,363,391 $1,413,374 $1,461,044 $1,233,370 $1,307,372 $1,385,815 $1,468,963 $1,557,101 $1,650,527 Net income $175,418 $185,078 $146,477 $123,275 $165,622 $175,559 $186,093 $197,258 $209,094 60% 50% 40% 30% 20% 10% 0% - 10% - 20% Revenue Growth (%) 47% 49% 20% 12% 9% 6% 6% 6% 6% 6% 2% 3% % - 16% Given the highly compe66ve marketplace and vola6le growth, we expect on average 6% growth yoy moving forward.

29 CriIcal Success Factors Cri/cal Success Factor What We Have Sustainable Compe//ve Advantage? Profitability 10% No. Distribu6on/Lead Times Lowest lead 6mes in the industry Yes. Produc6on 30,442 buses in 2012 No. Mee6ng the Customer s Needs Innova6on and Sustainability Customiza6on op6ons, strong customer service Innova6on Center No. Yes.

30 IntroducIon of AlternaIves Expand Opera6ons in Brazil Concentrate on Mature Markets Mul6- faceted Strategy with a Focus in Emerging Markets

31 AlternaIve 1 Expand OperaIons in Brazil PROS Liule change within supply chain Familiar with government regula6ons Familiar with customer s needs CONS Unable to feasibly capture emerging market Distance from major markets Will not drama6cally increase global market share

32 AlternaIve 2 Concentrate on Mature Markets PROS Sa6sfy changing customer demand for sustainable vehicles and energy Introduce customiza6on op6ons to amplify brand recogni6on CONS Market satura6on Established manufacturers already in Europe Heavy compe66on

33 AlternaIve 3 MulI- faceted Strategy with a Focus in Emerging Markets PROS Sa6sfy customer demand Capture addi6onal market share Dras6cally improve margins CONS Poten6al for compe66on to enter the same markets Government regula6ons for entering the market Takes 6me Expensive start up costs

34 CriIcal Success Factors Cri/cal Success Factor Brazil Mature Markets Mul/- faceted Strategy Profitability Moderate Moderate Low Distribu6on/Lead Times Moderate Moderate Moderate Produc6on High High Low Mee6ng the Customer s Needs Innova6on and Sustainability High Low Low Low Low Low

35 The Bodybuilding Plan BB Plan Marke6ng Opera6ons Human Resources R&D / Services Improve Distribu6on Expand Produc6on Increase Automa6on New Talent Bus Buyback Innova6on

36 Timeline Phase 1: Year 1 Phase 2: Years 2-3 Phase 3: Years 3-5

37 Overview of the Plan Phase 1 Iden6fy expansion and cost saving opportuni6es Increase awareness and rider demand Begin buyback program for buses Phase 2 Begin expansion, distribu6on op6miza6on efforts R&D investment Phase 3 Reevalua6on of customer demands Iden6fy new possible targets of expansion

38 MarkeIng: Quality & Convenience Aware Trade shows Bids Social Media campaign #bussesarebeuer Win bus passes Bollywood & Nollywood World Cup & Summer Olympics (2016) Know Brochures for various stakeholders Infographics 30x effec6veness Website BRT Advocate Maintenance contracts Training Buyback financing

39 MarkeIng Phases Phase 1 Source web development Trade shows Customer training Superior maintenance Bids Social Media campaigns Cultural research Transla6on services World Cup Phase 2 Bollywood Brand conscious Nollywood inexpensive Website Buyback financing Summer Olympics BRT Diplomats Phase 3 Con6nue Social media Bids Trade shows Update Website Brochures

40 OperaIons Phase 1 Source possible acquisi6on targets and/or contract agreements History of strong partnerships to consider Source IT companies to develop automa6on sowware Inves6gate main focuses of logis6cs (20%) in largest opera6ng countries Source warehouses to contract Phase 2 Contract IT company for automa6on services Contract warehouses Argen6na (70%), Brazil (49%), Colombia (49%), Australia (41%) Phase 3 Inves6gate feasibility of further automa6ng processes 3D Prin6ng possibili6es

41 Human Resources Phase 1 Contract talent for marke6ng and sales Outside firm, consultants Phase 2 Analyze produc6vity in newly added facili6es Consider possible layoffs, reloca6on of employees Maintain higher revenue/employee ra6o Hire specialized talent in new produc6on facili6es Phase 3 Reevaluate the efficiency of automated processes Consider possible layoffs, reloca6on of employees

42 R&D and New Services Phase 1 Con6nue to invest in R&D Source building facili6es of big compe66on abroad Criteria: No country with a current JV agreement Stable government Phase 2 Stay current with newer models of more fuel efficient buses Inves6gate other possibili6es for onboard entertainment LiFi, new electronic jacks Phase 3 Reevaluate customer demands, trends in the market Be cau6ous of heavy investments in leading edge technology

43 Budget ( 000s of USD) Phase 1 Phase 2 Phase 3 Opera6ons $200 $300 HR $1,500 R&D and New Services $300 Marke6ng $10,000 $5,000 $14,000 NPV of Total Costs: $40,809 Projected increase in Revenues: NPV of Revenues: $78,641 $15,625 $16,562 $55,891 Net expected gain of $37,832,000

44 Foreign Currency Risk Over a third of our business on average is overseas Subject to vola6le changes in currency from factors outside our control Must hedge in order to protect revenue and limit risk

45 Foreign Currency Strategy Work with an interna6onal bank in Brazil to find poten6al opportunity for currency swaps Use forward contracts when costs or revenues are known Have a bank back the accounts receivable with riskier customers Reinvest the income in local opera6ons E.g., R&D or sales representa6ves

46 Metrics of Success Profitability Distribu6on/Lead Times Produc6on Mee6ng the Customer s Needs Increase 2% by year 3 Remain industry leader Increase 18% by year 5 Increase customiza6on offerings

47 Risks and MiIgaIons Risk Probability Mi6ga6on China penetrates emerging markets 35% Emphasis innova6on and customiza6on op6ons Poli6cal Strife permits opera6ons 20% Evaluate joint venture op6ons

48 AddiIonal ConsideraIons How will future changes in technology change our opera6ons? Automa6on to reduce human resources Changes in hybrid technology How do we an6cipate our compe66on to react to our expansion in emerging markets?

49 QuesIons and Answers

50 Appendix Marcopolo How much do we build? Our Margins Overview of the Plan Components Our Decision Making Process Takeaways Agenda The Ques6ons at Hand Bus Market Compe66on Buying Busses Popula6on & Industry Needs Changing Cost Structure Brazil Revisi6ng the Ques6ons What do we do? Our Global Presence SWOT Analysis SWOT Analysis SWOT Analysis Who is our customer? Do we meet the customers needs? Decision Makers vs End Consumers Customer Service Our Compe66ve Advantages Who are we really compe6ng against? Comparison within the Industry Cost Review Revenue Cri6cal Success Factors Introduc6on of Alterna6ves Alterna6ve 1 Expand Opera6ons in Brazil Alterna6ve 2 Concentrate on Mature Markets Alterna6ve 3 Mul6- faceted Strategy with a Focus in Em... Cri6cal Success Factors The Bodybuilding Plan Timeline Marke6ng: Quality & Convenience Marke6ng Phases Opera6ons Human Resources R&D and New Services Budget Foreign Currency Risk Foreign Currency Strategy Metrics of Success Risks and Mi6ga6ons Addi6onal Considera6ons Con6ngency Plan 1 Expand Opera6ons in Brazil Con6ngency Plan 2 Concentra6on on Mature Markets Customiza6on Op6ons Opera6ng in China Consul6ng Op6on Joint Ventures in Mature Markets Hofstede

51 Components Caixas do Sul facility: Air Condi6oning Seat Foam Engineering plas6cs

52 ConIngency Plan 1 Expand OperaIons in Brazil 1. Search for ways to op6mize opera6ons 2. Con6nued R&D department 3. Heavy marke6ng campaign during World Cup and Olympics

53 ConIngency Plan 2 ConcentraIon on Mature Markets 1. Evaluate joint venture op6ons in China and Europe 2. Enter joint venture agreements 3. Source new employees 4. Begin Opera6ons abroad 5. Launch marke6ng campaign

54 CustomizaIon OpIons Bus Side adver6sing Adver6sements built into the interior and exterior of our buses? RFID Devices Track buses to measure bus ac6vity Reevaluate design of bus efficiency awer tracking

55 OperaIng in China Volvo in parts and components business Concerns with joint venture requirements Once China recognizes rights for intellectual property, we will evaluate penetra6ng the market

56 ConsulIng OpIon 1. Innova6on and customiza6on op6ons 2. Concerns with compe66on bea6ng us with beuer supply chains

57 Joint Ventures in Mature Markets Risks: Culture differences Difficult to agree on opera6ons Difficult to agree on prices

58 Hofstede Evaluate Culture differences in emerging markets Rela6onships with buyers Different standards in business prac6ces Different preferences in bus features Sustainability features Compartments