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Business Recommendations to HipArt

Ray Yip
Ray Yip

- Net income of 106M in FY14, up from 47M in FY13 and 59M in FY12 - Recommendations include creating tourist kiosks and a strategic partnership with TrueMove mobile operator to help expand from 4 to 130 kiosks within 3 years and achieve profitable growth - Adding mobile app and live support services can further increase sales and reduce costs through more efficient labor utilization

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Net income of 106M in FY14 Growth Create & Sustain
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Core competencies of HipArt 2 Exclusive Technology Speed & Convenience Highly Customizable Large Variety High Speed & Convenience Exclusive Premium Technology
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 3 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Rapid Expansion Pressure Unsustainable Competitive Advantage
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 4 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Unsustainable Competitive Advantage Passive marketing strategy in highly competitive market segment Need to reposition to capture unexplored customers segments Rapid Expansion Pressure
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 5 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Unsustainable Competitive Advantage Contract requires expansion to at least 130 kiosks in 3 years Threat of cannibalization during expansion Insufficient human resources due to labour shortage Rapid Expansion Pressure
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 6 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Unsustainable Competitive Advantage Contract can only guarantee exclusive technology for 3 years Niche market faces potential competition from Chinese counterfeits Rapid Expansion Pressure
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Key Question 7 Unspecified Market Penetration Strategy Current Situation Rapid Expansion Pressure Unsustainable Competitive Advantage Key Question Challenges 4 phone case kiosks in department stores How can HipArt achieve a healthy and profitable growth when expanding the number of kiosks within 3 years?
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Recommendations 8 Strategic partnership with True Move Create Sustain Tourist Kiosks Add-on services (App + Live Support)
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Recommendations 9 Strategic partnership with True Move Create Sustain Tourist Kiosks Add-on services (App + Live Support) + Impact: Expansion to at least 130 kiosks within 3 years Net income of 106 Million in 2014 +
Create Tourist Kiosks 10
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The tourism industry in Thailand is booming 11 Total Tourist Spending in 2011 = 770b
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Tourist Kiosks can create value for both customers and HipArt 12 High Customization High Quality Preservation High Speed For HipArt: Expand customer base + Higher margin + Less reliance on repeat purchase For customers: Needs and expectations satisfied
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Bangkok, Ayutthaya and Pattaya are 3 best cities to install Tourist Kiosks 13 Bangkok Pattaya Ayutthaya
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The Thai government will support HipArts Tourist Kiosks 14 Ministry of Tourism and Sports For Thai government: Increased publicity + Money incentive
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Implementation of Tourist Kiosks is within HipArts capability 15 Resources needed Achievable? Additional expense (rental fee, installation and maintenance) Additional labour Additional changes to kiosk to cater for tourists needed
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Key challenges are well tackled in HipArts Tourist Kiosks 16 Tourists Specified market penetration effect 90 Kiosks Ease operational expansion pressure High volume & turnover Maximize machine utilization & boost sales
Sustain Strategic partnership with TrueMove 17
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The smartphone accessories market is growing in Thailand 18 The surge in consumer demand has boosted the sales volume of smartphones by over 80% in the first quarter of 2012 (In Thailand) GfK Thailand Prominent Market Researcher
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Department stores has a proven demand but limited growth potential 19 Current monthly average customers per store: 250 If continue, even at 50% penetration: 100
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Partnership with mobile operator brings in new business 20 First time clients: Need to buy casing Active marketing effect Re-purchase possibilities
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Strategic partnership with TrueMove will be HipArts best choice 21 Criteria AIS DTAC TrueMove Customer group size Customer group fit Less Competition in store Chances of strategic partnership Overall
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation TrueMove Strategic Partnership will help build impeccable business model 22 Lifestyle Customers Sophisticated market penetration 41 Kiosks Ease operational expansion pressure Increase market size Maximize machine utilization
Add-on Services: App & Live Support 23
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Smartphone application increases sales through raising turnover rate in kiosks 24 1. App allows you to create designs on own phone 2. 1 fast lane, 1 full service 3. Print & collect Increased turnover & customer satisfaction Increases Sales
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Live support can reduce cost through more effective use of labour 25 1. Operators stationed at headquarters 2. Press button for communication 3. Remote Control function to solve any issues High human capital utilization Less prone to labor shortage
Financials 26
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Net income is forecasted to reach 106M in FY14 -10 10 30 50 70 90 110 130 150 FY12 FY13 FY14 Net Income over 3 Years 27 (in millions) 1. 63% of printers are deployed in tourism, the segment with highest margin 2. 57% of Dreamjet Artist printers are deployed in FY13 3. Average net margin is 26% in FY13 and 30% in FY14 Forecast: 106M Base Case: 47M 59M
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 56% budget is dedicated to create while 41% to sustain 28 Create: 56% Sustain: 41% Budget Allocation LiveSupport: 3% App: 0.4%
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Major expenses are salary, depreciation, fee to TrueMove and fee to government 29 Distribution of Top 4 Expenses Depreciation: 11% (28M) Miscellaneous: 28% Fee to government: 8% (22M) Salary: 43% (113M) 1. Top talents of rental sales, design and are hired at over industry salary average 2. Dreamjet Artist printer is depreciated over 5 years 3. Share of net income with TrueMove is set between 25-40% 4. Rental fee to government is set at 10k per kiosk per month Fee to TrueMove: 10% (25M)
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Positive cash flow accumulates to over 131M by the end of FY14 0 20 40 60 80 100 120 140 FY12 FY13 FY14 Cash Flow Statement in 3 Years 30 (in millions) 131M 1. 2-year bank loan of 14M at 12% interest rate is obtained to finance necessary expansion-related expenses in FY12 2. Loan is repaid at the end of FY13 3. The quantity of new printers acquired and deployed are 30, 74, 39 respectively over the 3-year period 1M
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Net profit is most sensitive to sales revenue 31 0% 1% 2% 3% 4% 5% 1% Increase in Sales Revenue 1% Decrease in COGS 1% Decrease in Operating Cost 1% Decrease in Salary 1% Decrease in Budget Needed for Create 1% Decrease in Budget Needed for Sustain Sensitivity Analysis % Change in Net Profit
Implementation 32
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Timeline Administration & Create 33 FY12 FY13 FY14 Administration Borrow a loan of 7m Recruit 1 Rental Sales Head & 1 Creative Advisor Expand Operation Team Create Tourist Kiosks Negotiate with Ministry of Tourism & Sports Operation in Bangkok tourism spots Operation in Ayutthaya tourism spots Operation in Pattaya tourism spots
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Timeline Sustain & Add-on Service 34 FY12 FY13 FY14 Sustain Strategic Partnership with TrueMove Install additional kiosks in department stores Negotiate with TrueMove Operation in TrueMove stores Operation in TrueMove coffee shop Add-on Service App & Live Support System Develop App & Live Support System App & Live Support System in place
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation HipArt will be able to execute the Create & Sustain strategy Risks Mitigation The Thai government turns down the cooperation plan Negotiate with individual souvenir shops using the profit-sharing model Tourists demand for Tourist Kiosks not as high as expected Move kiosks to other new tourist spots or even department stores TrueMove turns down the partnership offer Approach DTAC with a more attractive profit-sharing offer Low demand on HipArt app Promote the HipArt app via online marketing means Convert fast-track kiosks back to normal kiosks 35
Conclusion 36
Conclusion 37 Challenges faced by HipArt Recommendations to solve challenge How they tackle the challenges Unspecified market penetration strategy Rapid expansion pressure Unsustainable competitive advantage Tourists Stable partnership for expansion Exclusive operation Tourist Kiosks Strategic partnership with True Move Add-on services: App+Live Supoort 1st time smartphone users Expansion leverages on branch network Build brand name Tech savvy and service-seeking customers Maximize machine utilization Less prone to labour shortage
Conclusion 38 2014 Healthy and profitable expansionMaximize utilization within 3 yearsNet Income of 106M in FY14Create Sustain
Appendix 39
際際滷 navigator Main 際際滷s Appendix 1. Situation Analysis Core Competencies 3 Key Challenges Key Question Recommendations 2. Create Tourist Kiosks Tourism situation Benefit both customers and HipArt 3 Strategic Places Government support Implementation within capability Key challenges tackled 3. Sustain Strategic partnership with TrueMove The Smartphone accessories market is growing in Thailand Department stores has a proven demand but limited growth potential Partnering with mobile operators brings in new business Strategic partnership with TrueMove is HipArts best choice Key Challenges tackled 3. Add-On Service App 4. Add-On Service Live Support System 5. Financials 6. Implementation Timeline Administration & Create Timeline Sustain & Add-On Service Risk Mitigation 7. Conclusion A. Financial > Tourist arrival > Margin > Tourism overview > Tourism Bangkok Ayutthaya Pattaya > Department store > Mobile operator > Salary > New Printer > Base case > Net income scenario > Expense distribution > Higher return for tourists B. Create recommendation > Potential Scenic spots C. Sustain recommendation > 1st jobber market > Thailand smartphone market > TrueMove implementation > TrueMove Stores D. Long term > Rental Service > Alternative printers E. Others > Creative advisor criteria > VOX price comparison > Smartphone costs 40
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Thailand Quarterly Tourists Arrival from 2007 - 2012 41 Numbers show number of tourist arrivals (in millions). Dates of political unrest and untoward events : 2009 : most negative events 11-12 April 2010 : most negative events : around 19 May 2011 : flooding of Central Thailand and part of Bangkok Oct-Dec Source: Thaiwebsites.com
Margin Conservative FY12 FY13 FY14 Gross margin 0.700 0.700 0.700 Operating margin 0.006 0.340 0.369 Net margin -0.019 0.266 0.296 42 Optimistic FY12 FY13 FY14 Gross margin 0.700 0.700 0.700 Operating margin -0.203 0.390 0.402 Net margin -0.162 0.312 0.321
Tourism Segment (Bangkok) FY12 FY13 FY14 Price per casing 600 600 600 No. of stores 15 30 30 Per hour using rate 4 2 2 Operating hour 7 7 7 Time of service (y) 0.5 1 1 Total customer served 76,650 153,300 153,300 43
Tourism Segment (Ayutthaya) FY12 FY13 FY14 Price per casing 600 600 600 No. of kiosks 0 45 30 Per hour using rate 4 2 2 Operating hour 7 7 7 Time of service (y) 0 0.5 1 Total customer served 0 114,975 153,300 44
Tourism Segment (Pattaya) FY12 FY13 FY14 Price per casing 600 600 600 No. of kiosks 0 15 30 Per hour using rate 4 4 2.5 Operating hour 7 7 7 Time of service (y) 0 0.5 1 Total customer served 0 76,650 191,625 45
Department Store Segment FY12 FY13 FY14 Price per casing 500 500 500 No. of kiosks 16 12 12 Per hour using rate 1 1 1 Operating hour 8 8 8 Time of service (y) 0.5 1 1 Total customer served 23,360 35,040 35,040 46
Tourism Segment (Overview) 47 Per year, Total customers served under full-run: 500K Total visitors to Thailand: 19M Success rate: 2.6%
Mobile Operator Segment (Flagship) FY12 FY13 FY14 Price per casing 400 400 400 No. of kiosks 3 6 9 Per hour using rate 2 1.5 1.5 Operating hour 8 8 8 Time of service (y) 0.5 1 1 Total customer served 8,760 26,280 39,420 48
Mobile Operator Segment (Normal) FY12 FY13 FY14 Price per casing 400 400 400 No. of kiosks 8 16 16 Per hour using rate 1 1 0.75 Operating hour 8 8 8 Time of service (y) 0.5 1 1 Total customer served 11,680 46,720 35,040 49
Mobile Operator Segment (Coffee Shop) FY12 FY13 FY14 Price per casing 400 400 400 No. of kiosks 0 8 16 Per hour using rate 0.75 0.75 0.75 Operating hour 8 8 8 Time of service (y) 0 0.5 1 Total customer served 0 8,760 35,040 50
Salary (Head) Heads Salary No. Total Manager 250,000 2 500,000 Creative Advisor 100,000 1 100,000 IT Advisor 100,000 1 100,000 Design 150,000 2 300,000 Rental Sales 200,000 2 400,000 IT 150,000 1 150,000 Machine Maintenance 80,000 3 240,000 Operations 150,000 3 450,000 Inventory & Admin 100,000 3 300,000 51
Salary (Junior) 52 Junior Salary No. Total Rental Sales 60000 3 180000 IT 50000 1 50000 Operation 60000 9 540000 Inventory & Admin 50000 6 300000
New Printers Deployment 53 Segment FY11 FY12 FY13 % of Total Tourism 15 60 15 63% Operator 12 22 8 28% Dept Store 12 0 0 8% Operator - Flagship 3 6 0 6% Operator - Normal 8 8 0 11% Operator - Coffe Shop 0 8 8 11%
Base Case Assumption 54 Only Dept Store Total Price per casing 500 500 500 No. of stores 60 300 400 Per hour using rate 1 1 1 Operating hour 8 8 8
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Net Income in different scenarios -10 10 30 50 70 90 110 130 150 FY12 FY13 FY14 Net Income in Different Scenarios over 3 Years 55 (in millions) Key Assumptions: 1. 63% of printers are deployed in tourism, the segment with highest margin 2. 57% of Dreamjet Artist printers are deployed in FY13 3. Average net margin is 26% in FY13 and 30% in FY14 Conservative: 106M Base Case: 47M Optimistic: 143M 59M
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Detailed Expenses Distribution 56 45% 11% 10% 9% 5% 4% 3% 2% 11% Distribution of Top 8 Expenses Salary Depreciation Fee to TrueMove Rental Fee to Govt Maintenance Exp Designer Fee Customer Support Exp
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The tourism customer segment provides a higher rate of return 79% 13% 8% Sales Distribution Tourism Mobile Operator Dept Store 57 1. Higher price and turnover rate 2. Lower rental expenses to government compared to those to mobile operator or department store 3. No customer support-related (e.g. LiveSupport) expenses 56%35% 9% Budget Allocation
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 1. Referral from Design societies 2. Headhunting Channels for hiring Creative Advisors 58 Thailand Creative and Design Center Thai Design Consortium RSM Thailand Pacific Bridge Incorporated KTI Consultants
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Potential scenic spots for setting up Tourist Kiosks 59 Bangkok Pattaya Ayutthaya 1. Wat Ratcha-orasaram 2. Wat Sai 3. Wat Nangnong Worawihan 4. National Museum of Royal Barges 5. Bangkok Noi railway station 6. Wat Suwannaram Ratchaworawihan 7. Wat Rakhang Kositaram Woramahawihan 8. Jim Thompson House 9. Erawan Shrine 10. The Museum of Imaging Technology 1. Wat Khao Phra Bat 2. The Sanctuary of Truth 3. Wat Yansangwararam 4. Nong Nooch Garden 5. Thai Alangkan Theatre 6. Baan Sukhawadee 7. Wat Chong Lom 8. Wihan Thep Sathit Phra Kitti Chaloem 9. Anek Kuson Sala (Wihan Sian) 10. Siriphon Orchid Farm 1. Ayutthaya Historical Park 2. Ayuthaya Ruins 3. Wat Phra Mahthat 4. Wat Yai Chai Mang Khon 5. Elephantstay 6. Wat Phra Sri Sanphet 7. Wat Chaiwattanarm 8. Temple of the Royal Restoration (Wat Ratchaburana) 9. Temple of the Reclining Buddha (Wat Lokayasutharam) 10. Wat Phu Khao Thong (Golden Mount)
Price comparison- Vox and Chic 60 139.00 ChicVox 790.00
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Thailands female 1st jobber population is estimated to be 0.9 Million 61 Source: Nationmaster, US Census Bureau Number of 20-24 year old female in 2010: 2.4 Million Employment to population ratio: 37.9 % Estimate of Thailand 1st jobber women population =0.9 Million
Smartphone Usage in Thailand According to Kasikorn Research Centre (KResearch), consumers now want their mobile phones to have easy and convenient access to social networks and multi-media functions. Mobile phones hence have been developed further to meet with the demands, especially smart phones, which are now very popular among thai consumers. Based on a survey by KResearch, 50.4% of consumers in Bangkok own smart phones. 56% of people answering the questionnaire, whose ages are between 20 to 24 years old or those who just start working, have smart phones in possession. Although smart phone ownership in Thailands capital is relatively high, most of the people answering the questionnaire in all age groups have no smart phones at present. However, 50% of them do plan to have the device in the future. 62
Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Implementation for TrueMove 63 Profit sharing scheme Locations: 3 Flagship, 8 Normal stores, 32 Coffee shops Prime locations for all shops- opportunities for re-purchase- close proximity to usual hang out/ shopping area Discounted price of 400BHT for 1st Time phone buyers from TrueMove
Number of Truemove stores and True Coffee in Bangkok 64 True Coffee: 32 stores
Number of True Flagship and Normal Shops 65 True Shop: 8 shops Flagship stores: 3
Rental Service provides long term growth strategy 66 Rental Service: Provide mobile printers in cars for rent for events Incentives: Profit sharing scheme Target customers: Art Exhibition, Weddings & Graduations/ Open days Strengths: Does not rely on Kiosk Untapped market segment Higher tendency to spend in Special Occasions Leverages on core competency
Alternative flatbed printer: Mimaki JUF 3042 67 Price: USD 20,000
Thailand smart phone prices 68 Apple 4: 17,900 Apple 4S: 20,900 Apple 3: 12,900 Galaxy Note: 15,500 Galaxy S: 12,000 Galaxy S II: 13,500 Blackberry Bold 9700: 12,000 Blackberry Bold 9900: 12,900

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Business Recommendations to HipArt

  • 1. Net income of 106M in FY14 Growth Create & Sustain
  • 2. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Core competencies of HipArt 2 Exclusive Technology Speed & Convenience Highly Customizable Large Variety High Speed & Convenience Exclusive Premium Technology
  • 3. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 3 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Rapid Expansion Pressure Unsustainable Competitive Advantage
  • 4. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 4 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Unsustainable Competitive Advantage Passive marketing strategy in highly competitive market segment Need to reposition to capture unexplored customers segments Rapid Expansion Pressure
  • 5. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 5 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Unsustainable Competitive Advantage Contract requires expansion to at least 130 kiosks in 3 years Threat of cannibalization during expansion Insufficient human resources due to labour shortage Rapid Expansion Pressure
  • 6. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 3 Key Challenges for HipArt 6 Unspecified Market Penetration Strategy Unspecified Market Penetration Strategy Unsustainable Competitive Advantage Contract can only guarantee exclusive technology for 3 years Niche market faces potential competition from Chinese counterfeits Rapid Expansion Pressure
  • 7. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Key Question 7 Unspecified Market Penetration Strategy Current Situation Rapid Expansion Pressure Unsustainable Competitive Advantage Key Question Challenges 4 phone case kiosks in department stores How can HipArt achieve a healthy and profitable growth when expanding the number of kiosks within 3 years?
  • 8. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Recommendations 8 Strategic partnership with True Move Create Sustain Tourist Kiosks Add-on services (App + Live Support)
  • 9. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Recommendations 9 Strategic partnership with True Move Create Sustain Tourist Kiosks Add-on services (App + Live Support) + Impact: Expansion to at least 130 kiosks within 3 years Net income of 106 Million in 2014 +
  • 10. Create Tourist Kiosks 10
  • 11. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The tourism industry in Thailand is booming 11 Total Tourist Spending in 2011 = 770b
  • 12. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Tourist Kiosks can create value for both customers and HipArt 12 High Customization High Quality Preservation High Speed For HipArt: Expand customer base + Higher margin + Less reliance on repeat purchase For customers: Needs and expectations satisfied
  • 13. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Bangkok, Ayutthaya and Pattaya are 3 best cities to install Tourist Kiosks 13 Bangkok Pattaya Ayutthaya
  • 14. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The Thai government will support HipArts Tourist Kiosks 14 Ministry of Tourism and Sports For Thai government: Increased publicity + Money incentive
  • 15. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Implementation of Tourist Kiosks is within HipArts capability 15 Resources needed Achievable? Additional expense (rental fee, installation and maintenance) Additional labour Additional changes to kiosk to cater for tourists needed
  • 16. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Key challenges are well tackled in HipArts Tourist Kiosks 16 Tourists Specified market penetration effect 90 Kiosks Ease operational expansion pressure High volume & turnover Maximize machine utilization & boost sales
  • 17. Sustain Strategic partnership with TrueMove 17
  • 18. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The smartphone accessories market is growing in Thailand 18 The surge in consumer demand has boosted the sales volume of smartphones by over 80% in the first quarter of 2012 (In Thailand) GfK Thailand Prominent Market Researcher
  • 19. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Department stores has a proven demand but limited growth potential 19 Current monthly average customers per store: 250 If continue, even at 50% penetration: 100
  • 20. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Partnership with mobile operator brings in new business 20 First time clients: Need to buy casing Active marketing effect Re-purchase possibilities
  • 21. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Strategic partnership with TrueMove will be HipArts best choice 21 Criteria AIS DTAC TrueMove Customer group size Customer group fit Less Competition in store Chances of strategic partnership Overall
  • 22. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation TrueMove Strategic Partnership will help build impeccable business model 22 Lifestyle Customers Sophisticated market penetration 41 Kiosks Ease operational expansion pressure Increase market size Maximize machine utilization
  • 23. Add-on Services: App & Live Support 23
  • 24. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Smartphone application increases sales through raising turnover rate in kiosks 24 1. App allows you to create designs on own phone 2. 1 fast lane, 1 full service 3. Print & collect Increased turnover & customer satisfaction Increases Sales
  • 25. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Live support can reduce cost through more effective use of labour 25 1. Operators stationed at headquarters 2. Press button for communication 3. Remote Control function to solve any issues High human capital utilization Less prone to labor shortage
  • 27. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Net income is forecasted to reach 106M in FY14 -10 10 30 50 70 90 110 130 150 FY12 FY13 FY14 Net Income over 3 Years 27 (in millions) 1. 63% of printers are deployed in tourism, the segment with highest margin 2. 57% of Dreamjet Artist printers are deployed in FY13 3. Average net margin is 26% in FY13 and 30% in FY14 Forecast: 106M Base Case: 47M 59M
  • 28. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 56% budget is dedicated to create while 41% to sustain 28 Create: 56% Sustain: 41% Budget Allocation LiveSupport: 3% App: 0.4%
  • 29. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Major expenses are salary, depreciation, fee to TrueMove and fee to government 29 Distribution of Top 4 Expenses Depreciation: 11% (28M) Miscellaneous: 28% Fee to government: 8% (22M) Salary: 43% (113M) 1. Top talents of rental sales, design and are hired at over industry salary average 2. Dreamjet Artist printer is depreciated over 5 years 3. Share of net income with TrueMove is set between 25-40% 4. Rental fee to government is set at 10k per kiosk per month Fee to TrueMove: 10% (25M)
  • 30. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Positive cash flow accumulates to over 131M by the end of FY14 0 20 40 60 80 100 120 140 FY12 FY13 FY14 Cash Flow Statement in 3 Years 30 (in millions) 131M 1. 2-year bank loan of 14M at 12% interest rate is obtained to finance necessary expansion-related expenses in FY12 2. Loan is repaid at the end of FY13 3. The quantity of new printers acquired and deployed are 30, 74, 39 respectively over the 3-year period 1M
  • 31. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Net profit is most sensitive to sales revenue 31 0% 1% 2% 3% 4% 5% 1% Increase in Sales Revenue 1% Decrease in COGS 1% Decrease in Operating Cost 1% Decrease in Salary 1% Decrease in Budget Needed for Create 1% Decrease in Budget Needed for Sustain Sensitivity Analysis % Change in Net Profit
  • 33. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Timeline Administration & Create 33 FY12 FY13 FY14 Administration Borrow a loan of 7m Recruit 1 Rental Sales Head & 1 Creative Advisor Expand Operation Team Create Tourist Kiosks Negotiate with Ministry of Tourism & Sports Operation in Bangkok tourism spots Operation in Ayutthaya tourism spots Operation in Pattaya tourism spots
  • 34. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Timeline Sustain & Add-on Service 34 FY12 FY13 FY14 Sustain Strategic Partnership with TrueMove Install additional kiosks in department stores Negotiate with TrueMove Operation in TrueMove stores Operation in TrueMove coffee shop Add-on Service App & Live Support System Develop App & Live Support System App & Live Support System in place
  • 35. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation HipArt will be able to execute the Create & Sustain strategy Risks Mitigation The Thai government turns down the cooperation plan Negotiate with individual souvenir shops using the profit-sharing model Tourists demand for Tourist Kiosks not as high as expected Move kiosks to other new tourist spots or even department stores TrueMove turns down the partnership offer Approach DTAC with a more attractive profit-sharing offer Low demand on HipArt app Promote the HipArt app via online marketing means Convert fast-track kiosks back to normal kiosks 35
  • 37. Conclusion 37 Challenges faced by HipArt Recommendations to solve challenge How they tackle the challenges Unspecified market penetration strategy Rapid expansion pressure Unsustainable competitive advantage Tourists Stable partnership for expansion Exclusive operation Tourist Kiosks Strategic partnership with True Move Add-on services: App+Live Supoort 1st time smartphone users Expansion leverages on branch network Build brand name Tech savvy and service-seeking customers Maximize machine utilization Less prone to labour shortage
  • 38. Conclusion 38 2014 Healthy and profitable expansionMaximize utilization within 3 yearsNet Income of 106M in FY14Create Sustain
  • 40. 際際滷 navigator Main 際際滷s Appendix 1. Situation Analysis Core Competencies 3 Key Challenges Key Question Recommendations 2. Create Tourist Kiosks Tourism situation Benefit both customers and HipArt 3 Strategic Places Government support Implementation within capability Key challenges tackled 3. Sustain Strategic partnership with TrueMove The Smartphone accessories market is growing in Thailand Department stores has a proven demand but limited growth potential Partnering with mobile operators brings in new business Strategic partnership with TrueMove is HipArts best choice Key Challenges tackled 3. Add-On Service App 4. Add-On Service Live Support System 5. Financials 6. Implementation Timeline Administration & Create Timeline Sustain & Add-On Service Risk Mitigation 7. Conclusion A. Financial > Tourist arrival > Margin > Tourism overview > Tourism Bangkok Ayutthaya Pattaya > Department store > Mobile operator > Salary > New Printer > Base case > Net income scenario > Expense distribution > Higher return for tourists B. Create recommendation > Potential Scenic spots C. Sustain recommendation > 1st jobber market > Thailand smartphone market > TrueMove implementation > TrueMove Stores D. Long term > Rental Service > Alternative printers E. Others > Creative advisor criteria > VOX price comparison > Smartphone costs 40
  • 41. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Thailand Quarterly Tourists Arrival from 2007 - 2012 41 Numbers show number of tourist arrivals (in millions). Dates of political unrest and untoward events : 2009 : most negative events 11-12 April 2010 : most negative events : around 19 May 2011 : flooding of Central Thailand and part of Bangkok Oct-Dec Source: Thaiwebsites.com
  • 42. Margin Conservative FY12 FY13 FY14 Gross margin 0.700 0.700 0.700 Operating margin 0.006 0.340 0.369 Net margin -0.019 0.266 0.296 42 Optimistic FY12 FY13 FY14 Gross margin 0.700 0.700 0.700 Operating margin -0.203 0.390 0.402 Net margin -0.162 0.312 0.321
  • 43. Tourism Segment (Bangkok) FY12 FY13 FY14 Price per casing 600 600 600 No. of stores 15 30 30 Per hour using rate 4 2 2 Operating hour 7 7 7 Time of service (y) 0.5 1 1 Total customer served 76,650 153,300 153,300 43
  • 44. Tourism Segment (Ayutthaya) FY12 FY13 FY14 Price per casing 600 600 600 No. of kiosks 0 45 30 Per hour using rate 4 2 2 Operating hour 7 7 7 Time of service (y) 0 0.5 1 Total customer served 0 114,975 153,300 44
  • 45. Tourism Segment (Pattaya) FY12 FY13 FY14 Price per casing 600 600 600 No. of kiosks 0 15 30 Per hour using rate 4 4 2.5 Operating hour 7 7 7 Time of service (y) 0 0.5 1 Total customer served 0 76,650 191,625 45
  • 46. Department Store Segment FY12 FY13 FY14 Price per casing 500 500 500 No. of kiosks 16 12 12 Per hour using rate 1 1 1 Operating hour 8 8 8 Time of service (y) 0.5 1 1 Total customer served 23,360 35,040 35,040 46
  • 47. Tourism Segment (Overview) 47 Per year, Total customers served under full-run: 500K Total visitors to Thailand: 19M Success rate: 2.6%
  • 48. Mobile Operator Segment (Flagship) FY12 FY13 FY14 Price per casing 400 400 400 No. of kiosks 3 6 9 Per hour using rate 2 1.5 1.5 Operating hour 8 8 8 Time of service (y) 0.5 1 1 Total customer served 8,760 26,280 39,420 48
  • 49. Mobile Operator Segment (Normal) FY12 FY13 FY14 Price per casing 400 400 400 No. of kiosks 8 16 16 Per hour using rate 1 1 0.75 Operating hour 8 8 8 Time of service (y) 0.5 1 1 Total customer served 11,680 46,720 35,040 49
  • 50. Mobile Operator Segment (Coffee Shop) FY12 FY13 FY14 Price per casing 400 400 400 No. of kiosks 0 8 16 Per hour using rate 0.75 0.75 0.75 Operating hour 8 8 8 Time of service (y) 0 0.5 1 Total customer served 0 8,760 35,040 50
  • 51. Salary (Head) Heads Salary No. Total Manager 250,000 2 500,000 Creative Advisor 100,000 1 100,000 IT Advisor 100,000 1 100,000 Design 150,000 2 300,000 Rental Sales 200,000 2 400,000 IT 150,000 1 150,000 Machine Maintenance 80,000 3 240,000 Operations 150,000 3 450,000 Inventory & Admin 100,000 3 300,000 51
  • 52. Salary (Junior) 52 Junior Salary No. Total Rental Sales 60000 3 180000 IT 50000 1 50000 Operation 60000 9 540000 Inventory & Admin 50000 6 300000
  • 53. New Printers Deployment 53 Segment FY11 FY12 FY13 % of Total Tourism 15 60 15 63% Operator 12 22 8 28% Dept Store 12 0 0 8% Operator - Flagship 3 6 0 6% Operator - Normal 8 8 0 11% Operator - Coffe Shop 0 8 8 11%
  • 54. Base Case Assumption 54 Only Dept Store Total Price per casing 500 500 500 No. of stores 60 300 400 Per hour using rate 1 1 1 Operating hour 8 8 8
  • 55. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Net Income in different scenarios -10 10 30 50 70 90 110 130 150 FY12 FY13 FY14 Net Income in Different Scenarios over 3 Years 55 (in millions) Key Assumptions: 1. 63% of printers are deployed in tourism, the segment with highest margin 2. 57% of Dreamjet Artist printers are deployed in FY13 3. Average net margin is 26% in FY13 and 30% in FY14 Conservative: 106M Base Case: 47M Optimistic: 143M 59M
  • 56. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Detailed Expenses Distribution 56 45% 11% 10% 9% 5% 4% 3% 2% 11% Distribution of Top 8 Expenses Salary Depreciation Fee to TrueMove Rental Fee to Govt Maintenance Exp Designer Fee Customer Support Exp
  • 57. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation The tourism customer segment provides a higher rate of return 79% 13% 8% Sales Distribution Tourism Mobile Operator Dept Store 57 1. Higher price and turnover rate 2. Lower rental expenses to government compared to those to mobile operator or department store 3. No customer support-related (e.g. LiveSupport) expenses 56%35% 9% Budget Allocation
  • 58. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation 1. Referral from Design societies 2. Headhunting Channels for hiring Creative Advisors 58 Thailand Creative and Design Center Thai Design Consortium RSM Thailand Pacific Bridge Incorporated KTI Consultants
  • 59. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Potential scenic spots for setting up Tourist Kiosks 59 Bangkok Pattaya Ayutthaya 1. Wat Ratcha-orasaram 2. Wat Sai 3. Wat Nangnong Worawihan 4. National Museum of Royal Barges 5. Bangkok Noi railway station 6. Wat Suwannaram Ratchaworawihan 7. Wat Rakhang Kositaram Woramahawihan 8. Jim Thompson House 9. Erawan Shrine 10. The Museum of Imaging Technology 1. Wat Khao Phra Bat 2. The Sanctuary of Truth 3. Wat Yansangwararam 4. Nong Nooch Garden 5. Thai Alangkan Theatre 6. Baan Sukhawadee 7. Wat Chong Lom 8. Wihan Thep Sathit Phra Kitti Chaloem 9. Anek Kuson Sala (Wihan Sian) 10. Siriphon Orchid Farm 1. Ayutthaya Historical Park 2. Ayuthaya Ruins 3. Wat Phra Mahthat 4. Wat Yai Chai Mang Khon 5. Elephantstay 6. Wat Phra Sri Sanphet 7. Wat Chaiwattanarm 8. Temple of the Royal Restoration (Wat Ratchaburana) 9. Temple of the Reclining Buddha (Wat Lokayasutharam) 10. Wat Phu Khao Thong (Golden Mount)
  • 60. Price comparison- Vox and Chic 60 139.00 ChicVox 790.00
  • 61. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Thailands female 1st jobber population is estimated to be 0.9 Million 61 Source: Nationmaster, US Census Bureau Number of 20-24 year old female in 2010: 2.4 Million Employment to population ratio: 37.9 % Estimate of Thailand 1st jobber women population =0.9 Million
  • 62. Smartphone Usage in Thailand According to Kasikorn Research Centre (KResearch), consumers now want their mobile phones to have easy and convenient access to social networks and multi-media functions. Mobile phones hence have been developed further to meet with the demands, especially smart phones, which are now very popular among thai consumers. Based on a survey by KResearch, 50.4% of consumers in Bangkok own smart phones. 56% of people answering the questionnaire, whose ages are between 20 to 24 years old or those who just start working, have smart phones in possession. Although smart phone ownership in Thailands capital is relatively high, most of the people answering the questionnaire in all age groups have no smart phones at present. However, 50% of them do plan to have the device in the future. 62
  • 63. Situation Tourist Kiosks Strategic Partnership Add-on Services Financials Implementation Implementation for TrueMove 63 Profit sharing scheme Locations: 3 Flagship, 8 Normal stores, 32 Coffee shops Prime locations for all shops- opportunities for re-purchase- close proximity to usual hang out/ shopping area Discounted price of 400BHT for 1st Time phone buyers from TrueMove
  • 64. Number of Truemove stores and True Coffee in Bangkok 64 True Coffee: 32 stores
  • 65. Number of True Flagship and Normal Shops 65 True Shop: 8 shops Flagship stores: 3
  • 66. Rental Service provides long term growth strategy 66 Rental Service: Provide mobile printers in cars for rent for events Incentives: Profit sharing scheme Target customers: Art Exhibition, Weddings & Graduations/ Open days Strengths: Does not rely on Kiosk Untapped market segment Higher tendency to spend in Special Occasions Leverages on core competency
  • 67. Alternative flatbed printer: Mimaki JUF 3042 67 Price: USD 20,000
  • 68. Thailand smart phone prices 68 Apple 4: 17,900 Apple 4S: 20,900 Apple 3: 12,900 Galaxy Note: 15,500 Galaxy S: 12,000 Galaxy S II: 13,500 Blackberry Bold 9700: 12,000 Blackberry Bold 9900: 12,900

Editor's Notes

  1. Source: The Authority of World Travel and Tourism http://www.wttc.org/site_media/uploads/downloads/thailand2012.pdf