business plan of an innovative patent rocket r1
TRANSCRIPT
ASAP Firmware – Rocket R1
Paolo Balasso
Mattia Meggiorin
Christian Sanson
BUSINESS PLAN
1
Index
Preface .................................................................................................................................................. 3
Business Idea ......................................................................................................................................... 4
The Company: ASAP Firmware ..................................................................................................................... 5
The Product: Rocket R1 ................................................................................................................................ 5
Mission, Vision & Values .............................................................................................................................. 6
External Analysis .................................................................................................................................... 7
Porter’s 5 Forces Analysis ............................................................................................................................. 8
PESTEL Analysis ............................................................................................................................................ 9
Conclusions ................................................................................................................................................ 10
Market Analysis ................................................................................................................................... 11
Introduction ............................................................................................................................................... 12
Sales of bicycles ................................................................................................................................. 13
Number of bicyclers in each country ................................................................................................. 14
Italian bicyclers .................................................................................................................................. 16
Bicycles theft along Europe ............................................................................................................... 17
Conclusion ......................................................................................................................................... 17
Market attractiveness ................................................................................................................................ 18
Potential Markets ...................................................................................................................................... 19
Demand Analysis ................................................................................................................................. 20
Survey Analysis ........................................................................................................................................... 21
Characteristics of the sample ............................................................................................................ 21
Target market ................................................................................................................................... 23
Conjoint Analysis ....................................................................................................................................... 24
Description and input ........................................................................................................................ 24
Results ............................................................................................................................................... 25
Market share in Italian market .......................................................................................................... 26
Sales and revenue estimation ............................................................................................................ 28
Conclusion ......................................................................................................................................... 30
2
Competitors Analysis ........................................................................................................................... 31
Main Competitors....................................................................................................................................... 32
Main Products ............................................................................................................................................ 32
Competitors product descriptions .............................................................................................................. 33
Competitors strategic map ......................................................................................................................... 36
Competitors’ placement ............................................................................................................................. 37
Strategy Identification .......................................................................................................................... 39
Value Chain................................................................................................................................................. 40
The SWOT Analysis ..................................................................................................................................... 41
The 4P’s Analysis ........................................................................................................................................ 42
Strategy Identification ................................................................................................................................ 44
Economic-Financial Analysis ................................................................................................................. 45
Preliminary cost analysis ............................................................................................................................ 46
Fixed costs .................................................................................................................................................. 47
Variable costs ............................................................................................................................................. 47
Economic-financial plan.............................................................................................................................. 48
Worst-case scenario ................................................................................................................................... 49
Best-case scenario ...................................................................................................................................... 50
Index analysis ............................................................................................................................................. 51
Annex .................................................................................................................................................. 53
Annex 1 – Survey ........................................................................................................................................ 53
Annex 2 - Characteristics of the sample ...................................................................................................... 55
Annex 3 - Conjoint Analysis and partial utilities .......................................................................................... 61
Annex 4 – R Software procedures ............................................................................................................... 63
3
Preface
Taking into account several books relating to business plans, there are different ways to develop one of
them.
Someone suggests a top-down approach, where top managers state the strategy and let their subordinates
develop the plan. Someone else provides advice using a bottom-up methodology, in which operation
managers define the plan and pass it to top managers for a certain strategic planning.
However the best practice is without doubts a mix among top-down and bottom-up approaches where
there is a continuous process of redefinition and fusion of different and complementary skills (“ Il business
plan-Financial Times ” p. 16).
Considering this last approach, the business plan under consideration is the result of a mixture of ideas and
discussions of the inventor GPS-Tracker R1 and three students of the Master degree in Management
Engineering at Padua University.
This meeting of technical and business competences allowed us to develop new features of a possible
product based on the patent of Rocket R1 considering technical and economic feasibilities.
4
BUSINESS IDEA
5
The Company: ASAP-Firmware
ASAP-Firmware SRL provides services in the field of electronic design. In 2008 it deposited the patent of a GPS tracker integrated in the bicycles’ chassis, but it may be exploited only in Italian market. During the last five years, some companies asked to buy the patent and one of them blocked its Italian sales due to the patent’s infringement (Spybike’s product). It was decided to develop a Business Plan in order to understand if and how this product can be fruitful in the market by analysing competitors, customers and the environment.
The Product: Rocket R1
Rocket R1 is a GPS localizer designed for bicycles that use the GPS System in order to detect the bicycle's position, sending a message to the mobile phone of the owner to get immediately the precise position of the vehicle. The main characteristic of the product is that it is designed to be inserted within the frame of the bicycle so the tracker is perfectly invisible and secure from attempts of tamper, ensuring the highest degree of safety. In anti-theft mode, when a shift is detected, a message is sent containing satellites coordinates and speed. This message can be repeated with a programmable period, to stay informed about the route made. At the detection of a stop another message is sent a message to know exactly where the bicycle is located.
Applications Burglar alarm: when the security mode is on and the bicycle gets stolen, precise position is sent to
the owner.
Bicycle sharing management: thanks to GPS tracker the bicycle is easily identified and the service is simpler to manage. In addiction it warns in case vehicle goes out from permitted area (geo-fencing).
Other possible applications:
Smartphone application allows to see the bicycle’s position in a map and to monitor physical activities (e.g. speed, calories etc.).
Satellite navigation system.
SOS device: thanks to its integration it can be helpful during a crash to figure out the dynamics and to warn the aids.
Technical Specifications Hardware features:
3,7 Volt Li-Ion battery power supply
Integrated battery-charger; Mini-DC Power Jack connector for external supply (5 Vdc, max 1 A)
Integrated GPS and GSM modules
Moving sensor
SIM card holder
Firmware updating on board
Three indication led: battery discharged, battery charging, generic alarm
Weight: 100g
Size: diameter 27 mm X 150 mm length
6
GPS features:
Chipset SiRFstarIII
Receiver type: L1 frequency, C/A code (SPS), 20 independent tracking channels
Tracking sensitivity: -158 dBm
Time To First Fix (TTFF): Cold start 40sec (*) Warm start: 30 sec (*)
Hot start: 2 sec (*) Typical values
GSM features:
GSM 850/GSM 900 DCS 1800/PCS 1900
GPRS
Multi-slot class 10
SMS MO/MT Text and PDU modes Cell broadcast
SIM Card 3V
Antenna Dual Band GSM 900 DCS 1800
Vision, Mission & Values
Vision
The vision defines the long-term goals, projecting the company in a future clear, realistic and achievable scenario.
"We want to guarantee that the transportation safety will be available for all, promoting green behaviours through sustainable and healthy lifestyles".
Mission
The mission describes the core purpose of the company, what distinguishes it from our competitors and all other companies, remaining focused more on the present and providing operational guidance.
"ASAP Firmware mission is to design, produce and distribute the most innovative security system for
bicycles. The company wants to develop safe, invisible, user-friendly and customized products. We focused on localization systems in order to stimulate our customer to use bicycle every day without
any concern and raise the idea of transportation’s sustainability".
Core Values
Security for all the customers
Warranty of quality products
Green thinking, ecologic and healthy
Sustainability, mobility and development
Accessibility, everywhere and in every moment
7
EXTERNAL ANALYSIS
8
Porter’s 5 Forces Analysis
With the Porter’s schema we want to analyse the level of competition within the industry. The goal is to determine the competitive intensity and then the attractiveness of an industry studying the five forces specified below:
1. Threat of new entrants
Patented product, but only in Italy Technical knowledge required for the
development of the product Capital requirements are not very high There is a good possibility to differentiate the
product in order to distinguish the company to another
MEDIUM-HIGH ATTRACTIVE
2. Threat of substitute products or services
There are already some products in the market, but the differentiation is very high
The customers could buy the new product if the price meets their expectation
Some products are difficult to install, so it will be difficult to change product for costumers
MEDIUM ATTRACTIVE
3. Bargaining power of customers
Theoretically the product has relatively a long life: low repetitiveness of the purchase
It is statistically detected that the customers could be interested in buying the product in a year, if the price is in line with their expectations
The product differentiation is quite high
MEDIUM-HIGH ATTRACTIVE
4. Bargaining power of suppliers
The final product is made in outsourcing Raw material and components for making the
product are standard Possibility to make partnerships with the
suppliers It is necessary to share important information
with the supplier The distribution channels are standard
MEDIUM-LOW ATTRACTIVE
5. Intensity of competitive rivalry
There market is growing so there are already some competitors
The competitors are medium-small enterprises and mostly start-up
There can be competitive advantage pushing on innovation
MEDIUM-HIGH ATTRACTIVE
9
PESTEL Analysis
PESTEL Analysis analyses the macro-environmental factors that can influence the market (i.e. political, economic, social, technological factors), in order to try to understand the trends for a strategic and long-term view. The PESTEL analysis’ result is summarized below:
Environmental quality is considered central in the European Union and its member countries are introducing more and more laws to ensure the careful use of natural resources, to minimize adverse environmental impacts of production and consumption, and to protect biodiversity and natural habitats. Moreover the EU integrates environmental concerns in its other policies, e.g. transport and energy, and is a major global force in pushing for tighter environmental standards and for effective action against climate change. For 2020, the EU has committed to cutting its emissions to 20% below 1990 levels. This commitment is one of the headline targets of the Europe 2020 growth strategy and is being implemented through a package of binding legislation. In Italy also some actions have been taken to promote sustainable mobility, but not enough has be done for support initiative of research and innovation that fortunately are covered by founding programs of the European Union, for example the Horizon 2020 program. This political effort is also reflected in the behaviour of the European and Italian citizens. More and more people are becoming aware of the problem of the climate change and the powerful of a “green” life style. This is a long-term change, a trend for the future that is going to modify several sectors of everyday life, for example the transportations. In particular, all these things make a trend also in the market of the bicycles: more and more people choose to use the bicycle for the everyday life and for short travels, for avoiding traffic jams and parking problems in the bigger cities and also due to the crisis. In fact in 2012 in Italy were sold more bicycles than cars (1,7 million bicycles against 1,4 million cars). Moreover the phenomenon of the bicycle sharing is increasing mostly in the bigger city. The most successful European initiatives of bicycle sharing are Vélib' in Paris, Bicing in Barcelona and BikeMi in Milan. So in this context problems about the bicycle’s security and vehicles’ localization are growing and in addition technology innovation continues to make available tools, such as smartphones with integrated GPS, which facilitate that task. In conclusion, talking about the legal factors, there are not particular legislative restrictions in this field, which, for example, could determinate barriers to the entrance of new competitors.
Sources: www.eur-lex.europa.eu/ www.ec.europa.eu/clima/policies/ www.apre.it/ricerca-europea/horizon-2020/ www.environment.nationalgeographic.com/environment/greendex/ www1.adnkronos.com/IGN/Sostenibilita/Tendenze/E-boom-delle-biciclette-nellUe-costi-zero-ecologica-e-di-moda_32637917612.html www.it.wikipedia.org/wiki/Bike_sharing www.en.wikipedia.org/wiki/Electric_bicycle_laws
10
Conclusions
For the study of the external environment, after the study of the Porter’s and PESTEL’s analysis, we can say
that:
Porter’s analysis shows a very interesting attractiveness of this market for a new company, as ASAP is.
Thus, ASAP will have the task to try to create more barriers once that it entered the market: for example
trying to increase the loyalty of the customers for the brand or increasing the switching costs.
But ASAP is conscious also that the market is very specialized so it will be very difficult to take advantage of
some effects like the economy of scale. Rather the firm has to point in the quality of the product and in the
services dedicated to the customers.
PESTEL’s analysis confirms that the trend about increasing “green-view” behaviour is going to change the
way of life of the customers, so ASAP also is going to follow the trend, trying to purchase “green” products
and services.
So ASAP business model will be, for now, “Business to Consumer” with the intention to study the future
possibility to adapt the product for a use in the context of the bicycle sharing in big cities. Moreover, the
initial market will be the Italian one, with the strong intention to move first in a European context and then
to take the decision to move outside it.
11
MARKET ANALYSIS
12
Introduction
In order to analyse the potential market of the Rocket R1, it could be useful to figure out which factors
could influence the sale of the product. GPS tracker demand and other important data about the market
have not been found. A hypothesis relating to this concerns the classification of this market as probably a
niche one, maybe for its peculiar application to bicycles. Therefore an alternative analysis about the
possible factors that can influence the demand has been deepened.
The factors taken into account are related to the bicycles due to the fact Rocket R1 is integrated into the
bicycle’s chassis for its anti-theft function. In this sense a customer, interested in the purchase of this
product, should have a bicycle to exploit the most important function of the device. The considered factors
are:
Sales of bicycles: These data are easy to find and they are considered as reliable. However we have
to understand the connection between the bicycles sales and GPS tracker ones. To conclude these
data may be useful to evaluate the future trend of bicycle sales, the attraction of the market in
different countries as well, and maybe the potential market but this possibility has to be deepened.
Number of bicyclers: The number of bicyclers, conjecturing the customer might install the Rocket
R1 only in one of his own bicycles. Several datasets, estimated through surveys, are available on the
Internet and they can be considered quite reliable. Therefore they could be useful to estimate the
potential market, the sales of the product and to estimate market attractiveness as well.
The possibility of a bicycle’s theft: This factor, concerned the risk of getting a theft, could be
convince people to buy this device, since anti-theft application is the most important Rocket’s
function. However it is difficult to understand its relation with the sales of the GPS tracker; in
addition the datasets about thefts in different country are not so reliable.
They may be used to estimate the market attractiveness.
In the next pages these factors will be showed more in detail. In particular how they can be used and where
they have been gathered will be explained.
13
3.966 3.600
2.835
1.606
1.035 780
555 550
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
Germany GreatBritain
France Italy TheNetherlands
Spain Sweden Denmark
Sale
s in
th
ou
san
ds
Country
Sales of bicycles
The following charts concern the sales split up into the first 8 European countries, considering bicycle sales
and market share in 2012. The most number of bicycles is absorbed by German market. In the following
positions we find the Great Britain, France and Italy that has less than a half of German demand. However
Italy is the fourth biggest market in Europe with an 8% of the total market share.
Source: http://ziv-zweirad.de/uploads/media/european-bicycle-market-industry-profile-edition-2013_01.pdf
14
Number of bicyclers in each country
Other Dataset, about the second factor taken into account, have been found in a report about the quality
of transport promoted by European commission. It was inherent the usage and assessment of different
means of transport in 2014. The survey has involved 27.868 respondents from different social and
demographic groups. However this survey includes only people who use the bicycle as a mean of transport
so it does not consider who uses the bicycle as a pastime or to practice cycling.
The following table represents the percentage of the interviewers who use bicycle, motorbike and train.
Respondents in the Netherlands were the most likely to mention the bicycle as the mode of transport most
often used on a typical day (36%), with bicycle use almost as common as car use (45%). Respondents in
Hungary (22%) were also the third most likely to have said they used a bicycle, after those in Denmark
(23%). Germany is another nation where bicycle’s use is frequent (13%). In Italy the 6% of the interviewers
use bicycle as mean of transport, less than European mean. This table is helpful to estimate the absolute
frequency of bicyclers in a country, multiplying the relative frequency of a country with its population.
Source:http://ec.europa.eu/public_opinion/archives/ebs/ebs_422a_en.pdf
Country Bicycle Motorbike or moped Train
Europe 28 8,00% 2,00% 2,00%
Belgium (BE) 13,00% 1,00% 4,00%
Bulgaria (BG) 4,00% 0,00% 1,00%
Czech Republic (CZ) 8,00% 0,00% 2,00%
Denmark (DK) 23,00% 2,00% 5,00%
Germany (DE) 12,00% 1,00% 1,00%
Estonia (EE) 5,00% 0,00% 2,00%
Ireland (IE) 2,00% 0,00% 1,00%
Greece (EL) 2,00% 9,00% 1,00%
Spain (ES) 3,00% 3,00% 1,00%
France (FR) 4,00% 3,00% 2,00%
Croatia (HR) 6,00% 1,00% 0,00%
Italy (IT) 6,00% 7,00% 2,00%
Cyprus (CY) 1,00% 1,00% 0,00%
Latvia (LV) 6,00% 1,00% 2,00%
Lithuania (LT) 7,00% 0,00% 0,00%
Luxembourg (LU) 2,00% 0,00% 4,00%
Hungary (HU) 22,00% 2,00% 2,00%
Malta (MT) 0,00% 1,00% 0,00%
Nederland (NL) 36,00% 3,00% 4,00%
Austria (AT) 6,00% 2,00% 3,00%
Poland (PL) 7,00% 0,00% 1,00%
Portugal (PT) 1,00% 2,00% 2,00%
Romania (RO) 7,00% 1,00% 1,00%
Slovenia (SI) 14,00% 1,00% 1,00%
Slovakia (SK) 17,00% 0,00% 3,00%
Finland (FI) 3,00% 0,10% 2,00%
Sweden (SE) 17,00% 0,16% 3,00%
United Kingdom (UK) 3,00% 0,08% 4,00%
15
Relating to the percentage among different means of transport and the socio-demographic features, we
can say especially young people and students use bicycle, with no difference among males and females.
Considering the socio-professional category, bicycle is most preferred by unemployed, managers and
manual workers.
In this way the table could be also useful to detect which segment of the population is interested in the
purchase of the product. A survey has been built up to confirm if the same segments of people, that prefer
bicycles as mean of transport, may be interested in purchasing Rocket R1. However, this topic will be
explored in the next chapter.
Car
Urban public transport (bus, metro, tram,
ferry, etc.) Walking Bicycle
Motorbike or moped
Train
EU 28 54% 19% 14% 8% 2% 2%
Gender
Man 59% 15% 11% 8% 4% 2%
Woman 49% 22% 17% 8% 1% 2%
Age
15-24 29% 35% 15% 11% 5% 4%
25-39 62% 16% 9% 7% 2% 3%
40-54 65% 14% 9% 7% 2% 2%
55+ 51% 17% 20% 8% 1% 1%
Education (End of)
15- 45% 18% 26% 7% 2% 1%
16-19 61% 16% 12% 7% 2% 2%
20+ 62% 16% 9% 8% 2% 3%
Still studying 22% 39% 15% 13% 6% 5%
Socio-professional category
Self-employed 76% 8% 6% 6% 3% 2%
Managers 68% 14% 5% 8% 2% 3%
Other white collars 66% 16% 5% 6% 2% 4%
Manual workers 62% 15% 10% 8% 3% 2%
House persons 48% 18% 25% 6% 1% 1%
Unemployed 43% 23% 20% 9% 3% 2%
Retired 47% 18% 23% 8% 1% 1%
Students 22% 39% 15% 13% 6% 5%
Difficulties paying bills
Most of the time 45% 22% 20% 6% 3% 2%
From time to time 52% 20% 16% 7% 3% 2%
Almost never / Never 57% 17% 13% 9% 2% 2%
Source:http://ec.europa.eu/public_opinion/archives/ebs/ebs_422a_en.pdf
16
Italian bicyclers
Due to the fact the patent of Rocket R1 can be merely exploit in Italian market, a deeper analysis is
necessary. Other data for what concerns distance cycled and mobility behaviour throughout Italy have
been found.
The sample of this survey has been interviewed by CATI system (Computer-Assisted Telephone
Interviewing). The survey, carried out with the system includes a statistically significant sample of the
15.000 Italians from 14 and to 80 years, stratified by region, by gender and by age group.
The following bar charts show that in 2013 bicycles recapture a decent market share (+0,7% compared to
2012). In 2013 more virtuous by an ecological point of view are the medium cities with a 5,8% of bicyclers
and big cities with a percentage of 2,8%.
Also in 2013 remains undisputed hegemony of the North-East for cycling (7,5%). So the North-East may be
a good area where ASAP may concentrate its marketing and sales efforts.
To sum up an interesting market, where the demand could be higher than other places, is medium cities in
the North-East of Italy.
Source:http://www.isfort.it/sito/statistiche/Congiunturali/Annuali/RA_2013.pdf
17
Bicycles theft along Europe
The afraid of getting the bicycle stolen is a factor that could be influence the anti-theft device purchase.
Dataset related to this fact have been picked up. Since that any theft are not registered we should not
considered this information as the most reliable. The following table is inherent the thefts in different
countries in 2014. The Netherland has highest the number of stolen bicycles per year followed by United
Kingdom, Germany and France. Another source has estimated that every year in Italy 320.000 bicycles are
stolen from a total of about 4.000.000 circulating bicycles (Source: http://www.ecf.com/news/in-italy-a-
conference-on-bicycle-theft/).
Considering this factor, the demand of GPS for bicycles could be object of interest especially in Netherland
and UK with respectively the 6% and 3% bicycle stolen related to the total amount.
Source: http://en.globometer.com/bicycle-solen-eu.php
Conclusion
Searching multiple sets of data, several factors have been found out for explaining a possible evaluation of
the demand of GPS-tracker and to find the most attractive European markets: the bicycles theft, number of
bicyclers and bicycle sales. As we said before, for the lack of data about GPS tracker’s sales, it is very
difficult to determine and statistically prove how the previous factors can influence the demand.
To calculate the potential market there were 2 possible choices:
By using bicycle sales, that can be easily found out in several sites. The measure of the sales is
conducted precisely every year and they could be useful to make forecasts. However the life-cycle
of a bicycle lasts several years, so these data do not seem suitable to what we are looking for.
However they could be useful to figure out an indication of tendency and to estimate the market
attraction. For example an increment of bicycle sales in a country could reflect an increase of
bicyclers and bicycle’s usage.
By using the number of bicyclers, estimated by European commission through a survey about
mobility and means of transports’ usage. These data are less precise than the previous ones but
they may be useful to obtain the potential market and the sales with more reliability.
Country Total of bicycles Stolen bicycles per
year
Netherland 15 millions 900.000
U.K 22 millions 686.000
Germany 41 millions 600.000
France 21 millions 400.000
Denmark 4,0 millions 100.000
Belgium 5,8 millions 100.000
Italy 4,0 millions 300.000
18
Conjecturing that even if a bicycler owned more than one bicycle, he would install only one GPS-tracker in
his most used bicycle, we adopt this second way to calculate the potential market.
Market attractiveness
By considering the three factors explained before, we have tried to estimate a market index attraction. The
factors have been considered differently with different weights. The number of bicyclers is considered as
the most important (weight = 0,65). The proportion of stolen bicycles per year has been obtained by
dividing the number of stolen bicycles over the total number of bicyclers for each country; data were
inherited the previous table. This last factor has been considered as the least important one (weight =
0,15). Due to the different measure units the numbers have been normalized. The weighted output is in
the column “Attraction index” and the ranking is showed in the last column. Italy is in the 3rd position even
if its attraction index is close to France and United Kingdom. The most attractive markets are Germany and
Netherland but, in order to confirm it, a competitive analysis is required as well.
Country Total
bicyclers
Proportion of stolen
bicycles per year
Bicycles Sales per
years Factors normalized
Attraction index
Ranking
Netherland 6.058.544 6,00% 1.035 0,640 1,080 -0,676 0,375 2
U.K 1.929.248 3,12% 3.600 -0,597 -0,145 1,097 -0,081 4
Germany 10.499.770 1,46% 3.966 1,971 -0,848 1,350 1,559 1
France 2.633.423 1,90% 2.835 -0,386 -0,660 0,568 -0,180 5
Denmark 1.294.264 2,50% 550 -0,788 -0,407 -1,011 -0,876 6
Belgium 1.396.312 1,72% 500 -0,757 -0,737 -1,046 -0,916 7
Italy 3.646.960 7,50% 1.606 -0,083 1,717 -0,281 0,119 3
Weight
0,65 0,15 0,3
19
Potential Markets
Considering the dataset of the European commission, the potential market for each country can be
calculated using the percentage of population that use the bicycle as a mean of transport and multiplying it
for the total population. Doing this estimation for Italy, with a population of 60 million, we obtain a
potential market of about 3.600.000, which is very closed to the number of circulating bicycles in Italy
(some surveys state 4 million in 2013).
In the following table is reported the same procedures for each country.
As in the bicycle sales chart, we see that Germany has the major number of bicyclers in Europe, followed by
Netherland and Italy, Poland and France.
These amounts, especially the Italian bicyclers, will be used later to determine the target market and the
sales of Rocket R1.
Country Total population Population % Bicyclers % over the national population
Total bicyclers
Europe 506.913.394 100,00% 8,00% 40553072
Germany (DE) 80.767.463 15,93% 13,00% 10499770
Netherlands (NL) 16.829.289 3,31% 36,00% 6.058.544
Italy (IT) 60.782.668 11,99% 6,00% 3.646.960
Poland (PL) 38.017.856 7,49% 7,00% 2.661.250
France (FR) 65.835.579 12,98% 4,00% 2.633.423
Hungary (HU) 9.877.365 1,94% 22,00% 2.173.020
United Kingdom (UK) 64.308.261 12,68% 3,00% 1.929.248
Sweden (SE) 9.644.864 1,90% 17,00% 1.639.627
Belgium (BE) 11.203.992 2,21% 13,00% 1.456.519
Romania (RO) 19.947.311 3,93% 7,00% 1.396.312
Spain (ES) 46.512.199 9,17% 3,00% 1.395.366
Denmark (DK) 5.627.235 1,11% 23,00% 1.294.264
Czech Republic (CZ) 10.512.419 2,07% 8,00% 840.994
Finland (FI) 5.451.270 1,07% 14,00% 763.178
Austria (AT) 8.506.889 1,67% 6,00% 510.413
Slovakia (SK) 5.415.949 1,06% 7,00% 379.116
Bulgaria (BG) 7.245.677 1,42% 4,00% 289.827
Croatia (HR) 4.246.809 0,83% 6,00% 254.809
Greece (EL) 10.992.589 2,16% 2,00% 219.852
Lithuania (LT) 2.943.472 0,58% 7,00% 206.043
Slovenia (SI) 2.061.085 0,40% 9,00% 185.498
Latvia (LV) 2.001.468 0,39% 6,00% 120.088
Portugal (PT) 10.427.301 2,05% 1,00% 104.273
Ireland (IE) 4.605.501 0,90% 2,00% 92.110
Estonia (EE) 1.315.819 0,25% 5,00% 65.791
Luxembourg (LU) 549.680 0,10% 2,00% 10.994
Cyprus (CY) 858.000 0,16% 1,00% 8.580
Malta (MT) 425.384 0,08% 0,00% 0
20
DEMAND ANALYSIS
21
9%
25%
30%
34%
2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Definitelyno
Probablyno
Probably ProbablyYes
Yes
Buying interest
6
14
9
2 2
10
20
1
0
5
10
15
20
25
Definitelyno
Probablyno
Probably ProbablyYes
Yes
Buying interest VS product interest
Notinterested
Interested
Survey Analysis
To estimate the real interest in the purchase of Rocket-R1 and GPS for bicycle in general, a specific survey
has been built for this occasion. The main goal of this survey was to determine the buying intention of
different respondents by segmenting the answer through the age, bicycle’s usage and value; so only B2C
demand is considered. The questionnaire is attached in Annex 1.
The answers have been cropped from different city in Veneto; especially data were collected in Padua and
Vicenza provinces. The approach used to collect data manages to guarantee that the sample is
representative of the whole population. The respondents are 64. The Italian questionnaire is divided in two
parts:
The first one is about demographic features and evaluates the characteristics of the respondent
related to buying intention. Its goal is to segment the market and to find out the demographic
information and behaviours of a possible market.
The second one has built up using factorial design approach and it will be use to analyse the utilities
of attributes of the GPS according to consumer’s view. The analysis and the structure of this part
will be explained after the analysis of the first part.
Characteristics of the sample
The following part describes the main results about the survey whereas the whole analysis is reported in
Annex 2. The last part of the first questionnaire’s page is related to the interested in the product idea and
the buying interest. Taking in account the buying interest chart, we can draw out that about 34% of the
sample may be interested in purchasing the product if it has a price according to consumers’ view. The bar
chart on its right concerns the interest about the product idea related to the buying interest. Here we can
see that the respondent’s interest of the product is connected with the buying interest.
22
4
9
7
4
2
7
10 9
1 2
9
0
2
4
6
8
10
12
Definitely no Probably no Probably Probably Yes Yes
Buying interest VS bike's value
<100 euro
100-400 euro
>400 euro
4%
12%
40% 44%
0% 0% 0%
29%
71%
0%
30% 30% 30%
10%
0%
11%
47%
16%
21%
5%
0%
33% 33% 33%
0% 0%
10%
20%
30%
40%
50%
60%
70%
80%
Definitely no Probably no Probably Probably Yes Yes
Buying interest VS occupation
Employee
Professional
Retired
Student
Unemployed
Other charts show the buying interest taking into account different segmentations. The goal of this
operation is to figure out the possible factors that influence the purchase of the product. The first graph
shows the respondents, who have high interest of purchasing, have also probably a high-value bicycle. This
result can orient the business, focusing its efforts to high-value bicycle market.
A statistic test was performed to prove the dependency between these two factors. A chi-squared test was
performed and it has proved this relation. Since that the p-value is 0.0194 we can state with a confident
interval of 95% that there is a correlation between these two characteristics.
The last chart concerns the relation between buying interest and occupation. This chart could be useful to
determine the target segment to which promote the product. The relative frequency is obtained
considering the occupations. For instance the majority of the students (47%) may not purchase the
product. The employees, who represent the largest segment of the respondents, are spread equally
between the class “probably no”, “probably” and “probably yes”.
The most interesting conclusion could be that mainly professional/freelance category may buy the product.
23
Target market
To determine the possible sales we can use a rapports chain. In the book “Ulrich, Eppinger, Filippini,
Progettazione e sviluppo prodotto(2007)” there is an interesting way to find out a preliminary demand.
Using data collected before about the buying intention and the potential market in Italy, we can estimate the Italian demand, considering private consumers only, according to the following formula:
Q = N x A x P • Q = Sales/year • N = Potential buyers/potential market • A = Fraction of person who know the product (20%) • P = Response over buying probability =0.2 x Frequency of “Probably Yes” + 0.3 x Frequency of “Yes”
Since the interview has been performed in Italy, it could be a mistake to extend the buying frequency to
other countries. The habits and way of thinking could be strongly different so that this formula is used to
estimate the target market in Italy.
N = 3.600.000 / 4.000.000
A = 20,00%
P = 0,20 x 34,00% + 0,30 x 2,00% = 0,0734375 = 7,34%
Using both potential markets we obtain a private Italian target market between 53.800 and 59.800
possible buyers. We do not know if we could consider this number as a number of sales per year, in fact
this depends on the product life cycle and the competitors as well. But we can state this could be
considered as a target market, where all possible competitors take their possible buyers.
Another way is by estimating the expected proportion of the possible consumers by using the normal
distribution, with a confident interval of 95%. We obtain that the proportion of possible Italian buyers is
between 29,83% and 41,983%. If we multiply this proportion with the potential market and a safety index
of 10% we obtain the possible Italian buyers may fluctuate between 119.569 and 167.930.
If we multiply this number with the proportion of the population in Veneto over the total Italian population
(8,10%), we obtain in Veneto a number of buyers between 8.716 and 12.242.
To calculate the number of possible sales other data are necessary such as the market share. In the
following pages we will try estimating the market share considering the product as an ensemble of
attributes. Conjoint analysis method is used to achieve this scope. It is necessary remember this market
concerns only private consumer so the B2C demand only.
Response Buying interest frequency
Definitely no 9,00%
Probably no 25,00%
Probably 30,00%
Probably Yes 34,00%
Yes 2,00%
Total respondents 100,00%
24
Conjoint Analysis
Description and input
We can apply conjoint analysis to predict the optimal configuration able to obtain the maximum market
share (See Annex 1 for further theoretical information).
The first step was to detect the most important attributes of this kind of product, also looking for other
products available in the market. We found out these factors that mainly characterize the different
products in the market:
Integration/Invisibility, it is a characteristic that keeps the GPS device safe from the
burglar. This attribute could differentiate in several levels:
Full integrated - the device is inside bicycle’s chassis
External/camouflaged - the device is attached externally on bicycle’s chassis but is
hidden from the burglar’s eyes
External/visible – the device is external and clearly visible
Easy maintenance/installation, this is a characteristic about consumer comfort. The device
has to be charge constantly, and consumer could not accept a difficulty in this way. The
three levels of this attribute are:
Difficult, technician needed
Difficult, no technician needed
Easy
Sound alarm, a sound alarm may convince the thief to escape and to avoid the theft. In this
case the level are only two:
Yes – the alarm is present
No – the alarm is not present
After identifying these attributes, the factorial design procedure is necessary to build up different profiles
that will be dispensed to interviewees. A full profile analysis would be need 18 different configurations
(3x3x2) so that a factorial design is required. Using orthogonal matrix this number decreases till 9
configurations. To build the matrix and the whole analysis the open-software R has been used
(Annex 2).
25
1,22
0,30
-1,52
-0,77
-0,12
0,89
0,48
-0,48
1,18
0,33
-1,50
-0,65
-0,10
0,75 0,49
-0,49
-2
-1,5
-1
-0,5
0
0,5
1
1,5
Inte
g
Est-inv
Est-vis
Co
mp
lex-tec
Co
mp
lex-no
Tec
Easy
Yes
No
Levels' utilities
Whole sample
Interested
Results
After collecting evaluations of several respondents about the different profiles, inferential analysis has
been performed to obtain partial-worth utilities.
So from this output we see how the attribute “Integration/invisibility” is the most important related to the
other. “Easy maintenance/installation” is the second, “while sound alarm” is the less important.
It the analysis deepens to the level of the attribute and using a scheme we can say:
Integration/Invisibility, The most important attribute, it counts the 50% of the whole
importance
Full integrated – This level has the highest utility among all other ones. A product
with this level can have a great advantage over other products (1,22).
External/camouflaged – This is the second level in according to utility’s order (0,3).
External/visible – the utility is negative, a product that owns this level will not be
choose. In fact the utility of this one is the lowest (-1,52).
Easy maintenance/installation, this attribute seems almost as important as the last one,
even if its importance is a little higher (28,7%).
Difficult, technician needed – This is considered as the second last according to
utility’s order.
Difficult, no technician needed – This level has a slight negative utility (-0,1).
However the inferential statistic is not significant, the value does not represent the
whole population, so the estimation could only have descriptive valence.
Easy – This level is in the second position according to utility’s order (0,75). So it is
preferable among other level of this attribute.
Sound alarm, it is the last attribute as importance, but its value does not differ so much
from “Easy maintenance/installation”
Yes – when alarm is present utility is positive (0,5)
No – when alarm is not present the utility has the opposite value (-0,5)
On the other hand these data want to consider the evaluations of all the respondents, including people that
are not interested in the product. The next step, therefore, will consider only the data from the people
interested in buying the GPS-tracker.
The following histograms want to compare the utility of the whole sample to the possible buyers’ ones.
26
51,04
28,71
20,26
51,93
31,68
16,39
0
10
20
30
40
50
60
Integration/invisibility Easymaintenance/installation
Sound alarm
Attributes importance
Wholesample
Interested
Market share in Italian market
Taking into account the interviewees’ evaluations using the R package “conjoint”, a market simulation has
been performed. It allows to turn the preference of respondents into choice or probability of purchasing.
If we want to go further into the models used for this simulation, the following brief description is
necessary:
Maximum Utility: It is a model used for products with a long life cycle and so when the buying
frequency is low.
BTL Model: It considers the purchasing as a probability. In these sense the market shares will be
less extreme than max utility model
Logit model: It does not differ from BTL model for what concerns the hypotheses. The probabilities
of purchase are expressed by an exponential way.
About the goodness of these market share esteems, we evaluate the Logit model as the most reliable so
even the graphs relating to this model are reported. Another important consideration is that prices of the
different competitors are considered the same, because the price was not considered in the initial factorial
design questionnaire.
Two different simulations have been performed: the former considers the rocket without alarm, the latter
with the sound alarm.
So the following output compare Rocket R1 to other main competitors that are Rocket, Nigiloc, Spybike
Seatpost, Lock8, The Cricket and Coban.
27
Rocket 26%
Nigiloc 10% Spybike S.
26% Lock8 10%
The Cricket 13%
Coban 15%
LogitModel - Rocket without alarm
Rocket 48%
Nigiloc 7%
Spybike S. 19%
Lock8 4%
The Cricket 10%
Coban 12%
LogitModel - Rocket with alarm
Total Utility Max Utility BTL Model Logit Model
Rocket without alarm 7,51 28,125 18,62 25,98
Nigiloc 6,11 3,12 15,19 9,77
Spybike Seatpost 7,51 28,13 18,62 25,98
Lock8 5,8 15,62 14,56 10,38
The Cricket 6,66 6,25 16,52 12,74
Coban 6,67 18,75 16,5 15,16
Product Total Utility Max Utility BTL Model Logit Model
Rocket with alarm 8,50 84,38 21,13 47,71
Nigiloc 6,11 0,00 15,19 7,45
Spybike Seatpost 7,51 4,69 18,58 19,00
Lock8 4,82 3,12 12,02 4,22
The Cricket 6,66 3,12 16,56 9,83
Coban 6,67 4,69 16,52 11,79
28
Sales and revenue estimation
By considering the market share and the target market we are able to calculate the possible sales. We used
two different approaches to obtain the target market and both of them were suitable. Therefore we
considered the lowest number as a pessimistic scenario (N = 53.800) while the highest number as the
optimistic one (N = 167.930). If we multiply these numbers with the market share in which the rocket has
the alarm (48%), and the total is split up into the life cycle of the product (4 years) we obtain the Italian
sales. The last procedure to obtain the turnover is to multiply these numbers for the price of the product
that is 149 € (the reason why this value has been chosen will be explained in the following part). The
following table shows all these procedures.
Scenario Target market Market share Life cycle Italian sales Price [€] Turnover [€]
Pessimistic 53.800 48% 4 6.456 149,00 961.944,00
Optimistic 167.930 48% 4 20.152 149,00 3.002.588,40
The right procedure should be to consider the sales trends in a logistic model. The “S” shape of this model
may better represent the real trend. At time zero sales start growing with a mild rate of growth, they reach
the maximum rate of growth in the middle and it decrease again at the end of the period taken into
account. The reason why this procedure has been implemented is quickly explained:
During the first year the product is not well-known by the consumer so, even if the market share obtained
by conjoint analysis is almost 50%; we estimate that this value may be reached only in the second or third
year.
According to this point of view, in order to simulate the curve of a logistic model, a coefficient for each year
is used to estimate the sales and the amount of revenue in both scenarios. The data are reported in the
following table that consider the first three years after putting the product on the Italian market.
In the next page other charts about the sales and the revenue are reported as well.
Year 0 Year 1 Year 2
Sales - Best case scenario 4.030 14.106 20.152 Revenue - Best case scenario [€] 600.518 2.101.812 3.002.588
Sales - Worst case scenario 1.291 4.519 6.456 Revenue - Worst case scenario [€] 192.389 673.361 961.944
Coefficient 0,20 0,70 1,00
29
0 €
1.000.000 €
2.000.000 €
3.000.000 €
4.000.000 €
Year 0Year 1
Year 2
€ 192.388,80 € 673.360,80 € 961.944,00
€ 600.517,68
€ 2.101.811,88
€ 3.002.588,40
Re
ven
ue
Revenue during the first 3 years
Revenue -worst casescenario
Revenue -Best casescenario
0
5.000
10.000
15.000
20.000
25.000
Year 0Year 1
Year 2
1.291 4.519 6.456
4.030
14.106
20.152
Sale
s
Sales during the first 3 years
Sales -Worst casescenario
Sales - Bestcasescenario
To conclude, this final output does not consider other marketing efforts such as promotion on the Internet,
and other kind of advertising that may promote the product and firm value. In addition we conjecture that
the utility of the product remains steady and that other products with a higher utility won’t enter in the
market.
30
Conclusion
To sum up the entire process of demand analysis of Italian market:
I. First of all we have estimated the potential market by considering the Italian bicyclers who are
approximately 4.000.000.
II. Then we used a survey to calculate the percentage of bicyclers that could be interested in
purchasing a GPS device for bicycle (36%). Since this percentage could be considered as an
optimistic one, two different methods have been used to calculate the real target market:
a. A method from the book “Ulrich, Eppinger, Filippini, Progettazione e sviluppo prodotto”
has been used and we obtained a target market of 53.800.
b. The target market, which is 167.930, has been obtained by using an estimation statistic
method on the expected proportion, with a confident interval of 95% (in addition a safety
factor of 10% has been used).
We considered the first value as a pessimistic scenario while the second as an optimistic one.
III. Conjoint analysis was used to evaluate the utilities of the different attributes of Rocket R1. It allows
us to figure out that “integration” was the most important one and that the implementation of a
sound alarm could give us a competitive advantage by considering the market share. To go further,
market share is used to calculate a possible demand even considering the competitors.
IV. We multiplied both scenarios of target market with the market share and we obtained a possible
sale.
V. In order to consider that our product will not be well-known from the majority of the consumers,
the previous values have been multiplied with the following coefficients 0,2 , 0,7 and 1,0
respectively for the first three years to simulate a logistic model.
31
COMPETITORS
ANALYSIS
32
Main Competitors
The following table shows the information of the competitors gathered on the Internet:
Company Location Year of
foundation Employees Products
Integrated Trackers London, United
Kingdom 2007 1-10
Spybike, Spybike Seatpost, Spybike Spylamp
Shenzen Coban Electronics co., Ltd.
Shenzen, China 1999 100-150 Coban
Lock8 Berlin, Germany 2012 1-10 Lock8
Nigiloc Dax, France 2014 1-10 Nigiloc
Flytrex Inc. Tel Aviv, Israel 2013 1-10 The Cricket
Helios Bikes San Francisco, US 2013 1-10 Helios
Mobiloc LLC Alsip, US 2011 1-10 Mobiloc
BikeSpike Chicago, US 2012 10-15 BikeSpike
Main Products
This table collects the main features of the competitor’s products:
Product Integration / visibility Installation complexity
Spybike Integrated Complex
Spybike Seatpost Integrated Complex
Spybike Spylamp Hidden Easy
Coban Integrated Complex
Lock8 Visible Easy
Nigiloc Integrated Complex
The Cricket Hidden Easy
Helios Integrated Easy
Mobiloc Visible Easy
BikeSpike Visible Easy
Product Connectivity Charge Battery life [weeks] Price [€]
Spybike GPS/GSM/GPRS USB 4 129,00
Spybike Seatpost GPS/GSM/GPRS USB 52 149,00
Spybike Spylamp GPS/GSM/GPRS USB 8 129,00
Coban GPS/GSM/GPRS USB 4 119,00
Lock8 GPS/GSM/GPRS/BLE Dynamo 104 249,00
Nigiloc Radio system/Bluetooth USB 10 99,00
The Cricket Bluetooth/iBeacon No 52 39,00
Helios GPS/GSM/GPRS/Bluetooth No 7 hours 279,00
Mobiloc GPS/GSM/GPRS No 20 hours 129,00
BikeSpike GPS/GSM/GPRS USB n.a. 199,00
33
Competitors product descriptions
Spybike
It is a covert GPS tracker for your bicycle that alerts you in times of theft, and begins tracking if your bicycle is stolen. Simply arm the device when your bicycle is locked and if your bicycle begins moving without disarming the device, then the device will alert you via text message, and will begin tracking the location of the bicycle. The device will sleep when the bicycle is not moving, and will wake up again if the bicycle begins to move. The important feature is that it can be placed in the front steering tube. A prepaid SIM card is required.
Spybike Seatpost
The seat post is a covert-tracking device that is hidden inside a bicycle seat post. It comes pre fitted into a seat post, which will replace the one your bicycle already has. If someone steals your bicycle, you can use the seat to track their movements online or via a mobile app. A prepaid SIM card is required.
Spybike Spylamp
It is a covert-tracking device that is disguised as a bicycle taillight. The device is disguised to look like a normal rear light and it works as a normal rear light as well. If someone steals your bicycle, the device can be used to track their movements online and on your mobile. A prepaid SIM card is required.
Coban
It is a covert GPS tracker for your bicycle that alerts you with
an SMS or a phone call in case of theft, and begins tracking if
your bicycle is stolen. As Spybike it can be placed in the front
steering tube. A prepaid SIM card is required.
Lock8
It is a keyless device, which require the smartphone as an e-Key
in order to easily be locked and unlocked. In addition a GPS
tracking to locate your bicycle if it goes missing or remember
where you left it and share your location.
34
Nigiloc
The device is a miniaturized product, which is completely
invisible to the naked eyes and lightweight. In addition antenna is
designed to work in a narrow space. Moreover, once the product
is installed and any activation is needed; everything is done
automatically. Finally, it is easy to use in fact smartphone is not
required; a basic mobile phone is enough to make the product to
work. With Bluetooth technology the device and the phone will
be paired. Then every time the device moves it searches for the
paired device around it, if the device is found it gets back to sleep and if not it sends an alert via text and
email. A prepaid SIM card is required.
The Cricket
It is a small, lightweight silent alarm for bicycles.
When someone as much as touches your bicycle, you will get an
instant notification on your smartphone. If the worst happens and
your bicycle is stolen, The Cricket can hunt down your bicycle using
its cloud based system ensuring a swift recovery.
Helios
It is a handlebar, equipped with LED headlight, rear LED turn indicators
(blinkers), Bluetooth, and even GPS. It uses a prepaid SIM card to
enable the low-power GPS module – simply send a text message to
your device, and the device will broadcast its current location.
Mobiloc
Its features a self-locking laser cut key entry system that prevents criminals from removing the device or
the lock. The optional GPS system will send an alarm by call, text or
both as soon as the locked mobile device moves from the location
where it was secured. Moreover, you can track the location of the
bicycle or other mobile property right from your smart phone or from
your computer using our specialized tracking software. A prepaid SIM
card is required.
35
BikeSpike
It is a tracking solution for your bicycle that allows you to broadcast your ride, as well as monitor its
location in times of theft. A device is attached to the bicycle and it becomes a GPS beacon that can alert
you in the case that your bicycle has been tampered with, as well as track your bicycle’s location on a
map. Additionally, it gives you the ability to track and share data about your ride, as well as alert loved
ones in case of a crash. A prepaid SIM card is required.
36
Competitors strategic map
In order to detect which competitors are the most dangerous, an innovation index has been defined. The
innovation index is calculated by the weighted average of four factors:
1. Integration/visibility: the degree of integration into the bicycle, i.e. difficulty to detect it and remove. The more integration/invisibility, the higher grade.
2. Installation complexity: the degree of how difficult for the final user to install the device. The more complexity, the lower grade.
3. Connectivity: the extent of communication with the device, i.e. how many ways has the device in order to communicate with the user and how many possibilities has the user to set the device. The more connectivity, the higher grade.
4. Battery life: the extent of battery file; the more battery life, the higher grade. The weights are set taken into consideration subjective criteria; integration/visibility has the highest importance because it is related to the main anti-theft function of the product. Installation complexity has the second highest weight because is linked to user-friendly aspect. Battery life is evaluated as well as installation complexity because the product has to work for a long time after the theft. Last connectivity is evaluated with the lowest weight because it is least feature taken into consideration by customers, and also it is difficult to measure and compare with a numerical index.
Product Integration /
visibility Installation complexity
Connectivity Battery life Score
Spybike 5 2 3 1 3,4
Spybike Seatpost 4 4 3 4 4,4
Spybike Spylamp 3 4 3 3 3,2
Coban 5 5 3 1 3,6
Lock8 2 4 4 5 3,2
Nigiloc 5 1 3 3 3,6
The Cricket 3 4 1 4 3,2
Helios 5 2 4 1 3,5
Mobiloc 2 5 3 1 2,5
BikeSpike 2 5 3 1 2,5
Weights 0,5 0,2 0,1 0,2
37
The following chart represents the score given into the last table: it can be clearly seen that Spybike
Seatpost obtains the highest score (4,4) followed by Coban, Nigiloc and Spybike, which are evaluated with a
similar score.
Competitors’ placement
Based on the competitors’ products evaluation and price, it is possible to build a competitive map of the
main competitors’ products.
2
2,5
3
3,5
4
4,5
5
0 50 100 150 200 250 300
Sco
re
Price [€]
Competitive Map
Spybike
The Cricket
Nigiloc Coban
Spybike
Spylamp
Mobiloc BikeSpike
Lock8 Helios
3,4
4,4
3,2
3,6 3,4
3,6
3,2 3,5
2,5 2,5
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
5
SpyBike SpyBikeSeatPost
SpyLamp Coban Lock8 Nigiloc TheCricket
Helios Mobiloc BikeSpike
Sco
re
Innovation index
38
It can be seen from the graph that Spybike Seatpost is the best value for money product. There are two
parts of the graph very interesting: the first one is the area above The Cricket because has good score and a
low price; the other one is the empty area above Spybike Seatpost. There is no product with a high score in
that part of the graph. These two areas can be exploited to place a product and gain competitive
advantage.
The previous chart helps to filter products in order to detect which are the most relevant competitors.
Some products are not taken into consideration because have or high price (Helios) nor low utility
(Mobiloc, BikeSpke and Spylamp). The remained competitors have been the input for the conjoint analysis,
because these products are the most relevant, which can compete in our utility-price range.
This graph shows the position of Rocker R1 with and without alarm in comparison to competitors’ products.
It can be clearly seen that Rocket R1 without alarm is placed better than Spybike Seatpost due to its lower
price. Instead, Rocket R1 with alarm has the highest utility among products, which are in that price area,
thus it is preferable for the customer compared to the others.
Rocket R1 with alarm
Rocket R1 without alarm
Nigiloc
Spybike Seatpost
Lock8
The Cricket Coban
4,0
4,5
5,0
5,5
6,0
6,5
7,0
7,5
8,0
8,5
9,0
0 50 100 150 200 250 300
Uti
lity
Price [€]
Competitive Map with Rocket R1
39
STRATEGY
IDENTIFICATION
40
Value Chain
In order to reach the purpose of identifying ASAP's strategy, in addition at the information given by
analysing the external environment, the market and competitors, we start using the Porter's model of the
Value Chain for defining the structure of the organization, trying to see ASAP’s organization as a series of
different activities: 5 primary ones and 4 support activities:
Preamble: After the evaluation of the cost of product, directly manufactured by an ownership plant, we
arrived at the conclusion that an outsourcing production is preferable. Outsourcing costs of production
include product assembly, packaging activities and transportation to our warehouse. In order to sell Rocket
R1, we stipulate a contract with Amazon, which includes product visibility to Amazon marketplace and
transportation to final customer.
Primary Activities:
Inbound logistics: Reception of the product Rocket R1 directly from the supplier completely
assembled and packed. The products are put in the warehouse, using the pallet truck, in the
defined space to allow a rapid fruition.
Operation: the main task includes the random quality control of the inbound products and general
warehouse management (stock management and so on) and activities of Research & Development.
Outbound Logistics: the products stored in the warehouse will be collected directly by Amazon’s
couriers and hereafter managed by Amazon.
Scheme of ASAP’s supply chain
ASAP Warehouse
Marketing and Sales: advertising, especially in the specific bicycle’s sector like in specialized
magazines (i.e. inBici) or advertising in specialized websites (i.e. Cycling.it). Presence in the web
with a website, and presence in the social networks (Facebook, YouTube etc.) where the customer
can find all the information about the product, information about the company and can contact us.
Service: ASAP guarantees two-years of warranty; an instruction manual containing the installation
procedures and how the product works will be given to the customer. In addition he will find videos
that explain extensively these things in the website. By the way, the customer can contact the
company in any moment with e-mails or through the social networks.
Amazon Final
Customer
Supplier
41
Support Activities:
Infrastructure: The Production Planning is set up analysing the market and calculating the
assumed demand at the beginning, and then it is planned following the sales. Secretaries do
activities of accounting and finance, while managerial staff does activities of controlling and
public relations.
Human Resource Management: initial recruiting and training of the secretaries, workers etc.
activities of motivation of the personnel: job enrichment, activities of bottom-up activities
(workshop of ideas), rewarding.
Technological Development: activities of workshop of ideas, both inside and outside the
company, for trying to emerge innovation in the product or for new products. Participation in
fairs for seeing the innovation made by other companies.
Procurement: the acquisition of the finished product directly by the supplier, possibility in the
future to establish partnership with the suppliers. Moreover there is the intention to
participate at the program “Horizon 2020” to obtain European funding.
The SWOT Analysis
After this primal analysis of the organization we want to get deeper in order to identify the internal and
external key factors. The former are referred to the strengths and weaknesses of the firm, the latter refer
to the opportunities and threats of the external environment. Some of these topics may resume and
specify what was identified before in the other analyses:
Strengths Weaknesses The product characteristic of being integrated
in the chassis can differentiate it from other products
The product is patented in Italy Specialist expertise in the field of the electronic
design can help the process of innovation continually
Presence in the distribution channel online: Amazon and own website
Lack of some expertise within the company i.e.
marketing experience. Brand unknown in the market of the bicycles Necessity to rent an estate and tools Production in outsourcing Necessity of capital, for starting the sales
Opportunities Threats The market is a niche market in the “growing
phase”: possibility to reach new customers and gain a piece of the market even if there are already competitors
Possibility, using internet, to reach customers worldwide
Possibility to sell the product through specialized retailers
Taking advantages of the lacks of the competitors, after making the competitor analysis
Competitors are already in the market with
similar but different products, we need to compete in quality and taking in advantage by the different characteristic of the product
The product is patented only in Italy, so in the other countries in EU or in the rest of the World the product can be copied
Since the market is growing other competitors may enter in the market
42
The 4P's Analysis
Also called “The Marketing Mix”, this analysis is done in order to study four variables. They are important
for the definition of the strategy: Product, Promotion, Price and Placement:
Product life cycle Since we have already described the product in details in the first chapter of this business plan, we want to
study now another important characteristic of the product, its life cycle: the exact form of product life
cycles, shown as the sales volume passing through four stages – introduction, growth, maturity and decline.
The product's industry is placed in an introduction/growth stage in a niche market, because mainly
medium/high valued bicycles use the device; as volume grows, competitors may enter the growing market.
To keep up with demand could be the main operations’ preoccupation. Rapid and dependable response to
demand will help to keep the demand vivid, while a high quality level must ensure that the company keeps
its market share as competition starts to increase.
After technical analyses, according with the patent owner, we can say that the product lifetime will be
around 4 years.
Promotion The company is a new one in that market and unknown in the specific sector of the bicycle. The activity of
promotion is very important to penetrate this new market. Promotion will be implemented through:
1. Advertising into specialized bicycle magazines
2. Presence in bicycle's faire and trade show
3. Flyers and brochures in specialized bicycle's shop if it is possible
4. Facebook, Instagram and Twitter campaigns
Top manager will have the function of sales representative; the goal is to stipulate a contract with bicycle
resellers, which will sell Rocket R1 into their stores. The budget per year, for marketing and promotion, is
set to 40,000 €.
43
Price The price estimation is derived from the Competitive Analysis: the price is set at € 149, it is a similar price of
our main competitors but according with the analysis, Rocket R1 has a higher utility, thus there will be a
preference among the main competitors.
This was evidenced especially in the competitive map (reported below for clarity): there is not any
competitor product with a high utility and a price of around 150€. Therefore, that space will be covered by
Rocket R1.
Placement The company decides to do not buy an estate but to rent it. Since the product will be made in outsourcing
the estate's areas will be divided: most of the space will be occupied by a warehouse, where the product
arrives from the supplier and will take up by the Amazon's courier.
So the company rents a warehouse and an office in the same building of 420 square meter for 1200 € per
month, in the Vicenza's area in order to be close to the supplier.
The location is not casual: as we have seen in Market Analysis’s chapter, the higher percentage of the
people that use the bicycle in Italy is concentrate in the North-East area. So we can assume that the higher
segment of the Italian market will be composed by the North-East inhabitant and the chosen placement will
be close to these customers.
In order to sell Rocket R1, we stipulate a contract with Amazon, which includes product visibility to Amazon
marketplace and transportation to final customer. So the distribution channel will be preferably on-line,
through Amazon and our own website, but we want to make deals with specialized bicycles resellers for
displaying Rocket R1 into bicycles shops.
44
Strategy identification
According to Porter's model for the generic strategies, what emerges is a focus on differentiation strategy:
In fact, as it can be seen in the image and, among all, according with what emerged by the analysis, the
target market is a niche market, with specific customers, owners of high-value bicycle. That was confirmed
by the questionnaire with a statistical test “Chi Squared” (for more information see demand analysis’
chapter).
Moreover the product is different from the others, with the main different characteristic (the integration in
the chassis) protected from copycats by the Patent only in Italy.
In addition, as it was specified before, the competitive analysis reveals that there is an area in the
competitive map that is not covered by the competitors. It may help defining the ideal strategic area to put
the product in.
There are, of course, some risks to watch out through the implementation of this strategy:
The niche market may become attractive for many other competitors
New technologies may move the problem or solve it in a different way, so customers' needs may
change
So it is important for ASAP, if it wants to remain competitive, to continue investing in new technologies,
studying the changes in the markets, new patents etc. and promoting activities of research and
development.
45
ECONOMIC-FINANCIAL
PLAN
46
Preliminary cost analysis
The following table shows a breakdown cost structure for the preliminary design and product development.
This total cost of € 69.500 is allocated into year 0 costs.
Activity Phase Forecasted
time [h] Cost [€] Total Cost
Product Profile Definition of product's functional specifics 40 50 2.000
Share of info with R&D 40 50 2.000
Validation 8 50 400
TOTAL
88
4.400
Product planning Preliminary costs analysis 80 50 4.000
Validation 8 50 400
TOTAL
88
4.400
Project planning
Planning HW to CAD 40 50 2.000
Development PCB to CAD 40 50 2.000
Prototypes assembly 16 50 800
Functional and technical specifics, details 80 50 4.000
Test HW of prototype with a trial FW 80 50 4.000
FW development according to the specifics
160 50 8.000
Debug FW on prototype 80 50 4.000
Test of electromagnetic compatibility 40 50 2.000
Cost at certificate structure CE
5.000
Cost of equipment PCB (lamina)
500
TOTAL
536
32.300
Production Case mechanical design 60 50 3.000
Engineering activities 60 50 3.000
Test of functional design 80 50 4.000
Packaging 40 50 2.000
Mold plastic container
10.000
TOTAL
240
22.000
Marketing Manuals 40 50 2.000
Brochure 40 50 2.000
TOTAL
80
4.000
Assistance Field test 40 50 2.000
Validation 8 50 400
TOTAL
48
2.400
Sales Start
TOTAL
2.112
69.500
47
Fixed costs
The table shows the fixed costs, which include advertising, cloud, all inclusive property rent and equipment
for logistics, human resources and development costs.
Advertising: on specialized magazines, into reseller’s shops, internet and social network (property
website, Facebook, Instagram, Twitter campaigns)
SaaS: Cloud structure system (€ 50.000) and the mobile phone app for the user-device interaction
(€ 20.000).
Rent: 420 square meter warehouse in Vicenza area, including furniture and bills.
Equipment: Manual pallet truck.
Human Resources: Electronic engineer, logistics manager, secretary.
Development: research and development on the product.
Fixed Costs [€]
Advertising and brand image 40.000
SaaS 70.000
Rent 30.000
Equipment and tools' purchase 1.000
Human resources 84.480
Development 50.000
TOTAL FIXED COSTS 225.480
Variable costs
The following table estimates the variable costs for the material, logistics and service voices directly
attributable to the product. The final price (€ 75,00) is the estimation made from the supplier, which
manufactures the whole product. It is comprehensive of suppliers mark-up.
Unitary Costs [€]
GSM antenna 20,00
GPS antenna 18,00
Microchip 2,00
Power supply 3,00
Accelerometer 1,00
Battery 3,00
Packaging 5,00
Cloud database 5,00
Amazon transportation 5,00
Mark-up 13,00
TOTAL UNITARY COST 75,00
Cloud cost is the direct cost for managing and delivering the precise position to the user mobile phone: it
includes the rent of the SaaS (service as a product) platform and the operative costs.
In addition, a discount on the price can be applied if the order of manufacturing is elevated.
48
Economic-financial plan
It is important to underline that all the values and the associated economic and financial balance sheet
ratios were calculated from a simplified financial model.
This model does not consider inventories, it is assumed an active bank accounts interest rate of 3,5% and a
tax rate of 40%, both constant over years. Staff salaries are inclusive of contributions, taxes are fully paid in
the following year, tangible assets are depreciated over 10 years on a straight line deprecation, 5 years for
materials and VAT is not considered. Any overdrafts are retrieved from the bank through a loan of the same
amount at an interest rate of 6.0% passive constant over the years.
Internal sources
A minimum budget of 10.000 € per year will be put as social capital; in addition the financial needs are also
funded by a bank loan.
It can be seen from the line graph that the break-even point is reached at:
a. 3.048 sold products for Asap case
b. 3.087 sold products in the case of an external firm would sell our product paying ASAP a royalty.
Conjecturing about an increment of around 16% (due to royalties) of variable cost and decrease of
20% of fixed costs. This graph shows that the business is also profitable for a firm, which would
invest into ASAP Rocker R1.
-400
-200
0
200
400
600
800
1000
1200
1400
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Ne
t p
rofi
t (i
n t
ho
usa
nd
)
Sales volume (in thousand)
Break-even Point
Asap
Externalfirm +Royalty
49
It is decided to split the analysis into two scenarios(See Demand analysis): worst-case scenario and best-
case scenario.
Worst-case scenario
Assumptions are:
1. Italian target market of 53.800
2. Italian market share of 48%
External sources
It is expected a financing from the bank, the amount financed is € 196.521 according to cash flow analysis.
This investment will cover initial suppliers payments, financial charge and immediate expenses.
Revenues, costs and profit
REVENUES Year 0 Year 1 Year 2
TOTAL REVENUES 192.389 673.361 961.944
COSTS
Purchases of raw materials, consumables and goods 97.840 338.940 484.200
Services 100.000 30.000 30.000
Employees 84.480 84.480 84.480
Advertisement 40.000 40.000 40.000
Research and development 69.500 50.000 50.000
Severance pay 6.258 6.258 6.258
TOTAL COSTS 398.078 549.678 694.938
EBITDA -205.689 123.683 267.006
EBIT -205.813 123.525 266.808
Profit (loss) -212.691 119.321 197.469
Economic and financial index
TOTAL RETURN INDEX Year 0 Year 1 Year 2
ROA -622,53% 109,09% 92,70%
ROE 104,93% -142,86% 173,21%
ROI 2870,35% 314,88% 1450,52%
ROS -106,98% 18,34% 27,74%
Net capital -€7.170,31 €39.229,24 €183.347,90
Debt equity €229.494,23 €184.79,57 €155.039,16
FINANCIAL INDEX Year 0 Year 1 Year 2
Debt ratio -16,31% -135,68% 252,46%
Current ratio 97,24% 182,51% 184,99%
Index of investments flexibility 96,99% 99,11% 99,65%
Index of financial flexibility 99,74% 54,30% 53,87%
50
Best-case scenario
Assumptions are:
1. Italian target market of 167.930
2. Italian market share of 48%
External sources
It is expected a financing from the bank, the amount financed is € 21.482 according to cash flow analysis.
This investment will cover initial suppliers payments, financial charge and immediate expenses.
Revenues, costs and profit
REVENUES Year 0 Year 1 Year 2
TOTAL REVENUES 600.518 2.101.812 3.002.588
COSTS
Purchases of raw materials, consumables and goods 303.274 1.057.959 1.511.370
Services 100.000 30.000 30.000
Employees 84.480 84.480 84.480
Advertisement 40.000 40.000 40.000
Research and development 69.500 50.000 50.000
Severance pay 6.258 6.258 6.258
TOTAL COSTS 603.512 1.268.697 1.722.108
EBITDA -2.994 833.115 1.280.481
EBIT -3.118 832.957 1.280.283
Profit (loss) -3.870 501.322 768.170
Economic and financial index
TOTAL RETURN INDEX Year 0 Year 1 Year 2
ROA -3,08% 80,64% 62,05%
ROE -63,13% 98,79% 60,22%
ROI -11,72% 99,27% 61,71%
ROS -0,52% 39,63% 42,64%
Net capital €26.612 €839.087 €1.787.735
Debt equity €88.694 €512.961 €769.008
FINANCIAL INDEX Year 0 Year 1 Year 2
Debt ratio 1.648,97% 203,55% 161,76%
Current ratio 150,39% 201,37% 268,32%
Index of investments flexibility 99,01% 99,90% 99,95%
Index of financial flexibility 66,49% 49,66% 37,27%
51
52
Index analysis
ROA (return on investment): an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing company's annual earnings by its total assets. For the pessimistic scenario it is very negative into the first year due to the huge loss, while for the optimistic scenario it is still negative but almost 0. During the following year the percentage improves thanks to the sales but the starts slightly decreasing due to the increase of cash.
ROE (return on equity): The amount of net income returned as a percentage of shareholders
equity. Return on equity measures a corporation's profitability by revealing how much profit a
company generates with the money shareholders have invested. For pessimistic scenario the ratio
is going to decline due to the fact that capital will be not reinvested into the company. The
percentage is positive during the first year (due to net profit and net capital are negative), during
the second year the percentage decreases and become negative ROA since becomes positive.
During the third year it rises again above 100% because debt ratio becomes positive. For the
optimistic scenario the trend is slightly different: ROE starts to be negative during the first year due
to ROA but then it goes up because ROA is increasing.
ROI (return on investments): A performance measure used to evaluate the efficiency of an
investment or to compare the efficiency of a number of different investments. To calculate ROI, the
benefit (return) of an investment is divided by the cost of the investment. For pessimistic scenario
the percentage in the first year is huge because invested capital is very low, instead in the
optimistic scenario it is slightly negative because invested capital is higher but EBIT is still negative.
The index decreases during the following years because profit is not distributed as dividend but it is
converted into cash for the company.
ROS (return on sales): It provides insight into how much profit is being produced per euro of sales.
The percentage is increasing because profit is increasing as well. Then it remains stable due to the
profit stability. For both scenarios the percentage starts negative into the first year due to the loss
but during the following years the ratio improves because profit is increasing.
Debt ratio: This ratio gives a general idea of the company's overall debt load as well as its mix of
equity and debt. Debt ratios can be used to determine the overall level of financial risk a company
and its shareholders face. In general, the greater the amount of debt held by a company the
greater the financial risk of bankruptcy. The ratio is high the first years
but it will decline thanks to the high revenues. The first year presents a high percentage but the
following years it improves because the loan is repaid and the net capital is increasing thanks to the
sales and the no dividend policy.
53
Current ratio: The ratio is mainly used to give an idea of the company's ability to pay back its short-
term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The
higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1
suggests that the company would be unable to pay off its obligations if they came due at that point.
For both scenarios the percentage is increasing because equity is increasing due to the sales.
Index of investments flexibility: helps to define loans composition, which depends on the type of
activity carried out by the company and the degree of flexibility of the company structure. The
more the structure of loans is elastic, the greater the company's ability to adapt to changing market
conditions; excessive rigidity of lending instead, involves difficulty by the company to adapt to the
new situation, as well as incurring significant overhead costs. 100% is the best result.
Index of financial flexibility: it indicates the weight of short-term sources than consolidated.
Interpretation in antithesis than the one provided for the degree of flexibility of use: the higher the
index the more risky it appears the structure. In both scenarios the percentage is decreasing
because current debts are increasing while total liabilities are decreasing over years.
54
Annex 1 – Survey
Indagine statistica per GPS-Tracker
Il seguente questionario vuole indagare le caratteristiche principali su cui si basa la scelta di acquisto di un
localizzatore satellitare GPS integrato nel telaio per biciclette. Gli intervistati sono coloro che sono in
possesso di una bici. Il questionario è anonimo e i dati verranno trattati nella tutela della privacy.
1.1 Qual è la sua età nell’anno 2015:
1.2 In quale di queste categorie rientra la sua occupazione lavorativa?
Studente
Dipendente/Impiegato
Pensionato
Professionista/imprenditore
Disoccupato
1.3 Genere:
Maschio
Femmina
1.4 Quante volte va in bici la settimana?
< 3
Tra 3 e 4
> 4
1.5 Che valore economico ha la sua bici?
Da 0-100 euro
Da 100 a 400 euro
Maggiore di 400 euro
1.6 Lascia spesso la sua bici in giro incustodita?
Mai
Alcune volte
Sempre
1.7 Sarebbe interessato o è già in possesso di un sistema di antifurto satellitare per biciclette?
Si
No
1.8 Se il prodotto avesse un prezzo in accordo con le sue aspettative, sarebbe disposto ad acquistarlo entro un
anno?
Non lo comprerei sicuramente
Probabilmente non lo comprerei
Forse lo potrei comprare
Probabilmente lo comprerei
Lo comprerei sicuramente
55
Valutare i seguenti cartellini, che rappresentano differenti configurazioni del localizzatore GPS per bici, inserendo un
giudizio da 1 a 10 nei rispettivi cerchi in basso a destra per ogni configurazione.
Le immagini nei riquadri rappresentano le diverse tipologie d’integrazione e visibilità del dispositivo.
Tipologie di integrazione/visibilità:
Integrato al telaio esterno-mimetizzato esterno facilmente identificabile
Le caratteristiche oggetto d’indagine sono: integrazione/visibilità, complessità d’installazione/manutenzione, allarme
acustico.
Integrazione/visibilità:
Integrato al telaio
Complessità installazione/manutenzione:
Complesso necessità di un tecnico
Allarme acustico:
Sì
Integrazione/visibilità:
Esterno-mimetizzato
Complessità installazione/manutenzione:
Complesso necessità di un tecnico
Allarme acustico:
Sì
Prezzo:
Integrazione/visibilità:
Esterno-mimetizzato
Complessità installazione/manutenzione:
Complesso senza necessità di un tecnico
Allarme acustico:
Sì
Prezzo:
Integrazione/visibilità:
Esterno-facilmente identificabile
Complessità installazione/manutenzione:
Complesso necessità di un tecnico
Allarme acustico:
Sì
Integrazione/visibilità:
Esterno-facilmente identificabile
Complessità installazione/manutenzione:
Facilmente installabile
Allarme acustico:
Sì
Integrazione/visibilità:
Integrato al telaio
Complessità installazione/manutenzione:
Facilmente installabile
Allarme acustico:
Sì
Integrazione/visibilità:
Esterno-mimetizzato
Complessità installazione/manutenzione:
Complesso necessità di un tecnico
Allarme acustico:
No
Prezzo:
Prezzo:
Integrazione/visibilità:
Esterno-mimetizzato
Complessità installazione/manutenzione:
Complesso necessità di un tecnico
Allarme acustico:
No
Integrazione/visibilità:
Integrato al telaio
Complessità installazione/manutenzione:
Complesso senza necessità di un tecnico
Allarme acustico:
No
Prezzo:
56
25
7
10
19
3
0
5
10
15
20
25
30
Employee Professional/Freelance Retired Student Unemployee
Occupation
Annex 2 - Characteristics of the sample
A descriptive analysis of the sample of interviewees is necessary. The order of these explanations follows
the order of the questions of the questionnaire.
1.1 Age of the questionnaire is spread from 19 to 77 years. The next table represents the main
statistical indicators while the histogram shows the distribution of the age of the sample.
The mean of the sample average is very similar to the mean of Italian population, which is 43.3 ages
in 2012 (Source: http://www.comuni-italiani.it/statistiche/eta.html). The survey is performed in
people aged 20 to 30 years but a large number of respondents are 30-50 years old.
1.2 Occupation of the respondents is most frequently employee. An high relative frequency of
occupation is represented by students followed by retired, professional/freelance and unemployed.
Statistical indicators for Age
Count 64
Mean 39,5469
St. deviation 15,6031
Variation coef. 39,45%
Minimum 19
Maximum 77
Range 58
57
36
14 14
0
5
10
15
20
25
30
35
40
< 3 days 3-4 days > 4 days
Weekly bike's use
42%
58%
0%
10%
20%
30%
40%
50%
60%
70%
Female Male
Gender
1.3 Genders male and female are represented almost in equal proportions as the following graph
states. The relative frequencies are 42 for females and 58 for males while the absolute ones are
respectively 27 and 37.
1.4 Weekly bicycle’s use is most of all 1 or 2 days. The other 50% of the respondents declares they use
a bicycle more frequently. About 25% respondents use a bicycle 3-4 days and the other 25% has a
weekly bicycle’s usage of 5 days or higher.
58
15
28
21
0
5
10
15
20
25
30
Never Sometimes Always
Unattented bike
24
29
11
0
5
10
15
20
25
30
35
<100 euro 100-400 euro >400 euro
Bike's value
1.5 Bicycle’s value could be probably a factor that can be related to the purchase of Rocket-R1. The
chart on the left shows that the highest frequency of respondents who have a bicycle with a
medium value. Only 11 respondents have an high-value bicycle. If we cross the bicycle’s usage with
weekly bicycle’s usage we obtain the graph on the right. It shows the relative frequency of bicycle-
values over each specific weekly usage. We see that an high usage could be connected to an higher
bicycle’s value.
1.6 This point is connected with the action of leave the bicycle without any beholder that looks at it.
The following chart shows its absolute frequency.
59
9%
25%
30%
34%
2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Definitely no Probably no Probably Probably Yes Yes
Buying interest
79%
8% 13%
48%
31%
21%
27% 27%
45%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
< 3 days 3-4 days > 4 days
Bike value VS weekly bike's usage
<100
100-400
>400
1.7 – 1.8 This last part of the first questionnaire’s page is related to the interested in the product idea
and the buying interest. Take in account the buying interest chart we can draw out that about 34%
of the sample may be interested in purchasing the product if it has a price according to consumers’
view. The next chart concerns the interest about the product idea related to the buying interest.
60
6
14
9
2 2
10
20
1
0
5
10
15
20
25
Definitely no Probably no Probably Probably Yes Yes
Buying interest VS product/idea interest
Notinterested
Interested
4
9
7
4
2
7
10
9
1
2
9
0
2
4
6
8
10
12
Definitely no Probably no Probably Probably Yes Yes
Buying interest VS bike's value
<100 euro
100-400 euro
>400 euro
The other charts show the buying interest taking in account different segmentations.
The following graph shows that the respondents who have high interest of purchase also have probably a
high-value bicycle. A statistical test was performed to prove the dependency between these two factors.
Independence test Test Statistic G.l. P-value
Chi-squared 18,251 8 0,0194
61
4%
12%
40%
44%
0% 0% 0%
29%
71%
0%
30% 30% 30%
10%
0%
11%
47%
16%
21%
5%
0%
33% 33% 33%
0% 0%
10%
20%
30%
40%
50%
60%
70%
80%
Definitely no Probably no Probably Probably Yes Yes
Buying interest VS occupation
Employee
Professional
Retired
Student
Unemployed
The last chart concerns the relation between buying interest and occupation. The employees, who
represent the largest segment of the respondents, are spread equally between the class “probably no”,
“probably” and “probably yes”.
The most interesting conclusion could be that most Professional/freelance may buy the product.
62
Annex 3 - Conjoint Analysis and partial utilities
There are several books that consider this approach as an optimal way to detect the best configuration of a
product according to the consumers’ point of view. A brief introduction about conjoint analysis is needed
even if we release a deeper handling of this topic to specific books.
First of all we introduce the following terms:
• Product: can be an object or a service characterized by the attributes that define it. These
attributes may have different modes (levels).
• Attribute (or factor): is the characteristic of a product.
• Mode (or level): is the value that is assigned to the attribute. It is what defines the attribute.
• Profile (or stimulus): is one configuration among all possible combinations of the levels considered.
• Part –Worth (partial utility): Estimated preference or utility associated with each level (modes) of
each attribute.
• Overall utility: it is the preference expressed by a respondent about the profile.
The process of this analysis is to evaluate different configuration to consumers. Since a product could have
a lot of configurations, a factorial design has to be conducted. It is a procedure to reduce the number of
configurations that will be proposed to consumers till the minimum possible number of configurations
needed: the sum of all the levels added to 1. For more information is essential the consultation of the book
“Design and Analysis of Experiments by Douglas Montgomery”.
Conjoint methodology is based on a decomposition approach: the total utility of a product is a function of
the utilities of its attributes.
In other words, from the overall utility evaluation given by the respondents to a set of product profiles, we
obtain the part-worth utility evaluation for the attributes’ levels.
Therefore conjoint analysis allows you to evaluate:
• Part-worth utility that a respondent assigns to each mode of the attributes of a product
• The importance a respondent assigns to each attribute of the product
It follows that conjoint analysis is a market research technique that can determine the best
product profile that provides the highest market share.
In particular this approach creates a correspondence between the concept of preference and the utility,
which means that the profile of preferred product is one from which the respondent gets the most utility
and satisfaction.
63
In metric conjoint, the estimate of individual utility function is calculated with ANOVA based on multiple
regression model with dummy variables. The following example formula concerns a model for two factors:
Where:
y = evaluation of the combination of i-th level (factor 1) and j-level (factor 2) assigned by one subject
μ = mean of all evaluations y, assigned by one subject to the combinations
β = it is deviation from μ of i-th level of factor 1 and j-th level of factor 2
ε = estimated error of model
When we get the evaluation of every individual utility, we can calculate the theoretical utility of every
profile. So, the total utility function, for a product profile, is the sum of partial utility for each level of each
factor.
wikp = partial utility of factor, coefficient indicating importance of factor at p level for the i-th respondent
zmkp = dummy variable
𝒆𝒊𝒎 = Statistic error of respondent on combination m
Doing some matrix operation we get the partial utilities wkp of all the factors. In addition we have to
consider the statistic error that is useful to determine the goodness of the model, usually expressed by R-
squared coefficient.
64
Annex 4 – R Software procedures
R software requires a programming language, but the advantages overcome the shortcomings. In fact
downloading several packages from the most important universities, several analyses can be performed. In
our case a package conjoint () has been utilized.
See the link http://cran.r-project.org/doc/manuals/R-intro.pdf for other information. Now steps to perform
the analysis are briefly showed. Using the command “experiment<-expand.grid” and “design<-
caFactorialDesign”, the following orthogonal matrix has been obtained.
Attr1 Attr2 Attr3
1 integ complex-tec yes
2 est-inv complex-tec yes
3 est-inv complex-noTec yes
4 est-vis complex-noTec yes
5 integ easy yes
6 est-vis easy yes
7 est-vis complex-tec no
8 integ complex-noTec no
9 est-inv easy no
After uploading the data, the command “caPartUtilities()” that estimates the individual part-worth utilities
and command “Conjoint()” have been used giving the following output:
Residuals:
Min 1Q Median 3Q Max
-5,6375 -0,7617 0,2117 0,7805 4,2156
Coefficients:
Estimate Std. Error t value Pr(>|t|)
(Intercept) 6,05156 0,06942 87,170 < 2e-16
factor(Integration/invisibility)1 1,17682 0,08503 13,841 < 2e-16
factor(Integration/invisibility)2 0,32760 0,09350 3,504 0,000495
factor(Easy maintenance/installation)1 -0,64635 0,08063 -8,017 6,19e-15
factor(Easy.maintenance/installation)2 -0,10417 0,10587 -0,984 0,325571
factor(Sound.alarm)1 0,48672 0,07449 6,534 1,42e-10
(Intercept) ***
factor(x$Integration/invisibility)1 ***
factor(x$Integration/invisibility)2 ***
factor(x$Easy.maintenance/Installation)1 ***
factor(x$Easy.maintenance/Installation)2
factor(x$Sound.alarm)1 ***
---
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Signif. codes: 0 ‘***’ 0,001 ‘**’ 0,01 ‘*’ 0,05 ‘.’ 0,1 ‘ ’ 1
Residual standard error: 1,392 on 570 degrees of freedom
Multiple R-squared: 0.3872, Adjusted R-squared: 0.3818
F-statistic: 72.02 on 5 and 570 DF, p-value: < 2,2e-16
"Part worth (utilities) of levels (model parameters for whole sample):"
levnms utls
1 intercept 6,0516
2 integ 1,1768
3 est-inv 0,3276
4 est-vis -1,5044
5 complex-tec -0,6464
6 complex-noTec -0,1042
7 easy 0,7505
8 yes 0,4867
9 no -0,4867
Looking at this statistical output some comments are important to spend:
From the residuals output we see that Median is almost 0 and the first quartile and third quartile measures
don’t stray a lot from 0. If we look at the minimum and maximum we can infer some outliers are present in
the input data.
Seeing coefficient analysis almost all the factors are significant. The only estimation does not is the second
level of the attribute “Easy maintenance/installation” that cannot be extended to whole population.
The inferential statistic on the whole model is very strong with a low p-value (p-value: < 2,2e-16).
On the other and the Multiple R-squared that explains the goodness of the model is only 0,4. It means that
the model taken into account explains the 40% of the total variance.
Considering the average importance of attributes according to all the sample data:
"Average importance of factors (attributes):"
Integration/invisibility 51,04
Easy maintenance/installation 28,71
Sound.alarm 20,26
Sum of average importance: 100,01
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To explain what just said in a graphical way, some histograms are reported:
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Closing credits
Everybody equally participates to draft the business plan, in particular Christian Sanson focused his
attention into the external analysis and the strategy identification, Paolo Balasso into market analysis and
demand analysis, Mattia Meggiorin into competitors analysis and economical and financial analysis.