PowerPoint Presentation

CASE ANALYSISAlex Bottausci Mark LemoineYousef MadaniPhilippe St-AmourJohn Molson School of Business Concordia University

AGENDAThe Challenges

The Media Industry

The LED Electronic Display Industry

The Entrepreneur

The Company

Financial Analysis

The Package & Benefits

Five Alternatives

Our Recommendation

Tlcit 94 99AGENDATHE CHALLENGESTHE CHALLENGESWhat strategic direction should Tlcit take for growth?

What to do with Tlcits idle capacity?What can Tlcit do considering its financing capabilities and limitations? THEMEDIA INDUSTRYBARGAINING POWER OF SUPPLIERS

LOW

Many SuppliersTHREAT OF SUBSTITUTE PRODUCTS

MEDIUM - HIGH

Many Mediums AvailableRIVALRY BETWEEN COMPETITORS

HIGH

Many AdvertisersBARGAINING POWER OF BUYERS

LOW

High Demand for Advertising SpacePORTERS 5-FORCESTHREAT OF NEW ENTRANTS

MEDIUM

Sizeable Capital Investment7Marketers looking for new methods to better reach their target audiences

Emerging trend of media fragmentationEarly adoption by advertisers and advertising agencies Specialized TV channels (i.e. Musique Plus, RDS)

Public transit audience not exploited

MEDIA INDUSTRY 80s & 90sMicro-Marketing: Target marketing which capitalizes on reaching fragmented consumer marketTHE LEDELECTRONICDISPLAY INDUSTRYTHREAT OF NEW ENTRANTS

HIGH

Now a CommodityBARGAINING POWER OF SUPPLIERS

LOW

Many Suppliers

THREAT OF SUBSTITUTE PRODUCTS

HIGH

Traditional SignsRIVALRY BETWEEN COMPETITORS

HIGH

Limitless CompetitionBARGAINING POWER OF BUYERS

MEDIUM

Different Size Customers PORTERS 5-FORCESVery limited use and capabilitiesLimited use in public spacesNot present in the public urban transitsNot considered as mediaTHE LED ELECTRONICS POTENTIAL, LIMITATIONS & OPPORTUNITIESTHEENTREPRENEURTlcit Inc. President and CEOAlways saw himself as an entrepreneurBEng, Concordia University1977:Full time: Northern TelecomPart-time: MBA, McGill University1979: Full-time: MBA Part-time: Computer-software business Partner: Frank Ruffolo Short-lived failure1980: Booz-Allen & Hamilton Management Consultant, Britain1986: Incorporates Tlcit Inc.

MARSHALL MOREYNE13StrengthsBEng + MBATechnical know-howLead innovative research projectsCommercialization of LED products

WeaknessesDoesnt value the full potential of the advertising opportunitiesDoesnt delegate enough Spreads himself too thinMARSHALL MOREYNE

Delegation after signing contract in 1991, he should have focus on the next big opportunities. He should have hired somebody to focus on the marketing and sales.He should have been driving the vision.

14OPPORTUNITIESMoreyne identified opportunities: For incremental innovation (luminosity, visibility & readability) To create a new vehicle for communicationTo generate advertising revenue by introducing innovative LED technology to the media industry via urban public transit networks$ Media Industry $$$$$

Innovative LED TechnologyPublic transport driving the LED technology towards the Medias industrys advertising dollars. 15THE COMPANYTLCIT INC.1986:Founded by Moreyne in Pointe-Claire, QCManagement consultancy & communications company Privately owned

1991: Tlcit wins pilot project

1993: Major contract with for fully integrated Visual Communication Network (VCN)System covers 3 of 4 Mtro lines & 423 Mtro cars

MANAGEMENT STRUCTUREPresident & CEOMarshall MoreyneVP EngineeringFrank Ruffolo VP ManufacturingAngelo Guercioni

To establish itself as an innovator in the field of worldwide communications

VISION

Conduct research and development to refine electronic high technology in its applications to mass transit systems while offering and maintaining the highest standards of excellence in its products, services, and professional conduct

MISSIONTLCITS PROMISES

Increase Ridership Maximize Passenger Satisfaction Generate Revenues

Deliver 21st century information technology-now!: developing some of the worlds most modern urban transportation vehicles and passenger information systems.

Make public transportation the vehicle of choice for commuters: By providing passengers with dynamic and relevant information in a timely and entertaining way

Consistently innovate!: Applying the latest communications technologies and services to meet the information needs of todays fast-paced commuter world

CORE COMPETENCIES

Research & DevelopmentElectrical engineeringDisplay panel innovation

MarketingVisual communications productsFirst to MarketVisual Communication Network (VCN)A disruptive technology & new advertising medium

14 Years of Public Transit A/V Media Technology Expertise & Experience80 86: Scouting business opportunities87 91: Innovated, developed & refined VCN91 94 : Outfitted 423 Mtro carsCOMPETITIVE ADVANTAGES

PESTEL ANALYSISMACRO-ENVIRONMENTAL FACTORS

SWOT ANALYSISSTRENGTHSInherent appeal to advertisers because captive marketHigh quality standards: ISO 9002, 9000Income stability: 20 year contract with the STCUMR&D + PeopleMarketing of technical productsThe VCNs uniqueness had the potential to tap into an emerging micromarketing trendConsulting expertise (engineering, electrical and CIS analysis)WEAKNESSESLimited financial capabilitiesNo experience in manufacturing Human resources shortages in production, marketing and advertising for expansionProduct not bought up frontOPPORTUNITIESIndustry trend in North America = Micromarketing and VCN can answer this need300 major transit system in the world, 49,000 subway cars in the world and about 23,000 busesFirst to market: Can quickly monopolize largest global transit networksTHREATSFast technological development (innovation) environmentFirst to market: Must keep innovating to maintain lead on competition

FINANCIAL ANALYSIS VCN AD RATES

PROJECT CASH FLOW ESTIMATES

BANK VS. VC?What if Tlcit borrowed from a Bank rather than a VC?FINANCIAL ANALYSISCapital Intensive ModelNeed finance for new sub/bus contracts

Return on InvestmentVenture Capital do not see return

Cant make loan payments

Transit authorities cannot investWhat does this mean?THE PACKAGE & BENEFITSVCN: A robust and comprehensive wide area network based information system capable of fulfilling the information display needs of any mode of public mass transportationVISUAL COMMUNICATIONNETWORK32An innovative and disruptive technology:

Multicolor, high resolution, sharper images & text-only displays Luminosity, visibility & readability

Providing timely information Emergency messages for passengers safety

Pre-recorded digitalized vocal messages

Automatic Vehicle Location (AVL) Wireless data communication

Possibility of high frequency advertising A new medium for a captive audience VCN CORE TECHNOLOGYAn innovative and disruptive technology:

Multicolor high resolution displays: (LED, LCD, Plasma) for multi-modal system for advanced visual/audio applicationsMulticolor text-only displays: LED based panels for text only applicationsDisplay panels providing timely information + emergency messages to transit passengersSharper images and text display provided a new medium for a captive audienceLuminosity visibility & readability: Visually impaired and elderly can readPre-recorded digitalized vocal messagesAutomatic Vehicle Location (AVL) Wireless data communication via high speed multi-point and wide area networksPossibility of high frequency advertising

33Non-modular installation: Requires custom modification by car manufacturer

Software & network integration

Limited lifetime: Graphic quality 20 years

Limited creative capabilities (graphic animation)

Advertising is soundlessVCN CONSTRAINTS34

THE VCN IN THE

35VCN BENEFITSA complete, end-to-end, multi-modal integrated real-time passenger information system to increase the value of public transportation:

Maximize Passenger Safety:Inform travelers of emergency measuresPassengerAssistance: Turn traveler "downtime" into productive "uptime!

Assist passengers in their travel decision making processesEnhance Passenger Experience: An opportunity to communicate a variety of beneficial messagesRevenue Generation: Set up display panels for advertising purposes in buses, subway cars, shopping malls, and airports36INCREASE TRANSIT REVENUES VCN is a compelling strategy to achieve heightened passenger satisfaction and increase ridership levels

It provides passengers with dynamic and relevant information in an entertaining way Significant potential for an alternate source of revenues through advertising salesBy providing passengers with dynamic and relevant information in an entertaining way, the Visual Communication Network (VCN) represents A compelling strategy to achieve heightened passenger satisfaction and increase ridership levels. As such, it presents transit authorities with significant potential for an alternate source of revenues through advertising sales. With VCN, transit authorities can offer advertisers and sponsors the power of a defined, consistent and captive audience. As a powerful marketing tool, VCN offers significant advantages over traditional consumer media.

Maximum reach with a captive and receptive mass audienceHigh frequencyLow production ratesVery low cost per thousand (CPM)Short production times and system flexibility provide significant micro-marketing opportunitiesRelevance of information assures increased attention and retention:Messages may be targeted to specific locations, time of day, day of week and point of sale mechanismsVariable and colorful graphics maintain audience attentionTimely promotional and event announcements

37 VCN ADVERTISINGSignificant Reach: 846 A/V displays on 3 of 4 Mtro linesUp to 4,5 million viewers/weekAvg. of 607,000 passengers who ride the Mtro 2/day-5/weekExceptionally High Frequency:One 20 second spot every 15 minutesExcellent Value: Low production and broadcast ratesLowest cost per thousand in Montreal (CPM)Maximum Targeting Capabilities:Specific subway lines, municipal regions & specific stationsTargeted Time Slots:To support in-store promotions for retailers located on a specific Mtro line or stationInstant Transmission:Any time point from 05:30 12:307 days/weekContent:55% Information: News, weather, sports, current events, cultural segments, entertainment, games, health, beauty, fashion45% Advertising: Contests, promotions and advertisingA Dynamic, Immediate and Cost-Effective Medium!

38FIVEALTERNATIVESToronto & London Subway SystemsLicensing for RATP

Buses

NYCTA Station PlatformsOEM MarketALTERNATIVESGLOBAL SUBWAY SYSTEMSPROSCONSMany subway systems49,000 subway cars worldwideTelecite experience with subwaysCore competencies: R&D + MarketingSolves idle capacity issuePotential market size $490M Different physical sizesDifferent electrical systemsCustom engineering Capital intensiveInvestment required $490M

TORONTOLONDONTORONTO TRANSIT COMMISSIONPROSCONSEasy sell: TO was aware of the product and knew it workedTO and MTL (756 cars) are about the same size (622 subway + 265 tramway)Potential revenue $20MTO did not want to pay for the panelsInvestment $20M

LONDON UNDERGROUNDPROSCONSBig media market with big potential3,912 carsPotential revenue $70MToo big to handle?Cars made by various manufacturers, much reengineering requiredInvestment $87M

RGIE DES TRANSPORTS PARISIENS (RATP) LICENCINGPROSCONSBig media marketMtro & RER: 3,472 + 1,328 carsMinimal risk: Pass financial responsibility to otherQuick and easy revenuesFrench language commonalityWill give away technology secretsCede media marketDoes not solve idle capacity issue

BUSESPROSCONSBig market with 22,792 (active buses worldwide MTL, LON, PAR, NYC, TOR, MEX) Will solve idle capacity issuePotential revenues $406MTechnological challenge$2M needed No experience with busesMany different bus manufacturers High customizationInvestment $506M

NYCTA STATION PLATFORMSPROSCONSMassive urban market34 lines & 935 StationsNew ADA regulations for communication security To be completed by 2000NYCTA set aside $1B Telecite has financing to proceedCould open door to enter LED displays in subwaysWill solve idle capacity issueStrong US DollarCost to adapt to system $1MNo experience with station platforms

46SUPPLY OEMPROSCONSTlcit can focus on R&DKeep intellectual propertyContinual product innovationLess capital intensiveWill solve idle capacity concernPotential to have all new subway cars fitted with VCN or similar systemsCan make a global footprintProfitablePartnership takes time to developCede media market to OEMDependency on OEMLong sales cycle

47EVALUATION OF ALTERNATIVESCRITERIACASHNEEDED25%SPEED OF BREAK-EVEN20%MARKET GROWTH20%FILLING IDLE CAPACITY15%PROFIT15%COMPANY VISION5%Wtd.Avg.ALTERNATIVES1244352.755531433.752255343.454444433.953344453.601 = Unfavorable5 = Favorable

48OURRECOMMENDATIONOUR RECOMMENDATIONSHORT-TERM 1 2 YearsNYCTA Transit Platforms & RATP Licensing

MEDIUM TO LONG-TERM2 5 Years OEM MarketSHORT-TERM NYCTA Station Platforms: 1994

Requires an injection of $1MTlcit has the fundsAmerican with Disabilities Act provided legal advantage for productNYCTA allocated $1B for this project

RATP Licensing: 1995

Little capital requiredMuch needed quick, easy revenuesCommon language set upNegative: Loss of brand control

MEDIUM TO LONG-TERMOriginal Equipment Manufacture (OEM): 1995

Targets: i.e. Bombardier & AlstomPartnership takes time to developTlcit can focus on core of R&DPass off selling to OEMWill keep staff busy

TLCIT 1994 - 199994 99 TIMELINENYCTA471 Indoor displaysOEM Displays to Europe & NAMajor contract to install RER with SNCF & FRPPrinciple supplier for Alstoms train applicationsNew product: Airport Terminal DisplayUS Electronic system manufacturing plant openedHong Kong MTR Pilot: Dynamic Route Maps & VCNMexico City STC: VCNNYCTA: Automatic Vehicle Location technology (AVL)Sydney (Aus.) bus shelters: Ultra bright displaysAlstom acquires TlcitHong Kong MTR: Fully integrated solutionMilestonesOn the right track to success since 1986!1999- Telecite is acquired byAlstom,the largest multinational transit equipment builder. Telecite is now Alstom's center of excellence for Advanced Traveller Information Systems.1998-Hong Kongpilot project results in contract to supply a fully integrated VCN solution for the MTRC's fleet car modernization program.1998- Australia selects Telecite to provide ultra bright exterior displays for bus shelters in Sydney.1998- First application that utilizes Automatic Vehicle Location technology (AVL) to integratereal-time bus informationwithin Telecites Visual Communication Network for NYCTs Manhattan bus shelters.1997- VCN is purchased byone ofthelargest subway operator on the North American continent- Sistema de Transporte Colectivo (STC) of Mexico City for new trains destined for STCs line A.1997-Hong Kongprovides a gateway to the Asian market. The MTRC (Mass Transit Railway Corporation) looks to Telecite to install dynamic route maps and the VCN in their pilot train.1997- Telecites USA electronic systems manufacturing plant begins operations.1996- Telecite becomes the principal supplier for Alstoms onboard train applications generating orders forthousands of entry level displaysthroughout the world including Europe, Asia, South America and Australia.1996- Telecitesnewest product, the airport terminal display, is installed in the Kansas City International Airport.1995-Major European contractwith Frances SNCF and FRP (Socite Nationale des Chemins de Fer and France Rail Publicit). The contract: to install the RER (Rseau Express Rgional) "C" line with dynamic real-time information and route map displays.1994- Telecite begins to provide rugged transit rated OEM displays to major car builders and integrators in Europe and North America.1994-U.S. market- The NYTC (New York City Transit Corporation) is supplied with 471 indoor and outdoor platform based displays.1993-Major contractfor a fully integrated VCN is signed with the STCUM. The system covers 3 of 4 lines in Montreals metro system (423 metro cars).1991- Telecite wins itspilot projectfor the STCUM (Socit de transport de la Communaut urbaine de Montral), the public transit corporation for the city.

54Fall 1999: Tlcit acquired by Alstom, largest multinational transit equipment builder

Tlcit became Alstom's center of excellence for Advanced Traveller Information Systems:System engineering, design, integration and installationSoftware development and validationPrinted Circuit Board (PCB) development and manufacturingMedia production and programming

With facilities in Canada and the US, the company sought to strengthen its leadership position as a solid communications resource for transit authorities throughout North America and the world

ACQUISITION BY ALSTOM

1999: Tlcit General Manager

2003: Go-Logix Technologies Inc.Chairman & CEOProvider of web based shippingSolutions that enable organizations to streamline the processing, rating, tracking and management of all their shipments in a multi-carrier, distributed environment

MARSHALL MOREYNEWhere is he Now?CONCLUSIONWhat growth strategy should Tlcit take that will solve idle capacity issues and be within financial capabilities?Short-Term:NYCTA Platforms & RATP LicensingMedium to Long-Term: OEM MarketCONCLUSIONAlex BottausciMark Lemoine

Yousef MadaniPhilippe St-AmourMMXIIIJohn Molson School of BusinessConcordia University

THANK YOU!EMBA 698Entrepreneurship and Small Family BusinessDr. A. Bakr IbrahimMontral, Qubec, Canada

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