CSI CSI

Iryna ButlerIryna ButlerMichael Dongieux Michael Dongieux

Carrie HogueCarrie HogueLifeng Geng Lifeng Geng Steve MartinSteve Martin

AgendaAgenda

• Executive SummaryExecutive Summary• Company OverviewCompany Overview• SWOT Analysis SWOT Analysis • Macro-Economic OutlookMacro-Economic Outlook• Micro-Economic OutlookMicro-Economic Outlook

Executive SummaryExecutive Summary

CSI seeks to achieve the following objectives:CSI seeks to achieve the following objectives:1.1. Lower Risk ProfileLower Risk Profile

2.2. Market accumulated intellectual property in the form Market accumulated intellectual property in the form of a commoditized product/service of a commoditized product/service

3.3. Become an International FirmBecome an International Firm

We recommend:We recommend:1.1. Standardize “Pharos” product for small-medium Standardize “Pharos” product for small-medium

Brazilian businessesBrazilian businesses

2.2. Build a broader revenue base to lower risk, andBuild a broader revenue base to lower risk, and

3.3. Eventually enter the US marketEventually enter the US market

Company OverviewCompany Overview

• 16-employee Brazilian systems engineering firm 16-employee Brazilian systems engineering firm serving primarily large clients (VW, GM) since 1991serving primarily large clients (VW, GM) since 1991

• Specialize in the implementation of automated Specialize in the implementation of automated monitoring and control systems to manage monitoring and control systems to manage production processes, quality and logisticsproduction processes, quality and logistics

• highly customized, low cost, end-to-end service highly customized, low cost, end-to-end service enables CSI to compete with much larger firms in enables CSI to compete with much larger firms in the same industrythe same industry

• Their prized “Pharos” product represents the Their prized “Pharos” product represents the culmination of 18 years of experience in the industryculmination of 18 years of experience in the industry

SWOT AnalysisSWOT Analysis

Helpful to achieving the Objective Harmful to achieving the Objective

Internal Origin (Attribute of the Company)

StrengthsStrong IP base (Pharos) & accumulated experienceGood reputation with large Brazilian clients (VW, GM)

WeaknessesLimited Resources (16 employee firm)Currently only 4 big clients

External Origin (Attribute of the Environment)

OpportunitiesA large small-to-medium sized business marketBNDES Bank Subsidies for Technology DevelopmentFew local competitors

ThreatsBrazilian Hiring/Firing LawCustomer attrition (CSI only able to handle 4 large projects simultaneously) Global economic slowdownUS Competitors

US Economic OutlookUS Economic Outlook

• Current ConditionsCurrent Conditions– 2008 GDP grew by 1.1%, 4Q 2008 contracted by 2008 GDP grew by 1.1%, 4Q 2008 contracted by

6.2%6.2%– Business and consumer spending contracted, Business and consumer spending contracted,

sentiment lowsentiment low– Unemployment 8.5%, lowest number of Unemployment 8.5%, lowest number of

manufacturing jobs since 1985.manufacturing jobs since 1985.

• OutlookOutlook– GDP contract 2.4% in 2009, grow 2.0% in 2010GDP contract 2.4% in 2009, grow 2.0% in 2010– Unemployment 10% before getting betterUnemployment 10% before getting better– Tight consumer and business credit marketTight consumer and business credit market– Stimulus, Fed policy and recoveryStimulus, Fed policy and recovery

Brazil Economic Brazil Economic Outlook Outlook

• Current ConditionsCurrent Conditions– 99thth economy by GDP, regional industrial power, economy by GDP, regional industrial power,

prudent economic, financial and fiscal policy, prudent economic, financial and fiscal policy, strong trade balance and reservesstrong trade balance and reserves

– GDP grew 5.1% in 2008, Q4 2008 contracted 3.6%, GDP grew 5.1% in 2008, Q4 2008 contracted 3.6%, inflation 5.7%, unemployment 8.5%inflation 5.7%, unemployment 8.5%

• OutlookOutlook– GDP contract 0.3% to 1.5% in 2009GDP contract 0.3% to 1.5% in 2009– Inflation 3.5% in 2009Inflation 3.5% in 2009– Retail continues to be strongRetail continues to be strong– Earlier recovery compare to developed economiesEarlier recovery compare to developed economies

Macro-Economic Macro-Economic EnvironmentEnvironment

• CSI: a local small company with limited CSI: a local small company with limited financial, human and technical financial, human and technical resourcesresources

• Weak economic outlook in U.S.Weak economic outlook in U.S.• Brighter growth potential in Brazil and Brighter growth potential in Brazil and

Latin America regionLatin America region• Recession impact on strategic decisionsRecession impact on strategic decisions• Risk of expansion to U.S. vs. position Risk of expansion to U.S. vs. position

for future growth: tight credit marketfor future growth: tight credit market

US Industrial Process US Industrial Process Control Industry Control Industry

• NAICS 334513 - Industrial process control NAICS 334513 - Industrial process control instrument instrument is in contracting manufacturing is in contracting manufacturing sector of the economysector of the economy

• As of 2007, 66 out of 108 firms are small As of 2007, 66 out of 108 firms are small businesses, 34% failure rate among small businesses, 34% failure rate among small businessesbusinesses

• Industry total sales: $1,376 million, firms with Industry total sales: $1,376 million, firms with sales less than $4.99 million has a market sales less than $4.99 million has a market share of 6.6%share of 6.6%

• Segment sales grew 18% annually from 2005 Segment sales grew 18% annually from 2005 to 2007, to 2007, average EBITDA is 11.37% of sales average EBITDA is 11.37% of sales

Industry Trends and Industry Trends and DriversDrivers

• Data collection and access are standard and routine operationsData collection and access are standard and routine operations • Integrated information across enterprises and organized context for Integrated information across enterprises and organized context for

decision makersdecision makers• Predict and find assignable causes of operational variations.Predict and find assignable causes of operational variations.• Disconnected initiatives vs. integrated solutionsDisconnected initiatives vs. integrated solutions• Product life cycle management, control system security, and system agility Product life cycle management, control system security, and system agility • Integration of IT and industrial process control Integration of IT and industrial process control • Real-time optimization and future planning based on internal and external Real-time optimization and future planning based on internal and external

eventsevents• What-if scenariosWhat-if scenarios

US and Brazil Auto US and Brazil Auto IndustryIndustry

• US Auto IndustryUS Auto Industry– Sales tumbles from 16.1 million in 2007 to 13.2 million in Sales tumbles from 16.1 million in 2007 to 13.2 million in

20082008– In March 2009, GM, Ford, Chrysler sales fell 45%, 41%, and In March 2009, GM, Ford, Chrysler sales fell 45%, 41%, and

39%39%– Big Three are in surviving modeBig Three are in surviving mode– GM is pursuing “GM is pursuing “fewer, and better” strategyfewer, and better” strategy

• Brazil Auto IndustryBrazil Auto Industry– GovernmentGovernment support: $4 billion support: $4 billion– Tax breaks for manufacturersTax breaks for manufacturers– 16.9% sales increase in March 2009 compare to March 200816.9% sales increase in March 2009 compare to March 2008– Future drivers: booming ag and mining sector, 2014 world Future drivers: booming ag and mining sector, 2014 world

soccer cupsoccer cup

Brazil Industrial Process Brazil Industrial Process Control IndustryControl Industry

• High-end industrial process control suppliers High-end industrial process control suppliers are dominated by companies from developed are dominated by companies from developed countriescountries such as GE, Honeywell, Invensys, such as GE, Honeywell, Invensys, Siemens, Rockwell AutomationSiemens, Rockwell Automation

• Brazilian multinational: WEG IndustiesBrazilian multinational: WEG Industies• Local system integrators/service Local system integrators/service

providers/consultants: AGNUS Tecnologia providers/consultants: AGNUS Tecnologia Eletrônica, CONCEPT ENGENHARIA E Eletrônica, CONCEPT ENGENHARIA E AUTOMAÇÃO, MagnoCorp Automation, SEA AUTOMAÇÃO, MagnoCorp Automation, SEA Systems-Unicontrol International Ltda, Vision Systems-Unicontrol International Ltda, Vision Industrial Systems Industrial Systems

• Local Advantage: Service providersLocal Advantage: Service providers

CSI Prospective CSI Prospective

• Major clients in automotive industry: Risks and advantages Major clients in automotive industry: Risks and advantages in US vs. Brazilin US vs. Brazil

• BarrierBarrier to entry to US. Market: High small business failure to entry to US. Market: High small business failure rate in US industrial process control industry, culture and rate in US industrial process control industry, culture and costcost

• CSI strength: low cost provider, retrofitting existing small CSI strength: low cost provider, retrofitting existing small business manufacturers with CSI process technologybusiness manufacturers with CSI process technology

• Virtual manufacturing modelVirtual manufacturing model• Market: Small Latin America business as potential Market: Small Latin America business as potential

customerscustomers• Cost advantages over multinationalsCost advantages over multinationals• CSI is well positioned to take advantage of small CSI is well positioned to take advantage of small

manufacturing firm modernization in Latin American region.manufacturing firm modernization in Latin American region.

Competitive AnalysisCompetitive Analysis

• SMSM

Industry analysis of Industry analysis of potential client base potential client base

• SMSM

Pricing AnalysisPricing Analysis

• SMSM

Value Chain Analysis Value Chain Analysis

Large Business

Operations

Medium Businesses

Research & Development

Niche/focused services Customized solutions for business clients Development of both hardware and software solution Development and deployment of innovative technologies

Lean operations with focus on staying small yet agileOutsource hardware productionFocus on the software solutions and hardware prototypesInternational FootprintConsulting servicesContract maintenance services

Most new business opportunities come from past clients referralsComprehensive website, yet no English version Word of Mouth referrals Repeat contracts and maintenance after sale No structured sales force teamWeak marketing solutions to increase brand awareness The owner is critical driver of the business for CSI

Market research Limited market research and analysis both regional and globalFurther investment into tracking studies, monitoring industry trends and drivers No developed action-planning process identified

Sales/Services

Small Businesses

SegmentationSegmentation

• IBIB

Targeting Targeting

• IBIB

PositioningPositioning

• IBIB

Legal ConsiderationsLegal Considerations

• Regional Governance & CorruptionRegional Governance & Corruption– Corruption among government officialsCorruption among government officials– Transparency International’s Corruption Transparency International’s Corruption

Perceptions Index Perceptions Index – Control of Corruption index Control of Corruption index

Legal ConsiderationsLegal Considerations

• Labor LawsLabor Laws– Regulated by collective bargaining & Regulated by collective bargaining &

agreementsagreements

• Employer CostsEmployer Costs– Social Security ContributionSocial Security Contribution– 1313thth Annual Salary Annual Salary– Severance Pay Severance Pay – VacationVacation

Legal ConsiderationsLegal Considerations

• Labor LawsLabor Laws– Regulated by collective bargaining & Regulated by collective bargaining &

agreementsagreements

• Employer CostsEmployer Costs– Social Security ContributionSocial Security Contribution– 1313thth Annual Salary Annual Salary– Severance Pay Severance Pay – VacationVacation

Legal ConsiderationsLegal Considerations

• Copyright, Trademark, & Industrial Copyright, Trademark, & Industrial RightsRights– Grant of rightsGrant of rights

• CopyrightCopyright• TrademarkTrademark• Industrial RightsIndustrial Rights

– CourtsCourts

Recommendations Recommendations

• CHCH

ConclusionsConclusions

• CHCH