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CASE ANALYSIS

CASE ANALYSIS. Alex Bottausci   Mark Lemoine. Yousef Madani Philippe St-Amour. John Molson School of Business Concordia University. AGENDA. AGENDA. The Challenges The Media Industry The LED Electronic Display Industry The Entrepreneur The Company Financial Analysis

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CASE ANALYSIS

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  1. CASE ANALYSIS Alex Bottausci   Mark Lemoine Yousef Madani Philippe St-Amour John Molson School of Business Concordia University

  2. AGENDA

  3. AGENDA The Challenges The Media Industry The LED Electronic Display Industry The Entrepreneur The Company Financial Analysis The Package & Benefits Five Alternatives Our Recommendation Télécité ‘94 – ’99

  4. THE CHALLENGES

  5. THE CHALLENGES What strategic direction should Télécité take for growth? What to do with Télécité’s idle capacity? What can Télécité do considering its financing capabilities and limitations?

  6. THE MEDIA INDUSTRY

  7. PORTER’S 5-FORCES • THREAT OF SUBSTITUTE PRODUCTS • MEDIUM - HIGH • Many Mediums Available • BARGAINING POWER OF SUPPLIERS • LOW • Many Suppliers • BARGAINING POWER OF BUYERS • LOW • High Demand for Advertising Space • RIVALRY BETWEEN COMPETITORS • HIGH • Many Advertisers • THREAT OF NEW ENTRANTS • MEDIUM • Sizeable Capital Investment

  8. MEDIA INDUSTRY ’80s & 90’s Micro-Marketing: Target marketing which capitalizes on reaching fragmented consumer market • Marketers looking for new methods to better reach their target audiences • Emerging trend of media fragmentation • Early adoption by advertisers and advertising agencies • Specialized TV channels (i.e. Musique Plus, RDS) • Public transit audience not exploited

  9. THE LED ELECTRONIC DISPLAY INDUSTRY

  10. PORTER’S 5-FORCES • THREAT OF SUBSTITUTE PRODUCTS • HIGH • Traditional Signs • BARGAINING POWER OF SUPPLIERS • LOW • Many Suppliers • BARGAINING POWER OF BUYERS • MEDIUM • Different Size Customers • RIVALRY BETWEEN COMPETITORS • HIGH • Limitless Competition • THREAT OF NEW ENTRANTS • HIGH • Now a Commodity

  11. THE LED ELECTRONIC’S POTENTIAL, LIMITATIONS & OPPORTUNITIES • Very limited use and capabilities • Limited use in public spaces • Not present in the public urban transits • Not considered as media

  12. THE ENTREPRENEUR

  13. MARSHALL MOREYNE • Télécité Inc. President and CEO • Always saw himself as an entrepreneur • BEng, Concordia University • 1977: • Full time: Northern Telecom • Part-time: MBA, McGill University • 1979: • Full-time: MBA • Part-time: Computer-software business • Partner: Frank Ruffolo Short-lived failure • 1980: Booz-Allen & Hamilton Management Consultant, Britain • 1986: Incorporates Télécité Inc.

  14. MARSHALL MOREYNE • Strengths • BEng + MBA • Technical know-how • Lead innovative research projects • Commercialization of LED products • Weaknesses • Doesn’t value the full potential of the advertising opportunities • Doesn’t delegate enough  Spreads himself too thin

  15. OPPORTUNITIES • Moreyne identified opportunities: • For incremental innovation (luminosity, visibility & readability) • To create a new vehicle for communication • To generate advertising revenue by introducing innovative LED technology to the media industry via urban public transit networks $ Media Industry $ $$ Innovative LED Technology $$

  16. THE COMPANY

  17. TÉLÉCITÉ INC. • 1986: • Founded by Moreyne in Pointe-Claire, QC • Management consultancy & communications company • Privately owned • 1991: Télécité wins pilot project • 1993: • Major contract with for fully integrated Visual Communication Network (VCN) • System covers 3 of 4 Métro lines & 423 Métro cars

  18. MANAGEMENT STRUCTURE President & CEO Marshall Moreyne VP Manufacturing Angelo Guercioni VP Engineering Frank Ruffolo

  19. VISION • To establish itself as an innovator in the field of worldwide communications

  20. MISSION 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

  21. TÉLÉCITÉ’S PROMISES • Increase Ridership • Maximize Passenger Satisfaction • Generate Revenues • Deliver 21st century information technology - now!: developing some of the world’s 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 today’s fast-paced commuter world

  22. CORE COMPETENCIES • Research & Development • Electrical engineering • Display panel innovation • Marketing • Visual communications products

  23. COMPETITIVE ADVANTAGES • First to Market • Visual Communication Network (VCN) • A disruptive technology & new advertising medium • 14 Years of Public Transit A/V Media Technology Expertise & Experience • ’80 – ‘86: Scouting business opportunities • ‘87 – ‘91: Innovated, developed & refined VCN • ‘91 – ‘94 : Outfitted 423 Métro cars

  24. PESTEL ANALYSIS • MACRO- • ENVIRONMENTAL • FACTORS

  25. SWOT ANALYSIS

  26. FINANCIAL ANALYSIS

  27. VCN AD RATES

  28. PROJECT CASH FLOW ESTIMATES

  29. BANK VS. VC? What if Télécité borrowed from a Bank rather than a VC?

  30. FINANCIAL ANALYSIS What does this mean? • Capital Intensive Model • Need finance for new sub/bus contracts • Return on Investment • Venture Capital do not see return • Can’t make loan payments • Transit authorities cannot invest

  31. THE PACKAGE & BENEFITS

  32. VISUAL COMMUNICATION NETWORK VCN: A robust and comprehensive wide area network based information system capable of fulfilling the information display needs of any mode of public mass transportation

  33. VCN CORE TECHNOLOGY • An 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 Anew medium for a captive audience

  34. VCN CONSTRAINTS • Non-modular installation: Requires custom modification by car manufacturer • Software & network integration • Limited lifetime: Graphic quality  20 years • Limited creative capabilities (graphic animation) • Advertising is soundless

  35. THE VCN IN THE

  36. VCN BENEFITS A 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 measures Enhance Passenger Experience: An opportunity to communicate a variety of beneficial messages Revenue Generation: Set up display panels for advertising purposes in buses, subway cars, shopping malls, and airports Passenger Assistance: Turn traveler "downtime" into productive "uptime”! Assist passengers in their travel decision making processes

  37. INCREASE 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 sales

  38. VCN ADVERTISING A Dynamic, Immediate and Cost-Effective Medium! • Instant Transmission: • Any time point from 05:30 – 12:30 • 7 days/week • Significant Reach: • 846 A/V displays on 3 of 4 Métro lines • Up to 4,5 million viewers/week • Avg. of 607,000 passengers who ride the Métro 2/day-5/week • Targeted Time Slots: • To support in-store promotions for retailers located on a specific Métro line or station • Exceptionally High Frequency: • One 20 second spot every 15 minutes • Maximum Targeting Capabilities: • Specific subway lines, municipal regions & specific stations • Content: • 55% Information: News, weather, sports, current events, cultural segments, entertainment, games, health, beauty, fashion • 45% Advertising: Contests, promotions and advertising • Excellent Value: • Low production and broadcast rates • Lowest cost per thousand in Montreal (CPM)

  39. FIVE ALTERNATIVES

  40. ALTERNATIVES Toronto & London Subway Systems Licensing for RATP Buses NYCTA Station Platforms OEM Market

  41. GLOBAL SUBWAY SYSTEMS TORONTO LONDON

  42. TORONTO TRANSIT COMMISSION

  43. LONDON UNDERGROUND

  44. RÉGIE DES TRANSPORTS PARISIENS (RATP) LICENCING

  45. BUSES

  46. NYCTA STATION PLATFORMS

  47. SUPPLY OEM

  48. EVALUATION OF ALTERNATIVES 1 = Unfavorable 5 = Favorable

  49. OUR RECOMMENDATION

  50. OUR RECOMMENDATION SHORT-TERM 1 – 2 Years NYCTA Transit Platforms & RATP Licensing MEDIUM TO LONG-TERM 2 – 5 Years OEM Market

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