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Wednesday, September 29, 2004

MBA PROJECT

DRIVE THE FUTURE: A FEASIBILITY ANALYSIS FOR A HYBRID AUTOMAKER.







A research project submitted to the faculty of
San Francisco State University
In partial fulfillment of the
requirements for the
degree



Master of Business Administration









By
John Edward Acheson
Los Angeles, California
June 2004















DRIVE THE FUTURE: A FEASIBILITY ANALYSIS FOR A HYBRID AUTOMAKER.





John Acheson
San Francisco State University
June 2004






The purpose of this project is to analyze the “hybrid” market niche in the automotive industry and determine feasibility of starting-up an automaker to solely serve the niche. The methods used in the research were literature review and primary data collection from interviews with industry insiders and online consumer surveys. The outcome of this project will be a forecast of the market niche’s growth.
If the forecast results in sustained growth of over 13% per year until 2010 and can support a venture that will net one million dollars on proforma income statements by year three, the results of the project will be presented in feasibility analysis report form with business plan for doing business in the market niche.



I certify that the Abstract is a correct representation of the contents of this research project.
________________________________________ _________________

















CERTIFICATION OF APPROVAL






I certify that I have read DRIVE THE FUTURE: A FEASIBILITY ANALYSIS FOR A HYBRID AUTOMAKER by John Acheson, and that in my opinion this work meets the criteria for approving a research project submitted in partial fulfillment of requirements for the Master of Business Administration degree at San Francisco State University.


________________________________________ (Typewritten name of supervising instructor and professional title, for example, Professor of Management.)

________________________________________ (Typewritten name of the other committee member and professional title)




Table of Contents



Introduction

I Feasibility Analysis

A. Industry Analysis
I) History
II) Demographics
III) Trends
IV) Life cycle

B. Market Analysis
I) Demographics
II) Customer analysis
III) Competitors

C. Product/Service
I) Features and benefits
II) Timeline
III) IP and technology
IV) Differentiation

D. Team
I) Potential team members
II) Gap analysis

E. Finance
I) Start-up capital
II) Working capital
III) Fixed cost requirements
IV) Break-even analysis

F. Value Chain Analysis
I) Value chain
II) Alternative channel analysis
III) Innovations in the value chain

Feasibility analysis adapted from (Allen, 2003)

II Forecast

III Feasibility Report

G. Industry Analysis
I) Demographic forecasts
II) Trend forecasts
III) Life cycle trends

H. Market Analysis
I) Target market analysis
II) Competitor analysis
III) Customer profile
IV) Distribution channels
V) Entry strategies

I. Team
I) Qualifications
II) Critical task timeline
III) Gap descriptions


J. Product/Service Development Plan
I) Detailed description of offering
II) Current status
III) Tasks and timeline
IV) Prototype plan

K. Financial Plan
I) Summary of key points
II) Assumptions
III) Resources needs analysis
IV) Pro-formas
V) Break-even analysis

L. Timeline to Launch
I) Critical tasks

Feasibility analysis outline adapted from (Allen, 2003)

V Grant Proposal

1. The Face Page (DOE Form 4650.2) - completed and signed by appropriate officials.
2. Budget Page(s) (DOE Form 4620.1.) using U.S. dollars, with supporting written justification sufficient to evaluate the costs of the proposed project. List and explain cost-sharing arrangements, if any. If the application is for a multi-year period, use one budget page for each year of requested support.
3. Project Description: A detailed description of the proposed project, including the objectives of the project, its relationship to the Office of Science program and the applicant's plan for carrying it out. Use English only.
4. Biographical Sketches: Detailed information about the background and experience of the principal investigator(s) including references to publications.
5. Facilities and Resources: Include information on the experience of the applicant organization, its facilities and resources.
6. Bibliography of Literature
7. Statement of all current and pending support for the project and all related projects, and description of support for all projects which involve the principal investigator(s) and the period of time devoted to each project.
8. Pre-award assurances and certifications
http://www.science.doe.gov/grants/App.html


Conclusion

Bibliography

Appendix

A) Resumes
B) Tax returns
C) Copies of lease, purchase agreement for RE
D) Copies of licenses and other legal documents
E) Copies of letters of intent from suppliers, etc.
F) Pro-forma financial statements
G) Forms (critical tasks etc)
H) Interviews
I) Survey
J) Human Subjects































Introduction

“The design of the propulsion systems for automobiles and other transportation products is going through a major evolution…perhaps one of the biggest changes since the early part of the 1900s (Strattan, 2004).”


In 2004, cars became sexy again (Driving change, 2004) and hybrids were the fastest growing market niche in the automobile industry. Demand exceeded supply and consumers ordered $1 trillion (10% of US Gross National Product) more hybrid-electric vehicles (HEV) than the big six manufacturers could make. There were no manufacturers solely producing hybrids, although several niche players made alternative fuel vehicles (AFV), electric vehicles (EV) and fuel-cell vehicles (FCV).

One problem is the lack of research investigating why consumers are buying hybrids.

There are two types to choose from: completely new designs such as the Toyota Prius and redesigns of existing models such as the Honda Accord hybrid. JD Power (2003) reported that there were only three hybrid choices in 2004 and forecasted 12 in two years growing to 28 in 2008. Total sales in the trillions are projected for hybrids products including Volta, Dual-note, Hy-wire, Mind and Vision over the next six years. By 2010, hydrogen fuel-cell vehicles (FCV) will be available to the mass market prompting another industry evolution. FCVs are considered hybrids as they use both hydrogen and electricity for transportation. The trillion dollar race for the next propulsion system has started and most manufacturers have turned to outsiders; such as Ford licensing Toyota’s synergy drive or Toyota’s Volta hybrid being designed by an Italian firm. The 2007 Volta pictured below will be a hybrid with “drive by wire” and one electric motor for each wheel. Rated over 30 mpg it’s socially responsible at the same time providing high performace above and beyond most of Earth’s one billion cars forecasted in 2010 by Okuda (2003).


(Future/concept, 2004)

This feasibility analysis will review literature and primary data to forecast the emerging “hybrid” market segment and determine how large of an opportunity will be available for a first-mover hybrid automaker in 2005.

One question that this project will investigate is, why are hybrids so popular?

NOTE
Verbs from AOM journal
PAST
Indicated, noted, it has been well noted in literature, showed, it is worth reiterating, our findings suggest, we have suggested that, our results suggested,
FUTURE
Might instead explore

CONDUCTING THE FEASBILITY ANALYSIS

Industry Analysis
History
At turn of the last century, the automobile was born in Europe and adopted by America. The first propulsion systems were designed after the European internal combustion engine (ICE) to make machines that moved people. American entrepreneurs took the automobile from luxurious priveledge to ubiquity. By 1965, the American automobile industry grew to become the largest manufacturing operation in the world. In only two generations, the car came to define American life (Rae 1965).

It can be argued that American automobiles started a transportation revolution. But did cars start a gasoline and big oil revolution?

No, in 1900, Traister (1982) reported over 57 automobile plants in the US. 75% were manufacturing steam or electric vehicles (EV). Gasoline powered cars were considered primitive as noisy, smelly, shaky products that had to be hand-cranked. Historians are not sure why Henry Ford choose an ICE to lead the next evolution in the industry with his assembly line. By 1920 and the invention of the electric starter, Ford’s operations had wiped out the majority of steamers and electrics and the gasoline powered car monopolized transportation (Traister 1982).

One entrepreneurs choice had affected mankind for a century.

There were ? manufacturers including mom and pops that were making cars in garages all over the world. Tinkerers, scientist, entrepreneurs, businessmen and consumers were curiously fascinated with the replacement to the horse and carriage.

Demographics

Market
Global
In 2004 over 700 million vehicles parked and drove around Earth. Toyota’s CEO Hiroshi Okuda (2003) projected 1 billion units by 2010.

CHINA
Many analysts forecast that China will produce as many vehicles as the US sometime in the next 10 to 20 years. Optimists see China producing 30 million units while consuming more than half leaving 10-15 million in exports. That number could satisfy almost every new car and truck sold each year in the US. As global supply increases as China’s numerous plants in progress come online, the question mark is Chinese demand.

A primary data collection and analysis could yield more insight into Chinese consumers considering buying their first automobiles. On the production side of the industry, the Chinese market segment is in a strong growth phase.

Yan (2004) wrote that the Chinese automaking industry had 120 manufacturers that produced 4.2 vehicles in 2003. The larger players that produced over 100,000 units all had a “foreign equity partner sitting on the board (Yan, 2004).” Yan counted Volkswagon, GM, Hyundai, Honda, Citroen, Toyota, Ford, BMW and Mercedes-Benz as the big 10.

That leaves over 100 mom and pops building cars in China that the other forecasts will go bankrupt as the market approaches maturity and finally decline. A supplier partnership with a niche player is an excellent opportunity to add low-costs leader to the first mover strategy.

U.S
Of all the major manufacturers only two were American in 2004. The Big 3 was actually reduced to the Big 2 when Daimler (Mercedes Benz) acquired control of Chrysler. The US population and market was projected to continue growing where Okuda (2003) saw an 18-20 million unit market by 2010. In 2004, over 17 million new cars and light trucks were sold at the retail level.

CA
“Californians, who buy about 20 percent of the nation's automobiles, account for 28 percent of hybrid purchases nationwide (Hakim, 2004).” JD Power projected that the upper limit of the hybrid market segment at 3% while other more optimistic analysts foresee 10% (Hakim 2003). Gordon Wangers of Automotive Marketing Consultants is one of the optimists that forecasted the California hybrid market at 10% of all new-car sales by 2006 (Motor Trend, 2004).

Hakim (2004) wrote that according to R.L. Polk, the No.1 US market segment for hybrids is Los Angeles. LA is also the largest market segment in terms of existing units at 10 million registered vehicles.



Geopolitical: oil

US
America imports more than half of its oil demand. 34% comes from Latin America, 16% from Canada and 18% from Saudi Arabia.
CHINA
In the past three years demand for oil has increased 1.2 million barrels.
WORLDWIDE RESERVES
Conservative estimates run around 1,000 billion barrels of supply and 100 million in demand per day or 40 billion per year. That works out to about 25 years worth of oil. Whether we look at the conservative or optimistic projections, oil will run out by the end of the millennium.
IMPLICATIONS
In the auto industry, the implication is that every one of the 50 to a projected 100 million cars and light trucks on the planet will be replaced by a new technology (Simanaitis, 2004)

Fortunately the race has begun and the market segment that includes green vehicles is experiencing 100% growth spurred by oil price record highs reached in 2004.

Sociopolitical: grants

$4.1 Billion in Tax Incentives for Renewable Energy and Hybrid and Fuel-Cell Vehicles
The President has called for tax incentives totaling $4.1 billion through 2009 to spur the use of clean, renewable energy, and energy-efficient technologies, such as hybrid and fuel-cell vehicles, residential solar heating systems, renewable energy produced from landfill gas, wind, or biomass, and efficient combined heat and power systems.
http://www.whitehouse.gov/news/releases/2004/07/20040714-2.html

The White House: President George Bush
Fact Sheet: Key Bush Environmental Accomplishments


ROONEY
Local political level:
Rooney reported that automotive dealership are the most sought after businesses within city limits for tax revenues. Dealership contribute more than any other business in all other segments combined. Rooney reported a situation involved with a political battle that his dealership property that a competing dealership has rights for. Ford owns the land, Galpin has the rights, but Galpin won’t release the rights. Galpin can’t build a dealership there because of a non-compete TMA compliance within Sunrise’s area of 6 miles.

Democrats have not been kind to dealership, Rooney reported. Schwarzenegger took Grey’s triple tax back down. And Grey really pissed off the dealership during the budget crisis and HCE group is highly compensated and workman comp issues and the democrats have been unkind. It all lead to cutbacks for the dealerships.

Small dealership are going down but big dealership are doing great!

NOTES Expand on this with a interview



Demographics: baby boomers, 68M new drivers
Trends: hybrids

BATTERIES
HEVs have an additional battery that helps the vehicle down the road. American hybrids were 1st sold in 2001 and some have already worn out those battery packs. Simanaitis (2004) identified an un-served aftermarket segment replacing battery packs. He wrote that the secondary market outside of the manufactures value chain will offer reconditioned units at lower prices. On the other hand, he estimated that battery packs may exhibit the same durability of traditional power trains around 150,000 miles (Simanaitis 2004).


Life cycle stage: mature
Barriers to entry: high
Technology: batteries, materials, networking, fuel cells
The Economist reported that the next generation of cars will be powered by electronics. This will allow cars to be connected among drivers and to the outside world. Modern cars have about 80 computer controlled devices. Some control braking, movies, radios, the car’s mechanical systems, steering, suspension and most recently airbags. Telematics connect cars to network the ability to monitor traffic and accidents for example. The economist reported analysts have forcasted Telematics in two of three vehicles within a few years up from one in 20 in 2000 including satellite navigation systems rising from 1M to 30M (Clean machine, 2004).



R&D expenditures: research
Profit margins: research
Primary research from distributors, suppliers, competitors, retailers: interviews

Market (What does the terrain look like?)

Size: 16-17 million vehicles/year
2003 = 43K hybrids and 2004 = 80K???

In a speech for Washington DC’s Chamber of Commerce, Toyota’s CEO, Okuda (2003) spoke of the automotive industry’s future. Although some view the industry as mature, he introduced his projections with increased competition and opportunity. Populations and markets are projected to continue growing including the US which Okuda (2003) projected as a 18-20 million unit market by 2010. Okuda (2003) added that Europe is on a similar path with an equivalent market size. Asia with half of unit sales coming from China is also projected to consume 20 million units (Okuda 2003).


Growth:
Hakim (2004) wrote that according to R.L. Polk, the No.1 American market segment for hybrids is Los Angeles. “Californians, who buy about 20 percent of the nation's automobiles, account for 28 percent of hybrid purchases nationwide.” Automakers have an incentive to sell hybrids in California and the Northeast, where stringent emissions regulations are due to be phased in. JD Power projected that the upper limit of the hybrid market segment at 3% while other more optimistic analysts forsee 10% (Hakim 2003). Gordon Wangers of Automotive Marketing Consultants is one of the optimists that forecasted the California hybrid market at 10% of all new-car sales by 2006 (Motor Trend, 2004).


the California market for hybrids could range from

Demographics
Customer profile: green

Secondary Data Review
At National Geographic Magazine’s online article, “the end of cheap oil (Appenzeller, 2004) an online pool revealed the following poll, “Which would you rather own, an SUV or a hybrid?”
There were only two possible answers: SUV or hybrid and of the 18,368 responses 27% or 5,075 chose SUV and 72% of 13,293 responses were Hyrbrid (Poll tally, 2004).

This implies that there is a large possible consumer segment within the National Geographic reader demographic.

C5coupe (2004) at Mister Poll reported a five question poll asking respondents what it would take to buy a hybrid. Of the 37 responses to the poll the data showed that a majority expected hybrids to have the same features and comforts (77%) and performance (64%) as normal vehicles. 51% expected more gas mileage and 83% were willing to spend the same or more to purchase a hybrid. 85% of the responses were motivated by fuel savings (54%) and ecological friendly (32%) reasons.

The results of this poll suggested that hybrid consumers would trade the price of a normal vehicle or more for social responsibility and fuel savings/mileage.

A Kennet




Competitors: Toyota, Honda, Ford
http://www.econetwork.net/
http://www.peaknet.org/
http://www.nedernet.net/
http://www.solarpoweredhost.com/
http://www.sustainablehost.com/

Primary research on the customer: interviews

Idea (Products and Services)

Features and benefits of products and services: green
Development tasks
IP: .coms, Passive Climate Control
Differentiation: green

Team
Potential Team members are the focus of this section broken down into:
Managers and Employees
The front office team consists of the following tentative lineup.
Legal Council: Chris Sozzi and Matt Sundly
Architects: Allen Green and Public Vision Research
Chairman and President: Eric Quanstrom
Chief Strategic Officer (CSO): John Acheson
Chief Operating Officer (COO): Eric Quanstrom
Chief Financial Officer (CFO): Jeff Higashi, CPA, UCSB alumni, Phy Psy alumni
General Manager (GM): Jeremy Jacobs
Coach (Hitting and Pitching): Jeff Jacobs
VP of Baseball Sales and Marketing: John Wenger
VP of Entertainment Sales and Marketing: Dameth Rooney
Director of Public and International Relations: James McMichael
Director of Baseball Operations: Troy Hautzenrader

6.2 Management Team
The front office will be elected before January 1, 2005. Members may hold more than one position during the start-up phase.
Key leadership positions will be recruited from the following pool:
John Acheson, Entrepreneur and MBA candidate at SFSU
Entrepreneurship and strategic planning of the new venture are two areas that Acheson brings experience. His mission is to formulate a successful business plan, develop a powerful pitch, and put together a A team that leads idea through opportunity. His vision is to leverage experience into professional sports franchise ownership, and his mission is to implement ownership and operations of at least one minor league baseball team in the near term.
Previously Acheson has operated four start-ups and an acquisition in the sports entertainment industries. Acheson founded Altered Shot in 1991, conducted B2B e-commerce selling sports entertainment in 1992, acquired TNT Sports and founded Acheson Trading Co.in 1997, opened The Card Pro in 1999, 4th n Goal in 2000, started BEST Playroom in 2003, and went online with the Shot Boyz team in 2004. As an entrepreneur he has experience in strategy, finance, operations, sales and marketing and e-commerce. He has also worked professionally as a consultant, registered tax preparer, banker, teacher and computer operator.
Acheson will earn a MBA from San Francisco State University in 2004 and has a BA in Statistical Science from University of California at Santa Barbara (1994). John is an expert on sports statistics and Japanese baseball. He speaks Japanese and has a solid understanding of Asian cultures.
Jeff Jacobs, UCSB Coach and Entrepreneur
Jacobs held CEO responsibilities along with majority ownership in Altered Shot when Acheson approached him with a growth strategy in 1991. He successful led the company for three years and helped negotiate the sale of the business when Acheson graduated from UCSB. Professionally, Jacobs is a business consultant and has experience in long-term financial investments as well as retail sports management experience at Big 5 Sporting Goods.
Jacobs has decades of experience in sports, including several years of coaching experience. Jeff just started his fifth year assisting Head Coach Pete Dolan with the UCSB Track & Field/Cross Country teams. He assisted with cross country for the '90 and '91 seasons and then returned to the staff in the fall of 1999. Jeff has been an integral part of the recent success for Gaucho distance runners. Since 2000 Gaucho distance athletes have set school records in the women's 1500m, 5000m, 3000mSC, 10,000m and Distance Medley Relay, as well as the men's 800m and 10000m. Two athletes have received All-American honors and the men's cross country team has been ranked among the top 25 for the first time in school history, finishing 17th at the '01 NCAA Championship. In addition to being an assistant coach for the Gauchos, Jeff works for a financial planning organization, and still finds time to train and race. Jeff was a major contributor to the Gaucho program by earning team MVP three times in cross country as well as being an All-Conference runner in 1988. Top collegiate 5,000 was a 14:34.11.
Jacobs completed USATF I and II coaching certifications. He earned a BA in Communication Studies and completed the Coaching Certification Program at UC Santa Barbara in 1990. Jeff is an expert in sports information and coaching.
Jeremy Jacobs, Managing Director at Diavolo
Jeremy Jacobs, Jeff's younger brother, was born in Los Angeles, CA and has grown an organization from a $25,000 annual budget to a million dollar heavy hitter. He was the driving force behind transforming Diavolo into a professional touring group, securing a permanent 6,300 sq. ft. rehearsal studio and has managed every aspect of operations: travel, finance, public relations including radio and T.V. Most importantly, Jeremy has risen to the top of human resource management having dealt with the outrageous egos of circus performers, choreographers, designers, booking agents and the various unique personalities found in the sports and entertainment industries. He is an expert in managing the dynamics found in a sports franchise.
Leading up to his successful management at Diavolo, he received a BFA in Theater from The University of California at Santa Barbara, where he studied movement theater with James Donlon. Jacobs received an MFA in Theater from the University of South Carolina, where he studied modern dance with Melody Schaper. In 1993 he received a scholarship to the American Dance Festival. He joined his current organization, Diavolo in 1994 as a performer, was the Rehearsal Director from 1997-1999, and served on the Board of Directors from 1998 thru 2000. In 1999, Jacobs became Technical Director for Diavolo, and also assumed the role of Managing Director in August of 2000.
Jacobs has managed several fantasy sports teams and has achieved a winning record while working full-time for Diavolo. He's a seasoned human resource manager and Major League Baseball expert.
John Wenger, Sales Manager
Mr. Wenger can fill the essential position of Director of Sales and Marketing no matter what venture the team agrees to turn from idea into opportunity! John was actually college roommates with all three of the Altered Shot founders and experienced small business entrepreneurship first hand.
Wenger graduated UCSB in the early 1990s and earned a degree in Political Science. A long-beach native, he currently manages a large sales territory and conducts outside sales. Wenger has several years experience managing fantasy sports teams.
A die-hard Dodger fan, Wenger along with the Jacobs are fore-most experts on the Los Angeles Dodgers organization. Wenger is an expert in sports entertainment.
Eric Quanstrom, Manager and Entrepreneur
Quanstrom is a born leader, A player and top notch manager. Not only has Quanstrom successfully launched a $5M media start-up, he has on the field experience having played college baseball at SDSU. In addition, his professional career spans a decade of experience in sports entertainment media and business development.
He has co-produced a variety of projects including the Super Bowl and has tremendous passion for leadership, particularly in sport entertainment organization.
Quanstrom is a MBA candidate at San Francisco State University and earned a BA at SDSU's School of Journalism. He's an expert in sports media.
Troy Hautzenrader, Entrepreneur
Troy Hautzenrader, Vice President
leavz4455@comcast.net
1 Myrtle Court
Petaluma, CA 94952

Troy founded The Card Pro with John Acheson and has depth in the sports merchandising industries. He brings energy and youth to a leadership team that will need to implement on game day. Hautzenrader is an expert in project management and can step up to the plate when under pressure in the spot light. He loves a challenge and works hard to implement new ideas.
Troy started his 1st business at only 14 years old, grew up in Sonoma County and has been a lifelong sport fan. He has six years of experience in sports merchandising.
Dameth Rooney, President
daemeth@yahoo.com
27251 Sanford Way
Valencia, CA 91354
(818) 974-2992

(415) 250-8739

John Acheson, Secretary/Treasurer
email@johnacheson.com
11524 Poema Pl Unit 104
Chatsworth, CA 91311
(818) 882-0806

Consultants and Advisors
Bankers
Partners






Gap analysis
Team Gaps
The following Shot Boyz are currently being recruited to fill front office positions.
James McMichael, International Manager and Entrepreneur
When the Shot Boyz go global, McMichael will lead our international operations. As an experienced global leader, corporate manager and backed with small business ownership experience, James can round out our executive team. He'll be called upon to scout international players, work with foreign organizations, and research the possibility of international expansion.
It should be noted that baseball growth in diversity has been on a tear, with Latin American and Japanese players making up the majority of foreign born athletes playing in the bigs.
James currently manages social accountability and has a long professional career in management. He resides in San Francisco and has recently gotten engaged. As a San Diego native, he's a die-hard Padres fan!
McMichael holds a MSBA from San Francisco State University and BA from UC Santa Barbara. James is an expert in ethics and international relations, speaks Spanish and has a cultural understanding of Latin American countries.
Dameth Rooney, Sales Manager
This Shot Boy was last seen selling Fords near Six Flags Magic Mountain and the rumor is that he made it big in the .com days as the top sales manager. If you or anyone you know has heard of Rooney's whereabouts, please email the core@shotboyz.com
Rooney attended UCSB with the Shot Boyz in the early 90's and transferred to CSU Northridge to earn his Bachelor's degree.
As the company expands and pursues it's vision, we foresee a need for legal council and hope to retain one or both of the following Shot Boyz as lawyers and council. Future duties will include management of all legal contracts including business, human resources and of course player management:
Matt Sundly, Attorney at Law
Sundly joined Acheson and Jacobs in 1991 to form the partnership that managed the sports entertainment venture, Altered Shot. He brought multiple expertise including soccer, football and an understanding of human resource management. His professional background includes restaurant management and he's currently working towards partner in a law firm out of Orange County in California.
He earned a BA in Philosophy from UCSB in the early 1990's and went on to successfully graduate Western with a J.D. degree in law. Matt is an expert in soccer and sports entertainment law.
Chris Sozzi, Corporate Attorney at Law
Sozzi attended UCSB along with the Shot Boyz and earned his degree in the early 1990s. He went on to study law at Santa Clara and earned a J.D.. Currently he's on retainer by a for-profit corporation in the Silicon Valley.
As a Bay Area native, Sozzi is a die-hard Warriors fan and golf aficionado. He is also an expert in corporate law.


Values: green
Passion: save the planet
Experience: problem
Expertise: ok
Gaps: many

Finance

Start-up capital:
Foundation ISP Media Automaker Dealer RE
Assets
PP&E 10,000.00 10,000.00 1,000,000.00 2,100,000.00 3,000,000.00
Expenses
Wages 24,000.00 12,000.00 108,000.00 300,000.00 360,000.00 36,000.00
Sub-contractors 12,000.00 60,000.00 12,000.00
Rent 1,200.00 24,000.00 12,000.00 120,000.00 120,000.00
Fees 1,000.00 1,000.00 2,000.00 10,000.00 5,000.00 2,000.00

Total Start-up costs 26,200.00 59,000.00 192,000.00 1,430,000.00 2,585,000.00 3,050,000.00

Group Start-up costs 7,342,200.00

Working capital

Fixed cost requirements:
Break even analysis

Value Chain Analysis

Freeman (2004) wrote that strong demand for the Prius HEV has created a backlog in the value chain for the world’s best selling hybrid. In the U.S. alone, there were 22,000 orders taken by dealership with no physical inventory to supply them. Although Toyota has promised to double future production, there is not guarantee at the retail level that when or where consumers can buy a Prius. The results have been increased demand that has created a secondary market


Illustrate the chain
Distribution alternatives and target market segments
Innovation in the chain
The economist reported on the automotive industry’s value chain that when products change, the ways in which they’re made also change. The barriers of entry will come down along with the need for capital intensive factories. Start-ups could take away business from the big six in the form of hi tech firms, parts manufacturers turned assemblers and/or low-cost leaders like they have done in the airline industry. “The old car firms must reinvent themselves to seek profit, not just market share. Otherwise new, nimbler competitors will take advantage of technological change to do the job for them (Driving change, 2004).”





PRESENTING THE FEASIBILITY ANALYSIS

Executive Summary
Business Concept
Green Motor Company will manufacture innovative and efficient vehicles for socially responsible consumers. Through worldwide partnerships, we’ll help our customers build their own unique cars and trucks. By bringing together advanced transportation technologies from Asia, Europe and America, our customers will experience custom performance and convenience. Green Motors will build our brand through all forms of socially responsible media and deliver our product directly to the customer from our assembly and warehouse operations.

Macro-factors
President Bush (2004) recently initiated over $8 billion in grants and tax incentives, lasting through 2009, spurring clean technologies including hybrid and fuel-cell vehicles. Presidential candidate John Kerry has proposed $10 billion in grant monies to stimulate innovative green auto-making in an effort to bring back American jobs. California Governor Arnold Schwarzenegger just signed a bill to allow solo driven hybrids in commuter lanes and a few months earlier debuted the Hydrogen Highway project to make California first in zero emission infrastructure and. Following an oil war clean energy vehicles are very strong political drivers of macro business initiatives.

Market niche
Based on the data aggregated from the feasibility analysis, the overall US market for hybrids alone is projected at 600,000 to 2,000,000 units over the next five years. At $20,000 per unit, the CA market segment could spend over $3-10 trillion on new hybrids by 2010.

Growth

The opportunity is massive, growing and has room for new entrants.

Opportunity
The preliminary research shows that there is a growing un-served niche in hybrid vehicle technology. Only Toyota and Honda have released mass produced vehicles that pollute ten fold less than older technologies and decrease gasoline consumption by two to five times. In fact, Toyota is pre-sold out of over $1 trillion in socially responsible consumer dollars for hybrids through 2006, and the industry leader is scrambling to make vehicles to fill orders. Ford was forced to play catch up and licensed Toyota’s technology to put the first American hybrid into production. As of this proposal, there are no other players on the playing field with billions sunk into research.

Hybrids are the tip of the iceberg. The author has identified a niche in a growing multi-trillion dollar market up and down the value chain in advanced transportation technologies. From scooters to snowmobiles to cars and trucks to airplanes an evolution has started that the author believes will last 100 years, as long as the Internal Combustion Engine (ICE) survived. From suppliers to manufactures to dealers and consumers and from non-profit organizations to for-profit ventures, there is a socially responsible vacuum for clean hi tech solutions.


Title Page


Table of Contents



Introduction


I Executive Summary

II Title Page

II Feasbility Decision

III The Business Concept

IV Industry Analysis

A) Market Analysis


V Team

VI Product/Service Plan

VII Financial Plan



Names: The Acheson Foundation (Foundation), Hybrid ISP (ISP), Hybrid Media Group (Media), Hybrid Motor Co (Automaker), Hybrid Auto Group (Dealer), Advanced Real Estate (RE)

Founding Team Member Names: John Acheson, James Acheson, Daemeth Rooney, Troy Hautzenrader, Chris Sozzi, Olivier Lepord

Business Concept

Business
Customer
Value proposition
Delivery
Potential for growth and spinoffs

Industry Analysis

Industry and Target Market analysis
At $20K per unit times Okuda’s (2003) industry projections for 2010, the worldwide industry is valued at $1,200,000,000,000.00 while the US target market segments at $360-400 trillion. Using the US 2004 units sales figures of 17 million units shows a projected 18% increase in unit sales over the next six years. Although a mature domestic market, the size is massive, and the 3% annual growth rate is acceptable at current inflation rates.

Focusing on the hybrid market segment findings was much more exciting. Using the Prius as a barometer, and unit projection at 80m in the US for 2004 and 43K the year before, a growth rate is still 96% only three years after the introductory rate of 276%.

The numbers are elusive because supply cannot keep up with demand and tens of thousands of consumers have already put deposit up to buy 20-30,000 hybrid vehicles.

Niche
Based on Hakim’s (2004) reported data and Okuda (2003) projections, the overall US market for hybrids is projected at 600,000 to 2,000,000 units within the next five years. At an assumed 25% at $20,000 each, the CA market segment could spend over $3-10 trillion on new hybrids by 2010. That translates into another $3-10 billion in parts and services for new vehicles alone.

There’s no doubt about explosive growth but the size is still a niche market of a projected 100,000 units or $2 trillion at $20K per unit. A larger market exists in the cumulative hybrid vehicles on the road that require service. This suggests that remanufacturing and servicing the cumulative aging fleet is a larger market experiencing a slower growth rate. Even so, the competitors are fragmented mom and pop shops and virtually no aftermarket manufacturers. Batteries or other components that wear out may be another market segement to investigate.



Competitor analysis
Customer

Value Chain Innovation
A) R&D CALIFORNIA/NEVADA (design, software, systems)
B) Standard Components CHINA (fuel pump, suspension, plastic body parts etc.)
C) Advanced Components JAPAN (power and drive trains)
D) Final Assemby MEXICO or NEVADA (nuts and bolts, painting, finishing, etc.)
E) Sales/Mktg. CA (internet only sales, door to door distribution and service)


Distribution channels
Entry strategies
Just like JetBlue boomed during United’s bankruptcy with TVs in every leather seat combined with cheap tickets sold on the internet, Green Motors plans to combine hi tech with low cost assembly while delivering over the internet.


http://www.economist.com/printedition/displayStory.cfm?Story_id=3127206

Team



Qualifications
How critical tasks will be handled
Gap analysis

Product/Service

Descriptions
Current status
Tasks and timeline
IP owned and to be acquired
Plan for prototype

NOTE
The project proposes a current market segment serving 100,000 hybrid vehicles with aftermarket parts and services after they have left dealer lots.


Financial Plan

Summary of key points
Assumptions
Resource needs assessment
Pro-forma financial statements
Break even analysis

Timeline to Launch (use operations analysis)

Task
Order

Bibliography

Allen, K. R. 2003. Launching new ventures. Boston: Houghton Mifflin Company.

Appenzeller, T. (2004, June). The end of cheap oil. National Geographic Magazine. Retrieved September 27, 2004, from http://magma.nationalgeographic.com/ngm/0406/feature5/

Clean machine (2004, September 4). Economist, Vol. 372, Issue 8391. Retrieved September 27, 2004, from EBSCOhost database, Accession No. 14350564.

C5coupe (2004). Hybrid cars: Would like to know what it would take for you to buy a hybrid vehicle. Mister Poll. Retrieved September 28, 2004, from http://www.misterpoll.com/301990998.html

Driving change (2004, September 2). Economist. Retrieved September 27, 2004, from http://www.economist.com/printedition/displayStory.cfm?Story_id=3127206

Ford’ first hybrid SUV delivered (2004, September 16). The San Diego Union-Tribune. Retrieved September 27, 2004, from Motor Trend, http://motortrend.com/features/news/112_news60/index.html

Future/concept: allessandro volta (2004). Toyota. September 27, 2004, from
http://www.toyota.com/vehicles/future/volta.html

Hagerbaumer, C. (2003). Survey of Oregon hybrid gas-electric car owners. Oregon Environmental Council and Oregon Department of Energy. Retrieved September 28, 2004, from http://www.orcouncil.org/reports/HybridSurvey%202003.pdf

Poll tally (2004). National Geographic Magazine Poll @ nationalgeographic.com. Retrieved September 28, 2004, from http://ngmpoll.melia.com/ngm/poll/0406/poll.html

Simanaitis, D. 2004. Fill’er up… but whatever with? And wherever from? Road & Track, Volume 56, Number 2: pg 144.

Hakim, D. 2004. Hybrid Vehicles Hit the Heartland...Barely. The New York Times June 19, 2004 Saturday
Late Edition – Final
Retrieved on 9-17-2004 at http://0-web.lexis-nexis.com.opac.sfsu.edu/universe/document?_m=c450fb7234187d3952d93a7dbd7d1e80&_docnum=8&wchp=dGLbVlz-zSkVA&_md5=1850351add749fd3ce4e2a34461c9fb0

Hubbard, G. 2004. Business leaders building a better world: the 12th annual net impact conference. Columbia Entrepreneurship Update. Summer 2004: pg. 2.

J.D. Power and Associates Reports: Anticipated Higher Costs for Hybrid Electric Vehicles Are Lowering Sales Expectations (2003, October 27). J.D. Power and Associates. Retrieved September 27, 2004, from http://www.jdpa.com/news/releases/pressrelease.asp?ID=2003135

Okuda, H. 2003. Speeches. North American Press Room. Remarks. Washington, D.C. U.S. Chamber of Commerce
http://pressroom.toyota.com/photo_library/display_release.html?id=sp20030910
Retrieved 9/14/2004 printed on 09/10/2003

Rae, J. B. 1965. The American automobile: a brief history. Chicago: The University of Chicago Press.

Research protocol. Office of Protection for Human and Animal Subjects: Documents Samples. Retrieved September 27, 2004, from http://www.sfsu.edu/~protocol/human/sample_doc/exempt/protocol/E-4-protocol.doc

Rooney, D. J. 2004, Interviewing

Traister, R. J. 1982. All about electric & hybrid cars. Blue Ridge Summit: TAB Books, Inc.

Writing the plan 2004. SBA: starting your business: business planning. Retrieved September 27, 2004, from http://www.sba.gov/starting_business/planning/writingplan.html

Yan, L. Y. (2004, March 26). China's new auto recall regulation may be a lemon. Asia Time Online. Retrieved September 28, 2004, from http://www.atimes.com/atimes/China/FC26Ad01.html

Pg. 109, “TABLE 5.2: Feasibility Analysis”
Pg. 112, “TABLE 5.3: Feasbility Analysis Outline”

Appendix

Glossary
Social entrepreneurship: pursuing “double-bottom line venturing opportunities;” focused but not limited to the following industries: “energy, the environment, economic and community development, education, arts, and health (Columbia, 2004);” measuring social impact and social return on investment


Questionnaires
Maps
Forms
Resumes
Marc Ekert
Daemeth Rooney
James Acheson
John Acheson
Troy Hautzenrader




Survey
===============================================================
(Drive the future: a feasibility analysis for a hybrid automaker.)

Data collected from this anonymous survey will be used for completion of a master’s degree in Business at San Francisco State University. The information gathered will be used for research on forecasting.

You must be 18 years of age or older to participate. There are no risks or benefits to you in participating in this survey. Participation in the survey is optional. You may choose to participate or not, and may answer only the questions you feel comfortable answering. You may stop answering questions at any time. If you do not wish to participate, you may simply not fill out the online survey, with no penalty to yourself. If you do participate, completion and return of the survey indicates your consent to the above conditions.

Please do not put your name on the survey. The survey should take approximately 10 minutes to complete. Any questions or concerns should be directed to the principal investigator, John Acheson, at john@hyDrive.net
===============================================================

Do you own a hybrid?
Yes
No

NOWhat hybrid feature would you pay the most for?
Less air pollution
Higher gas mileage
A popular style
High technology

YES: What is the most important feature of your hybrid?
Less air pollution
Higher gas mileage
A popular style
High technology

Would you buy a hybrid if?
It polluted more than a normal car
It got worse gas mileage but better performance than a normal car
If broke down more than a normal car
It looked like a normal car and didn’t say “hybrid”
It used diesel instead of gasoline?
It used hydrogen instead of gasoline?
If you had to plug it in?
If it kept running an a stop light?

YESWhat could the dealer have done to make hybrid shopping better for you?
NO How could dealers have done to make hybrid shopping better for you?

How many hybrids do you think there will be?

Where do you service your vehicle?

1. Where are you from?
___North America
___South America
___Europe
___Asia
___Australia
___Africa
___Antartica

2. What is your Gender?
___Male
___Female

2. What is your yearly income level in U.S. dollars?
___$0 to 7,000
___$7,000 to $30,000
___$30,000 to $70,000
___$70,000 to $150,000
___$150,000 to $300,000
___$300,000 to $1 million
___$1 million to $1 billion

3. What is your Education Level?
___Did not graduate from high school
___High school graduate
___Associate Degree
___Bachelor’s Degree
___Master’s Degree
___Doctorate Degree

5. Are you married?
___Yes
___No

6. Do you have children?
__Yes
___ No

8. How often do you buy whole bean coffee?
___Never
___Sometimes
___Often
___Always (can’t start the day without making my own pot of joe!)

If never, thank you for taking my survey. You are done! If you chose Sometimes, Often, or Always, please proceed. You are half-way finished with the survey.

9. Please rank on the following scale your preference between the two coffee products. 1 = most likely to buy product #1 whereas 5 = most likely to buy product #2.

[NOTE: This type of questioning continues until all combinations of product attributes have been evaluated and ranked – approximately 20 preference options.]

Please indicate your preference between the two products on the scale provided.
Coffee Product #1 Coffee Product #2
Fair Trade Organic
$8.99 $6.99
Supermarket Specialty Grocery Store
Dark Roast Light/Medium Roast
Product 1 (1) (2) (3) (4) (5) Product 2

Please indicate your preference between the two products on the scale provided.
Coffee Product #1 Coffee Product #2
Shade-Grown Organic
$9.99 $8.50
Specialty Store Coffee Shop
Light/Roast Dark Roast
Product 1 (1) (2) (3) (4) (5) Product 2
2 of 3
10. When you considered and ranked Organic products, were you concerned about
___Your health
___The planet’s environment
___The health of the farmers who grow the coffee
(please rank from 1 – most important to 3 least important.)

11. When you considered and ranked Shade-Grown products, were you concerned about
___ Bird/wildlife environment
___ Protecting the rainforests
___The environment of the farmers who grow the coffee
(please rank from 1 – most important to 3 least important.)

12. When you considered and ranked buying the product
in the Supermarket, were you concerned about:
___Convenience
___Product Freshness/Quality
___Other (Please explain
____________________________________)
(please rank from 1 most important to 3 least
important.)

13. When you considered and ranked buying the product
in a Coffee Shop, were you concerned about:
___Convenience
___Product Freshness/Quality
___Support Neighborhood/Small Business
___Other (Please explain
_____________________________________)
(please rank from 1 most important to 4 least
important.)

14. When you considered and ranked buying the product
at a Specialty Supermarket, were you concerned about
___Convenience
___Product Freshness/Quality
___Support Neighborhood/Small Business
___Other (Please explain
_____________________________________)
(please rank from 1 most important to 4 least
important.)


15. Do you have any comments for me? ________________________________________


Survey adapted from Research protocol (2004).

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