forerunner integrity | quality | consistency anne, yuan yicarlos, lin junhua charlotte, zhou...

ForeRunnerIntegrity | Quality | Consistency

Anne, Yuan Yi Carlos, Lin Junhua

Charlotte, Zhou Zitao Daisy, Wu Ximin

Ginger, Zhang Jianfang Jacky, Chen Yacheng

May, Chen Yumei Yoyo, Io San Wa

Business Plan

Group Members

Market Assessment• Influential factors• Business Buying Process• STP Analysis

Market Planning• Current Competitors• New competitors• Market Response

Marketing Potential Forecasting• Introduction• Growth • Maturity

Investment Appraisal• Marketing Mix- 4Ps• Marketing Budget

ForeRunnerIntegrity | Quality | Consistency

Presentation Agenda

Applied Business Project – Module V

Company IntroductionPresented By Anne

ForeRunnerIntegrity | Quality | ConsistencyMarket Planning Investment AppraisalMarket potential ForecastingMarket Assessment

• Company name: ForeRunner

• Company Logo:

Company Introduction


Incentive service company

Target at the incentive tourism industry

Provide well-designed package to help company fulfill their goal of enhancing corporate commitment


Business Blueprint

Provide customized and delightful path for customers

Provide value-added strategies for business partners

Provide growth opportunity for employees

Foster innovation, creativity and teamwork


Mission Statement

MICE

Meetings Incentives Conventions Exhibitions

Type of employee rewardCultivate employee commitment


Business Concept

2004 2005 2006 2007 2008 2009 20100

5000

10000

15000

20000

25000

30000

35000

40000

Figure 1.1 - Number of Participants in Incentive Travel


Macau Market Overview

Start-up Strategy

• Corporate with other MICE companies

Future Development Strategy

• Corporation with other MICE companies

• Direct sell


Business Model


PEST AnalysisPresented By Ginger


PEST Analysis Political Factor


Supportive Entities

• Macau Fair & Trade Association

• Macau Convention & Exhibition Association (MCEA)

• Macau Trade and Investment Bureau (IPIM)

• Macau Government Tourist Office (MGTO)

Government Program and Funding

• Industry Partner Program (IPP)

• Strategic MICE Market Stimulation Program (For Incentive Tourism)

• Aid Schemes for Small and Medium Enterprise (SME)

• Investment Incentive Plan (IIP)

PEST Analysis Economic Factor


• Average of 12.68% annually from 2001 to 2007• Decrease in 2008 and 2009• Rebound to 26.4% in 2010

Gross Domestic Product (GDP)

• A continuous increase of inflation rate since August 2010Inflation Rate

• Currently unemployment rate in Macau is 2.6% Unemployment Rate

• 86% of visitor arrivals come from Mainland China and Hong Kong

• 7.4% come from other part of Asia

Customer Base Analysis

• MOP is indirectly pegging to the U.S dollar and kept depreciating against CNY last year

Exchange Rate and Interest Rate

PEST Analysis Social Factor


Population DistributionPeople aged

below 40 accounts for

67% of the total population

Overview of Tourists

Attracted more than 25 million

tourists come to Macau annually

LifestyleMacau is a

leisure city with a slow life

tempo

ReligionsMany religious activities even

become parts of Macau’s regular

festivals

PEST Analysis Technology Factor


Government Support

Application of Technology

The light rail project and HK-Zhuhai-Macau Bridge are under construction

The artificial reclamation made the built of the airport come true

Three over sea bridges connecting Macau and Taipa

Build Macau science center

in2005

Set Science and Technology

Development Fund in2004


Five Force AnalysisPresented By Charlotte


ForeRunnerIntegrity | Quality | ConsistencyMarket Assessment

Investment AppraisalMarket potential ForecastingMarket Planning


Market StrategiesPresented By Daisy




Market ProgramsPresented By May

Pricing ProgramClient companies care about

quality more than price

Adopt the cost-based pricing strategy





Distribution ProgramBusiness Partner Channel

• Other MICE companies, local government, hospitality industry• Good for a new company to obtain market awareness• May lose control to some extent

Internet Channel

• Provide details, provide quicker service• Make service arrangements instant

Direct Sales

• Establish its own customer database• Collect information through business partner and internet

channels



Promotion Program• Medium and large

size companies• Potential business

partners

Target Audience

• Obtaining recognition of potential partners

• Adopt marketing mix strategy by itself

Promotion Process



Promotion ProgramPrinted Flayers

Forthright, eye-catching, and informative

Different sets for both group of

target audience

Promotional Pamphlet

Provide detail information

about ForeRunner

Distributing Channel

Directly distribute to target audience

by hiring distributor

Cooperating with business

partners



Promotion ProgramSales

Promotion

Discount: based on the purchasing volume within an preset maximum limit

Gift: distribute free gifts to every participant

Direct Marketing

Internet

Direct mai

Telephone


Market Planning Investment AppraisalMarket Potential Forecasting


Market Potential ForecastingPresented By Carlos



ForeRunner Revenue Forecast Assumption• Market Timeline

• Customer average consumption is proportional to the inflation index



ForeRunner Revenue Forecast MICE Industry Sales

MICE Industry Revenue Forecast = No. of Travelers × Market Penetration Rate × Average Consumption• Number of Travelers as Proxy • Market Cycle Theory• Adjusted by inflation index

• The initial MPR, 1.75%, is calculated as: the Q3 in 2011 MICE participants 129,780 divided by the Q3 number of tourists 7,416,000.

• MPR growth rate = 10% from

2008 to 2012, 30% from 2013 to 2017, 5% after 2018 • Average Consumption = Inflation index * 10



ForeRunner Revenue Forecast Inflation Forecast Model Validation

Model MSE MAPE MPE

Naïve 0.2260 0.0038 0.0014

Simple Average 91.6749 0.0747 0.0371

Moving Average 0.5676 0.0062 0.0027

Double Moving Average 0.1760 0.0034 -0.0013

Time Series 65.6093 0.0789 -0.0178

Multiple Regression 1.7445 0.0114 -0.0002

Double Moving Average



ForeRunner Revenue Forecast Travelers Forecast Model Validation

Models MSE MAPE MPE

Naïve 27389.10 0.1008 -0.0003

Simple Average 477033.60 0.3155 0.2967

Moving Average 22764.69 0.0880 0.0214

Double Moving Average 38486.89 0.1161 -0.0078

Time Series 58231.43 0.1298 -0.0209

Multiple Regression 102720.70 0.1878 -0.0622

Exponential Smoothing 9035.31 0.0555 0.0048

Exponential Smoothing



ForeRunner Revenue Forecast MICE Industry Sales



ForeRunner Revenue Forecast ForeRunner’s Revenue Forecast

ForeRunner Revenue Forecast (Marco Approach) • Based on MICE Industry Revenue• Market Share Forecast Factors

- Customer Loyalty (Cl)• - Customer Penetration (Cp)• - Customer Selection (Cs)• - Price Selection (Ps)



ForeRunner Revenue Forecast Market Share Forecast

Stage Introduction Growth Maturity

Customer Penetration 36.4% 54% 72.675%

Customer Loyalty 40% 35% 45%.

Customer Selection 60% 75% 80%

Price Selection 85% 90% 100%

Forecasted Market Share 7.43% 12.75% 26.16%



ForeRunner Revenue Forecast ForeRunner Revenue Forecast （ in thousands)

Year Incentive Travel Sales 10%, constant

Incentive Travel Sales 10% - 20%

Incentive Travel Sales 10% - 30%

2012 4,925.71 5,219.98 5,514.25

2013 6,034.72 7,057.49 8,080.25

2014 16,348.16 20,889.01 25,429.70

2015 22,818.13 31,622.48 40,426.99

2016 31,806.32 47,517.12 63,227.92

2017 49,231.35 78,871.02 108,510.86

2018 63,136.96 107,849.13 152,561.29

2019 99,889.25 181,403.38 262,917.50

2020 108,342.00 208,465.95 308,589.90

2021 117,398.36 238,582.34 359,766.33

Forerunner will have a bright future!

Forerunner’s revenue =Industry sales* Forerunner’s market share


Market Planning Market potential Forecasting Investment Appraisal


Investment AppraisalPresented By Jacky



AssumptionsFour Key Assumptions

We do not sell on credit1

We assume the continued trend of MICE industry in Macau

We assume a capital structure with 30% debt

We assume annual sales without adjustment of seasonality

2

3

4



Key Indicators

Discounted Cash Flow Method

• Net Present Value of all cash flows

Return on Investment

• ROI = (Gain from investment – Cost of investment)/Cost of Investment

Payback Period Method

• Payback period = Cost of investment/ Annual cash flow



Initial Investment Items Costs

a. Down payment of office cost (4,250,000*30%) $1,275,000

b. License registration fees --Fees for issuing license (including 10% stamp duty) $25,000

--Fees for inspection of facilities 500

--Fees for publishing license extract in the Official Bulletin of the Macau Special Administrative Region (Overpayment refundable; supplemental)

1,000

--Miscellaneous (photocopy and other document prepared fees) Sub-total

1,000

27,500

c. Office equipment--Notebook Computer ( 7000@10,5 years life)--Photocopier ($5000@4, 5 years life)--Telephone($500@15, 5 years life)--OthersSub-total

70,000

20,000

7,5004,500

102,000

d. Shuttle Bus 335,000e. Official website 18,500

Total $1,758,000



Forecasted Cash Flow Data Source

- Five Public Companies in Travel Industry in China and Hong Kong (中旅，實德環球，南華集團，專業旅運，星辰集團 )

- Wing Hang Bank Website : http://www.whbmac.com/chi/mortgage/mortgage_link.html

- DSEC, Consumer Price Index Report - World Bank report released in 2011

http://www.whbmac.com/chi/mortgage/mortgage_link.html





Forecasted Cash Flow

Year Mortgage Salary Commission (30%)

Depreciation Promotion Other Expense

Total Expense

2012 0.24 1.90 0.67 0.14 0.12 0.08 3.14 2013 0.24 2.02 0.82 0.14 0.13 0.08 3.44 2014 0.24 4.11 2.74 0.14 0.14 0.09 7.45 2015 0.24 4.39 3.82 0.14 0.15 0.09 8.82 2016 0.24 4.68 5.91 0.14 0.16 0.10 11.23 2017 0.24 5.00 7.58 0.15 0.17 0.11 13.25 2018 0.24 5.34 8.27 0.15 0.18 0.11 14.30 2019 0.24 5.71 16.97 0.15 0.19 0.12 23.38 2020 0.24 6.09 18.40 0.15 0.21 0.13 25.23 2021 0.24 6.51 19.94 0.15 0.22 0.14 27.20

Illustration Exclude Mortgage, Commission, Depreciation Assume others increase with stable Inflation rate 6.8%



Forecasted Cash FlowYear 10% 10% - 20% 20% - 30%

2012 -0.91 -0.79 -0.66

2013 -0.70 -0.27 0.16

2014 1.68 4.94 8.20

2015 3.90 9.72 15.54

2016 8.47 19.44 30.41

2017 12.02 28.57 45.12

2018 13.27 34.08 54.88

2019 33.18 75.87 118.57

2020 36.12 88.56 141.00

2021 39.27 102.75 166.22

Illustration Calculation of EBIT = Revenue - Expenses



Forecasted Cash Flow Illustration Calculation of Interest Expense Interest expense = Total debts * loan rate (5.25%)

Year Total Liability Forecasted Sales Debt-to-Sales Ratio

2012 0.8 2.23 35.8%Level 10% 10% - 20% 20%-30%

Year Sales Debts Interest Sales Debts Interest Sales Debts Interest2012 2.23 0.80 0.04 2.36 0.84 0.04 2.48 0.89 0.052013 2.74 0.98 0.05 3.17 1.13 0.06 3.60 1.29 0.072014 9.13 3.27 0.17 12.39 4.44 0.23 15.65 5.60 0.292015 12.73 4.56 0.24 18.54 6.64 0.35 24.36 8.72 0.462016 19.70 7.05 0.37 30.67 10.98 0.58 41.65 14.91 0.782017 25.27 9.05 0.47 41.82 14.97 0.79 58.37 20.90 1.102018 27.57 9.87 0.52 48.38 17.32 0.91 69.18 24.77 1.302019 56.56 20.25 1.06 99.25 35.54 1.87 141.95 50.82 2.672020 61.35 21.97 1.15 113.79 40.74 2.14 166.23 59.52 3.122021 66.47 23.80 1.25 129.95 46.53 2.44 193.42 69.25 3.64



Forecasted Cash Flow

Annual taxable profits (in Mop) Rate

Income up to $200,000 Exempted

Portion exceeding $200,000:

$200,001 to $300,000 9%

Above $300,000 12%

Illustration Calculation of Tax Expense Tax expense = Profit before tax * Complementary Income Tax rate

Level 10% 10%-20% 20%-30%

Year PBT Tax Exp. NI PBT Tax Exp. NI PBT Tax Exp. NI

2012 -0.95 -0.11 -0.84 -0.83 -0.10 -0.73 -0.71 -0.09 -0.62 2013 -0.75 -0.09 -0.66 -0.33 -0.04 -0.29 0.09 0.01 0.08 2014 1.51 0.18 1.33 4.71 0.56 4.14 7.91 0.95 6.96 2015 3.66 0.44 3.23 9.37 1.12 8.25 15.08 1.81 13.27 2016 8.10 0.97 7.13 18.87 2.26 16.60 29.63 3.56 26.08 2017 11.54 1.38 10.16 27.78 3.33 24.45 44.02 5.28 38.74 2018 12.75 1.53 11.22 33.17 3.98 29.19 53.58 6.43 47.15 2019 32.12 3.85 28.26 74.01 8.88 65.13 115.90 13.91 101.99 2020 34.97 4.20 30.77 86.42 10.37 76.05 137.88 16.55 121.33 2021 38.02 4.56 33.46 100.30 12.04 88.27 162.58 19.51 143.07



Forecasted Cash Flow Illustration Forecasted Cash Flow = Forecasted sales – Total expense

Year Cash Flow 10% Cash Flow 10%-20% Cash Flow 20%-30%

2012 -0.70 -0.59 -0.48

2013 -0.52 -0.15 0.22

2014 1.47 4.28 7.10

2015 3.36 8.39 13.41

2016 7.27 16.74 26.21

2017 10.48 24.77 39.06

2018 11.37 29.34 47.31

2019 28.42 65.28 102.14

2020 30.92 76.21 121.49

2021 33.61 88.42 143.22



EvaluationInvestment Horizon: 10 yearsIncorporate three stages of industry life cycleBoard members want to reap profits at the maturity stage

Terminal Value included: better valuation of company

10% 10%-20% 10%-30%Payback Period 3.45 2.58 2.28Net Present Value (in Million) 36.69 94.60 94.60Return on Investment (%) 7.06 17.69 28.33Internal Rate of Return 90% 144% 188%

This is a figure you will NEVER forget!



Sensitivity Analysis Return on Investment (ROI) as a proxy for NPV

• Gains from investment• Costs of investment

Two factors *Level of uncertainties are bigger for the two factors

How do we fluctuate the factors Changing range: 15% for Market Share & Cost of Service Interval: 1%

Market Share Changes to ROICost of Service Changes to ROI



Market Share Sensitivity AnalysisForeRunner’s Market share: 7.43% 41.43%

10% ScenarioIntroduction: -0.754.27

Growth: 3.7616.72Maturity: 17.5437.38

10%-20% ScenarioIntroduction: -0.292.89

Growth:9.430.24Maturity: 43.5170.57

20%-30% ScenarioIntroduction: 1.883.34

Growth: 15.0443.76Maturity: 69.47109.05

ROI increases positively with Market Share



Cost of Services Sensitivity AnalysisPercentage change of cost 10% 10%-20% 20%-30%

50.40% 8.01 14.12 20.2351.40% 7.84 13.83 19.8252.40% 7.68 13.55 19.4153.40% 7.52 13.26 19.0054.40% 7.36 12.98 18.5955.40% 7.20 12.69 18.1956.40% 7.04 12.41 17.7857.40% 6.88 12.12 17.3758.40% 6.71 11.84 16.9659.40% 6.55 11.55 16.5660.40% 6.39 11.27 16.1561.40% 6.23 10.99 15.7462.40% 6.07 10.70 15.3363.40% 5.91 10.42 14.9264.40% 5.75 10.13 14.5265.40% 5.58 9.85 14.11

- As cost of service increases in different scenarioROI will decrease

- However, the cost can be controlled as long as ForeRunner uses the appropriate way to manage the operations

forerunner integrity | quality | consistency anne, yuan yicarlos, lin junhua charlotte, zhou...

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