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Table of Contents
Introduction ................................................................................................................................... 3
Summary Of The Idea ..................................................................................................................... 3
Analysis Of The Opportunity ........................................................................................................... 3
Overview Of The Competitive Space .............................................................................................. 4
Description Of Refinements And Development Steps.................................................................... 7
Structure Of The Venture ............................................................................................................... 8
Next Steps ..................................................................................................................................... 10
Conclusion……………………………………………………………………………………………………………………………… 11
Appendix A .................................................................................................................................... 11
Appendix B………………………………………………………………………………………………………………………………12
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Introduction
If you have ever wanted to listen to music without disturbing others around you, or if you have
you ever watched a DVD with someone who likes the volume too low, there is now a solution
that does not require cumbersome headphones. Using HSS or Hypersonic Sound technology, it
is possible to direct a beam of sound like a laser, having a stream of audio reach only one
listener at a time. This business proposal contains a summary of this concept and an analysis of
the opportunity it represents in the marketplace. Next, an overview of the competitive space,
and a description of necessary refinements and development steps is included. Finally the
proposed structure for a new venture is proposed, including a business model, and suggestions
for capturing the value in the innovation of HSS Technology.
Summary of the Idea
The Soundbeam is a portable directional speaker using Hypersonic Sound (HSS) technology to
focus a beam of sound in a single direction. This speaker would allow a person to listen to music
by directing the sound to one listener without disturbing anyone outside the path of the sound.
This directional speaker can be used as an alternative to headphones as well as providing the
ability to adjust the volume for a single listener. When attached to a larger system this single
speaker could allow two listeners to hear the same audio at different volumes. The Soundbeam
is small, fun, portable, and capable of connection to any audio system.
Analysis of the Opportunity
This section is the analysis of the Sound beam speaker opportunity, and will focus on the need
for the product and problems solved by the product. For music enthusiasts who want to listen
to music everywhere possible – be it office, library or home -without disturbing others, the
product is a portable directional speaker, which gives them freedom to listen to music without
turning the ambient music mute. The technology could also be used in two person hospital
rooms, jet airliners classrooms or anywhere headsets are currently used in stationary locations.
The market for such a product is potentially huge, especially in the United States.
Market Overview
Americans love their consumer electronics products. New “gadgets”, like large flat-panel TVs,
MP3 players and high definition DVDs, are often irresistible to the American public. The
demand for audio and video equipment is increasing at a rapid pace and has been promoted by
innovative new products and falling unit selling prices. The audio and video equipment
manufacturing industry is expected to generate revenue of about $8.4 billion in 2010. The
industry is highly globalized, with exports amounting to $8.2 billion and imports amounting to
$42.6 billion in 2010. The industry is expected to grow in the five years through 2015, at a real
average rate of 1.9% annually, with exports providing the engine for growth (forecast real
growth in exports averages 2.4% annually) as local manufacturers' domestic sales.
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Target Market: Cleveland area year 1
While Directional Speakers find usage in many commercial places as well as in military use, our
product is a portable electronic device which has more usage in homes and offices. Based on
the online survey that we conducted, we defined our target customers as students and
corporate employees in the age group of 20 to 35 years. (See Appendix B for the online
survey.)
The geographic target market initially for this product will be Cleveland and all cities around in
Ohio. As the product will grow in popularity, other cities which either have higher student
population or higher number of business offices around will be targeted.
The total market size for Audio and video equipments in the US is worth $8398 million out of
which speakers contribute 32%. Assuming portable speakers to be 70% of the total market size
of speakers, we estimate the total market size for portable speakers to be $1881 million.
Assuming Cleveland City contributes 5% to this market size, we estimate the market size in
Cleveland City for portable speakers to be $95 million. As our target age group is between 1835 years – which forms 21% of the total population in Cleveland city – we calculate the total
worth of our target market to be $19.75 million.
As from our online survey we deduced that 50% of the age-group between 18-35 years live or
work in a place where they will require our product ( please refer to results of our online survey
in Appendix B) , our target market size becomes $9.8 million. For the head start, our team plans
to capture just 2% of this target market; we estimate $197,500 to be our revenue for the 1st
year. As shown in our forecasted balance sheet, we would generate approximately $24,000.00
as our profit just from Cleveland City. (Refer Appendix A)
Should we target at least 4 more cities in the next year of operation we estimate to generate
$100,000.00 as our profit – taking into consideration that market for portable speakers would
grow by 10% each year (Estimated growth of this segment is actually 12% year on year).
Source IBISWorld: Audio – Video Equipment Industry Research
http://www.ibisworld.com/industry/executivesummary.aspx?indid=749
Overview of the Competitive Space
This section is an overview of the competitive space for our product, including a Five Forces
Analysis and market facts and statistics. An industry summary follows the analyses. The
industry is such that major brands capture only 40% of the market between them, leaving 60%
of space for other players. Of the 40% of the markets size in US, Bose and Sony share 12.5% of
market each, while Harman Incorporated and Panasonic take 9% and 6% of the market size
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respectively. However, these figures are for the entire Audio-Video Industry and do not
specifically speak about portable speaker markets. The market has room for new innovative
products and so we analyzed this market in terms of Porters Five Forces for our product
segment only.
Market Facts
This section defines some key market statistics and facts for the industry. Industry summary
information follows.
STATISTICS
Revenue
Number of
Enterprises
Average Profit
Margin
Average
Revenue of
Enterprise
2010KEY FACTS
$8,398 Competition in this industry is medium
Million
Volatility medium (revenue fluctuations between 3 and 10
points.)
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The life cycle stage is decline
3.5%
$18,217,787
Imports Share
of Domestic
Demand
99.5%
Exports Share
of Revenue
97.5%
The top 4 players account for 39% of industry revenue:
- Bose Corporation
12.5%
- Sony Corporation
12.5%
- Harman International Industries, Incorporated
9.0%
- Panasonic Corporation
6.0%
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Industry Summary
PRODUCTS AND SERVICE SEGMENTATION
Product/Services
Share
Automotive audio equipment (excl. speakers)
20.0%
Other consumer audio and video equipment
19.0%
Speakers (incl. loud speakers and commercial sound
32.0%
equipment)
Television receivers
29.0%
MAJOR MARKET SEGMENTS
Market Segment
Share
Other retailers
60.0%
Wholesalers
30.0%
Automotive manufacturers
and dealers
10.0%
Porters Five Forces
Porter's Five Forces is a framework for industry analysis and business strategy development
developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developing
Industrial Organization (IO) economics to derive five forces that determine the competitive
intensity and therefore attractiveness of a market. Attractiveness in this context refers to the
overall industry profitability. An "unattractive" industry is one where the combination of forces
acts to drive down overall profitability. A very unattractive industry would be one approaching
"pure competition". We believe that the industry for HSS technology is a very attractive one.
The five forces are, Threat of segment rivalry, Threat of new entrants, Threat of substitutes,
Threat of buyers growing bargaining power and Threat of suppliers growing bargaining power.
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Threat of intense segment rivalry: Low to medium
The threat of intense segment rivalry is low. There are no true competitors in the space
currently, as the true market potential has not yet been realized commercially.
Threat of new entrants: Low
The threat of new entrants would be high, but only after the first two years. As soon as the
technology is proven useful in the marketplace, competitors will fill the space.
Threat of substitute products: Low
Threat of substitute products would be very difficult to define. Music is currently enjoyed by
most or all people in areas that are public or private. It would seem, at first analysis, that there
could be no substitutes for such a product. The product itself is actually a substitute for
headsets for listening to music.
Threat of buyer’ growing bargaining power: Low to medium
The threat of buyers growing bargaining power is low because right now, there are no other
competitors in the space right now. After the second year, buyer power would increase, as
other competitors enter the space, increasing the choices of the customer.
Threat of suppliers’ growing bargaining power: Low
The threat of suppliers’ growing bargaining power is low. Electronic component manufacturers
are everywhere globally and can be sourced just about anywhere.
Description of Necessary Refinements and Development Steps
Necessary refinements would include a drill down into finding the lowest cost suppliers that
have the highest quality. This section includes a broad overview of the economics of the
product, including projected material costs, which leads to the proposed selling price.
Production Cost of Parts
Injection Molded plastic shell (component housing)
- Mold Tooling cost $40,000 - $50,000 (However, once mold is made, only material cost is spent
for each unit.)
- High density polyethylene (HDPE) cost hovers around $0.75 per pound.
- Plastic component housing cost - approx. $0.50 per unit.
Directional Speaker (Theoretical approximation of cost)
- Technology is in its infancy making cost high and difficult to approximate
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- purchased from 3rd party supplier $40 per unit
- Quantity of order decreases unit price.
Electrical Components and Wiring
- PCB (printed circuit board) 3"x4" order quantity 1000, cost per unit $1.60
- quantity of order decreases unit price.
- Internal wiring and external plug wire, cost per unit $0.65
Display Screen
- 1"x4" LED display screen - cost per unit $2.00
Battery and Power source components
- Rechargeable Lithium ion Battery (best size/output ratio) - $4.00 per unit
- Power input converter - cost per unit $1.75 at 5000 quantity order
Material cost per unit - $50.50 after mold tooling cost.
"ALIBIBABA.COM" is a great source for all high tech manufacturing companies in Asia.
Structure Of the Venture/Capturing the Value
This section of the plan discusses the structure of the proposed venture. It includes a
discussion on the broad business logic that will be deployed, as well as broad competitive
objectives and strategies. This discussion leads into the presentation of a COAR Map, a
business development tool that is used to drill down into critical aspects of the business.
Finally, the management team of the new venture is presented.
Broad Business Logic
Our broad business logic will be asset utilization. The company will need to be low-cost or
efficiency driven, like all electronic manufacturers. A repeatable revenue stream from
customers through differentiation and perceived value will be necessary. Great customer
service will be a mainstay of the new venture.
Broad Competitive Objectives
Our Broad competitive objectives will be Product Leadership and customer and
stakeholder Intimacy. We want to produce the highest quality product at the lowest price;
hence the factory location will be in Asia.
Business Model/COAR Map
The Business model we will use for the company start up was formed using a COAR Map. A
COAR Map is a process for building business models that are sustainable. “COAR” in COAR Map
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stands for Customer Outcomes, Objectives, Activities and Resources. The Map discusses what
will be core for the business to be successful.
Customer Outcomes
The desired outcome will be satisfied customers that will do repeat business. We would
like to create a cult-like following of people who know our company and want to be part of the
family of people that own our product. A cult like love can be built at the grass roots, by
targeting college dorm rooms and hospital rooms that have two rooms.
Objectives (Metric: Outputs from Activities)
Core objectives will be the efficiency with which the speakers can be produced and so Cost of
Goods Sold is a key metric.
Activities (critical)
Critical activities will include efficiency and on time delivery. Steady demand will be required so
techniques will be needed to smooth out demand. Study of the cyclical nature of the business
will need to be done.
Resources (Key)
Key resources will include a highly efficient factory and distribution system.
Management Team
The management team is the most important element to any successful venture. Peter Sciulli,
Sharad Guarav and Aaron Drake are a capable management team with diversified experience,
skill sets and education.
Peter E. Sciulli
Pete Sciulli has over fourteen years of diversified management experience in the consumer
products, aerospace and health care industries. He has held positions in product and business
development, engineering, research, and project management, and is graduating with an MBA
at Case Western Reserve University in May, 2010. Pete has written and advised on several
business plans in his career, on his own, and while working at BioEnterprise Corporation. He is
the Vice President of Marketing and Finance for the Entrepreneurship club at Case. Pete is
starting a company with two partners to launch a product in the children’s dinnerware market
segment. He and his team filed for provisional patent status in May, 2010.
Aaron Drake
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Aaron Drake, is about to receive a Bachelor of Fine Arts in Industrial Design from the Cleveland
Institute of Art. He is a recipient of the Ford Motor Company Departmental Scholarship, and a
Departmental Award for Excellence in Industrial Design. Aaron is currently working towards his
second BFA from the Cleveland Institute of Art in the field of Jewelry & Metals.
Sharad Gaurav
MBA Candidate, Class of 2011. Sharad has four years of extensive experience in Business-toBusiness Marketing. He is President of the Marketing Club at Case Western Reserve University
and also a member of the Entrepreneurship club.
Next Steps
Next steps would include building or leasing a factory for production. Building or leasing a
factory in the United States has many advantages, such as those US workers have some of the
highest productivity in the world. Manufacturing in the U.S. can also be used as a marketing
ploy and would simplify logistics and make for a faster turnaround time from design to
implementation. Our company would also be taking advantage of the US manufacturing
incentives put in place by the Obama Administration. The ability to oversee the entire
manufacturing process to make sure that corners are not cut, would also be an advantage.
However, considering the cost and the price we propose to sell at, we should build our factory
in a place, which has low land and labors costs. Low costs is part of our operating strategy,
explained in the previous venture section Big factories are despised and penalized with high
taxes, strict zoning regulations and infinite bureaucracy. NIMBY (Not In My Backyard) attitudes
are driving manufacturing offshore. On the other hand, Ireland, China, Korea, Hong Kong and
many other countries seem to be inviting industry with open arms and deferred taxes. Labor
skills and availability are important, but automation (available globally) reduces dependency on
those factors. This brings the choice down to proximity to material sources, and/or proximity to
markets, plus lowest cost with the best quality.
In today’s global environment whoever manufactures products better, cheaper and faster,
wins. Every country in the world is competing. In consumer products, Asian countries and
Mexico are grabbing a lot of the prizes and manufacturing operations should be in those areas,
with India, China and Mexico being frontrunners.
Conclusion
Using HSS or Hypersonic Sound technology, it is possible to direct a beam of sound like a laser,
having a stream of audio reach only one listener at a time. This business proposal contains a
summary of this concept and an analysis of the opportunity it represents in the marketplace.
Next, an overview of the competitive space, and a description of necessary refinements and
development steps is included. Finally the proposed structure for a new venture is proposed,
including a business model, and suggestions for capturing the value in the innovation of HSS
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Technology. If you have ever wanted to listen to music without disturbing others around you,
or if you have you ever watched a DVD with someone who likes the volume too low, there is
now a solution that does not require cumbersome headphones. The technology is sure to be
found useful in the future.
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Appendix A: Market Analysis
Market Size
Share of Speakers
Share of Portable Speakers
Market in Cleveland
Target Population(Age 18-35)
Work place
Our Target
Selling Price
Units
32%
70%
5%
21%
50%
2%
Worth
$
8,398.00
$
2,687.3600
$
1,881.1520
$
94.0576
$
19.7521
$
9.8760
$
197,520.96
$
60.00
3,292.0160
= 3000(approx)
Million
Million
Million
Million
Million
Million
Forecasted Balance Sheet
Revenue
COGS
SGA
GI
Labor
Other
NI
Tax
Profit
Unit
Profit
$
$
$
$
$
$
$
$
$
197,520.96
150,000.00
3,000.00
44,520.96
4,992.00
@$8/hr for 3days a week for 52 weeks
2,000.00
37,528.96
13,135.14
24,393.82
3,000.0000
$
8.13
Per Unit
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Appendix B: Customer Research Survey
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