iRobotStrategic RecommendationsTeam 3Divye GoyalRebecca PapilloJoseph SakrPatrick Tehan
iRobot’s business is based on three key pillars    Management                     Concentrated                    R&D expe...
iRobot needs to leverage existing operations and look at newareas for growthHow can iRobot reduce demand volatility and th...
Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a...
Commercial cleaning provides a ripe opportunity for iRobot’sexpansion into a new marketGlobal market for microelectronics ...
We propose a new paradigm - increased speed, battery life and capacity – scaling towards industrial robotic cleaning      ...
The commercial cleaner’s cost-effectiveness will render it an attractive proposition for its target markets    Comparison ...
A specialised sales team will enable marketing that specificallytargets the concentrated customer bases                   ...
The risks associated with a commercial cleaner can be mitigatedSales personnel not meeting expected     Performance manage...
Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a...
Introducing a new product will ease volatility throughdiversification and entrenchment in customers’ lives                ...
Expanding into horticulture represents the most attractiveproposition                Commercial Cleaner | Mowbot | Marketing
“Mowbot” will be fully automated and will leverage off existingRoomba technology                                       • M...
The “Mowbot” will be US-focused using existing operationalexpertise                                   • Predominantly dist...
The risks associated with Mowbot can be mitigated                                         Automatically turns off when bum...
Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a...
The use of traditional mass media will raise consumer awarenessof iRobot products     Social Media:                       ...
Television represents the most attractive advertising medium               Commercial Cleaner | Mowbot | Marketing
Advertising will be carefully targeted towards wealthy, time poorconsumersNumber of viewers (USA) with income             ...
The risks associated with television advertising can be mitigatedBrand is tied too closely to a particular   Advertise dur...
The commercial cleaning strategy will return a net present valueof USD 116.9m over ten years$180,000,000$160,000,000      ...
The Mowbot strategy is predicted to have a net present value ofUSD 73.60m$90,000,000$80,000,000                           ...
The marketing strategy also creates value for iRobot, returning anet present value of USD 280.2m$450,000,000$400,000,000  ...
Collectively, these strategies will add USD 470.7m to iRobot’sbottom line      Value added to iRobot by                   ...
Implementation timeline                       Negotiate withAdvertising                         network                   ...
Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a...
AppendicesCommercial cleaning      Mow-bot             TV ads                  Financial               General            ...
How will these strategies be funded?                                                         • Funding is of fundamental C...
What would happen if we were to reject these strategies?800            Revenues in USD (m)                           • Not...
Do you have the resources to implement two new products at        once?        • There is a real and present danger that i...
What strategies did you reject and why?  Strategy                  Description                          Reason for Rejecti...
The future role of the military in iRobot’s future• The role of the military, as iRobot’s largest customer (making up arou...
Why did you pursue television advertising despite its failingeffectiveness in advertising?                                ...
Commercial Cleaning – where to outsource sales teams                                      • Sales team locations          ...
Strategy 2 – Criteria for judging the attractiveness of other typesof products (Cooking)         Criteria                 ...
Strategy 2 – Criteria for judging the attractiveness of other typesof products (Bathroom Cleaning )         Criteria      ...
Strategy 2 – Criteria for judging the attractiveness of other typesof products (Laundry equipment)         Criteria       ...
Key Financial Statistics
Key Financial Assumptions
Financial Modelling Excerpt – Commercial Cleaning
Revenues – Commercial Cleaning Strategy
Expenses – Commercial Cleaning Strategy
Financial Modelling Excerpt – Mowbot
Revenues – Mowbot Strategy
Expenses – Mowbot Strategy
Financial Modelling Excerpt – Marketing Strategy
Revenues – Marketing Strategy                              Revenues from MarketingAdditional Sales     % expected increase...
Expenses – Marketing Strategy
Advertising Harvey ball data                                                                           Conveys product    ...
Speed assumptions for Commercial cleaner                                     roomba 610 source            Commbotrooms per...
Is it reasonable to make a ten year projection?• It can be argued that a ten year financial projection in the robotics ind...
Geographic expansion• We considered, and then rejected, the idea of a geographic expansion strategy, for  three reasons:  ...
Mowbot Competitor analysis• The robotics industry as a whole has not proved to be a necessity in the consumer  electronics...
Returns policy for Comm-bot• Given the higher price margin and higher usage load, offer a longer warranty to  appease cons...
What message will the television advertisements convey?• The television advertisements will promote the iRobot brand as an...
Should iRobot consider vertical integration or broadermanufacturer arrangements?• Vertical integration addresses two probl...
How should iRobot deal with the risk of obsolescence?• R&D is one of the core competencies of iRobot:    • 6% revenue rein...
What are the social costs of introducing a commercial cleaner?• Unemployment may result from the introduction of a commerc...
Performance management of sales staff for commercial cleaner• Utilisation of trusted sales organisation     • Salesinc – 1...
Commercial Cleaning – why outsource• Focus on core competencies- design, develop and market robotics• Given the multinatio...
Mow-bot price• High variability in lawnmower prices from competitors     • Robomower RM200: $900 at lower end     • LawnBo...
Alternative if ads become too expensive• TV advertising is a great way to enhance brand exposure but must continue to look...
Why TV is the prefferred option to increase robotic industryexposure• Average American watches “3 hours and 46 minutes of ...
What is stopping competitors from emulating our advertisingcampaign?• It can be argued that increased competition will ser...
Why isn’t advertising campaign occurring in areas other thanUS?• Initially need to be very selective about the locations i...
Presentation Slides Index                                                                                   Financials and...
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  1. 1. iRobotStrategic RecommendationsTeam 3Divye GoyalRebecca PapilloJoseph SakrPatrick Tehan
  2. 2. iRobot’s business is based on three key pillars Management Concentrated R&D expertise expertise customer base - Employs nearly 50%- Financial position of staff Non-military Military - Variable demand - Tender process - Limited product - Spiral development awarenessHow can iRobot reduce demand volatility and thus build a platform for profit growth?
  3. 3. iRobot needs to leverage existing operations and look at newareas for growthHow can iRobot reduce demand volatility and thus build a platform for profit growth? Growth from new Growth from existing Cost Cutting operations operations New New Geographicproducts customers expansion
  4. 4. Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a platform for profit growth? New target market Existing target market Enhance product Improve volumes integrationCommercial cleaning “Mowbot” gardening TV advertising robot robot NPV: USD 116.9m NPV: USD 73.6m NPV: USD 280.2m Commercial Cleaner | Mowbot | Marketing
  5. 5. Commercial cleaning provides a ripe opportunity for iRobot’sexpansion into a new marketGlobal market for microelectronics • New customers providecleaning equipment, 2010 ($USD Billions) diversification benefits 9 • Less volatile demand because of 8 differences between 7 commercial and private usage. 6 5 • Cleaning equipment market is 4 growing quickly 3 2 • Have industry expertise 1 - 2009 2010 2011 2012 2013 2014 2015 Commercial cleaning robotics is a viable and lucrative marketSource: BCC Microelectronics Cleaning Report, 2010 Commercial Cleaner | Mowbot | Marketing
  6. 6. We propose a new paradigm - increased speed, battery life and capacity – scaling towards industrial robotic cleaning 2002 2004 2005 2006 2007 2010- Roomba Robot - Red - Scheduler - Dirt Dog - 560 range - 610 range initial launch - Discovery - Intellibin Specifications Roomba 610 “Comm-bot 1000” Speed 80m2/hr 200 m2/hr Weight/diameter 8.3 lbs/13-inch 30 lbs/30-inch Capacity 1 x regular bin 4 x high capacity sweeper bin 1 x high capacity bin Battery life 2 hours, 3 hours recharge 8 hours, 15 hour recharge Source: iRobot.com Commercial Cleaner | Mowbot | Marketing
  7. 7. The commercial cleaner’s cost-effectiveness will render it an attractive proposition for its target markets Comparison of manual cleaning and • Focus where cleanliness is necessary automated cleaning vs. time but not core to business1200010000 • Factories 8000 • Libraries • Educational institutions 6000 4000 • Attractive pricing allows quick break- 2000 even points 0 • Warranties and associated 1 4 7 10 13 16 19 22 25 28 maintenance provide feedback channels Source: Payscale, iRobot financial report Commercial Cleaner | Mowbot | Marketing
  8. 8. A specialised sales team will enable marketing that specificallytargets the concentrated customer bases Research and Manufacturing Sales Development• Continue current • Continue team model • New product requires manufacturing for R&D expenditure different selling processes approach • Hire 20 staff and• Focus manufacturing group them under a • Outsource dedicated in the US plant new team sales team• Allows better • Cross functional- • Target developed monitoring commercial expertise countries Commercial Cleaner | Mowbot | Marketing
  9. 9. The risks associated with a commercial cleaner can be mitigatedSales personnel not meeting expected Performance management procedures fortargets sales personnelProduction delays after orders taken Contract financial penalties for delay which are then passed onto consumersLoss of control of sales message Initial training regarding product specifications and updates every year Commercial Cleaner | Mowbot | Marketing
  10. 10. Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a platform for profit growth? New target market Existing target market Enhance product Improve volumes integrationCommercial cleaning “Mowbot” gardening TV advertising robot robot NPV: USD 116.9m NPV: USD 73.6m NPV: USD 280.2m Commercial Cleaner | Mowbot | Marketing
  11. 11. Introducing a new product will ease volatility throughdiversification and entrenchment in customers’ lives Reduced volatility Diversification Reduced reliance on single product New “Consumer goods” product Entrenchment in Reduced volatility consumer products Enhanced customer market loyalty Commercial Cleaner | Mowbot | Marketing
  12. 12. Expanding into horticulture represents the most attractiveproposition Commercial Cleaner | Mowbot | Marketing
  13. 13. “Mowbot” will be fully automated and will leverage off existingRoomba technology • Multi-functional device • Lawnmower • Line trimmer • Water’s gardens • Weed spray • Uses existing Roomba sensory technology • Has safety lights, plastic guard and rubber wheels for wet weather navigation Commercial Cleaner | Mowbot | Marketing
  14. 14. The “Mowbot” will be US-focused using existing operationalexpertise • Predominantly distribute through US retailers and online channels • Target similar customer base as Roomba • Middle-high class segment • Research and Development will require extra 30 personnel • Manufacturing to continue at three plants Commercial Cleaner | Mowbot | Marketing
  15. 15. The risks associated with Mowbot can be mitigated Automatically turns off when bumped,Perception of dangerous product protective case and guard railing installed Work with local councils to addressLocal regulation regarding unmanned further noise/safety concerns. Similarrobots approach to competitors Use of multiple, geographically diverseDisruption to factory production factories diversifies factory-specific risks Commercial Cleaner | Mowbot | Marketing
  16. 16. Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a platform for profit growth? New target market Existing target market Enhance product Improve volumes integrationCommercial cleaning “Mowbot” gardening TV advertising robot robot NPV: USD 116.9m NPV: USD 73.6m NPV: USD 280.2m Commercial Cleaner | Mowbot | Marketing
  17. 17. The use of traditional mass media will raise consumer awarenessof iRobot products Social Media: Traditional mass media: Characteristic Trust in Advertising Trust in Advertising Wealthy 45-55 years old Tech savvy Time poor Commercial Cleaner | Mowbot | Marketing
  18. 18. Television represents the most attractive advertising medium Commercial Cleaner | Mowbot | Marketing
  19. 19. Advertising will be carefully targeted towards wealthy, time poorconsumersNumber of viewers (USA) with income • Advertise during shows with wealthy> USD 100K, 2009 (millions) viewers2.00 • Use advertisements to demonstrate1.50 the value of household robotics1.00 • Grow customer interest within0.50 industry0.00 • In turn, sales growth of existing products Advertise during high rating televisionSource: Neilson Media Research, 2009 shows between 7-11pm weeknights Commercial Cleaner | Mowbot | Marketing
  20. 20. The risks associated with television advertising can be mitigatedBrand is tied too closely to a particular Advertise during several high ratingtelevision show television showsPrice of advertising during selected time Look to alternative advertising optionsslot increases including radio and print media Commercial Cleaner | Mowbot | Marketing
  21. 21. The commercial cleaning strategy will return a net present valueof USD 116.9m over ten years$180,000,000$160,000,000 NPV = USD 116.9m$140,000,000$120,000,000 IRR = 55.92%$100,000,000 $80,000,000 Revenue Drivers Cost Drivers $60,000,000 Sales R&D costs Total Revenues $40,000,000 Total Expenses Cross-selling Manufacturing $20,000,000 costs $- Sales team costs Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10
  22. 22. The Mowbot strategy is predicted to have a net present value ofUSD 73.60m$90,000,000$80,000,000 NPV = USD 73.60m$70,000,000$60,000,000 IRR = 36.05%$50,000,000$40,000,000 Revenue Drivers Cost Drivers$30,000,000 Sales R&D costs$20,000,000 Total Revenues Cross-selling Manufacturing Total Expenses costs$10,000,000 Administrative $- costs Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10
  23. 23. The marketing strategy also creates value for iRobot, returning anet present value of USD 280.2m$450,000,000$400,000,000 NPV = USD 280.20m$350,000,000$300,000,000 IRR = 34.29%$250,000,000$200,000,000 Revenue Drivers Cost Drivers$150,000,000$100,000,000 Total Revenues Additional sales Agency fees Total Expenses $50,000,000 TV network fees $- Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10
  24. 24. Collectively, these strategies will add USD 470.7m to iRobot’sbottom line Value added to iRobot by NPV = USD 470.7m each strategy in USD (m) IRR = 37.33% Payback period = 4.1 years Sensitivity Analysis
  25. 25. Implementation timeline Negotiate withAdvertising network Measure effectivenesscampaign Contract ad Develop and Begin subsequent Launch Launch ad agency produce ad campaign ad Design, develop, Launch product modify Mowbot Expand distribution Recruit R&D staff Continuous monitoring and improvement capacity Design, develop,Commercial Continuous monitoring and improvement modifycleaner Recruit R&D Launch product Evaluate sales team performance Partner with sales org staff March 2011 March 2012 March 2013 March 2014
  26. 26. Collectively, these three strategies will address the key questionHow can iRobot reduce demand volatility and thus build a platform for profit growth? New target market Existing target market Enhance product Improve volumes integrationCommercial cleaning “Mow-bot” TV advertising robot gardening robot NPV: USD 116.9m NPV: USD 73.6m NPV: USD 280.2m
  27. 27. AppendicesCommercial cleaning Mow-bot TV ads Financial General Scope for verticalSocial costs Market price Television ad message Key Statistics integrationPerformance management Harvey balls- cooking Harvey ball data Assumptions Risk of obsolescence Harvey balls- Decline of TV Comm. Cleaning -Why outsource bathroom effectiveness Modelling Effect of doing nothing Harvey balls- Why TV the preferred Comm. Cleaning - Usefulness of 10-yearWhere to outsource laundry advertising method Revenues horizon Alternate strategy if ads become too Geographic expansionReturns policy Competitor analysis expensive Comm Cleaning - Expenses potential Competitors "free- Cleaning area riding" off our Resources available to assumptions marketing Mowbot - Modelling implement strategies Advertising location Mowbot - Revenues Rejected strategies Role of military Mowbot - Expenses customer Marketing - Modelling Presentation Slides Marketing - Revenues Marketing - Expenses Funding mix
  28. 28. How will these strategies be funded? • Funding is of fundamental Current financing arrangements for importance iRobot • iRobot has been savvy in its financing decisions to date 31.26% • As well as avoiding downturns, cash creates opportunities 66.73% 2.00% • As such, we propose adopting an Current liabilities identical funding model as currently Non-current liabilities Equity stands • The equity component will be raisedSource: Annual Financial Report through a rights issue
  29. 29. What would happen if we were to reject these strategies?800 Revenues in USD (m) • Not only do these strategies provide a positive effect on iRobot’s bottom700 line, but they also help avoid the600 negative base-line case of doing nothing.500 Revenues with our strategies400 • What does this mean? Industry analysts, such as Roger Christian, VP Revenues without300 our strategies at Motoman, agree that the robot industry must grow strongly, and200 quickly, in order to survive100 • Inaction may well cripple the 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 industrySource: Financial modelling
  30. 30. Do you have the resources to implement two new products at once? • There is a real and present danger that iRobot faces, in terms of spreading itself too thinly • This issue is particularly acute for iRobot, because of the relative scarcity of good personnel – robotics is still only an emerging field • To mitigate this risk, our recommended implementation timeline staggers the new projects a year apart, in order to have more time to attract staff Design, develop, Launch product modify Mowbot Expand distribution Recruit R&D staff Continuous monitoring and improvement capacity Design, develop,Commercial Continuous monitoring and improvement modifycleaner Recruit R&D Launch product Evaluate sales team performance Partner with sales org staff March 2011 March 2012 March 2013 March 2014
  31. 31. What strategies did you reject and why? Strategy Description Reason for RejectionAlternative Devoting R&D expertise to booming Requires highly specialised knowledge,energy area of renewable energy generation beyond mere roboticsMedical Applying robotic controls to common Requires highly specialised knowledge,procedures surgical procedures, such as prostate beyond robotics surgery, minimises blood loss and speeds recovery timeCreation of Using expertise in robotics to create Already a highly competitive andprosthetics sensate, responsive prosthetics for innovative field, and it would be amputees – DARPA grants are available difficult to quickly gain market shareMilitary Creating a new robotic military Tender-based, so independentprojects technology, as has occurred in the past innovation is wasteful, and with UAVs and the like relationships are already developedConsumer & Either domestic or mass-produced Quality would likely suffer, and anycommercial meals produced by automation robotic meal preparation would likelycooking have limited appeal
  32. 32. The future role of the military in iRobot’s future• The role of the military, as iRobot’s largest customer (making up around 40% of revenue), is critical. Dealings with government Sales Relationship Alternative is Spiral Nature ofTender-based unviable feedback governmentOn this analysis, iRobot will maintain both its relationship with the military, as well as its sales.
  33. 33. Why did you pursue television advertising despite its failingeffectiveness in advertising? • While its effectiveness may be decreasing, we believe this is more of a normalisation than a decline. • Television has enjoyed decades of being the central entertainment hub, and with the expansion of consumer technology (social media, computer gaming, iPods, internet, cable), it is reasonable to see a decline in its popularity. • Indeed, television is still an effective mechanism of advertising – this is indicated by the value the market places on it (see graph, left).Source: Signtel.com
  34. 34. Commercial Cleaning – where to outsource sales teams • Sales team locations • 2 x North America • Boston • Los Angeles • 1 x Asia • Tokyo, Japan • 1 x Europe • London, UK • Targeting wealthy, industrial cities with established sales outsourceSource: NASA, SalesForce Inc, Sales teams and reputation for technologyInc, Lighthouse sales uptake
  35. 35. Strategy 2 – Criteria for judging the attractiveness of other typesof products (Cooking) Criteria Reasoning Horticulture USD 13.5b USD 16.4b Large Market size Fast food spending used as Freedonia Market Research proxy: Key Note consulting 5% until 2015 3.4% Ongoing Market growth Bain industry analysis Freedonia Market Research report No hygienic concerns. Hygienic Concerns Consumers are not tooQuality of Output expected Consumers expect higher concerned with quality levels of output for food. control.
  36. 36. Strategy 2 – Criteria for judging the attractiveness of other typesof products (Bathroom Cleaning ) Criteria Reasoning Horticulture USD 4.7b USD 16.4b Large Market size Freedonia Market Research Freedonia Market Research 27% 3.4% Ongoing Market growth PackagedFacts.com Freedonia Market Research Hygienic Concerns No hygienic concerns. Consumers expect higher Consumers are not tooQuality of Output expected levels of output for concerned with quality bathroom cleaning. control.
  37. 37. Strategy 2 – Criteria for judging the attractiveness of other typesof products (Laundry equipment) Criteria Reasoning Horticulture USD 10.0b USD 16.4b Large Market size MindBranch Industry Freedonia Market Research Report 6.4% 3.4% Ongoing Market growth MindBranch Industry Freedonia Market Research Report Hygienic Concerns No hygienic concerns. Consumers expect higher Consumers are not tooQuality of Output expected levels of output for laundry concerned with quality cleaning. control.
  38. 38. Key Financial Statistics
  39. 39. Key Financial Assumptions
  40. 40. Financial Modelling Excerpt – Commercial Cleaning
  41. 41. Revenues – Commercial Cleaning Strategy
  42. 42. Expenses – Commercial Cleaning Strategy
  43. 43. Financial Modelling Excerpt – Mowbot
  44. 44. Revenues – Mowbot Strategy
  45. 45. Expenses – Mowbot Strategy
  46. 46. Financial Modelling Excerpt – Marketing Strategy
  47. 47. Revenues – Marketing Strategy Revenues from MarketingAdditional Sales % expected increase in sales 5% Existing sales 262199000 $ 275,308,950 Source: McKinsey Advertising Industry Report, 2010
  48. 48. Expenses – Marketing Strategy
  49. 49. Advertising Harvey ball data Conveys product Access to target Conversion Cost per customer experience Wealthy consumers watch the 1-4% Engages most senses. 320 000/7.6m = 4.2c shows targeted Copernicus marketing Easiest way to USA network viewing figures,Television demonstrate adage.com capabilities Wide demographic which 2-3% Relies on sight, can 1500/876,638 = 0.17c includes but not targets high grab attention but not New York Times, Boston Print income individuals HTG industry report experience Globe Wide demographic which 1.5-4% The functionality of 20 000/1m = 0.2c includes but not targets high Roomba can’t be Radio marketing bureau, Radio income individuals HTG industry report exploited. WABC listener numbers Cannot see. No targeting at all, can mail 1-3% Cheapens image and $1,500/1,000 = 1.5c based on suburb income but Copernicus marketing relegates brand to Smallbusiness.com Direct mail nonetheless haphazard. ‘junk mail’ status
  50. 50. Speed assumptions for Commercial cleaner roomba 610 source Commbotrooms per hour 4 - internationalsize of average room (m2) 20 residential code 200battery life (hours) 2 8Charge time (hours) 3 15total area per run/charge cycle (m2) 160 1600cycles per night 1.8 (9 hours) 1total cleaned area per night 288 1600
  51. 51. Is it reasonable to make a ten year projection?• It can be argued that a ten year financial projection in the robotics industry is misplaced, as the industry and technology change so swiftly.• However, we believe that the following is more convincing: • First, the robotics industry has long lead times, and hence needs long-term thinking • Secondly, sophisticated decision-making requires long-term thinking, even if the future is not perfectly clear • Thirdly, our projection is for current projects only, and is not a projection of iRobot’s business as a whole. The outlook for those projects should be relatively stable.
  52. 52. Geographic expansion• We considered, and then rejected, the idea of a geographic expansion strategy, for three reasons: • First, iRobot already has a booming international presence, and is quickly growing • Secondly, the nature of iRobot’s business is such that there is no need for a physical expansion – it already utilises global channels such as its partnership with Amazon • Thirdly, we believed that other avenues of diversification, namely in commercial cleaning and gardening, would be more profitable in the long run, as they would continue iRobot’s success in pioneering ‘blue ocean’ markets
  53. 53. Mowbot Competitor analysis• The robotics industry as a whole has not proved to be a necessity in the consumer electronics market• Hence, competition will help push this market into customers’ minds and lower prices• As a cost-leader, iRobot has the ability to fight price wars and hence wants to encourage competition which will increase the market as a whole.• Incumbent products are: RoboMower and LawnBott • Still blue-ocean given iRobot was the last entrant in the automated vacuum market but still captured majority of market.• Additionally, Mow-bot will have more features: line trimming, weed spraying and watering
  54. 54. Returns policy for Comm-bot• Given the higher price margin and higher usage load, offer a longer warranty to appease consumer indecision regarding product.• Roomba has a 1 year warranty, the Comm-bot 1000 will have a 3 year warranty which includes battery life and full parts warranty • High level of manufacturing expertise and design will ensure this expense is kept to a minimum • Further, the higher price charged allows greater flexibility in warranty options on behalf of iRobot
  55. 55. What message will the television advertisements convey?• The television advertisements will promote the iRobot brand as an essential part of stylish living, adding a layer of serenity, ease and freedom to the everyday lives of its consumers• The advertisements will convey the functionality of the products, with a focus on the best selling Roomba, and how the products integrate seamlessly into family life• Overall, stress the importance and usefulness of robotics within the home and ensure it is a ‘must-have’ item
  56. 56. Should iRobot consider vertical integration or broadermanufacturer arrangements?• Vertical integration addresses two problems a) Lowers costs b) Increases certainty of supplies• Neither of these is an issue for iRobot, • Already cost leader • Has a long term contract with one manufacturer and two other reliable manufacturers• Further to this, manufacturing is beyond iRobot’s core areas of expertise and may add unnecessary complexity to the organisation, which would prove costly
  57. 57. How should iRobot deal with the risk of obsolescence?• R&D is one of the core competencies of iRobot: • 6% revenue reinvestment • Nearly 50% of staff in R&D• iRobot must maintain organisational focus on innovation • Recruit the best people – hire graduates from the best engineering schools and experienced hires from firms with similar specialisations • Provide good remuneration to attract and retain staff • Continue to invest heavily in R&D
  58. 58. What are the social costs of introducing a commercial cleaner?• Unemployment may result from the introduction of a commercial cleaner into industries and commercial organisations• Labour is very costly and often an overhead expense which business’ seek to reduce• iRobot is in the business of creating solutions and improving the efficiency of everyday tasks• Innovation is necessary to continue to minimise the costs that businesses face, allowing them their ability to improve products and services delivered
  59. 59. Performance management of sales staff for commercial cleaner• Utilisation of trusted sales organisation • Salesinc – 12 years experience, created $1b in sales for clients • Salesforce- One of the largest sales organisations in the world. Provides online and telephone support as well • Lighthouse sales – focus on emerging and new technology companies• Work closely with sales organisation to train staff in iRobot products and experience • 2 day intensive course • Regular information packs with updated information • Helpline• Regular monitoring and evaluation of sales performance • 10% success rate requirement which is the rate used in financial analysis
  60. 60. Commercial Cleaning – why outsource• Focus on core competencies- design, develop and market robotics• Given the multinational sales channel, would need to establish a cross-country sales team which would be both labour and capital extensive • In addition, don’t have local knowledge which helps in sales techniques• iRobot of successful alliances. • Although mainly manufacturing firms, highlights in the importance placed on quality and choosing the best people for the job, not the cheapest. • Use same thought-process for sales team.
  61. 61. Mow-bot price• High variability in lawnmower prices from competitors • Robomower RM200: $900 at lower end • LawnBott LB 3510: $4000 at upper end Source: Amazon.com• Thus, iRobot can safely price within this range which allows a margin enhancement to the current Roomba product line• Also, given the proposed “Mow-bot” will have added features, we can once again charge a greater premium • As iRobot is the cost leader, can ensure a price war can be fought if eventuated
  62. 62. Alternative if ads become too expensive• TV advertising is a great way to enhance brand exposure but must continue to look at cost-benefit analysis • If too expensive, not worthwhile to pursue this avenue• Look at radio and print media which were the next best advertising alternatives to again drive customer knowledge and provide enhanced experience
  63. 63. Why TV is the prefferred option to increase robotic industryexposure• Average American watches “3 hours and 46 minutes of TV each day” – AC Nielsen• Fast, effective way to quickly impart knowledge regarding Roomba and robotics as a whole • Facebook advertisements have click-through rates of approx. 0.01% which is a highly passive marketing strategy • TV advertisement allows greater engagement and thus conversion from viewer to customer• Engages more senses which allows greater emotional connection to the message • More interactive than listening to radio ads or print media ads
  64. 64. What is stopping competitors from emulating our advertisingcampaign?• It can be argued that increased competition will serve well for the slowly diminishing robotics industry by increasing awareness of the products amongst a wider base of consumers.• This is supported by Industry analysts, such as Roger Christian, VP at Motoman, who agrees that the robotic industry must grow strongly, and quickly, in order to survive.• This will increase the market size of the industry and it is assumed that the increase in market share will be outpaced by the increase in market size leading to an overall rise in absolute market share
  65. 65. Why isn’t advertising campaign occurring in areas other thanUS?• Initially need to be very selective about the locations in which we advertise as it is capital intensive.• US is the most developed nation yet it has been shown that there are large amounts of the population who still are not aware of robotics.• US is the market in which iRobot has the greatest understanding of and can use their current national networks to gain maximum exposure• Therefore the US serves as the optimum starting point for the advertising campaign
  66. 66. Presentation Slides Index Financials andIntroduction Strategy 1 Strategy 2 Strategy 3 ImplementationFront Page Strategies Strategies Strategies Strategy 1 Diversification & Mass media vs socialPillars Cleaning Market entrenchment media Strategy 2 New paradigms - what is a What is the mostHow to reduce commercial Which is the most attractive mass mediavolatility cleaner? attractive market? market? Strategy 3 Cost-effectiveness What is a Mowbot? Targeting of advertising Overall Specialised Sales Implementing the Team Mowbot Risks and mitigation Implementation Risks and mitigationRisks and mitigation Summary

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