2nd UPDATE

Strategic and Financial Analysis of the Holographic Phone

Written by: Dallon Claire, Tam Connie, Leger Jules, Zammit Mathilde, and Rotter Gergely

March 24, 2015

OutlineStrategic Analysis............................................................................................3.

PESTEL framework............................................................................................................3.

Political..................................................................................................................................3.

Economical.............................................................................................................................4.

Social......................................................................................................................................5.

Technological.........................................................................................................................5.

Environmental........................................................................................................................6.

Legal.......................................................................................................................................6.

SWOT analysis.....................................................................................................................7.

Strength..................................................................................................................................7.

Weaknesses............................................................................................................................7.

Opportunities..........................................................................................................................7.

Threats....................................................................................................................................8.

Porter’s Five Forces Analysis..............................................................................................8.

The Threat of New Entry.......................................................................................................8.

The Threat of Substitutes.......................................................................................................8.

The Power of Buyers..............................................................................................................8.

The Power of Suppliers..........................................................................................................8.

Competitive Rivalry...............................................................................................................8.

Stakeholder mapping...........................................................................................................9.

Financial Analysis............................................................................................10.

Concept Evaluation..............................................................................................................10.

Strategy..................................................................................................................................10.

Limits.....................................................................................................................................11.

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Strategic Analysis of the Holographic PhonePESTEL

By using the PESTEL framework a relevant picture can be gained about the market where the

company aims to operate. The PESTEL analysis will focus on the Hungarian market and will

examine the current situations in different fields of life.

Political

The political background of Hungary is much divided. The governing party – the FIDESZ - has

almost a two third majority in the parliament so therefore is has a total power in the political area.

On the other hand the citizens of Hungary are also divided because there are people who support

the left-sided parties, some support the right-sided parties and their opinions are rarely similar

about certain issues. It is also important to mention that many people have disappointed and lost

their faith for the governing party so nowadays the Party has relative more representatives in the

parliament than supporters in the country.

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Economical

In the economic field Hungary used to be very instable in the past 8 years, approximately since

2006 when it had to apply for IMF (International Monetary Fund) help. The financial crisis had a

significant impact on Hungary and it could not recover totally from the losses. Since 2012 the

economy of the country has become more stable than it was before. The unemployment rate is

7.4% at the beginning of 2015 according to the Hungarian Central Statistical office, it is 4.6%

decrease since 2012 when the unemployment rate was 12.0%. The inflation is close to zero and it

is the result of relative low inflation in the past three years and also the drop of the fuel prices

from 440 HUF to 320 HUF. The minimum wage in Hungary increased from 71,500 HUF to

105,000 HUF during the period of 2009-2015.

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Social

The social background of Hungary is optimal for the project because the country has around 30%

of the labor force who has at least an undergraduate degree, and also as it was mentioned in the

economic section the average minimal wage is lower than the Euro-average. It is also important

to mention Hungary is a centralized country. 2.5 million people live in the capital – Budapest –

out of the less than 10 million citizens. The regional differences are also spectacular. The capital

city is the most advanced in terms of technology and living standards. The rural areas are less

developed, and there is also a significant difference between the more advanced western and the

eastern part of the country where the poverty is the highest.

Technological

The technology available in Hungary that is required to build a prototype and to start the mass

production are available. As it was mentioned in the Social part, the Hungarian people are a

highly educated cheap labor force compared to the Western countries. Many technological

companies has chosen Hungary as their headquarters and the center of their production. Three

examples of this are the Audi, Mercedes, and the Prezi.

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Environmental

The company does not have a significant impact on the environment, but it has to take into

consideration the reduction or the elimination of the wastes. It is also important to have system

where the wrong devices can be handled and safely managed, because like every electronic

device the holographic phones also contain some dangerous materials.

Legal

The Hungarian legal system is advanced, and it supports the companies. However the red tape

and a bureaucracy are high and the taxes are above the European average

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SWOT

The SWOT analysis gives a closer look at the company’s internal and external environment. It

helps identify the opportunities and threats that is the external part of the environment and the

strength and weaknesses as well.

Strengths

The main strength of the product is its uniqueness. There are no smart device in the market that

has the real-time three-dimensional colorful holographic communication opportunity. With a

feature like that, the product can gain a significant market share and as long as the telephone

producers compete with each other to provide the best smart device available the product can

maintain this market share which is necessary to stay competitive and sustainable over a long

period of time. As it was mentioned in the 1st update the technology can be used not just in the

telecommunication market but it can be successful in other areas such as in the business

environment, where meetings could be organized without the real presence of the members.

Weaknesses

The most important weakness of the product is the price and the riskiness of this new feature. The

price is a significant weakness, because the research and development costs are high and

therefore initially those products having this feature will be extremely expensive. But on the other

hand this is a market where there are a lot of people who are willing to pay the price just because

they want to try the new opportunities. Later on the price will be less expensive and people will

be more likely to try it because it will be proven that the holographic phones work well and they

give a new level of experience for the users. This relates closely with the second weakness of the

product saying that it is risky. It is risky for the users at the beginning because they have little or

no experience and have no idea what they can expect.

Opportunities

The greatest opportunity this product have is that it will be the first in the market and as a result

the competition at the beginning will be low. By the time the new entrants are appearing the

product will have the competitive advantage it will have gone through the testing stages and the

whole product will be more stable and reliable.

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Threats

The threat that the product has to face are the new entrants of the market. These companies may

have more capital or higher production capacity than us and as a result the product can lose a

significant market share.

Porter’s Five Forces

By using Porter’s Five Forces analysis the attractiveness of the market can be measured based on

five important criteria: the first is the threat of new entry, after that the threat of substitutes, then

the power of buyers followed by the power of suppliers and finally the competitive rivalry.

The Threat of New Entry

The threat of new entry is high if the product will be successful. Companies and entrepreneurs

will recognize immediately the opportunities the market has and there are many people who have

the sufficient capital to enter into the business. However there are high entry barriers due to the

high research and development costs and also the high production costs.

The Threat of Substitutes

The threat of substitutes are relative low because we are working on a product that has never

existed before. Some of the substitutes might be the traditional way of calling or the

videoconference but as the product matures and becomes more available to the market these

threats will be lowering.

The Power of Buyers

The product will have two types of buyers. One of them are the end-users. They have a low

power over the product because they are separated and they buy only a small quantity. The other

group are the big electronic companies such as Samsung, Nokia, LG, or Apple. They have way

more power as a result that they will buy the biggest amounts.

The Power of Suppliers

The power of suppliers will be moderate because both companies will depend on each other and

fair trade will happen between both parties.

Competitive Rivalry

After the new entrants appear the competitive rivalry will be high because of the limited number

of buyers.

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Stakeholder Mapping

The stakeholder mapping is a great tool to analyze which stakeholders are important and which

are less important from the point of view of the company. By using this methods the stakeholders

will be grouped into four categories based on their power and interests. Those stakeholders who

have little power and little interest in the operations of the company require minimal effort. The

stakeholders having large interest but no power are need to be kept informed. The third group is

the stakeholders which have low interest but high power and they need to be kept satisfied. And

finally, there are those stakeholders who deserve the most effort because they have high interest

and high power as well.

The most important stakeholders of the company are the following:

Owners and shareholders Customers Employees Competitors Suppliers Government Political groups Unions Charity organizations

Level of interest

Low High

Power

Low Charity

organizations

Competitors

Unions

High

Political groups

Government

Suppliers

Employees

Customers

Owners and

shareholders

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Concept Evaluation

Strategy

This product will be launched in parallel with the launch of the Samsung Galaxy S7 in order to

have one year before entering the market (Samsung Galaxy S6 is to be launched in April 2015).

The financial model relays on an agreement between Samsung and the company.

The main points of the agreement are:

Samsung puts its brand on the device Samsung relates its smartphones to the device on websites (to improve sales) Samsung is offered 20% of ownership share and a 2 years exclusivity if they fill those

conditionsSales of Samsung Galaxy S4 : 16 million (first three months)

Sales of Samsung Galaxy S5 : 12 million (first three months)

Estimated sales of Samsung Galaxy S6 : 22 million (first three months)

The Samsung Galaxy S7 could reasonably register 20 million sales during the first three months

following its launch.

According to a research and the ATAR Model, the following things can be argued (results must

be revised after the survey results) :

Expected Units Sold of Samsung Galaxy S7= 20 million

10 % aware of product 70 % who would try product if they can get it 50 % to whom product is available (internet exclusivity to avoid delivering costs) 1 repeat measure because it is a durable product 2 Number of units repeaters buy in a year (it is expected that all customers will convert at

least two of their parents or friends to buy the device)The price of a Samsung Galaxy S5 is about US$ 500 and the maximum price for a Samsung

accessory is US$ 90 (waterproof technology hull). So, it is estimated that the price of the device

should not exceed 20% of the price of a Samsung smartphone. As the device presents a high-tech

aspect, the targeted selling price will be US$ 100.

Profit per Unit = 100 (revenue per unit) – 70 (cost per unit) = US$ 30

As this is the launching phase, economies of scale cannot be done. A 30% margin should be

expected.

Profits = Units Sold x Profit per Unit

Units sold = 20 million x 10% x 70% x 50% x 1 x 2 = 1,4 million

Profits = 1,4 million x US$30 = US$ 42 million

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But those profits have to be considered if the device enters the worldwide market. As a

negotiation has to be made with Samsung to define the terms of the contract, those profits could

be less impressive. Indeed, Samsung could test the product in the South Korean market before.

There are 50 million South Koreans and among them, one out of five is a Samsung Galaxy

owners. The South Korean market represents 15% of Samsung smartphones sales.

So, if the device only enters the Korean market, 210 000 units sold and US$ 6,3 million profits

could be expected.

Limits

The strategy depends on Samsung expected terms of agreement

If they do not agree with the precedent propositions, more marketing costs should be supported

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