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Reboot Systems
Submitted by-
Pulkit Bohra | Pulkit Mathur| Tarun Gupta
Team Iguanas, IIM Ranchi
Composition:
Cover Slide - #1
Main Slides - #15
Appendix - #7
Recommen-dation
Entry Strategy & Business Opportunities
Financial AnalysisIndustry Analysis Value Chain Analysis
To identify market potential of used PCs in India
Market growth trends in used PC market and e-waste management
were observed
Lack of affordable PCs is a major hindrance in market growth
Leading players in the segment were interviewed
Value chain was broken to understand specific nodes and relevant issues were identified
Warranty and after sales service are important decision makers
Phase 1: Target Metro CitiesEstablish hold in big Industrialized zones
Phase 2: Target tier 1 & major tier 2 cities
Create wider customer network
To analyse the minimum margin and penetration required for a
profitable business
Strategicobjectives
Analysis
Insights
Reboot Systems is well poised to grow its market share in the expanding Used PC market. Scaling up operations using the suggested Phase Wise Expansion & GTM strategy followed by entry into E-Waste Management will help them leverage First Mover Advantage.
To dissect the value chain and identify nodes for improvement
To outline a Go-to-Market strategy and identify future
business prospects
Reasons for low penetration of PCs were analysed
Short and long term strategies were mapped with phase wise
market entry
Projection of USED PC market in the urban and rural regions.
Calculations of margins per computer and ROI in “Most
likely” scenario
Go-to-market strategy was outlined to come up with a
three stage model for each of the identified regions
Reboot should focus on collection, refurbishment and redistribution in short term;
Long term market opportunities in e-waste management
To maintain a consistent ROI of greater than 30%, the
penetration and margin should be greater than 0.38% and 15%
respectively.
The present margin per PC for Reboot Systems is 23%
(approximately)
Executive Summary
“Used” PC Market is naïve. Offers scope for First Mover Advantage
High growth rate forecast for adoption of used PCs in both rural
and urban markets
Short and long term implementation plan designed
Phase 2: Target tier 3 & villagesPenetrate the underserved rural
markets & fight digital divide
ENTRY STRATEGY & BUSINESS
OPPORTUNITIES
Agenda
INDUSTRY ANALYSIS
PRIMARY RESEARCH
VALUE CHAIN ANALYSIS
FINANCIALSINDUSTRYANALYSIS
Refurbished Computer Industry holds strong potential driven by expanding domestic market
Sources: Case Exhibit 3c & 5
REASONS TO ENTER
GROWING AWARENESS
4
LARGELY UNORGANIZED
MARKET
2
SCOPE FOR INNOVATION
3
E-waste Market
90% of the e-waste finds its
way in the unorganized
sector. 90%
10%
E-waste Market
Unorganized
Organized
EXPANDING MARKET
1
PC use forecast-
Compounded annual
growth rate0
10
20
30
China India US Japan
CAGR
PC use is slated to have the
highest CAGR in India
Share of Market
Used computers have 15% share
of the total market. 0
5
10
15
20
0
10
20
30
40
50
60
70
Reasons for No Internet Access
0
10000
20000
30000
40000
50000
60000
70000
80000
2011 2012 2013 2014 2015 2016
Market that can be captured by Reboot in “Most Likely” scenario (No. of Used PC’s)
Rural Urban Total
• Lack of affordable PC’s/Laptops result in a “No PC at home situation”
• Low internet penetration and lack of usability pose greater challenges.
• ICT adoption has been majorly by the affluent section of the society.
• Majority of the market lies in Urban (tier I and tier II) cities.
• Even with a .25% market share in urban cities and 1% market share in rural, Reboot can sell more than 70 thousand units by 2016
• The growth rate towards adoption of used computer is high in both rural and urban cities.
Reboot systems is well poised to face the challenges posed by the used computer business
Sources: Case (Exhibit 8), Appendix (Exhibit 1)
Agenda
INDUSTRY ANALYSIS
PRIMARY RESEARCH
VALUE CHAIN ANALYSIS
FINANCIALSPRIMARYRESEARCH
ENTRY STRATEGY & BUSINESS
OPPORTUNITIES
Warranty and after sales service
are critical to purchase decision.
Primary Research was conducted at ECORaksha, Bangalore
• Corporates either rent their computers or buy them, majority of our e-waste comes from corporates that buy laptops/Pc’s. • My customers are Entrepreneurs, small
business owners and individual buyers. • Majority of the market is unorganized, an
organized player with an innovative approach can really leave a mark on the business.
Mr. Mithun Garudapalli
Partner Ecoraksha
• Customers demand warranty while buying a refurbished computer hence after sales service plays an important part. • Given the margins that we operate in
achieving Scale of operations is the key to success. • Majority of the players in the market do not
have the capital to invest in a recycling plant. Mr. B S Mukund
Owner Ecoraksha
KEY TAKEAWAYS
Majority of players still to set up their recycling
plants
Our customers include individual buyers and small
businesses
47%
21%8%
6%
6%12%
E waste Management services Market
Infotrek
Trishiraya
E-parisaraa
INAA enterprises
Tessam Recyclers
Others
Agenda
ENTRY STRATEGY & BUSINESS
OPPORTUNITIES
INDUSTRY ANALYSIS
PRIMARY RESEARCH
VALUE CHAIN ANALYSIS
FINANCIALSVALUE CHAIN
ANALYSIS
Reboot Systems’ Strategy
Reverse Logistics ChainManufacturing
Distribution Reuse
Refurbish
Recycle
RedistributionEND OF
PRODUCT USE /DISPOSAL
E-Waste Handling
ISSU
ES
• Establish local Nodes• Profit Sharing Scheme
for retailers• Competitive Bidding for
Corporate Clients• National & International
Regulations
• Supply From Individuals• Local Retailers• Recycling Industries• Corporate Clients• Non Profit Organizations
SUP
PLI
ER
2
ISSU
ES
• Large Warehouses• Inventory Management• Human Health & Safety• Environmental
Protection
• Handling- Transportation• Cleaning/Data Security• Asset Recovery/Testing• Hardware Assembling• Software Installation
SER
VIC
ES
ISSU
ES
• Identify potential clients.• Target Government
Initiatives as supply markets.
• Establish nodal centers for regional penetration.
• Packaging• Marketing &
Communications• Distribution Channels• Service Centers/Call
Centers
CH
AN
NEL
S
4
ISSU
ES
• Huge Plant establishment CAPEX
• Health Issues& safety• Environmental
Protection & Regulations
• Dismantling• Extraction of pollutants• Segregate the useful
waste.FUTU
RE
Sources: UNESCO Guide to Computer Recycling -2008 ; Cognizant ‘s Reverse Supply Chain-Completing the Supply Chain
Implementation plan (short term, long term)
Manufacturing
Distribution
Recycle
RedistributionEND OF
PRODUCT USE /DISPOSAL
Reuse
RefurbishE-Waste Handling
Staggered/Phased Market Entry
Establishment in Supplier Rich Regions
Increase Customer Base
Fill the Digital Divide in Rural Areas
Phase 1 Phase 2 Phase 3
Top Metros & Tier 1 Cities
Expand in Tier 1 & Tier 2 Cities
Expand in Tier 2 & Associated Sub-
urbans
Phase 4
Forward Integration into the E-Waste
Handling Business
Short Term (5 years) Long Term ( 10 years)
Increased Market to Cater to
Reverse Logistics Chain
Sources: List of cities and towns in India – Wikipedia; Reverse Logistics Model –University Of South California
Agenda
INDUSTRY ANALYSIS
PRIMARY RESEARCH
VALUE CHAIN ANALYSIS
ENTRY STRATEGY
FINANCIALSENTRY
STRATEGY & BUSINESS
OPPORTUNITIES
KEY FACTORS FOR CHOOSING CENTRES
Literacy Rate Per Capita Income1 2
LUCKNOW
NEW DELHI
JAIPUR
PATNA
KOLKATA
HYDERABAD
CHENNAI
MUMBAI
AHEMDABAD BHOPAL
BUBANESHWAR
TRICHI
BENGALURU
kanpur
allahabad
Malda
hugli
vijaywada
guntur
madurai
coimbatore
mysore
davangere
pune
udaipur
ajmer
rajkot
surat
warangal
nagpur
Suggested Model For Selecting Collection Centres
Targeted regions
Rest of India
Sources: List of cities and towns in India – Wikipedia; Indiastat.com
• UP(Agra, Meerut, Varanasi)• WB(Siliguri, Asansol, Khargpur)• Bihar(Arwal, Gaya, Muzaffarpur)• MP(Ujjain, Ratlam, Indore, Sagar)• Rajasthan(Pali, Sikar, Alwar)
• AP(Vishakhapatnam, Eluru)• TN(Thoothukudi, Vellore, Salem)• Maharashtra(Thane, Dombivili)• Karnataka(Gulbarga, Mangalooru)• Gujarat(Vadodra, Bhavnagar)• Orissa(Dhenkal, Debargh)
Phase 1• Target metros & major Cities
• Establish hold in big Industrialized zones which will act as suppliers
Phase 2• Target tier 1 & major tier 2 cities
• Create a wider customer network
Phase 3
• Target tier 3 cities
• Cater to the digital divide by penetrating the under-served rural market
Tie
r 3
Cit
ies
Reboot should follow a Three Stage model for each of the identified Regions
Based on the product life
cycle and the target
market in a specific
geography, one or more of
the three pillars have
been chosen as focus to
meet our clients business
needs.
Stage 1
Primary focus
Secondary focus
• Reboot Systems should leverage the first mover advantage
• Focus on Product and capture the Market Share
Stage 1Leveraging the First Mover Advantage
Three Pillars for
GTM Strategy
• Competition would increase as the market gains traction
• Need to focus on distribution channels to reduce costs and fight competition
Stage 2Focus on DistributionChannels to improve Efficiency
• Customer retention becomes very important
• Reboot can offer All India Helpline to offer online resolution of problems
• Introduction of loyalty programs
Stage 3Significant emphasis on Customer Retention
Customer
ChannelProduct
New Product
Entry
Entry of Competition
Mature
Markets
Stage 2 Stage 3
Sources: AT Kearney (Redifining GTM)
Tie ups with government agencies and After Sales Service are Critical for Success
Investment/
ExpensesHR Requirement Priority
Returns /
Impact
Direct Sales
Tie-ups with
government
agencies
Tie-ups with small
private enterprises
Promotions to
create Awareness
After Sales Service
Loyalty Programs
• Major mass market
consumer interface
• Lease program with
appropriate warranties
would encourage use
of refurbished
computers with such
establishments
• People are ready to
consume but are
unaware of such cos.
• This will help generate
trust and improve
customer satisfaction
• Critical for customer
retention
INDUSTRY ANALYSIS
PRIMARY RESEARCH
VALUE CHAIN ANALYSIS
Agenda
ENTRY STRATEGY & BUSINESS
OPPORTUNITIES FINANCIALSFINANCIALS
ROI in 2012Margin per PC
5% 10% 15% 20% 25%
Used PC
Market
Captured
0.13% -0.72 -0.44 -0.16 0.11 0.39
0.25% -0.44 0.11 0.67 1.23 1.79
0.38% -0.15 0.69 1.54 2.39 3.23
0.50% 0.11 1.23 2.34 3.46 4.57
0.63% 0.40 1.81 3.21 4.61 6.02
ROI in 2013
Used PC
Market
Captured
0.13% -0.78 -0.55 -0.33 -0.11 0.12
0.25% -0.55 -0.11 0.34 0.79 1.24
0.38% -0.32 0.36 1.04 1.72 2.40
0.50% -0.11 0.79 1.68 2.58 3.47
0.63% 0.13 1.25 2.38 3.51 4.63
ROI in 2014
Used PC
Market
Captured
0.13% -0.80 -0.60 -0.40 -0.20 0.00
0.25% -0.60 -0.20 0.20 0.60 1.00
0.38% -0.39 0.22 0.83 1.43 2.04
0.50% -0.20 0.60 1.40 2.20 3.00
0.63% 0.01 1.02 2.03 3.04 4.04
ROI in 2015
Used PC
Market
Captured
0.13% -0.80 -0.61 -0.41 -0.22 -0.02
0.25% -0.61 -0.22 0.17 0.56 0.95
0.38% -0.41 0.19 0.78 1.38 1.97
0.50% -0.22 0.56 1.34 2.13 2.91
0.63% -0.02 0.97 1.95 2.94 3.92
ROI in 2016
Used PC
Market
Captured
0.13% -0.80 -0.61 -0.41 -0.22 -0.02
0.25% -0.61 -0.22 0.18 0.57 0.96
0.38% -0.40 0.19 0.79 1.38 1.98
0.50% -0.22 0.57 1.35 2.14 2.92
0.63% -0.01 0.98 1.96 2.95 3.94
ROI sensitivity analysis w.r.t Margin per PC and Used PC market captured
To maintain a consistent ROI of
greater than 30% year on year,
Reboot should focus on maintaining a
margin of at least 15% per PC and
capture at least 0.38% of the Used PC
market.
Sources: Appendix (Exhibit 1 & 2)
Market Sizing : Exhibit 1 (Appendix)
ROI & Margin calculations : Exhibit 2 (Appendix)
Appendix
Overall Market in India, Growing at a CAGR of 26.5%
2011 2012 2013 2014 2015 2016
Used PC Market 8790127 11040400 13866742 17416628 21875285 27475358
Rural 182219 228867 287457 361046 453473 569562
Urban 8607908 10811533 13579285 17055583 21421812 26905795
Market that can be captured by 'Reboot' (No of used PC's)
Optimistic (market captured, Urban .5% & Rural 2%)
Rural 3644 4577 5749 7221 9069 11391
Urban 43040 54058 67896 85278 107109 134529
Total 46684 58635 73646 92499 116179 145920
Most Likely (market captured, Urban .25% & Rural 1%)
Rural 1822 2289 2875 3610 4535 5696
Urban 21520 27029 33948 42639 53555 67264
Total 23342 29318 36823 46249 58089 72960
Pessimistic (market captured, Urban .1% & Rural .25%)
Rural 456 572 719 903 1134 1424
Urban 8608 10812 13579 17056 21422 26906
Total 9063 11384 14298 17958 22555 28330
Overall Market Sizing and estimation of market captured by Reboot
Exhibit 1
Margin (per 100 PCs sourced)
Working PCs 70% 70 Not working PCs 30% 30
Pick up
price/computer 2500 Pick up price (Rs/Kg) 20
Refurbishment cost Weight per PC (Kg) 12
Material 2000 Selling price (Rs/Kg) 30
Labour 400 Margin (per PC) 120
logistics 100
Total Margin (Non
Working PCs)
Cost per PC 5000
Selling Price 6500
Margin Per PC 1500
Margin (Working
PCs) 105000
Margin (Non Working
PCs) 1440
Total Margin (100 PCs) 106440
*From 100 PCs sourced, 70 Pcs are in working condition and 30 are not.
*Average weight of a PC has been taken as 12 Kg's
2012 2013 2014 2015 2016
Rent (Rs 50000/Outlet) 9000000 16200000 24000000 31200000 39000000
No of outlets 15 27 40 52 65
Rent for Furbishment
space 100000 200000 300000 400000 500000
Marketing Spend 1910328 2399372 3013612 3785096 4754081
Store Employees
Salaries 4775821 5998431 7534029 9462741 11885202
Miscellaneous
(Electricity etc) 318388 399895 502269 630849 792347
Investment 16104537 25197699 35349909 45478686 56931630
Total operating Margin 31838805 39989539 50226861 63084938 79234682
Net profit 15734268 14791841 14876952 17606251 22303052
ROI 0.98 0.59 0.42 0.39 0.39
*Marketing Spend has been taken as 6% of the total revenue
*Employees salaries have been taken as 15% of the total revenue, based
on the no. of employees required to operate and outlet and an assumption
that each employee can refurbish at least 20 laptops everyday.
*An increase in number of outlets from 3 in 2011 to 65 in 2016, has been
taken as a linear growth.
*Operating margin has been calculated by using the Margin(100 Pcs)
calculated in table 1 and the total no. of expected PC sales by Reboot
calculated using Exhibit 3C, 5, 7 and data mentioned in case.
ROI & Margin calculations for “Most Likely” scenario
Exhibit 2
Margin per computer = 1500/6500
= 23.1%
Adding Value Decreasing Cost Differentiation
Providing affordable &
quality PC in India:
• Bridging the Digital
Divide
• Solving the E-waste
problem Of India
Decreasing cost of PC
heavily with:
• Refurbished
computers
• Selling E-waste to
big Recyclers.
Pioneering:
• Reverse Logistics Model
• Offloading E-waste
handling & recycling duty
from big enterprises.
Influencing Industry
Attributes
Negating Risk Gaining Knowledge
• Halving the cost of PC
• Increasing penetration
in Tier 2&3 cities.
• Handling E-waste
effectively &
profitably.
India’s high risk index is
overcome by the Increased
customer targeting &
including large corporates
as our major suppliers.
• Gaining knowledge of the
vastly untapped Tier2&3
• Gaining knowledge of E-
waste disposal business –
scope for backward
integration.
Reboot Systems is ADDING value by scaling up its operations
We see that scaling up &
expansion adds value &
Chowdhary-Subbarao should go
ahead with investing in Reboot
System’s growth in India.
First Mover Advantage Framework
Most important reasons and methods of disposal
Most important reasons for replacement of Computers
Methods of disposal of Computers
Important considerations while disposal
Sources: Frost & Sullivan (India waste management services market
1%
3%
3%
4%2%
62%
25%
Financial Obsolence
As per Company's ITPolicy
Better Tech at cheaperprice
Latest Trends
Others
Technical Problems
Obsolete Technology
18% 3%
9%
13%24%
33%
Sold in second handmarket
Sold to employees
Donations
Sold to scrap collectors
Exchange for newproducts
Vendor buy backs
24%
9%16%
42%
2% 7% Convinience
Quick pick up, no space tostore
Best exchange offer
Best Price
Environmentally frienlydisposal
Others
Suggested Design For The Refurbishment Facility
Sources: UNESCO- Entrepreneur’s Guide To Recycling Industry
Used Product From Suppliers
TEST 1:Homogeneity
Of Inflow
In the long term, it is more profitable to
process homogeneous batches of equipment than to maintain and repair computers of
different configurations and
brands.
Test 2:Brand, Chip
Speed & Age
Decide on feasibility of their refurbishment
and about the market on which they could be
resold.
Inflow For Refurbishment
Facility Specifications
• 300 sq. m Storage area• 200 sq. m Courtyard area• 100 sq. m Workshop
• 10-15 employee strength
• Utilities: Electricity, Water, Telecomm
Key Takeaways
1. Design a Training Program for Employees for handling & processing Inflow for refurbishment.
2. Careful Central Inventory Management System for:• Recording in-out movements.• Identifying Equipment asset.• Maintaining supply of parts across Centres.
3. Maintain Traceability for legal & certification purpose.
