Doing Business in Emerging International Markets Global Business
Doing Business in Emerging International Markets Global Business Alliance 13 th Annual Business Forum Presented by M. Sean Molloy Regional Director, Asia Pacific DATE 02 -07 -07
Agenda Introduction n Lo. Jack Corporate Overview n – Defining the challenge: Vehicle theft – Company Information – Lo. Jack Products and Services n Lo. Jack International – Mitigating risk through Licensee relationships – Key international initiatives n Emerging Market Opportunities – China – India n Global Economic Challenges – Risk of no presence may be greater than operational risk – Risk mitigation; leveraging community resources n 2 Conclusions
Vehicle Theft Problem
Vehicle Theft n North America – A vehicle is stolen every 25 seconds – 1. 2 M vehicles stolen per year – $20 B per year n Europe – 1. 5 M vehicles stolen per year (Europol) – $22 B per year – Countries with highest rate of stolen vehicles – UK, France, Italy, Spain, Poland (Europol) n Asia Pacific – Est. 600, 000 vehicles stolen per year (approx. $10 B per year) – High theft rates and ratio of NVS to car parc in India & China – Growing theft with income disparity in emerging markets 4
Lo. Jack – Corporate Overview
Mission – To Be the Leading Global Provider of Products and Services for the Tracking and Recovery of Valuable Mobile Assets 6
Lo. Jack Corporation (LOJN) n World leader in stolen vehicle tracking and recovery n 90+% recovery rate n 20 -year history of success n NASDAQ-listed company ― Symbol: LOJN n Global ― 26 States + Washington D. C. ― 28 Countries 7 n Over 5 million units sold and installed • Over 180, 000 vehicles recovered globally worth $3 billion
Core Strengths • Proprietary covert Radio Frequency Technology • Extensive Private Wireless Network • Relationships with Law Enforcement • Compelling Commercial Model • Insurance Relationships • Brand Recognition (see below) 97% 96% 94% 93. 3% 93% 91% 85% 77% Duracell Wal-Mart U. S. survey - aided & unaided 8 Kleenex Yahoo AT&T Master. Card ebay Amazon. com
Markets Served Passenger Cars Motorcycles Mobile Assets Commercial Vehicles Construction Equipment 9 Cargo
Strong Revenue Growth $ in millions CAGR (2001 -2005) = 17. 5% 3 years of consistent quarter over quarter growth in revenue and earnings n Revenue: 70% US – 30% International n Units Sold: 50% US – 50% International n 10
Business Segments n Domestic – Automotive Dealers – Construction – Motorcycle n YTD 2006 Boomerang – Insurance – Automotive Dealers n Consolidate Revenue International – Licensees – Limited Investment 9% 21% 70% Segment 11
Lo. Jack Recovery Network Coverage Areas n Lo. Jack works best in areas with: – Greatest population density – Highest number of new vehicle sales – Highest incidence of vehicle theft § § § § Arizona California Colorado Connecticut Delaware District of Columbia Florida Georgia § § § § § Illinois Louisiana Maryland Massachusetts Michigan Nevada New Hampshire New Jersey New York § § § § § Lo. Jack operates in markets that represent 70% of theft in the nation 12 North Carolina Ohio Oregon Pennsylvania Rhode Island South Carolina Tennessee Texas Virginia Washington
Lo. Jack’s Global Footprint 13
Lo. Jack Brands 14
Products and Services
How Lo. Jack Works The Lo. Jack system includes a small wireless transceiver that is randomly hidden in your customer’s vehicle n When activated, the unit emits silent radio signals over the Lo. Jack network that allow the police to track and recover the vehicle (complemented by Early Warning product) n 16 1 2 3 4 5 Installation Notification Activation Location Recovery • Lo. Jack unit hidden in vehicle by certified technician. • Registered in Lo. Jack or police database. • Customer reports theft to police or directly to Lo. Jack in certain regions. • Police or Lo. Jack send radio signal from tower. • Lo. Jack unit emits uniquely coded signal. • The signal is tracked and used to locate the vehicle, usually within hours. • The vehicle is returned to the owner.
Market Drivers n Best Technology Choice - Proven – Technology more robust than competitive technologies n Dealership Benefits – Dealers make money on sale and installation – Customer satisfaction n Insurance – Many global markets are driven by insurance mandates • Europe, Latin America, South Africa – Insurance discounts are offered in many regions n Customers – Provides asset protection and peace of mind – Proven product with real consumer benefit 17
Lo. Jack International Building a Global Brand
Lo. Jack’s International Expansion 1992 expansion begins n Builds on Bill Reagan’s entrepreneurial origins n Early technology license & distribution model n – – – – n Growing need to hedge against regional/global risks – – n 19 Licensing fees finance expansion Seeking local experts allows for immediate market entry Allows for local tracking and marketing flexibility Leverages entrepreneurial innovation and R & D Minimizes investment requirements Allows for local relationship management Cuts down on international administration costs Need to leverage brand value globally (Global SVR leader) “on call” and black box safety regulations Demand for regional operational coverage Telematics IT convergence and OEM relationships Evolving model for emerging markets
Increasing International Market Penetration n Market Opportunity – 66 Million New Vehicles Sold Annually – For Every Vehicle Stolen in U. S. , 2 are Stolen Globally n Licensee Strategies for Growth – Develop Programs Enabling Licensees to Increase Local Market Share – Consolidating operations and establishing subsidiary presence – New product development – Develop New Markets in Asia/Pacific Rim – Seek Global Agreements with Vehicle Manufacturers 20
Leveraging Global Presence n Ownership and Operation of Select Markets – Creating Shareholder Value n Italy First Step – Operational in Rome and Milan n Pan-European Network – Distribution and Recovery Experience in U. S. Applicable n Develop key emerging markets – China ’ 07 – India & SE Asia in development 21
Developing New Products in the Tracking and Recovery Space 22 n Knowledge of Police Systems and Process n Proven Radio Frequency (RF) Technology n Brand = Tracking and Recovery
SVR in Emerging Markets Considering China and India
Emerging Market Opportunities n China and India – – n the two most populous countries, account for 40% of the world’s population, are the fastest growing economies in the world Business objectives moving from outsourcing and supply chain efficiencies to presence & market share Challenges remain: developing economies in transition – Formation of institutions (political and regulatory) – Formation and maturity of markets n Impacts becoming material – Impacts of continued Sino-Indian growth will become larger – In 1980 when China grew ten percent, the absolute increment to global GDP and global demand was insignificant. – Now the GDP is over 1. 88 trillion $, and a ten percent increment is large in absolute terms (equivalent in terms of global demand of about a 1. 4% increment in US growth 24
Engines for Global Growth China and India represent unprecedented growth opportunities n GDP per capita predicted to grow by a factor of 4 to 7 within next 20 years n Obvious impacts on global consumer spending trends n 25
China and India: The Fastest Growing Vehicle Markets in the World • China’s 2004 car parc was 24. 1 Million • China’s car parc grew at CAGR of 5% from 2000 - 2004 • China’s car parc is predicted to grow at CAGR of 9% from 2005 - 2015 • China already is the third largest light vehicle market by vehicle sales in the world • China is expected to become the second largest auto market in 2007, surpassing Japan • India projected to grow to 3 M in annual new vehicles sold by 2010 HISTORICAL AND PROJECTED CHINA CAR PARC — LIGHT VEHICLES Source : Global Insight Asian Automotive Industry Forecast Report August 2005. Light vehicles include passenger cars and light trucks.
China and India: Vehicle Theft Rates Among the Highest Worldwide • “Automobile theft is rampant. In 2005, Chinese police authorities recorded 683, 000 automobile theft cases” Source: People’s Daily Online January 20, 2006 • Over 2% of the vehicle car parc was stolen in 2005 • Theft rates among the highest in the world, comparable with South Africa and Brazil • Market survey revealed that 50%+ of car owners know someone whose car was stolen • Theft rates in India skyrocketing, now also approaching 2% Estimated Global Theft Rates and 2004 Car Parc by Market Source : Global Insight Asian Automotive Industry Forecast Report August 2005, Company and Lo. Jack Corporation estimates
Global Economic Challenges
“The World is Flat” n Globalization as an opportunity and a challenge – Opportunities will become threats if not engaged – Avoiding emerging markets may be a bigger risk than confronting the challenges they present n Lo. Jack’s Approach – Leverage maximum resources through partnership – Maintain a focused, prioritized, and strategic approach to new markets and product development – Ensure leading position and brand recognition in developed countries and commit to key emerging markets – Identify and invest in good people 29
Utilizing Community Resources 30 n Market studies n Strategy consulting n Partner search n Regional networking n Sharing best practices n Regional consultants n References
Conclusions n Globalization as an agent of change – The best companies will risk failure in order to gain opportunity – Risk is not a matter of choice, but strategy – Partnerships allow companies to overcome risk by leveraging shared resources and specialization – Harnessing entrepreneurship drives creativity and innovation in an increasingly competitive environment – A company is only as good as the people it keeps. 31
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