Abstract
In late September 2014, after reviewing the revised financial projection of their new venture, Maui Millan, the CEO and the head of product development, and Mannix Chong, the COO and the head of business development were alarmed. They planned to call their board of advisors to discuss the future of SmartFleet, the new product of the Philippines-based firm called Pahrsek Inc. SmartFleet is a cloud-based fleet management tool that provides enterprise resource planning capability to fleet vehicle operators. For Maui and Mannix, there were numerous challenges ranging from developing a pricing strategy, growing the market as a pioneer in this industry in the Philippines, to proactively managing the potential global competitors who were on the verge of the Philippines market. They were anxious because they knew that only a set of careful, well-thought out and smart decisions could ensure survival and sustainability of this new venture.
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IdeaSpace holds an annual tech startup contest, where it selects some promising entries after multiple rounds and provides an intensive incubation program for the finalists. During the incubation, IdeaSpace provides PHP 50000 grant for the prototype development, presentation materials, and other initial operating expenses. IdeaSpace selects 10 startups as winners in the acceleration phase. Winners receive an initial grant of PHP 1 million which consists of fifty percent outright cash investment, and rest in the form of business management classes and marketing and financial consulting, incorporation and business registration costs, etc. IdeaSpace also provides an office accommodation at A-Space and housing to the team, if needed. For those startups that successfully complete the acceleration programme, IdeaSpace evaluates them to provide further funding worth PHP five millions. Year 2014 was the second time that Ideaspace held the competition. During 2014, it was assisting 24 startups selected from the two previous competitions. IdeaSpace also provides support to some promising startups independently.
Peso, denoted as PHP, is currency of the Philippines; one USD was equivalent to around 43 pesos in June 2014.
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Appendices
Exhibit 1: Operations Automation Tool (OAT) dashboard
Exhibit 2—Fleet Management Tool (FMT) dashboard
Exhibit 3—SmartFleet: financial projections
Option A (Data extracted from the company records. All figures have been changed to protect confidentiality)
September 2014 | October 2014 | November 2014 | December 2014 | Year end | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OAM | FMT | OAM | FMT | OAM | FMT | OAM | FMT | ||||||
Number of vehicles | 55 | 30 | 155 | 65 | 255 | 175 | 275 | 195 | |||||
Implementation fee one time | 10,000 | 2500 | 10,000 | 2500 | 10,000 | 2500 | 10,000 | 2500 | |||||
Price per vehicle | 100 | 1000 | 100 | 1000 | 100 | 1000 | 100 | 1000 | |||||
Total revenue | 15,500 | 32,500 | 48,000 | 25,500 | 67,500 | 93,000 | 35,500 | 177,500 | 213,000 | 37,500 | 197,500 | 235,000 | 589,000 |
Variable costs | |||||||||||||
Sales incentives | 10 | 95 | 10 | 95 | 10 | 95 | 10 | 95 | |||||
Application hosting/unit | 35 | 150 | 35 | 150 | 35 | 150 | 35 | 150 | |||||
Variable cost per unit | 45 | 245 | 45 | 245 | 45 | 245 | 45 | 245 | |||||
Total variable cost | 2475 | 7350 | 9825 | 6975 | 15,925 | 22,900 | 11,475 | 42,875 | 54,350 | 12,375 | 47,775 | 60,150 | 147,225 |
Contribution margin | 38,175 | 70,100 | 158,650 | 174,850 | 441,775 | ||||||||
Depreciation | 1000 | 1000 | 1000 | 1000 | |||||||||
Office utilities | 475 | 475 | 475 | 475 | |||||||||
Office rent | 2075 | 2075 | 2075 | 2075 | |||||||||
Stationary | 1050 | 1050 | 1050 | 1050 | |||||||||
Events | 3000 | 3000 | 3000 | 3000 | |||||||||
Physical collateral | 5000 | 5000 | 5000 | 5000 | |||||||||
Online ads | 2000 | 2000 | 2000 | 2000 | |||||||||
Book keeping | 750 | 15,350 | 750 | 15,350 | 750 | 15,350 | 750 | 15,350 | 61,400 | ||||
Operating profit | 22,825 | 54,750 | 143,300 | 159,500 | 380,375 | ||||||||
Contribution margin ratio | 0.79 | 0.76 | 0.75 | 0.74 | 0.75 | ||||||||
Break-even point (in PHP) | 19,301 | 20,364.5 | 20,608.6 | 20,630.5 | 81,862 | ||||||||
Margin of safety (MOS) | 28,699 | 72,635.5 | 192,391.4 | 214,369.5 | 507,138 | ||||||||
Operating profit ratio | 48% | 59% | 67% | 68% | 65% |
Option B (Data extracted from the company records. All figures have been changed to protect confidentiality)
September 2014 | October 2014 | November 2014 | December 2014 | Year end | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OAM | FMT | OAM | FMT | OAM | FMT | OAM | FMT | ||||||
Number of vehicles | 55 | 30 | 155 | 65 | 255 | 175 | 275 | 195 | |||||
Implementation fee one time | 5000 | 500 | 5000 | 500 | 5000 | 500 | 5000 | 500 | |||||
Price per vehicle | 50 | 600 | 50 | 600 | 50 | 600 | 50 | 600 | |||||
Total revenue | 7750 | 18,500 | 26,250 | 12,750 | 39,500 | 52,250 | 17,750 | 105,500 | 123,250 | 18,750 | 117,500 | 136,250 | 338,000 |
Variable costs | |||||||||||||
Sales incentives | 10 | 95 | 10 | 95 | 10 | 95 | 10 | 95 | |||||
Application hosting/unit | 35 | 150 | 35 | 150 | 35 | 150 | 35 | 150 | |||||
Variable cost per unit | 45 | 245 | 45 | 245 | 45 | 245 | 45 | 245 | |||||
Total variable cost | 2475 | 7350 | 9825 | 6975 | 15,925 | 22,900 | 11,475 | 42,875 | 54,350 | 12,375 | 47,775 | 60,150 | 147,225 |
Contribution margin | 16,425 | 29,350 | 68,900 | 76,100 | 190,775 | ||||||||
Depreciation | 1000 | 1000 | 1000 | 1000 | |||||||||
Office utilities | 475 | 475 | 475 | 475 | |||||||||
Office rent | 2075 | 2075 | 2075 | 2075 | |||||||||
Stationary | 1050 | 1050 | 1050 | 1050 | |||||||||
Events | 3000 | 3000 | 3000 | 3000 | |||||||||
Physical collateral | 5000 | 5000 | 5000 | 5000 | |||||||||
Online ads | 2000 | 2000 | 2000 | 2000 | |||||||||
Book keeping | 750 | 15,350 | 750 | 15,350 | 750 | 15,350 | 750 | 15,350 | 61,400 | ||||
Operating profit | 1075 | 14,000 | 53,550 | 60,750 | 129,375 | ||||||||
Contribution margin ratio | 0.63 | 0.56 | 0.56 | 0.56 | 0.56 | ||||||||
Break-even point (in PHP) | 24,532 | 27,326.7 | 27,458.4 | 27,482.7 | 108,783.6 | ||||||||
Margin of safety (MOS) | 1718 | 24,923.34 | 95,791.55 | 108,767.2 | 229,216.4 | ||||||||
Operating profit ratio | 4% | 27% | 43% | 45% | 38% |
Exhibit 4: Competitors of SmartFleet
(a) Competitors for Operations Automation Tool (OAT)
Fleetio: Pronounced “Fleet-ee-o”, is based in the United States, and serves over 20 countries. It provides vehicle and driver overview, fuel management, service history, and reminders. It is accessible in the cloud and can be accessed either over the web or through mobile phones, by multiple users, with the possibility of different permission levels. It provides basic reports, listing and summaries filtered by time period and characteristics. It is offered free for one user and up to 2 vehicles. Price varies from $1.9 per vehicle per month (approx. PHP 85 per vehicle per month) for up to 10 vehicles to $0.69 per vehicle per month (approx. PHP 31 per vehicle per month) for up to 1000 vehicles.Footnote 4
SmartFleet Australia: It is based in Australia, and serves over 160 clients and more than 35,000 vehicles in Australia. It offers managed services, and service providers themselves provide operational, registration, procurement/disposal, and road-side assistance. It also offers self-management modules that provide some services of Operation Automation Tool.Footnote 5 The prices of its products are not revealed.
(b) Competitors for Fleet Management Tool (FMT)
Fleet Genius Pro: A product by Prova Systems, based in the United States. It provides both fleet optimisation and fleet tracking services and has more advanced telemetrics and vehicle health monitoring device than that of SmartFleet FMT. It provides free fleet optimisation services to SMEs with 5 or fewer vehicles. For larger fleets, it charges $2 per vehicle per month (approx. PHP 90 per vehicle per month), and $8 per vehicle per month (approx. PHP 360 per vehicle per month) for both, fleet optimisation and advanced fleet tracking services.Footnote 6
Automotive Resources International: A US-based company, having offices globally. It has an office in Hong Kong also. It manages more than 1 million vehicles in the United States, Canada, Mexico, Puerto Rico and Europe, and over 2 million vehicles worldwide, along with its partners and affiliates. It uses ‘Big Data’ to manage all vehicles in a safe and inexpensive way. It uses thousands of rules and around 14,000 metrics tailored to each client for automated analyses. ARI Fleet’s clients get dashboards with data exploration and predictive models for decision making.Footnote 7 The prices of its products are not disclosed.
TeleTrac: A US-based company that serves over 20,000 fleets across industries, and tracks over 200,000 vehicles, across 87 countries, mainly in the United States. It offers multiple products, but its Fleet Director Tool offers services similar to SmartFleet FMT. It also uses ‘Big Data’ for its operations, using intelligent data analytics to find root causes of high fuel consumption and waste. It helps in taking corrective actions to minimise safety risks leading to lower insurance premiums, and improvements in productivity, vehicle diagnostics, route optimisation, and customer service response times.Footnote 8 Prices of its products are not disclosed.
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Agrawal, A., Mehta, A. & Abraham, N. Offering fleet automation: SmartFleet in the need of smart decisions. J Info Technol Teach Cases 8, 110–117 (2018). https://doi.org/10.1057/s41266-017-0030-6
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DOI: https://doi.org/10.1057/s41266-017-0030-6