Reboot Systems

Submitted by- Composition:

Cover Slide - #1
Pulkit Bohra | Pulkit Mathur| Tarun Gupta Main Slides - #15
Team Iguanas, IIM Ranchi Appendix - #7
 Executive Summary
Entry Strategy & Business
Industry Analysis Value Chain Analysis Financial Analysis
Opportunities
Strategic To outline a Go-to-Market To analyse the minimum margin
To identify market potential of To dissect the value chain and
objectives strategy and identify future and penetration required for a
used PCs in India identify nodes for improvement
business prospects profitable business

Market growth trends in used PC Leading players in the segment Short and long term strategies
Analysis market and e-waste management were interviewed Projection of USED PC market in
were mapped with phase wise
were observed the urban and rural regions.
Value chain was broken to market entry
understand specific nodes and Go-to-market strategy was
Reasons for low penetration of relevant issues were identified Calculations of margins per
PCs were analysed outlined to come up with a computer and ROI in “Most
Short and long term three stage model for each of likely” scenario
implementation plan designed the identified regions

Insights Lack of affordable PCs is a major Warranty and after sales service Phase 1: Target Metro Cities To maintain a consistent ROI of
hindrance in market growth are important decision makers Establish hold in big greater than 30%, the
Industrialized zones penetration and margin should
“Used” PC Market is naïve. Offers Reboot should focus on Phase 2: Target tier 1 & major be greater than 0.38% and 15%
scope for First Mover Advantage collection, refurbishment and tier 2 cities respectively.
redistribution in short term; Create wider customer network
High growth rate forecast for The present margin per PC for
Long term market opportunities Phase 2: Target tier 3 & villages
adoption of used PCs in both rural Reboot Systems is 23%
in e-waste management Penetrate the underserved rural
and urban markets (approximately)
markets & fight digital divide

Recommen- Reboot Systems is well poised to grow its market share in the expanding Used PC market. Scaling up operations using the suggested
dation Phase Wise Expansion & GTM strategy followed by entry into E-Waste Management will help them leverage First Mover Advantage.
Agenda

ENTRY STRATEGY
INDUSTRY PRIMARY VALUE CHAIN
INDUSTRY
ANALYSIS RESEARCH ANALYSIS
& BUSINESS FINANCIALS
OPPORTUNITIES
ANALYSIS
Refurbished Computer Industry holds strong potential driven by expanding domestic market

30
PC use
20 PC use is slated REASONS TO ENTER
forecast-
CAGR to have the
Compounde 10
highest CAGR in
d annual 0 India 1
growth rate China India US Japan EXPANDING MARKET

E-waste Market
90% of the e-
E-waste
10% waste finds its 2 LARGELY
way in the UNORGANIZED
Market Unorganized
unorganized MARKET
Organized sector.
90%
3 SCOPE FOR
20 INNOVATION
15 Used computers
Share of 10 have 15% share
Market 5 of the total 4
GROWING
0 market. AWARENESS

Sources: Case Exhibit 3c & 5

 Reboot systems is well poised to face the challenges posed by the used computer business

Reasons for No Internet Access

Market that can be captured by Reboot in “Most Likely”
70 scenario (No. of Used PC’s)
60 80000
50 70000
40 60000
30 50000
40000
20
30000
10
20000
0 10000
0
2011 2012 2013 2014 2015 2016

Rural Urban Total

• Majority of the market lies in Urban (tier I and tier II)

• Lack of affordable PC’s/Laptops result in a “No PC at
cities.
home situation”
• Even with a .25% market share in urban cities and 1%
• Low internet penetration and lack of usability pose
market share in rural, Reboot can sell more than 70
greater challenges.
thousand units by 2016
• ICT adoption has been majorly by the affluent section
• The growth rate towards adoption of used computer is
of the society.
high in both rural and urban cities.
Sources: Case (Exhibit 8), Appendix (Exhibit 1)
Agenda

ENTRY STRATEGY
INDUSTRY PRIMARY VALUE CHAIN
ANALYSIS
PRIMARY
RESEARCH ANALYSIS
& BUSINESS FINANCIALS
OPPORTUNITIES
RESEARCH
 Primary Research was conducted at ECORaksha, Bangalore

E waste Management services Market

• Corporates either rent their computers or
buy them, majority of our e-waste comes 12%
Infotrek
from corporates that buy laptops/Pc’s. 6%
• My customers are Entrepreneurs, small Trishiraya
business owners and individual buyers. 6% 47% E-parisaraa
Mr. Mithun • Majority of the market is unorganized, an
Garudapalli organized player with an innovative approach 8% INAA enterprises
can really leave a mark on the business.
Partner Ecoraksha 21% Tessam Recyclers
Others

• Customers demand warranty while buying a

refurbished computer hence after sales KEY TAKEAWAYS
service plays an important part.
• Given the margins that we operate in
Majority of Warranty and Our customers
achieving Scale of operations is the key to
players still to set after sales service include individual
success.
up their recycling are critical to buyers and small
Mr. B S Mukund • Majority of the players in the market do not
plants purchase decision. businesses
Owner Ecoraksha have the capital to invest in a recycling plant.
Agenda

INDUSTRY PRIMARY VALUE ENTRY STRATEGY

VALUE CHAIN
ANALYSIS RESEARCH & BUSINESS FINANCIALS
CHAIN
ANALYSIS OPPORTUNITIES
ANALYSIS
 Reboot Systems’ Strategy

Reverse Logistics Chain

Manufacturing
Recycle

END OF
E-Waste
Redistribution PRODUCT USE
Refurbish Handling
/DISPOSAL

Distribution Reuse

2 4
• Packaging
• Supply From Individuals • Handling- Transportation
• Marketing & • Dismantling

CHANNELS
SERVICES
SUPPLIER

• Local Retailers • Cleaning/Data Security

FUTURE
Communications • Extraction of pollutants
• Recycling Industries • Asset Recovery/Testing
• Distribution Channels • Segregate the useful
• Corporate Clients • Hardware Assembling
• Service Centers/Call waste.
• Non Profit Organizations • Software Installation
Centers
• Establish local Nodes
• Large Warehouses • Identify potential clients. • Huge Plant
• Profit Sharing Scheme
• Inventory Management • Target Government establishment CAPEX
for retailers
ISSUES

ISSUES

ISSUES
ISSUES

• Human Health & Safety Initiatives as supply • Health Issues& safety

• Competitive Bidding for
• Environmental markets. • Environmental
Corporate Clients
Protection • Establish nodal centers Protection &
• National & International
for regional penetration. Regulations
Regulations
Sources: UNESCO Guide to Computer Recycling -2008 ; Cognizant ‘s Reverse Supply Chain-Completing the Supply Chain
 Implementation plan (short term, long term)

Manufacturing Recycle
END OF
E-Waste
Redistribution PRODUCT USE
Refurbish Handling
/DISPOSAL

Distribution Reuse
Reverse Logistics Chain

Staggered/Phased Market Entry

Short Term (5 years) Long Term ( 10 years)

Phase 1 Phase 2 Phase 3 Phase 4

Top Metros & Tier Expand in Tier 1 & Expand in Tier 2 & Forward Integration
1 Cities Tier 2 Cities Associated Sub- into the E-Waste
urbans Handling Business

Establishment in Increase Customer Fill the Digital Divide in Increased Market to

Supplier Rich Regions Base Rural Areas Cater to

Sources: List of cities and towns in India – Wikipedia; Reverse Logistics Model –University Of South California
Agenda

INDUSTRY PRIMARY VALUE CHAIN ENTRY

ENTRY
ANALYSIS RESEARCH ANALYSIS STRATEGY & FINANCIALS
STRATEGY
BUSINESS
OPPORTUNITIES
 Suggested Model For Selecting Collection Centres
KEY FACTORS FOR CHOOSING CENTRES

1 2
Literacy Rate Per Capita Income
NEW DELHI

LUCKNOW
JAIPUR
ajmer
kanpur
PATNA

udaipur

AHEMDABAD allahabad
BHOPAL
Malda • Target metros & major Cities
rajkot hugli
KOLKATA Phase 1 • Establish hold in big Industrialized zones which will act
surat
as suppliers
nagpur BUBANESHWAR
• Target tier 1 & major tier 2 cities
HYDERABAD Phase 2
MUMBAI pune • Create a wider customer network
vijaywada
• Target tier 3 cities
davangere
warangal
guntur Phase 3 • Cater to the digital divide by penetrating the under-
BENGALURU
CHENNAI
served rural market

mysore • AP(Vishakhapatnam, Eluru) • UP(Agra, Meerut, Varanasi)

• TN(Thoothukudi, Vellore, Salem) • WB(Siliguri, Asansol, Khargpur)
Tier 3 Cities
TRICHI Targeted regions
coimbatore • Maharashtra(Thane, Dombivili) • Bihar(Arwal, Gaya, Muzaffarpur)
madurai
Rest of India • Karnataka(Gulbarga, Mangalooru) • MP(Ujjain, Ratlam, Indore, Sagar)
• Gujarat(Vadodra, Bhavnagar) • Rajasthan(Pali, Sikar, Alwar)
• Orissa(Dhenkal, Debargh)
Sources: List of cities and towns in India – Wikipedia; Indiastat.com
 Reboot should follow a Three Stage model for each of the identified Regions
Three Pillars for
GTM Strategy Stage 1 Stage 2 Stage 3
Based on the product life
cycle and the target
Customer
market in a specific
geography, one or more of New Mature
Entry of
the three pillars have Product
Competition Markets
been chosen as focus to Entry
Product Channel
meet our clients business
needs.

Stage 1 Stage 2 Stage 3

Leveraging the First Focus on Distribution Significant emphasis
Mover Advantage Channels to improve Efficiency on Customer Retention

• Competition would • Customer retention

• Reboot Systems should increase as the market becomes very important
leverage the first mover gains traction • Reboot can offer All India Primary focus
advantage • Need to focus on Helpline to offer online
• Focus on Product and distribution channels to resolution of problems Secondary focus
capture the Market Share reduce costs and fight • Introduction of loyalty
competition programs
Sources: AT Kearney (Redifining GTM)
Tie ups with government agencies and After Sales Service are Critical for Success
Investment/ Returns /
HR Requirement Priority
Expenses Impact

• Major mass market

Direct Sales consumer interface

Tie-ups with • Lease program with

government appropriate warranties
agencies would encourage use
of refurbished
computers with such
Tie-ups with small establishments
private enterprises

• People are ready to

Promotions to consume but are
create Awareness unaware of such cos.

• This will help generate

After Sales Service trust and improve
customer satisfaction

Loyalty Programs • Critical for customer

retention
Agenda

ENTRY STRATEGY
INDUSTRY PRIMARY VALUE CHAIN
& BUSINESS
ANALYSIS RESEARCH ANALYSIS OPPORTUNITIES FINANCIALS
FINANCIALS
 ROI sensitivity analysis w.r.t Margin per PC and Used PC market captured
Margin per PC
ROI in 2012
5% 10% 15% 20% 25%
0.13% -0.72 -0.44 -0.16 0.11 0.39
Used PC 0.25% -0.44 0.11 0.67 1.23 1.79
Market 0.38% -0.15 0.69 1.54 2.39 3.23
Captured 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
0.13% -0.78 -0.55 -0.33 -0.11 0.12
Used PC 0.25% -0.55 -0.11 0.34 0.79 1.24
To maintain a consistent ROI of Market 0.38% -0.32 0.36 1.04 1.72 2.40
Captured 0.50% -0.11 0.79 1.68 2.58 3.47
greater than 30% year on year, 0.63% 0.13 1.25 2.38 3.51 4.63
Reboot should focus on maintaining a ROI in 2014
0.13% -0.80 -0.60 -0.40 -0.20 0.00
margin of at least 15% per PC and Used PC 0.25% -0.60 -0.20 0.20 0.60 1.00
Market 0.38% -0.39 0.22 0.83 1.43 2.04
capture at least 0.38% of the Used PC Captured 0.50% -0.20 0.60 1.40 2.20 3.00
market. 0.63% 0.01 1.02 2.03 3.04 4.04
ROI in 2015
0.13% -0.80 -0.61 -0.41 -0.22 -0.02
Used PC 0.25% -0.61 -0.22 0.17 0.56 0.95
Market 0.38% -0.41 0.19 0.78 1.38 1.97
Market Sizing : Exhibit 1 (Appendix) Captured 0.50% -0.22 0.56 1.34 2.13 2.91
ROI & Margin calculations : Exhibit 2 (Appendix) 0.63% -0.02 0.97 1.95 2.94 3.92
ROI in 2016
0.13% -0.80 -0.61 -0.41 -0.22 -0.02
Used PC 0.25% -0.61 -0.22 0.18 0.57 0.96
Market 0.38% -0.40 0.19 0.79 1.38 1.98
Captured 0.50% -0.22 0.57 1.35 2.14 2.92
Sources: Appendix (Exhibit 1 & 2) 0.63% -0.01 0.98 1.96 2.95 3.94
Appendix
Overall Market Sizing and estimation of market captured by Reboot

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

Exhibit 1
 ROI & Margin calculations for “Most Likely” scenario

2012 2013 2014 2015 2016 Margin (per 100 PCs sourced)
Rent (Rs 50000/Outlet) 9000000 16200000 24000000 31200000 39000000 Working PCs 70% 70 Not working PCs 30% 30
No of outlets 15 27 40 52 65 Pick up
Rent for Furbishment price/computer 2500 Pick up price (Rs/Kg) 20
space 100000 200000 300000 400000 500000 Refurbishment cost Weight per PC (Kg) 12
Material 2000 Selling price (Rs/Kg) 30
Marketing Spend 1910328 2399372 3013612 3785096 4754081
Store Employees Labour 400 Margin (per PC) 120
Salaries 4775821 5998431 7534029 9462741 11885202 Total Margin (Non
Miscellaneous logistics 100 Working PCs)
(Electricity etc) 318388 399895 502269 630849 792347 Cost per PC 5000
Investment 16104537 25197699 35349909 45478686 56931630 Selling Price 6500
Total operating Margin 31838805 39989539 50226861 63084938 79234682 Margin Per PC 1500
Margin (Working Margin (Non Working
Net profit 15734268 14791841 14876952 17606251 22303052
PCs) 105000 PCs) 1440
ROI 0.98 0.59 0.42 0.39 0.39
Total Margin (100 PCs) 106440
*Marketing Spend has been taken as 6% of the total revenue *From 100 PCs sourced, 70 Pcs are in working condition and 30 are not.
*Employees salaries have been taken as 15% of the total revenue, based *Average weight of a PC has been taken as 12 Kg's
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. Margin per computer = 1500/6500
*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 = 23.1%
calculated using Exhibit 3C, 5, 7 and data mentioned in case.

Exhibit 2
Reboot Systems is ADDING value by scaling up its operations

Adding Value Decreasing Cost Differentiation

Providing affordable & Decreasing cost of PC Pioneering:
quality PC in India: heavily with: • Reverse Logistics Model
• Bridging the Digital • Refurbished • Offloading E-waste
Divide computers handling & recycling duty
• Solving the E-waste • Selling E-waste to from big enterprises.
problem Of India big Recyclers. We see that scaling up &
expansion adds value &
Influencing Industry Negating Risk Gaining Knowledge
Attributes Chowdhary-Subbarao should go

• Halving the cost of PC India’s high risk index is • Gaining knowledge of the ahead with investing in Reboot
• Increasing penetration overcome by the Increased vastly untapped Tier2&3 System’s growth in India.
in Tier 2&3 cities. customer targeting & • Gaining knowledge of E-
• Handling E-waste including large corporates waste disposal business –
effectively & as our major suppliers. scope for backward
profitably. integration.
First Mover Advantage Framework
Most important reasons and methods of disposal
Methods of disposal of Computers
Sold in second hand
1% 3% Financial Obsolence market
3%
4%
2% 18% 3%
Sold to employees

25%
As per Company's IT
Policy
33% Donations

Better Tech at cheaper 9% Sold to scrap collectors

price
Latest Trends 13% Exchange for new

24% products
Vendor buy backs
Others

Technical Problems
Important considerations while disposal
62%
2% 7%
Convinience
Obsolete Technology
Quick pick up, no space to
24% store

Most important reasons for replacement of Best exchange offer

Computers
42% 9% Best Price

16% Environmentally frienly

disposal
Sources: Frost & Sullivan (India waste management services market Others
Suggested Design For The Refurbishment Facility
Used Product From Suppliers
Facility Specifications TEST 1: Test 2:
Homogeneity Brand, Chip
• 300 sq. m Storage area Of Inflow Speed & Age
• 200 sq. m Courtyard area In the long term, it is Decide on feasibility of
• 100 sq. m Workshop more profitable to their refurbishment
process homogeneous and about the market
• 10-15 employee batches of equipment on which they could be
strength than to maintain and resold.
repair computers of
• Utilities: Electricity, Water, different
Telecomm configurations and
brands.

Inflow For Refurbishment

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.
Sources: UNESCO- Entrepreneur’s Guide To Recycling Industry