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Team 2 Cheryl Lee Marisol Cadiz Diana Lee-Akalin Sangtae Lee 1 Agenda • • • • • • • Introduction Company & Product Overview Core Competencies Customers & Competition Critical Issues & Financials Critical Recommendations Question? 2 Introduction • Boeing intends to be a leader in the new mobile economy - -and that means helping our airline customers and their passengers stay globally connected at all times. The airplane will begin to look like your home or office and the experience of travel will change - Phil Condit, Boeing chairman and CEO 3 Air Travel Today • Few choice – Book – Magazine – Several movies • New market emerging – 3 million people board 42,300 flight a day – 48% of air travelers in USA are business travelers – 70% of business traveler carry a laptop on board 4 Connexion by Boeing • New broadband telecommunication service in flight • Real time, high speed, two-way connectivity • Real time Internet and Live TV • Service to begin in 2002 Market size: $70 billion over the next 10 years 5 The Capability of Connexion Expedia/ Airlines Destination Information Surf the Web E-mail (80%) Stock trades (49%) Book reservations Plan itinerary Check weather (75%) Reservations (45%) CNN/CNBC News & Information News(63%) Business Money CNN AOL/Yahoo Internet Live TV Entertainment (41%) News reports Weather Sports events Indiv Co Airline E-Commerce Shopping Duty-free Company Intranet E-mail (80%) Reports Company news Airline Carrier Information Airshow Flight Facts Travel planning (46%) Travel support Frequent flier mileage Airport maps Flight maps Gate information % :Air traveler’s preference 6 Core Competencies Technology In Depth Knowledge - High Speed -Deploying large scale - Two way - Broadband -Communication sys. Financial & Human capital - $45 Billion company - 200,000 Employee Global Relationship Strategic Alliance - Airline industry - Industry leader & - Government Content Provider 7 Alliances -Live Sports Network -Satellite and Transponder -Asia coverage Contents Provider -Satellite and Transponder -Market News -Europe coverage - Stock Hardware -Airport -Weather - City Guide MASC MATSUSHITA AVI. -In Flight SYSTEMS CORP. Entertainment Sys. -Satellite and Transponder -North America coverage 8 Customers Advertising Agencies 9 Competition Connexion In Flight Network Tenzing Comm Existing IFE Prov. Deployment 2002 Testing 2001 Testing 2001 Testing “Emport” High Speed Real Time Y N N N Range of Services Extensive Basic Email Movies Basic Email & Web Basic Internet Movies Infrastructure Reqmt Extensive Minimal Minimal Minimal $$$$$ $$ $$ $ Cost 10 Competition (cont.) 11 Competition (cont.) 12 Issues: Cost • Up Front Investment: $100M - $200M – – – – Development Integration of communication, platform Hardware & Software Installation Content Development • Est. $17/hour for email and net access – Customers willing to pay • Operating Cost – Satellite communication: $20 per call 13 Issues: Technology • Frequency sharing needs regulation authorities approval • Development limits to existing technology & infrastructure • Technology - what’s next? 14 Other Issues • Consumer Acceptance -What do they use & how much are they willing to pay? •Target Markets & Content Offerings -Who are they & what do they want? • Airlines, Partnership & Alliance - They control what to provide & when to implement 15 Rough Financials Analysis Assumptions: Revenue Sharing 20% 30% ROI 5-Years 5-Years - Annual Rev.(m) $4,600 $8,200 $3,000 Market Share 29% 52% - # of Paid Users (m) 108 192 - • Revenue sources – Service fees: 50% – Advertising: 30% – Co-Branding: 20% • Expenses: – Service: $20/call – Revenue sharing – Standard stuff Boeing’s Estimati on Revenue Sharing 16 Recommendation: $$$ models • Service Fees – Offer Basic – Corporate Accounts – Prepaid Service Premium Service • Advertising – Charge fees and use the proceeds to reel in Basic service users • Co-Branding – Charge Airlines and Content Providers 17 Recommendation: dis-integration • SBU with tracking stock – Heavy promises require speed, flexibility, and focus – Boeing is a dinosaur – …but Connexion still needs Boeing’s • technological expertise • government and regulatory contacts • customer relationships 18 Recommendation: Focus on Value Stop comparing yourselves to cellular phones Value Proposition Core Benefit Selection/Service Price (relative) Business Travelers Efficiency/save time Fast, real-time, little to no advertising, email, reservations, full spectrum of business services (virtual office) Highest – In most cases the company pays for it, not the traveler. Company is willing to pay because “time is money”. Customer Segment Airlines Customer loyalty Co-branded (seamless), full spectrum of the airline’s travel services/ forms of revenue beyond the ticket you purchased Med. to High – differentiation through service is extremely important. Additional revenues can be generated by attracting volumes Leisure Travelers Convenience/entertainment Travel planning, reservations, weather, email, movies, TV, news, games, very recent but may not need real –time Low - People will be willing to pay only to the extent that current needs are not satisfactorily met by means such as books, magazines, and IFE systems. 19 Questions? 20