2007 1st Place - National University of Singapore

1. Sharon Poerwanto Brian J Chen Anusha Bhagnani David Z Wang At the forefront of innovation Red Bulls

2. Main recommendation Create JV with bicycle manufacturer while reducing lead time Product creation paves way for expansion Boost future Innovation One step ahead of the competition 1 2 3

3. What Motivates Shimano? Risk Management Motivations Motives drive decision making Strategy supports these motives Financial Gain Innovation and Technology 2 1 3 “ Inspire ourselves to think creative , improve technical skills and achieve objectives through innovation and responsiveness to challenges .” Shimano

6. What does Shimano need to do? Need to increase market share increase Need to be technological leader & Development of new products Leads to a b Constraints

7. Criteria to Evaluate Options Criteria & Options Financial gain Innovation and technology Risk management 1 3 Highest NPV Capabilities for every component Maximise Resources Criteria derived from goal to increase MS 2

9. Option 1: Low cost strategy - Dilution of R & D capabilities - Shift to new emerging markets - Pressure to outsource manufacturing - Need massive global integrated operations - Decrease in margins - Increase price competition Business Risk Innovation capabilities Financial gains $621 mil. Developed Rest of World Road bikes Mountain bikes Hybrid bikes Raw materials Component Bicycle manufacturer 1 3 2

10. Option 2: Hybrid bicycles Developed Rest of World Road bikes Mountain bikes Hybrid bikes Raw materials Component Bicycle manufacturer - Hybrid not a breakthrough product - Presence in all 3 product lines - Giant present in market - High fixed cost and capital outlay - No first mover advantage - Fighting on cost Business Risk Innovation capabilities Financial gains $763 mil. 1 3 2

11. Option 3: Innovate high end Developed Rest of World Road bikes Mountain bikes Hybrid bikes Raw materials Component Bicycle manufacturer - Able to impact product innovation - Potential to change consumer trends - Adoption problems - Partnership with potential JV - First mover advantage - Market leader in high end Business Risk Innovation capabilities Financial gains $996 mil. 1 3 2

12. Options Utilise resource capability Defeat direct competition Forefront of consumer trends 2. Hybrid 1. Low End 3. New Product Factors Weights 2. 3. 1. Maximise financial gain Preferred option: Innovate high end TOTAL 100% 1.80 1.40 2.80 Criteria & Options 20% 20% 20% 40% 1 3 1 2 2 3.20 3 2 3 3 1 2.20 2 1 2 1 4 3.00

13. Trek Carbon fiber frame maximizes power, minimizes weight Innovate full bicycle architecture, not just components! Components Shimano Innovation in linked component sets Bontrager Focus on comfort, weight, aerodynamics Frames Mechanical Parts Non-Moving Parts Preferred option: Trek-Shimano X Preferred option x

15. … Superior pricing COGS 60 Additional benefits from JV Increased COGS to 70% Current Targeted Selling Price (%) COGS 70 Gross Profit 40 Gross Profit 40 +Gross Profit 20 130 100 Preferred option x

17. Medium run strategy 2-4 yrs 150-200 scientists to Team X R & D lab in Waterloo, Wisconsin R&D Prototype in year 2 Test on professional racers & patent Develop Launch final product in Europe Sponsor Tour de France Teams Launch Through Trek stores Distribute Endorsements by Óscar Pereiro Enthusiast Magazines Market 5 yr implementation x

19. Increasing market size Financials

20. Looking into the future x Financials

21. Market Penetration for High End Net Income Market Acceptance of Trek-Shimano X Sensitivity Analysis

22. Timeframe Impact of Recommendation 2006 2007 2008 2009 2010 2011 Global Expansion Continuous research on niches Roll out in developed regions Current product $100 mil investment in production facilities Review/ Feedback Trek-Shimano X $50 mil initial JV Investment with Trek Prototype & test market Roll-out Trek-Shimano X in Europe

23. Recommendation revisited Product creation paves way for expansion Boost future Innovation One step ahead of the competition Net Profit (mil $) Relative market share 250 85% 80% 190 Value Achieved x Improved Position Strong Joint Venture

24. Sharon Poerwanto Brian J Chen Anusha Bhagnani David Z Wang 24 Mar 2007 At the forefront of innovation Red Bulls Q & A

30. Key Financial Assumptions 1.

31. units sold 2.

32. units sold 3.

33. Market Share Projections (x) 4.

34. Pro Forma In USD mln. 5.

35. NPV for the Trek-Shimano JV : 995.77 million USD In USD mln. NPV for Low End Market : 628.38 million USD In USD mln. NPV for Hybrid Option : 763.97 million USD Cash Flow Projections 6.

36. 7a.

37. 7b.