Why is Selco Attractive-Developing Enterpreneurship-Lecture Slides, Slides for Entrepreneurship Development. Shri Jagdishprasad Jhabarmal Tibrewala University
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aabid7 August 2012

Why is Selco Attractive-Developing Enterpreneurship-Lecture Slides, Slides for Entrepreneurship Development. Shri Jagdishprasad Jhabarmal Tibrewala University

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Prof. Shriranga Shreeyash delivered this lecture for Developing Entrepreneurship course at Shri Jagdishprasad Jhabarmal Tibrewala University. Its main points are: Selco, Attractive, Product, Delivery, People, Network, Ul...
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4/22/2004 2

WHY IS SELCO ATTRACTIVE?

Market leader – first into new market with global strategy to serve new customers We have the right product to enable the development of the market We have extensive management team experience We have proven market acceptance We have a proven delivery system that has led to a branded physical network serving an extensive customer base Our product base is expanding from and due to our core offering Our ultimate target market is huge and untapped – two billion people representing $50 billion annually

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4/22/2004 3

SELCO BUSINESS DESCRIPTION

Product distribution and service company that is developing the consumer market in those regions of emerging market countries that are removed from or not well served by the power grid Core business is selling and servicing packaged household lighting and electricity systems SELCO believes that electricity is fundamental to economic development and consumer behavior Delivery system is a network of sales and service outlets selling to individual consumers SELCO provides a superior source of lighting and electricity while costing less than available alternatives Core product is an enabling device leading to consumer desire for related applications

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4/22/2004 4

ABOUT SELCO

Corporate office is in Chevy Chase, MD near Washington, DC

Majority owned subsidiaries in India, Vietnam and Sri Lanka

Employs 300 people world wide and has network of 32 outlets

SELCO companies have an installed customer base of 10,000

Sales in 1999 were $873 Thousand

Sales in 2000 were $1.7 Million

Sales in 2001 were $2.6 Million

Further expansion into Africa, South America and further into Asia

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4/22/2004 5

TRACK RECORD

SELCO SALES HISTORY AND 2001 RESULTS

Sales have grown at a CAGR of 155% from 1998 through 2000 Sales are expected to continue growing rapidly for the foreseeable future.

0

500

1,000

1,500

2,000

2,500

3,000

1998 1999 2000 2001

(in thousands of US$)

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4/22/2004 6

SELCO’S COMPETITIVE ADVANTAGE

The only independent company targeting the off-grid lighting and electricity market

First to develop physical points-of-presence

Proven strategy for bringing new products to this new market

Direct access to the end consumer

Brand recognition

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4/22/2004 7

STRONG BRAND IDENTITY

Registered Logo SELCO has protected its distinct brand

name and logo for worldwide marketing purposes The name “SELCO” along with its accompanying sunburst-over-rooftop symbol is officially registered with the United States Patent and Trademark Office

Brand Recognition SELCO has established a strong brand identity in the marketplace. In many of its markets, customers seeking household electricity ask for a “SELCO”

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4/22/2004 8

MARKET

SELCO is targeting the $50 billion-dollar market consisting of consumers who lack access to grid electricity in the emerging economies Over 400 million households representing more than 2 billion people throughout the world lack access to electricity Hundreds of millions of more households and businesses receive unreliable electric service and severe power outages The typical target customer currently spends about $10 per month for inferior, expensive electricity and lighting sources such as kerosene and dry-cell batteries, and to recharge car batteries Demand for related electrical appliances is growing commensurate with rising incomes

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4/22/2004 9

SELCO MARKET PENETRATION ANALYSIS TOTAL = 25 MILLION UNELECTRIFIED HOUSEHOLDS IN SELCO’S

CURRENT TARGET MARKETS

0 2 4 6 8 10 12

South Africa

Sri Lanka

Western China

Vietnam

South India

Millions of households

COUNTRY BREAKDOWNCUSTOMERS’ ABILITY TO PAY

Cash

Short-term credit

Long-term financing

Affordable with subsidies

5% - 1.25 million households

20% - 5 million households

25% - 6.25 million households

50% - 12.5 million households

SELCO intends to sell one million solar home systems by 2010, for a 16% penetration of its targeted cash and credit markets

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4/22/2004 10

SELCO PRODUCTS

Components & Appliances SELCO sells individual components for system expansion as well as private-labeled lights, fans, televisions, and other electrical appliances SELCO intends to expand its offerings to meet additional market opportunities

Customized Systems SELCO also sells customized electric systems. The company designs, installs, and maintains systems for customized applications

Service SELCO provides installation and services for all of its packaged electricity systems Provides design and installation for specialized custom electricity systems applications

SHS SELCO’s primary product is a packaged household lighting system with an ASP of $500 per unit SHS represents 75% of the company’s revenues

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4/22/2004 11

SOLARELECTRIC POWER: THE MOST ECONOMIC ENERGY ALTERNATIVE IN OUR MARKETS

COMPARATIVE POWER COSTS OVER SHS LIFETIME

Non-SHS Household US$

Kerosene 2,000 Dry cells 300 Battery recharging 300 Battery replacement 225

TOTAL 1 2,825

SHS Household US$

System price 495 Light replacement 2 186 Battery replacement 2 369 Maintenance 237 Financing costs 3 400 TOTAL 4 1,687

COST OF GRID EXTENSION TO UTILITIES = US$ 3,000 per household

NET GAIN TO CUSTOMER: Over life-time of a SHS, customer SAVES $1,138

1 Based upon SELCO market research: believed conservative 2 Battery and lights replaced every five years 3 Downpayment = 25%; Term = 3 years; Interest Rate = 25% 4 Does not factor in benefits accrued through quality of life improvements and convenience

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4/22/2004 12

SELCO SOLUTION

SELCO’s unique combination of branded products, on-site service and local presence allows the Company to provide, in addition to its packaged lighting systems, its customers with a wide-range of high quality electric appliances and related applications

Non-SHS revenue is expected to reach 40% of total sales by 2008.

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4/22/2004 13

DISTRIBUTION CHANNEL

SUB. HQ

RMC

RMC

RMC

SSC SSC

SSC

SSC

SSC

SSC

SSC

SSC SSC

CUSTOMER BASE

CUSTOMER BASE

Sales and Service Centers (SSC) SELCO services its market territories through sales and service outlets called Sales and Service Centers (SSC) SSCs are the point-of-presence with its end- customers, and serve as the base of local sales and service operations Sales and Service Centers contain a showroom for company products All SSC employ local staff, which operate according to standardized SSC operating procedures As the network grows, it will be managed through Regional Management Centers (RMCs)

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4/22/2004 14

DISTRIBUTION CHANNEL

Inexpensive protected means of acquiring millions of new customers eager to purchase consumer goods

SSC costs $20,000 to establish

Covers 50,000 households

Expected annual sales of $200,000

Payback generally of less than one year

Once customers have electricity they consume more panels and applications

Distributed model adapts easily to lowest cost method of serving market for electricity (e.g. fuel cells in the future)

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4/22/2004 15

MANAGEMENT

Corporate Management Neville Williams, Chairman, has devoted 10 years to solarelectric wireless power development in 11 countries Carter Hertzberg, Chief Financial Officer, has 8 years of strategic financial management experience in start-up energy and communications companies.

Board of Directors John Kuhns, Vice Chairman, is a leading financial expert in the renewable and independent power sectors Paul Maycock is the leading technology expert for the Photovoltaic Industry Anthony Dixon, a senior officer for Salomon Smith Barney, is an expert in international asset-backed financing Lars Zoellner, CEO, Gaia Kapital, Germany

Subsidiary Management Dr. H. Harish Hande, Canh Tran and Susantha Pinto are the managing directors for India, Vietnam and Sri Lanka More than 25 years of combined experience in the renewable and power industries in addition to extensive educational qualifications

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4/22/2004 16

CONCLUSION

Investor interest in the renewable energy industry is substantial and growing

SELCO has arrived early to its markets

Market development based upon filling a basic consumer need – deliver electricity first

Market targeted with the most commercially viable product delivery system currently available

A proven business strategy that can penetrate a huge untapped market

Core business readily expands with related add-on applications and sources of revenue

Investor returns are expected to exceed 60% annually

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4/22/2004 17

POSTSCRIPT: CARBON OFFSET BENEFITS

Provides additional financing opportunities

The world’s first carbon offset funding agreement for solar rural electrification was signed in August, 1999 between SELCO and the Solar Energy trust, providing $500,000 - from PacifiCorp’s Klamath Cogeneration Project in Oregon - for SELCO to use over a 30 year period to finance SHS in India, China and Sri Lanka

A single 35Wp SHS will displace 7.2 tons of carbon dioxide emissions caused by burning kerosene and recharging car batteries over 20 years

The Klamath Falls project is for 1 million tons or $0.50 per ton CO2. As the pressure mounts in the area of climate change mitigation and carbon trading, prices will escalate

Carbon offsets enhance shareholder value with “free” equity

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4/22/2004 18

Images of SELCO at Work

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4/22/2004 19

DON BOSCO – YUVAPRACHODINI - Bangalore

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4/22/2004 20

TGB - Taykanahalli

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4/22/2004 21

A SHOP USING A SELCO LIGHT

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4/22/2004 22

KENTENICH VIDYANIKETAN - Bangalore

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4/22/2004 23

PRAYERS UNDER SOLAR LIGHTS IN KENTENCH _ ALWAYE

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4/22/2004 24

AN OVERVIEW OF THE 56000 LITRE INSTALLATION AT MAHE - MANIPAL

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4/22/2004 25

A 300 LPD INSTALLATION

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4/22/2004 26

ONE OF THE 75 STREET LIGHTS AT MUNDGOD

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