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KINEWISE DG505: Financial Aspects of Innovation Projets

Assignor: Hans D’achard van Enschut Students: Willem Rabsztyn, Nina van Adrichem, Xinyi Pan, Nino Spasojevice, Nikki Butter


We, Kinewise, fight for a green environment. We are making the next step towards it. We are providing products that can be used all over the world. Imagine that in 20 years no fossil fuels have to be used any more, all because of green energy. To reach our vision we have set a goal. We want 10 % of the houses to be green, with the usage of our products in 2017, so that our products will be standard in every new built house.

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Index

• About KINEWISE • Business Model

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• Processes • Market Introduction

9 10

• Street Price Calculation

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• Direct Cost

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• Overhead Out of Pocket

15

• R&D Department

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• Calculation Summary

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• Breakeven

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• Future

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• Appendix

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About KINEWISE

Vision

To mainly use green energy in 2020. That all new build houses will be equipped with our green products that will lead into money saving families and a greener environment. Identity

Identity

We deliver high quality products that will save you money and contribute in to the green environment development.The products are made in cooperation with Pear Stairs company (http:// www.pearstairs.co.uk/)

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About KINEWISE Products Description Product A Energy generating stairs ( closed ): The energy generating stairs generate energy because the steps collapse after someone has stepped on it. The kinetic energy will be saved in a storage for later use. The electronics and storage can be hidden behind the stairs.

Product B Energy generating stairs ( open ): The energy generating stairs generate energy because the steps collapse after someone has stepped on it. The kinetic energy will be saved in a storage for later use. The electronics and storage can be hidden inside the stairs, that is why this product is more difficult to make.

Product C Energy generating hallway: The energy generating hallway can be only ordered in combination with product A or B. It is a part for more energy saving. The energy which is generated will be stored, everything will be hidden under the floor.

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About KINEWISE

Future Product Energy generating drains: The energy generating drains can be ordered if product A, B or C is ordered. Of course is the combination A + B + C + D possible. The energy will be generated by the rotating turbine which is placed in the drains. This energy can be stored in the same storage as for the stairs or hallway.

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Businees Model Here below is KINEWISE’s business model, which outlines specific processes, functions and activities KINEWISE uses to produce consumer products and services.

KINEWISE is a big company which also owns Hardware, Software, Assembly Departments and Warehouse for stocking. After finishing the producing chain, products will be sold to Logistics and Retailers. For concerning customers, KINEWISE provides a whole package including sevice and repairation sevice. So the products won’t directly go to customers but go to the Installation Company. So customers will buy our products in Retailers - House Agency, and Installation Company will provide service to customers. As can be observed in the above model, our company doesn’t have raw materials. So before producing we also has to find suppliers for materials. Moreover, KINEWISE is a new company. And our products are innovative but not so many people know it. So we also put much effort on advertising. Stairs and drains are facilities that will be settled down before customers buy the house. So we also have to advertise to House Agency and encourage them build our green products in new houses.

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Processes Process Overview

Our products are all in a package of software, hardware also including services. There are many different processes for Product A+B+C : - contract with staircase suppliers to get discount on staircases or floor tiles - buy and transport the staircases which were ordered by the customers (via a retail company), to our factory - adjust staircases to make room for electronics - build hardware parts electronics and build software to control the systems - assembly hardware, software and staircase together for every order - the result of this process is the customized energy generating staircase, ready to be installed in the house - until the moment of installation, the staircase will be stored in our warehouse - contract with transport company who transports the staircases to the right cities at the time the installation company needs to work with it

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Processes Outsource Processes

During the whole process, outsourced manufacturing is essential to functioning of the compay. So we also need to contact some outsourced companies for finishing the whole chain: Building stairs, since then we do not need to learn how to build and design nice stairs, but we can just use them already, and only adjust them to build in the technology. Shipment is outsourced, for example, DHL. We pay DHL to deliver the products from our warehouse to the retail. Source: http://www.dhl.com/en/express/industry_solutions. html Installation is outsourced, we arrange a company which will install the stairs at the customer, the customer can pay for the installation, or the installation of the stairs is included in the price. Repair/service group is also outsourced. The repair group will be the same company as the installation company.

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Market Introduction

Market Plan Since our products are uinque and has been developed for new houses. We stated that our direct constumer is House Building Agency. While people buying new houses, the agency will propose our product to their customers. It is a matter for us to persuade House Agency to put our products into their house building plan.

Product Range According to our research, there are 50.000 new houses are built yearly in the Netherlands. We assume we will sell our stairs to 10 % of these buyers: so 5000 houses will with electricity generating stairs will be our target. We assume that 50 % (= 2500 units) of our sales is product A, 40% (=2000 units) will be product B and product C will count for 10% (= 500 units) of the total sales.

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Street Price Calculation Based on the average prices on a staircase supplier site, there is assumed that the staircase supplier counts product A: €1360,- and €1100,- for product B. Product C counts the same as product A + tiles. Assumed that the tiles supplier counts floors on average €25,- p/m2. We also make a questionnaire for researching on price that customers would accept.

Therefore, € 3,832.50 is took as a reasonable street price for product A. The street price for product B is a bit cheaper since this is the open stairs, so this one is cheaper in materials for the supplier. The street price for product C is the sum of the street price of product A and the extra price for the hallway tiles.

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Direct Cost Personnel All three products take the same amount of time to build. Therefore, 5000/175 working days a year = 28,5 staircases/floors per working day. Assumed is that we therefore need: - factory workers, who adjust the staircases/floors to build in the technology. Assume 1 person can adjust 5 staircases/floors a day. - factory workers, who develop the hardware (sensors, etc) and build it in. Assume 1 person can build 5 staircases/floors a day. Together these 2 people can finish 5 staircases/floors in a day. - indirect person who writes the software (and develops it). He is only needed once in the process, because after completing the program, every staircase/floor gets the same of this software. So this is counted as indirect costs for two months. So we need: 2 persons to make 5 staircases ready per day. To reach our target, we need to build 28 stairs a day, so the calculation is: (28,5 * 2) / 5 = 11,2 persons/day Each factory worker will get a salary of €2500,- a month Furthermore we will need to pay salaries for : Position Salary(per month) Group Leader for Factory workders Purchaser/ Warehouse bookkeeper Sales&Marketing General Manager

€3000 €5000 €3750 €5800 €6666

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Direct Cost

Material Costs The materials that are required to complete the stairs and floors are the electronics to include inside the steps or tiles. Material costs for prod A and B are the same: €500,- , since they require the same amount of electricity generating units. For prod C more electronics are required to cover the floor as well, therefore the costs for this product are €800,Caluation Summary: Product A Product B Product C

Cost €500 €500 €800

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Overhead Out of Pocket As out of pocket costs we need to include travel between the warehouses and offices, to training and business fairs etc.

Car

Costs for having two cars for the company: Amount Price Item 2 €25.000 Car 2 €5.600 Depreciation car 2 €1.024 Gas (on basis of average gas price, 10.000km a year) 2 €1.488 Tax 2 €829 Insurance 2 €300 Car service Total €68.482

Warehouse

For our warehousing there are four warehouses (of +/- 600 m2) in the Netherlands Assumed is that renting a warehouse building will cost: €3,- p/m2 incl VAT * 4 buildings * 600m2 * 12 months = € 86.400,In this warehouses, there is space to do the assembly as well.

Advertising

Because our company and products are all fresh. So we decide to spend more assets on advertising. We will divide 10& of Turnover every year: €6.913.662,60 (Total TO) * 10% = € 691.366,26

Transporting

For logistics of the stairs and floors to the houses, we hire DHL to transport it, because buying our own trucks will be too expensive. Now estimated on € 100.000,00 a year.

Interest

Interest over 4 months:

4/12 months * 9% = € 207.409,88

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Overhead Out of Pocket Patents

Our products are totally innovative. For protecting them, we decide to use legal entity to protect our ideas. So we also register patents. Patents for the following countries: • The Netherlands • United States of America • United Kingdom • Japan • Italy • Germany • Belgium • Denmark • France With this countries you will have covered the most important and innovative part of the world. This would cost us €17.408,- for 10 years, so €1.740,80 each year

Outsouced Software Developer

Accoding to our products, we need software inside. So we need software developer help us to manage the software. But we don’t need to hire him/her every month. The developer is only need once a year to update the software, therefore we only hire him when necessary. The cost would be: 2 months * €3750 = € 7.500,00

Re-investment

Re-investment for next years new project 2,2 % of TO = € 152.100,58

Installation Company

Hire the installation company to build the stairs and floors into the actual houses of the customers. Assumed is that installing the stairs/floors will take 1 working day for the installation company to finish. They will ask about €360,- per service, therefore €360,- * 5000 = € 1.800.000,00

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R&D Department

We want to add new products to our product portfolio, therefore we will research and develop an electric generating drain water pipe; we call it drainergy. To setup our R&D department we hire 3 R&D people who are able to interact really well as a team. They cost the company about €98000/ year together. They also have special R&D equipment and there could be write down €25000 / year for it. They fit in our company housing so we don’t need to add something else to the costs of our R&D department. Caluation Summary: Yearly(€) R&D labor (three RD guys) 98000 R&D equipment 25000 R&D total 123000 We plan they have the drainergy ready for sale after 9 months (3 quartiles). The sale could start in Q4 of the year. After Q4 we therefore don’t include the costs of the R&D department, then can develop a new product for us in the year after. As estimated before we will equip 5000 houses a year with our products. So we target to equip also 5000 houses with our new drainergy concept.

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R&D Department Below you can see all concrete calculations including our new product.

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R&D Department

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Calculation Summary

From the above calculation, we got real profit from Quarter 9. This can be explained by the fact that KINEWISE is a begining company. But we have quite much increase every quarter.

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Breakeven

According to the calculation summary we made. We can see from the above graph, after Q12 we’ve made 10170 sales and a solid product in the market. We also could pay the loan back.

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Future KINEWISE is a young and dynamic company which encourages the world to be green. In the future, we want to expand our company. Not just Europe or US, we also draw our grand prospect on Asian countries. We also promise that many unique developed eco-friend products are yet to come.

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Appendix

New Product (Product D) Cost

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Appendix

References Processes http://www.dhl.com/en/express/industry_solutions.html Steet Price http://www.pearstairs.co.uk/pages/home/default.aspx http://www.tegelconcurrent.nl/shop/c2/Vloertegels Overhead Out of Pocket http://www.autoweek.nl/kostenberekening?id=42949&jaar=0&cache=no http://www.dhl.com/en/express/industry_solutions.html http://www.octrooicentrum.nl/index.php/wrapper.html

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Dg505 report kinewise