Global Business Development Team

(Samuel Tabi, Jamsheer Abbas, Yafei Wei, Nina Blinova)

Seneca College

April 15, 2016

Cervelo2017

Export to Latvia

What We’ll Cover Today

Why Cervelo?

Company

Bicycle

People

Why Latvia?

SWOT Analysis

Marketing Strategy

Distribution

Financial overview

Risks Mitigation

Implementation Schedule

Concept & Opportunities

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Why Cervelo?

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Professional cyclists andtriathlon racers currently donot have any opportunity topurchase Cervelo bicycles inLatvia.

DTC Jauniba Triathlon club, Triathlon racers ETU

RomānsVainšteins, champion of 2000 UCI Road World Championships

Marco Koshier, IRONMAN racer

Source: Tri2teach.comSource: Sport in Latvia

Company

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Manufactures the fastest and the lightest bicycles in the world

Was established in Toronto in 1995

Provides constant innovation and has professional engineering team

Has 56 distributors worldwide, sales revenue - CAD 11 million (2014)

Helps prominent cyclists successfully participate in all world cycling competitions

Source: Cervelo

https://www.youtube.com/watch?v=arehyOYsFUo&nohtml5=False

Bicycle

BICYCLE:

• Road / Triathlon bicycle

• Materials: Carbon fiber

• Minimal weight

• Maximal stiffness

• Exceptional aerodynamics

• Price: CAD 2,000 -15,000+ (Toronto, Canada)

TARGET CUSTOMERS:

• 18-45+ years old

• Male / Female

• Middle / Upper middle class

• College / University education

• Professional sportsmen / racers (Ironman, ETU)

• Urban citizens

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Source: Cervelo

People

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HQ

CEO

Country Manager

Latvia

Global Business Development Team

Sportlife, Authorized Distributor in Latvia

Global Distribution

Europe

Phil White

Samuel Tabi

Yafei WeiJamsheer Abbas Nina Blinova

Source: LinkedIn

Why Latvia?

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Latvia shows significant progress to integrate into EU economy.

Social: Latvians have a strong work ethics and are highly motivated. High interest in healthy lifestyle.

Technological infrastructure and transportation systems are well developed (3 sea ports).

Stable political situation, no border conflicts. Democratic parliamentary republic. 2 million citizens.

Civil law. Legal system comply with EU regulations and provide protection for intellectual property as well.

Environmental: among 10 environmentally best countries of the world (EPI).Source: CIA,

Why Latvia?

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Why Latvia?

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Authorized Distributor; sport outlet in Riga, famous cycling brands & cycling club.

Import of bicycles in Latvia -40,000 units for CAD 9 million. 25% of Latvians have bicycles;Cycling clubs & cycling events (ETU, EuroVelo)

Great connection to Russia, Belarus, Lithuania;50 from 100 richest people in Latvia are from Russia.

Limited competition - 2 from 7 top competitors are presented in Latvia. Prices: 1,000- 16,000 CAD

Source: Eurovelo

SWOT Analysis

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Marketing strategy

11Source: Cervelo

CERVELO R5 Shimano Dura Ace 9070 Di2

Marketing strategy

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PRODUCTCERVELO R5 Shimano Dura Ace 9070 Di2

High performance road / triathlon bicycle

Carbon fiber, personalization options

Light, fast and reliable on the road

Lifetime warranty

PRICECAD 11,970 DAT Riga

Premium price strategy

Discounts for 2nd bicycle and spare parts.

PLACEAgreement with Sportlife about Sales and Partnership

Sportlife outlet in downtown of Riga, Latavia

Online (website Cervelo & Sportlife)

PROMOTIONWebsite Cervelo (link to Sportlife)Latvian newspapers / TVBillboardsVenue advertising (ETU events, trade shows)Social Media (Facebook, YouTube)Blogs of triathlon racersDemo bicycles in sport outlet

Primary target market–16,800 Latvians

Potential target market –Russia, Belarus, Lithuania

(1,25 million people)

Source: Cervelo

Distribution

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MonrealAmsterdam

Toronto

Riga

Freight Forwarding (Canada) • A1 Freight Forwarding Inc.Shipping company (Canada) • Maersk LineTransportation / Customs brokerage (Latvia) • DB Schenker

Distribution

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Ocean freight (boxes/container) – 48.40 CAD/unit + insurance 22.00 CAD/unit. Prices DAT Riga Incoterms:

1st delivery –February 2, 2017 – 50 bicycles2nd delivery – April 1, 2017 – 50 bicycles3rd delivery – June 1, 2017 – 50 bicycles

Source: Maersk Line

Financial overview

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Sales Forecast of Cervelo bicycles in Riga, Latvia 2017 - 2019

2017 2018 2019 TOTAL

Units to be sold 150 200 250 600

Sales price (DAT Riga, CAD) 11,970 11,970 11,970 5,280,000.00

Total Sales 1,795,500.00 2,394,000.00 2,992,500.00 7,182,000.00

ITEM 2017 2018 2019

Beginning Cash 20,000.00 45,806.00 213,185.00

Receipts 1,795,500.00 2,394,000.00 2,992,500.00

Expenses 1,769,694.00 2,256,912.00 2,803,715.00

Ending Cash 45,806.00 182,894.00 401,970.00

Cash Flow Budget as at 31st December 2017- 2019

Financial overview

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Budgeted Annual Income Statement of Cervelo sales in Riga, Latvia, as at 31st December 2017 - 2019, in CAD

ITEM 2017 2018 2019

150 UNITS 200 UNITS 250 UNITS

Sales 1,795,500.00 2,394,000.00 2,992,500.00

Less cost COGS(8,800.00) 1,320,000.00 1,760,000.00 2,200,000.00

GROSS PROFIT 475,500.00 634,000.00 792,500.00

LESS EXPENSES

Selling and Administration 15,000.00 15,000.00 15,000.00

Commission (1,484.00) 222,600.00 286,000.00 357,500.00

Tariffs (4.7%) (413.6) 62,040.00 82,720.00 103,400.00

Shipping cost (48.00) 7,200.00 9,600.00 12,000.00

Insurance (22.00) 3,300.00 4,400.00 5,500.00

Travelling Expense 10,000.00 5,000.00 7,000.00

Advertisement and Promotion 125,000.00 70,000.00 70,000.00

TOTAL EXPENSES 445,140.00 472,720.00 570,400.00

EARNING BEFORE TAX 30,360.00 161,280.00 222,100.00

Income tax (15%) 4,554.00 24,192.00 33,315

NET PROFIT 25,806.00 137,088.00 188,785.00

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Risk Mitigation

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POTENTIAL RISKS MITIGATION MEASURES

Non-fulfilment of obligations by authorized distributor

Preliminary verify credential of potential authorizeddistributor;

Consult with the Canadian Chamber of Commerce andTrade Commissioner in Latvia;

Consider some alternative distributors (Sportland, ZeroSport Outlet).

Cost overruns and delays in distribution

Consider hedging options and insurances (Marine andCargo Insurances, Insurance for Freight Forwarders).

Currency fluctuations Consider hedging; Consider prices in Euro with profit margin about 10-40%.

Lack of recreational bicycles Consider proper market segmentation and dynamicpromotion on Latvian market.

Differentiate products in the future (bicycles R-Series, P-Series; spare parts and accessories; sportswear).

Implementation Schedule

Approval of Business plan

Agreement with Sportlife and outsourcing companies

1st payment & 1st delivery from Toronto to Riga

Advertising campaign in Riga

Monitoring & Controlling - time and payments

Cervelo bicycles in Sportlife’ outlet & closing payment

2nd and 3rd deliveries in 2017

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Concept & Opportunities

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The Concept Primary target market - 16,800 Latvians. Entry to the market will cost CAD 140,000.00. Authorized Distributor – Sportlife in Riga, Latvia. Export of Cervelo bicycles will be organized by members

of Global Business Development Team (GBDT) withsupport of HQ of Cervelo Cycles Inc.

The Opportunity Profitability of Cervelo’s entry - CAD 25,000 (2017) with the potential growth in the next 2 years.

The Potential Further increase of sales will be achieved by: Deeper market penetration (Russia, Belarus and

Lithuania – 1.25 million potential consumers), Supply of spare parts and accessories, Provision of assembly & maintenance services Product differentiation (bicycles R3, R2, and P/S-series).

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THANK YOU

Source: Tri2teach.com

2017

LATVIA

56 DISTRIBUTORSWORLDWIDE

Racing bicycles evolution 2016

Bike weight – 667 g

Speed -140+ km/h

Difference between gold and silver Olympic medals –8 milliseconds

1817Bike weight – 16 kgSpeed -16 km/h

1995 2016