ELECT-RA

Prepared for: Prepared by:

Turul ATASOY Erdem SARIEYYPOLU Almurad SHAHMURADOV Leyla UZUN Canberk AYGN

December 27, 2010 Ankara

Business Plan

OWNERS
Business name: Adress: Telephone: Fax: E-mail: ELECT-RA kitelli Organize Sanayi Blgesi No:5-S Sefaky / STANBUL 0212 423 12 42 0212 423 12 43 mail@electra.com.tr

I. EXECUTIVE SUMMARY: ELECT-RA is established and owned by Almurad Shahmuradov. He is the electronic engineer who has important success in the area of electronic systems in his career. He decided to establish his own company by finding new product. Then he is cooperated with three people named Leyla Uzun, Canberk Aygn and Erdem Sareyypolu. ELECT-RA is envisioned to be the best quality electronic systems in the automobile market, especially for luxury automobiles and we make installation of electronic systems into private automobiles through the desire of individuals. Our company is prepared to produce the new electronic system which can perceive the moods of the driver. Through the perception of moods, the electronic system massages the driver and changes radio station as to the mood of driver. This electronic system also measures the alcohol level of the driver and does not allow someone to drive the automobile by stopping it in the high alcohol level. ELECT-RA is producing the intermediate good for the automobiles so ELECT-RA will target firms, which produce the luxury automobiles, by this electronic system. We are contacting with automobile firms such as BMW and Mercedes. This electronic system will make automobiles more comfortable and safer. These features of the electronic system will affect the automobiles firms positively because this is unique idea and the automobile firms want to differentiate from others. This will provide us some competitive advantages in the automobile market. Automotive electronic systems are the growing and developing sector. Recently more and more automobiles have been equipped by electronic systems. We predict that ELECT-RA which is investing the electronic systems is growing more than the other sectors. Many people who have high level of income are interested in the automobiles which are more comfortable and safer. Moreover, producing such an electronic system is not cheap. For these reasons, we establish our first marketing strategy for luxury automobiles for people having high level income. Then, we will establish this electronic system into the ordinary automobiles which people having medium level income can buy.

II. GENERAL COMPANY DESCRIPTION: Our company whose name is ELECT-RA is one of the leading companies which produce the electronic systems for the automobiles in Turkey. We are targeting the companies who use the electronics systems in their product. We are producing the electronics systems instead of them. To improve its position, our company mostly focuses on producing new products to market. This year, company is being prepared to produce the new product for the luxury automobiles. The company is owned and managed by young entrepreneur whose name is Almurad Shahmuradov. He has a degree in electrical engineering from the Middle East Technical University. He is a certified electronics technician with various brand companies. He is responsible for production and developments of electronic systems. Our company has two successful managers whose names are Canberk Aygn and Leyla Uzun. Objectives: Our company is a growth-oriented business. Its ten year goal is to take place in top ten in the market. With this in mind, the objectives over the next years are the following: * To achieve steady growth in sales revenues * To improve our product for ordinary automobiles * To expand product line to include different sectors. Mission: The mission of our company is to provide high quality, convenient and comprehensive electronic systems for the luxury automobiles. The most important aspect of our business is new good qualified products and patents from others. Our motto is Elect for the best. This motto explains the main mission of our firm to produce the best electronic systems. Our company offers the high-quality work. We have knowledgeable technicians and engineers who are successful in this area. We have good contacts with automobile firms to sell our product.

III. PRODUCTS AND SERVICES: Our product is electrical system that is designed for car drivers. We spend a lot of time driving car, which is sometime boring, sometime accidental and sometime tiring. Our aim is to help drivers to get rid of these negative factors. We want to give maximum comfort and safety to our customers with our new product. When we create our project we tried to give control to computer system of car as much as we can, because this will give driver more comfort and safety. In order to do this our engineers used chip technology with plenty of sensor. We started from beginning when driver gets inside the car. When driver gets in car he/she can be in different moods. Touching to steering wheel for the first time with help of sensor on it our system can detect mood of driver. This is done by measuring heart beats of person and it will define whether driver calm or aggressive. Computer system will get this information and will guide how to use car not to have accident. This process will continue during driving and remind the driver all the time. Using mood information our system will try to bring you to normal condition by changing radio stations and finding the most suitable songs for you. If there is not anything suitable for driver it will load to computer system and will try same thing from here. We also concerned about health of our customers. During driving our system will check for health. With help of sensors on steering wheel it will measure blood pressure and will notify driver frequently. When it gets out of critical range car will slow down and lock itself. We also put temperature sensors for human body, inside of car and outside. With outside temperature system will estimate season and using human body temperature it will arrange inside temperature of car to suitable form. As we know smoking is very harmful for health and it is very dangerous when smoked in closed areas like car. The car will notify you weather inside of car is ok or not, because there can be children and none smokers inside of car. To fight against driving with alcohol we put sensor that measure your alcohol level. If it is above certain value car will lock itself. We also put massager for your neck on the drivers chair to relief you. The features that I mentioned above cannot be done all by driver itself because either they will be concentrated to driving or it is impossible to do. Our uniqueness using this product is that we are using lots of chips together to control driver during driving in order to

give safe and comfortable drive. It does not take a lot of space even driver cannot see chips because of size. One can be seen from Figure 1 as an example.

Figure 1 These chips will give the most precise calculations with high probability. However, there can be some mistakes, as it is tested this errors can be neglected like 0.001%. Moreover this system does not need any knowledge of control because it is automatic. The product we created is very attractive and useful. We spend 3 years to develop this product and this reflected to its price. Technology we used is very expensive and difficult to develop, so needs a lot of money to create our product. When we put its research, development, production and other expenses into account the price will be like this for each system: Research and Development- 1000 TL Production- 2000 TL Final product and other expenses- 2000TL + TOTAL- 5000 TL

IV. MARKETING PLAN: Economics: In Turkey, there are almost 15 million vehicles by the end of the October of 2010. Our market includes all the vehicles in Turkey. There is no other company that produce our product, thus we have the hundred percent share of this market. Because the concept of our product is new, current demand is unknown at the beginning. However considering that Turkey is one of the most developing markets for vehicles and modified cars, our product will be a part of this market. Consumers want to fallow the trend and our product will satisfy their preferences. In the short run, there can be some barriers we face in entering this market. Brand recognition and consumer acceptance will be the biggest barrier to entry. It will be difficult to use a product completely new for consumers at first hence they will be a part of this trend eventually. To extend our product we use advertisement. By this way we overcome that barrier. Product: We can give all main features of our product like this: - Mood detector - Body pressure measurement - Heart beat measurement - Temperature arranger - Radio station changing - Alcohol tester - Massager

As we can see system controls driver and car electronically, which is safer than human control. Drivers who concern about their safety and comfort will benefit from this system. The system development belongs to our company so also fabrication is also done by us in our laboratory. We also give 3 years of warranty for our product. Delivery is done by us in a special form not to hurt system and delivery cost is added as other expenses to the cost of product. Customers Our target customers are people having high level of income. People having high level of income live in Istanbul and our location is suitable for selling our products to them. Moreover, we are contacting with companies which produce luxury automobiles. Most of the companies distributing luxury automobiles are located in Istanbul so they can easily contact us. Competition As we have mentioned earlier, one of our products is the device which gives an opportunity to customer to change radio station with his/her emotions. Another one enables customers to test his/her alcoholic condition. And there are also some others. These devices may be used by automobile companies from the fabrication stage and may be integrated to some cars by the owners desire. We are the only producer of this product. Since we have the patent of these products we may have an extra income from other producers. For now, we have no competitor in the sector. However we have to consider the worst situation. We have to take into account the possibility of entering other electronic system companies into this sector. Another consideration would be that the other companies may develop the product or launch another system which compete our product. The companies which we will compete are listed below. They are the most known companies in the market. Venom Elektronik Sistemler Address: Balarba Mah. Osmangazi Cad. No: 5/A BURSA Telephone: 0224-242-17-61

Nec Elektronik Address: Kemer Alt Caddesi Buyuk Balkl Han Kat:2 No:23 Karaky/STANBUL Telephone: 0212-243-65-92 Sunset Elektronik Address: Altnehir Osmanl Cad. No:43/2 Baakehir/STANBUL Telephone: 0212-687-69-95 Since we are the only one producer of these products in the sector, the companies listed above are just indirect competitors. For example, they import some kind sound system for cars and they assemble to the cars with some modifications. The cost is much lower than our system therefore some customers with lower income level prefer them. This situation enables us to market different types of products for different types of customers. Moreover, our company takes place almost each segment of production phase which are design, installation and control. Therefore we give a special guarantee to our systems as all. The competitive analysis is below. We had some comments about us and when doing this table we tried to be honest. We observed that we have much more strength. However, we had some weaknesses also. By the market research, we investigate our indirect competitors. Then searched whether our weakness is their strength or not. Another investigation was whether they have the capacity to compete us or not.

Factor Products Price Quality Selection Service Reliability Stability Expertise

Me Creative innovation Expansive High quality Different opportunities Kindly Reliable Steady Experienced

Strength X

Weakness

Venom

Nec

Sunset

Importance to Customer 5

X X X X X X X

Cheapest

5 4 2 4 3 2 4

Monopoly in the market Far away Location city center Good Appearance looking Sales Not proper Method enough Credit Little credit Method Advertising Multi way Image Good Niche

Company Reputation

X X X X X X X Good at sales method Banks agreement Closest to the city center

4 3 4 3 3 2 3

We see our company in the top ten among international automobile electronic systems companies in the next five years. In order to reach our purpose, we have to prove our systems to the world. Strategy Promotion We will present our production advertising on television, radio and newspaper. First we use television and newspaper in order to show a visual and to have a place on the customers mind. Then we repeat this advertise or the similar one on the radio. Using radio will be lower the cost since we have strong relations with a radio station. Another advertising type will be the distribution of catalogs, brochures to the car sellers. We want to be seen on the places in which related products are sold. Like, a customer who wants to change the sound system of his/her car may be interested with our product. Promotional Budget We have to think that we have an innovation and we have to take into account that Turkish people may not accept the changes directly. Therefore, we should allocate a large amount of money before the startup. If this works, we may reduce the amount of money that we use for the promotion. Pricing

As we have mentioned in the competitive analysis part, our pricing may be seen as a little bit high but it is necessary for meeting the expenses and for some amount of profit. Competitive analysis has shown that we should not compete with other companies on their pricing policy. Moreover we are not selling the same product and service. For most customers, the higher price means that getting higher quality of product with better service. Proposed Location Actually we already have a location but it may not be enough when we export our products. Therefore we have to buy or rent a place where close to airport or seaport. We also need a place at the city center just for advertising the system and for selling some parts of car. Since our current location is out of the city center. The design, production and the control of the systems are done in there. We may also place systems to cars in there. There is no parking problem up to 20 cars and we may deal with 3 cars at the same time. Customers do not want to wait so we propose them to deliver their car at the end of the day or one day after. Since we are located in the car repairs it enables us to be known easily. Distribution Channels We sell both product and service. We may deal with car owners personally and we may also be subcontractor of an automobile company starting from fabrication stage of big car companies. Special production for automobile factories brings much more therefore we generally want to deal with the big companies depending on the requirements we are supposed to do.

V. OPERATIONAL PLAN Production Our project firstly developed in computer base by our senior engineers. They mainly developed theoretical part of project. It does not cost very much, because it consists of mostly

computer simulation. This part gives direction to our assistants in laboratory. There assistants work for a long time to produce desired equipment. This part is the most expensive and hard part. There is a big probability of not working for the first time because our system consists of small chips. Our production is automatic, so we do not hire more people, which reduces expenses. Equipments in our laboratory and their usage costs us expensive, so it reflects on the price. When product leaves laboratory there is control part where it is tested whether it is working properly or not. Location The office of our company is out of the city center. Here we do not keep much worker, so main offices do not need to be huge. However, we should have a big place for fabrication, because chip technology equipments are very big and sensitive and fabrication has several steps. We should have a big cleaning system to keep inside clean. For business meeting customers do not need to visit laboratory, they will visit main office. Our total investment for our company, including equipments which are expensive, is 30,000,000 TL. Legal Environment For our product we got certificate from the Ministry of Industry and Trade of Turkey. We also get international licensing for our every product. Other companies can produce our product only with our permission and 20% tax. We also give insurance to all our workers. Personnel Our work hours are 9 am- 5 pm and we have 40 employees. The project developer engineers are doctor degree engineers with senior level. They mainly develop ideas. Production engineers are master of science degree and they work in labs. Control part workers are technique people. They do not need any university degree. They should test equipments for a given procedure. Depending on profession level payment of employees is also changing. Suppliers Macka 2475, Istanbul- distributor of products to the nearer cities and countries. Neukolin 1/33, Berlin, Germany- distributor of products to the nearer cities and countries.

We opened two critical suppliers in two important place so that to recover any problem quickly and not spend a lot of money on suppliers. There is not any expected problem in delivery. Our prices are steady.

Credit Policies We sell on credit with large party. We do not sell on credit with small buyers. When we sell with credit the opposite side is big company, so it is easy for us to trust them. Our credit system lasts 1.5 years. It is not good for us to extend credit, because we micro company we should get incomes from our product. VI. MANAGEMENT AND ORGANIZATION Almurad Shahmuradov has a degree in electrical engineering from the Middle East technical university. During his education, he gained extensive experience in project management, engineering and electronics systems. Almurad is responsible of producing and developing the new electronic systems in our company. Leyla is manager of the company. She is responsible of contacting the automobiles companies and presenting and selling our electronic systems. She regulates the relations within the company and between other companies. We have 15 employees in our company. Financing, accounting and market search are made by these two partners whose names is Erdem and Canberk so our companys initial staffing consists of Murat, Leyla and two partners of them with 15 technician trainees. VII. STARTUP EXPENSES AND CAPITALIZATION

Startup Expenses
ELECT - RA

Sources of Capital
Owners' Investment (name & % ownership) Almurad

10,000 10,00 Leyla Canberk Erdem Total Investment Bank Loans Trkiye Bankasi Total Bank Loans $ 60,000 $ 60,000 0 10,00 0 10,00 0 $ 40,000

Capital Equipment List Furniture Equipment Fixtures Machinery Total Capital Equipment Location and Admin Expenses Rental Prepaid Insurance Pre-opening Salaries Other Total Location and Admin Expenses Opening Inventory Category 1 Total Inventory Advertising and Promotional Expenses Advertising Printing Total Adv and Promo expenses $ 8,000 1,00 0 $ 9,000 $ 100,000 $ 100,000 $ 10,000 3,00 0 10,00 0 $ 23,000 $ 10,000 25,00 0 2,00 0 20,00 0 $ 57,000

Reserve for Contingencies

$ 5,000

Summary Statement
Sources of Capital Owners' and Other Investments Bank Loans Total Source of Funds Startup Expenses 57,00 Capital Equipment Location / Admin Expenses Advertising / Promo Expenses Contingency Fund Total Startup Expenses 0 23,00 0 9,00 0 5,00 0 $ 94,000 $ 40,000 60,00 0 $ 100,000

Owners Almurad Leyla Canberk Erdem Loan Guarantors (other than owners) Fulya Akbuga Levent Alptekin

VIII. FINANCIAL PLAN

OPENING DAY BALANCE SHEET

ELECT - RA

ASSETS
Current Assets Cash in Bank Inventory Prepaid Expenses Total Current Assets $ 194,000 $ 100,000 94,000

Fixed Assets Machinery & Equipment Furniture & Fixtures Total Fixed Assets $ 25,000 10,000 $ 35,000 $ 229,000

Total Assets

LIABILITIES & NET WORTH

Current Liabilities Accounts Payable Notes Payable (due within 12 months) Total Current Liabilities $ 94,000 10,000 $ 104,000

Long-term Liabilities Bank Loans Payable Notes Payable to Stockholders Total Long-term Liabilities $ 60,000 40,000 $ 100,000 $ 204,000 $ 25,000 $ 229,000

Total Liabilities

Owners' Equity (Net Worth)

Total Liabilities & Net Worth

Breakeven Analysis
ELECT - RA

Cost Description Inventory or Materials Salaries (includes payroll taxes) Supplies Repairs & maintenance Advertising Rent Telephone Utilities Insurance Interest Depreciation

Fixed Costs ($) 180,0 00 2,0 00 22,0 00 12,0 00

Variable Expenses (%) 5.8 0.0 13.3 0.0 0.0 0.0 0.4 0.1

22,0 00 12,0 00 2,2 00 $ 252,200

0.0 0.0

Total Fixed Expenses Total Variable Expenses

19.5

Breakeven Sales level =

313409