Envision Technology

The Vision of the Future

Jessica Huskey, President
jhuskey2@utk.edu

Marcie Baker, VP of Manufacturing

mbaker7@utk.edu

Hui Zhang, VP of Marketing

hzhang8@utk.edu

Choi Yee Hui, VP of Sales & HR

chui1@utk.edu

Mei Liu, VP of Accounting & Finance

mliu4@utk.edu

Executive Summary
Mission Statement Envision Technology strives to provide efficient, reliable and user-friendly computer technology in a multinational environment. We work to provide hassle-free products, so our customers can focus on what is important to them... their business. Past & Present At the end of quarter three, Envision Technology was leading the pack in terms of financial performance, brand judgment, and market share in all of our targeted segments. We achieved this position by targeting the highest demand areas for our products and entering those markets first so that we could gain brand recognition relatively quickly. Our strategic plan to be a fast follower was a little difficult to implement because our performance exceeded that of our competitors. We worked to improve our brand judgments and advertising judgments in the fourth quarter, but underestimated our competitions business savvy and were surpassed slightly in these areas. However, while the competitor was focusing on imitating our brands, Envision was working to improve not only the brands, but also the efficiency in which we produced those brands in addition to expanding our capacity. We were able to improve our factory efficiency from 69% to 80%. Our initial target markets were the Traveler and the Workhorse. In quarter four, we created a new brand to include the Mercedes, which was a completely untouched market segment. We knew that the competition did not have the resources that Envision had, and thus it would be easier for us to target this market than our competitors. Objectives Envision Technology will increase sales to more than $42,000,000 in the next four quarters by focusing on the strengths of our company in addition to the customers needs and wants. To do this we are seeking $5,000,000 in venture capital for which we will exchange common stock. We are asking $400 per share. This capital will be used primarily for R&D and for rapid expansion. Our goal is to get a significant amount of the market share in each segment we are targeting, so that we can attain profit margin leader status. We plan to open several new offices in the next four quarters, while increasing our sales force in the offices that have already been established. Envision will also begin to expand our market presence in higher demand regions by opening web centers in quarter five. We are now in a position to follow our strategic plan and begin incorporating the strengths of our competitors in brand and advertising design, while still maintaining a strong financial position.

Strategic Situation Analysis

Business Strategy Envision Technology has established a business strategy as a fast follower. Our goal is to study the strategic moves of our competitors to determine the best results from each group and incorporate and improve upon the best of all worlds to maintain our position in the marketplace. Market Performance In quarter three, Envision took 17% of the total market share, concentrated primarily in the Workhorse and Traveler segments (Workhorse 19% and Traveler 30%). Our gross profit margin was 52.9% overall. In quarter four, we increased to 26% of the total market share spread over four segments (Workhorse 21%, Traveler 32%, Innovator 34% and Mercedes 74%). Our gross profit margin increased as well to 65.6%. Strategy Markets In quarter five, Envision is opening our first web center in Toronto. We chose this location because Canada is currently an untapped market due to the tariff disputes between the U.S. and Europe. We anticipated this problem based on industry news and chose to open our manufacturing plant in China for this reason. There are also some rumblings in the industry in regards to the low prices on U.S. imports from China. In response, we are delaying opening any more offices in the U.S. until quarter seven. We will continue monitoring the situation and reevaluate our decision in the coming quarters. We plan to increase our market share by adding twelve sales offices and three web centers between quarter five and quarter eight. Segments and Brands In every segment that Envision has entered, we have commanded the highest demand for each individual segment as well as placing first in overall demand. In addition to the Workhorse, Traveler, and Mercedes markets, Envision will include the Innovator segment in our targeted segments beginning in quarter five. We are currently developing a new brand for the Innovator market and are confident that we will be able to take the majority of the demand for that segment as well.

Competitors Our primary competitor in Workhorse, our priority target market, is Advanced CompuTech. As stated in the Executive Summary, though, our goal is not necessarily to maintain the top position in each segment. Instead, we prefer to maintain our leadership position in overall market share by taking large portions of the market share in four of the five segments. Strategic Investments Plant Expansion We are planning rapid expansion of our production facility in China to meet our growing demand. We expect to have an operating capacity of over 16,000 units by quarter eight. Research & Development Research and development is critical to maintaining our strategic position. To keep the majority of the market share in each segment, we will have to continue producing quality products with the latest technology to satisfy the needs of our business customers. We will achieve these goals by investing $5,000,000 in quarter five and $3,000,000 in quarter six. Advertising In quarters three and four we used local advertising as our primary media. Beginning in quarter five, however, we will expand to include local and regional advertising and thus reach a larger audience.

Environmental Analysis
Strengths Management Envision has a very talented team of professionals who all have an extremely high work ethic. The group is made up of an excellent mix of personalities ranging from very conservative to highly aggressive. This mix helps to keep balance in the decision-making processes.

Operating Efficiency Because of significant investment in R&D and human resources, Envision was able to improve operating efficiency by 11% between quarters three and four. We plan to invest more into these two areas and thus expect this percentage to continue improving in future quarters. Financial Performance Our financial performance relative to our competitors is gauged by the results of the cumulative balanced scorecard.

Cumulative industry results for last four quarters ending in quarter : 4

Minimum Total Overall Financial Performance Market Performance Marketing Effectiveness Investment in Future Wealth Human Resource Management Asset Management Manufacturing Productivity 0.00 -21.91 0.08 0.60 1.86 0.09 0.66 0.58 0.28 Maximum 4.93 23.96 0.36 0.72 13.75 0.86 0.72 1.37 0.54 Average 0.66 -6.16 0.18 0.65 5.38 0.46 0.70 1.06 0.40 Envision Technology 4.93 23.96 0.19 0.72 4.01 0.86 0.71 1.11 0.54

Envision Technologys financial performance of 23.96 is well above the average in the industry, with our closest competitor having a score of 2.52. Our overall performance in each individual quarter (not pictured here) increased from .16 in quarter three to 11.03 in quarter four, while our financial performance alone significantly improved from 1.54 to an astounding 46.37! Weaknesses Asset management In quarter two, the management team of Envision Technology was able to effectively project demand for quarter three. We finished the quarter with only twenty stock-outs and less than sixty units in ending inventory. The effectiveness of our brand creations and marketing plan in the test quarter, however, created more demand than we anticipated in quarter four. Our actual demand was almost 30% over what we projected

and we were unable to meet the customers needs due to an increase in stock-outs. We now have access to more data related to market share and feel with this additional information, we will be able to predict demand more accurately. Ad design In quarter three, Envision had the best ad judgment ratings for each segment targeted. In an attempt to improve our ad ratings, we made some adjustments that dropped our ad ratings. We can use what we learned from this quarter to adjust for future quarters. Opportunities Untapped segments The results from quarter three showed that the Mercedes market had been left virtually untouched. Our strong financial position allowed us to enter this market in quarter four. Our early presence in this segment has allowed us to dominate this particular market segment with 74% of the market share. Strategic Alliances We realize the importance of R&D expenditures in our companys early stages of development. Because of the added value of investing in R&D combined with the high prices to purchase it, we feel it is in our best interest to form strategic alliances to decrease R&D expenditures and maintain our leading financial position. Currently, we are undergoing negotiations with two companies. Threats Economic Factors Envision initially placed our manufacturing facility in China due to the rumblings in the news regarding tariff issues between the U.S. and Europe. Now, however, the U.S. electronics industry is accusing China of selling electronics in the U.S. below their cost of production. Several congressmen are asking for hearings to investigate these allegations. With a 65.6% gross profit margin, it is obvious that Envision Technology is not pricing our product below the production cost. Therefore, while there is potential for the U.S. to impose higher tariffs on imports from China, given our high profit margin, we feel that higher tariffs will not threaten our financial position significantly.

Envision Technology
Quarter 1 Segments Targeted Work Horse Traveler Work Horse Traveler Work Horse Traveler Work Horse Traveler Mercedes Work Horse Traveler Innovator Mercedes Montreal Beijing Web - Toronto Work Horse Traveler Innovator Mercedes Paris Guangzhou Rome Vancouver Web - Tianjin Quarter 2 Quarter 3 Quarter 4 Tactical Plan Quarter 5 Quarter 6 Quarter 7 Work Horse Traveler Innovator Mercedes Rio de Janiero Sau Paulo Berlin Web - Chicago

Quarter 8

Quarter 9

Work Horse Traveler Innovator Mercedes

Markets Entered Chicago Shanghai Los Angeles London

Curitiba New York Toronto

Atlanta Belo Horizonte

Brands Designed Fortune Tranquil Tranquil $3000 Fortune $3400 Tranquil S $2950 Fortune $3325 Elite $4583 Elite Tranquil S

Innovate

Brands for Sale & Price

Tranquil S $2950 Fortune $3325 Innovate $3650 Elite $4583 local regional 498,980 40 3171 3250 2359 700,000 4,000,000 1,394,161 96 6000 6500 6175 5,000,000 9,000,000

Tranquil S $2950 Fortune $3325 Innovate $3650 Elite $4583 local regional 2,102,209 146 9200 13000 10400 3,000,000

Tranquil S $2950 Fortune $3325 Innovate $3650 Elite $4583 local regional 2,467,811 186 11520 14625 11700 600,000

Tranquil S $2950 Fortune $3325 Innovate $3650 Elite $4583

Media Plan Advertising Budget Sales/Service Employees Projected Demand Fixed Capacity Operating Capacity R&D Expense Equity Investment 1,000,000 2,000,000

local

local 151,079 12 600 1625 791 120,000 3,000,000

local

local regional

2,117,715 220 13840 16250 13000 600,000

Envision Technology
Actual Income Statement Quarter 1 - Quarter 4 Quarter 1 Gross Profit Revenues Cost of Goods Sold Tariffs Gross Profit 1,425,780 (671,993) (19,486) 734,301 5,797,390 (1,994,881) (103,238) 3,699,271 Expenses Research and Development Quality Cost Licensing Fees Advertising Sales/Service Force Expense Sales Office and Web Center Expenses Marketing Research Shipping Interest Depreciation Inventory Holding Costs Excess Capacity Cost Total Expenses 120,000 120,000 24,970 151,079 216,359 490,000 115,000 26,958 25,000 8,731 57,000 (57,000) 450,000 (450,000) 1,178,097 (443,796) 330,000 57,000 Operating Profit Miscellaneous Income and Expenses Interest Income Other Income Licensing Income Other Expenses Income Before Taxes Loss Carry Forward Taxable Income Income Taxes Net Income Common shares outstanding Earnings per Share Quarter 2 Quarter 3 Quarter 4 Quarter 5 17,427,010 (5,228,103) (174,270) 12,024,637

Pro-Forma Income Statement Quarter 5 - Quarter 8 Quarter 6

Quarter 7

Quarter 8

26,277,615 (7,883,285) (262,776) 18,131,554

35,254,440 (10,576,332) (352,544) 24,325,564

42,354,293 (12,706,288) (423,543) 29,224,462

820,000 249,770 498,980 760,416 725,000 115,000 109,300 48,958 9,179 3,336,603 362,668

5,000,000 522,810 1,394,161 1,152,000 1,151,000 115,000 522,810 261,405 27,477 10,146,663 1,877,973

3,000,000 788,328 2,102,209 1,752,000 1,992,000 115,000 788,328 394,164 51,127 10,983,157 7,148,397

600,000 800,000

600,000 800,000

2,467,811 2,232,000 2,068,000 115,000 1,057,633

2,117,715 2,640,000 1,905,000 115,000 1,270,629

528,817 82,856

635,314 120,975

9,952,117

10,204,633

14,373,447

19,019,829

13,500

13,500

(43,500) (43,500) (43,500) 10,000 (4)

(436,500) (436,500) (436,500) 20,000 (22)

(443,796) (443,796) (443,796) 30,000 (15)

362,668 (923,796) (561,128) 362,667 40,000 9

1,877,973 (561,128) 1,316,845 (395,054) 1,482,920 52,500 28

7,148,397

14,373,447

19,019,829

7,148,397 (2,144,519) 5,003,878 52,500 95

14,373,447 (4,312,034) 10,061,413

19,019,829 (5,705,949) 13,313,880

52,500 192

52,500 254

Envision Technology Actual Cash Flow Statement Quarter 1 - Quarter 4 Quarter 1 Total Receipts from Operations Beginning Cash Balance Receipts from Operating Activities Revenues Licensing Income Other Income Interest Income Total Receipts from Operations 13,500 13,500 13,500 13,500 1,425,780 1,425,780 5,797,390 5,797,390 17,427,010 18,548,048 56,500 20,000 813,893 1,121,038 Disbursements from Operating Activities Production Research and Development Quality Cost Licensing Fees Advertising Sales/Service Force Expense Sales Office and Web Center Expenses Rebates Marketing Research Shipping Tariffs Interest Excess Capacity Cost Inventory Holding Costs Income Taxes Other Expenses Total Disbursement from Operations 57,000 57,000 120,000 330,000 450,000 759,303 120,000 24,970 151,079 216,359 490,000 115,000 26,958 19,486 8,731 1,931,886 1,999,361 820,000 249,770 498,980 760,416 725,000 115,000 109,300 103,238 9,179 5,390,244 Investing Activities Fixed Plant Capacity Sinking Fund Total Investing Activities Financing Activities Increase in Common Stock Borrow Conventional Loan Borrow Long-Term Loan Borrow Emergency Loan Repay Conventional Loan Repay Emergency Loan Deposit 3 Month Certificate Withdraw 3 Month Certificate Total Financing Activities Cash Balance, End of Period 6,003,079 26,277,615 32,280,694 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Quarter 6 Pro-Forma Cash Flow Statement Quarter 5 - Quarter 8 Quarter 7 11,292,067 35,254,440 46,546,507 Quarter 8 20,889,642 42,354,293 63,243,934

5,411,086 5,000,000 522,810 1,394,161 1,152,000 550,000 115,000 522,810 174,270 27,477 575,353 15,444,969

8,119,783 3,000,000 788,328 2,102,209 1,739,955 970,000 115,000 788,328 262,776 51,127 2,451,119 20,388,627

10,893,622 600,000 800,000 2,467,811 2,327,465 1,325,000 115,000 1,057,633 352,544 82,856 4,534,934 24,556,866

13,087,476 600,000 800,000 2,117,715 2,890,580 1,520,000 115,000 1,270,629 423,543 120,975 5,821,449 28,767,367

600,000 600,000

600,000 600,000

1,100,000 1,100,000

2,100,000 2,100,000

600,000 600,000

1,100,000 1,100,000

600,000 600,000

1,000,000 900,000 100,000 56,500

1,000,000 1,000,000 20,000

1,000,000 900,000 1,900,000 813,893

1,000,000 1,000,000 1,121,038

5,000,000 5,000,000 6,003,079

11,292,067 20,889,642

33,876,567

Envision Technology Actual Balance Sheet Quarter 1 - Quarter 4 Quarter 2 Quarter 3 Quarter 4 1,121,038 91,791 20,000 900,000 813,893 87,310

Quarter 1 Current Assets Cash 3 Month Certificate of Deposit Finished Goods Inventory 56,500 900,000 Long Term Assets Sinking Fund Net Fixed Assets 956,500 1,520,000 2,076,203 600,000 1,175,000 Total Assets Liabilties and Owner's Equity Debt Conventional Bank Loan Long-Term Loan Emergency Loan Equity Common Stock Preferred Stock Retained Earnings Total Liabilities and owner's equity

Quarter 5 6,003,079 274,775

Pro-Forma Balance Sheet Quarter 5 - Quarter 8 Quarter 6 Quarter 7 11,292,067 511,273

Quarter 8

20,889,642 828,563

33,876,567 1,209,752

2,226,042 3,438,871

4,064,637 10,342,490

4,258,428 16,061,768

4,925,076

5,140,342

26,643,281

40,226,661

1,000,000 -43,500 956,500

2,000,000 -480,000 1,520,000

3,000,000 -923,796 2,076,204

4,000,000 -561,129 3,438,871

9,000,000 1,342,490 10,342,490

9,000,000 7,061,768 16,061,768

9,000,000 17,643,281

9,000,000 31,226,661

26,643,281

40,226,661