BEIJING INNOTREK TECHNOLOGY CO., LTD BUSINESS PLAN

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BEIJING INNOTREK TECHNOLOGY CO., LTD BUSINESS
PLAN

• ADVANCED
• BROADBAND TECHNOLOGY INSTALLATION FOR
• HOTELS

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Contents

• Companys Overview
• Introduction to Project
• Market Analysis
• Competitor Analysis
• Marketing Strategies and Sales
• Marketing Mix
• Financials
• Conclusion

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Companys Overview

• Established in November 2003
• Certified by the Science committee of Beijing.
• Specializes in in the development of
  cable-exempted LAN construction.
• Attained Intellectual property rights and patent
  rights to its technology.
• All research and development were carried out
  according to the requirements of ISO 9000 to
  ensure quality of excellence of products
  developed.

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Companys Overview- Organisation Structure

• Main drivers for companys businesses Marketing
  Team and Technical Team
• Innotrek has a total of five stakeholders.
• Mr. Wynn Wang as Managing Director
• Mr. Tao Cheng as Technical Director
• Mr. Wu Dan as Assistant MD.

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Project Description

• Project Advanced Broadband Technology
  Installation Service for Hotels
• Makes use of Innotrek Intelligent Broadband LAN
  System, which combined Power Line Communication
  (PLC) with DSL technology and LAN technology
• It applied the high speed PLC technology on
  telephone lines and cables lines, solving
  problems such as the instability in connection.
• Making use of telephone lines to access the
  internet to realize the transformation from the
  point to point model to point to multipoint
  model, thus increasing broadband clearing rate
  greatly at a much lower capital.
• System omitted the need for additional wiring and
  construction work such as drilling into buildings
  for the installation of broadband network.

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Project Description

• For hotels.
• Time and cost effective, as sales and other
  opportunity costs would not be incurred in the
  process of upgrading.
• no drillings and additional cabling is required
  in the installation of broadband network, thus
  not affecting any daily operations.
• Completing the setting up of Broadband internet
  for a hotel in a day, at a low rate charged per
  room each day
• Emphasizes largely on the low cost of realization
  as well as fast speed of construction of
  Broadband network using our technology.

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Project Description- Stage of Development

• Innotrek Intelligent Broadband LAN System was
  first brought to market in November 2003.
• Introductory Phase of the Product Line cycle
• Major efforts in emphasizing on making our
  technology known to the public, and bringing
  awareness to targeted customers.
• Projected to bring about a high sales forecast of
  RMB 25,000,000 in 2008, with profit reaching RMB
  2,000,000.
• Based upon past historical figures and the belief
  that it will develop to the Growth Phase of the
  Product Line Cycle by the end of the year with
  more funding in place to create awareness through
  publicity, as well as to take on a larger market
  share with a larger management and technical
  team.

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Project Description- RD and Patent

• Innotrek Intelligent Broadband LAN System makes
  use of advanced technology to establish broadband
  networks in buildings, without the need for
  additional wiring or drillings into buildings.
• One-of-its-kind in the world, and is a patented
  product under Beijing Innotrek Technology CO.,
  Ltd, strong barrier of entry into the market by
  potential competitors.
• RD base - Beijing Jiaotong University
• Plans of development of our own research centre,
  should there be expansion and more capital in
  place. Such plans would be a form of good
  investment for Innotrek to accelerate companys
  development in the long run.

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Project Description- Production

• Product
• Beijing Jiaotong University is currently the base
  for production and development of Innotrek
  Intelligent Broadband LAN System. The research
  team is headed by Mr. Tao Cheng, Technical
  Director of Innotrek. As business expands to meet
  up with the targets, a larger scale of production
  is required. Innotrek would outsource to overseas
  for manufacturing, where Innotrek will be an ODM.
  This would effectively save costs and raise
  productivity. For this, Innotrek is in the midst
  of contractual negotiations with Taiwan. Once
  agreements were made, Innotrek would shift
  production to manufacturing plant in Taiwan Accex
  Pte Ltd.
• Service
• Installation of broadband network will be done by
  well-trained internal staff of Innotrek. As
  business expands, more technical staff will be
  employed to cater to the growing needs. Upon
  establishment of network system in the hotels,
  hotel employees will be trained by technical
  staff from Innotrek to handle basic technical
  problems. The quality of technology service
  provided is maintained with efficient 24 hours
  customer service.
• Our project Advanced Broadband Technology
  Installation Service for Hotels is not a one-off
  payment product business, but rather, one that
  receives payment from clients on a regular basis
  for maintenance fees

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Market Analysis Market Size

• The market size is determined by two components
  Hotel Industry and the demand for broadband
  service in the region.
• Demand for Broadband Service
• In June 2007, the internet users of rural China
  reached 37.41 million and among the rural
  population of 737 million, the Internet
  penetration rate reached 5.1 the internet users
  in urban areas reached 125 million, with the
  penetration rate reaching 21.6.
• Over the years, efforts have been made to bridge
  the large gap in Internet development status
  between the rural and urban parts of China.
  Besides efforts has also been done in bridging
  the technological gap between the East and the
  West.
• Many see the need to keep up with IT advancement,
  given their improved standard of living, thus
  making broadband service provider a very
  lucrative business, be it within Beijing, or in
  the less developed parts of China.

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Market Analysis Market Size

• Hotel Industry
• China is a big player in the worlds economy.
  Being a large country housing a large population
  of 1,321,851,888, there would be a large number
  of business dealings, both with domestic
  businessmen from all over China, as well as with
  international foreign business travelers. Hence
  there is increasing demand by local hotels to
  improve their IT facilities in order to attract
  and pull in a large customer crowd.
• Statistics from China National Tourism
  Administration shows that the total number of
  hotels sums up to 400,000, inclusive of 13,378
  star level rated hotels.
• The prospective clients for the project are
  hotels 3 star and below, which makes up 80 of
  the entire hotel industry, thus, the maximum
  market potential for our business in China would
  be a total of 320,000
• The technology used by Innotrek emphasizes on the
  easy implementation and installation of Broadband
  into hotels. With the large market demand for
  Internet access in China, there will be a
  potential large market that could be explored and
  its already large market is expected to continue
  expanding.

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Market Analysis Market Growth

• Market Trends
• Market Saturation

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Market Trends
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Market Growth
Table 1. Internet Usage and Growth Statistics
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Market Analysis Market Growth

• Market Saturation
• The opportunity of window for Innotrek is large,
  with the number of 3 star hotels with no
  broadband access reaching 1,124 in Beijing. In
  addition, with development in hotel industry
  within the city of Beijing, more and more new mid
  range, economical hotels are built, thereby
  expanding its market size.
• Statistics have shown, the number of new
  star-level rated hotels in 2006 amounted to
  1370,an increase of 11.26 from the previous
  year. Of which, 298 are five-star hotels, 1,400
  four-star hotels, 4,998 three-star hotels, 6,027
  two-star hotels and 660 one-star hotels. The
  market for broadband installation in the hotel
  industry is indeed nowhere near its point of
  saturation instead, the market will drive the
  companys product towards the growth phase of the
  product life cycle.
• Beijing Olympics Games 2008, the need for better
  hotel service and facilities is projected to
  create further upward pressure.

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Market Analysis Market Growth

• Market Saturation
• Innotrek has also the intention of venturing into
  other parts of China, i.e., developing parts of
  china where there are a bigger number of hotels
  with no broadband, as well as a growing demand
  for such service. Till date, Innotrek has
  business in Hefei, Cangzhou, Shenyang, and many
  other cities, and we intend to extend further to
  the developing areas in China, where Internet
  growth is picking up, and demand for such service
  is increasing.
• Innotrek also has plans to expand globally,
  opening up markets in other developing countries
  in Asia, such as Vietnam etc. Figures show
  9,013.4 growth in the use of Internet,
  indicating the rise in the demand for Internet
  services in Vietnam. Such figures are important
  in showing the feasibility and potential market
  size, hence, its profitability.
• With Innotreks patented technology of Innotrek
  Intelligent Broadband LAN System, the increasing
  demand for broadband installation in hotels and
  its large market can even be a blue ocean of high
  profitability and sustainability.

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Competitor Analysis

• 4. Competitor Analysis
• The market is in its growth stage and many big
  players in the telecommunications industry are
  showing their interest in this sector, coming up
  with new packages and projects catering
  especially to eat into the market share of the
  hotel industry. We will discuss the business
  competitive environment as well as Innotreks
  competitive advantage in this section.
• 4.1 Competitive Environment
• The competitive environment consists of big
  companies like CNC and China Telecom, which
  handles broadband installation of buildings,
  including hotels.
• These competitors are big players in the
  telecommunications industry. To cater to the
  emerging demand for internet service in the hotel
  sector, they start up a series of internet
  service packages for hotels, such as Olympics
  Hotels, E-Hotels, and Broadband Hotels. These
  projects were targeted at newly built hotels and
  upgrading hotels as they prepare for the surge of
  business travelers into Mainland China. Their
  reputation as a well-known brand country-wide
  posed great threats to Innotreks launch of
  Advanced Broadband Technology Installation
  Service for Hotels into the hotel industry.
• These companies, however, focus mainly on
  nationwide telecommunications, with broadband and
  internet connectivity installation being a small
  component of their entire business. They
  establish external connection to the entire
  building, while the construction of internet
  connection within the buildings will be done by
  other companies, or their subsidiaries. These
  companies are generally smaller in size and their
  technology would not have been on par with
  Innotrek. Innotrek uses a patented technology
  which could minimize instability and it does not
  require additional wiring. In fact, such
  technology is among the leading few in the world.
  Thus, where Innotrek faces competition with
  bigger, well-known companies, Innotrek has a
  competitive advantage in terms of the quality of
  technology provided. Notably, Innotrek can
  collaborate with these companies to gain trust
  from the potential customers, but such plans are
  still in their initial stage.

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Competitor Analysis

• 4.2 Competitive Advantage
• More about Innotreks technology, the system has
  also transformed from a point to point
  structure to a point to multipoint structure,
  which greatly lowers the cost of DSLAM. As there
  is no need to do additional wiring, it greatly
  reduces the amount of capital we need to invest
  in network wiring. In addition, time taken for
  construction comparative to ADSL technology is
  greatly reduced as well. This thus enhanced the
  efficiency of our service, making our technology
  more competitive.
• Another alternative to broadband Internet
  connection is wireless Internet connection.
  Wireless Internet allows LANs to be deployed
  without cabling, typically reduces the costs of
  network deployment and expansion. However, it
  constantly faces the problem of network
  connection instability and is most susceptible to
  breakable privacy encryptions. The most common
  wireless encryption standard, Wired Equivalent
  Privacy or WEP, has been shown to be breakable
  even when correctly configured. In addition,
  wireless Internet connection Installation
  requires horizontal and vertical wiring, and is
  thus not completely free from cabling work during
  installation.
• To conclude, in terms of technology superiority,
  Innotrek Intelligent Broadband LAN System not
  only leads in terms of speed of installation, but
  also in terms of the quality and stability of
  internet network provided. Table 3-1 is a
  comparison in the advantages and disadvantages
  between different access technologies used by
  Innotrek and various competitors in the market.

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Marketing Strategies

• Segmentation, Targeting, Positioning
• Marketing Mix Product, Place, Price and
  Promotion.

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Marketing Strategies- Segmentation

• Innotrek segmented the market based on hotel
  ratings.
• There are different types of hotels catering to
  all types of guests. Hotel star level rating is a
  common method of categorizing hotels into
  different class levels.
• While the project Advanced Broadband Technology
  Installation Service for Hotels could serve more
  than one specific group of hotels, it is most
  useful for economical hotels.
• By segmenting based on such ratings can help
  Innotrek better identify where the bulk of our
  customers lie.

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Marketing Strategies- Targeting

• Niche market, narrowing down the scope to
  existing upgrading hotel
• Most ideal for existing hotels, as our
  construction of network does not require
  additional cabling and thus does not affect its
  daily operations while assists hotels in their
  upgrading process.
• Large market size of 80 of entire hotel industry
  
• Research have shown, that the average occupancy
  rate for hotels without broadband technology lies
  between 60-70 , in contrast with an average of
  90-120 for hotels providing broadband
  technology.
• Prepare hotels to tap into the market of
  increasing business travelers.
• Innotreks targeted clients include non rated
  hotels, which takes up a large and significant
  proportion of hotels in China. These hotels are
  catered for local business and leisure travelers,
  and Advanced Broadband Technology Installation
  Service for Hotels is customized to meet the
  needs of such hotels to provide better service
  and attract more business travelers.

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Marketing Strategies- Positioning

• Hassle-free construction of broadband technology
  network into the entire building without the need
  for additional wiring and drillings.
• Competitive advantage, saves on cost of capital,
  reduces time of installation, minimizes
  opportunity costs and improves stability with its
  advanced technology of Innotrek Intelligent
  Broadband LAN System.
• Completing the setting up of broadband Internet
  for a hotel in a day, at a low rate charged per
  room per day.
• Emphasizes efficiency of our operations and the
  low cost of realization, and suggests the
  profitability of our business with our
  capabilities to take on multiple clients
  simultaneously, given the technical efficiency
  and ease of implementation of service.

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Marketing Strategies- Marketing Mix

• Product Differentiation
• Competitive advantage over the big companies in
  the industry in terms of the technology it is
  able to provide.
• Unlike competitors that require additional
  drillings into buildings, Innotrek can better
  cater to existing hotels, without incurring
  additional opportunity costs.
• identifies Innotrek from the rest of the
  competitors in the market.

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Marketing Strategies- Pricing

• The proposed business model of Completing the
  setting up of Broadband internet for a hotel in a
  day, at a low rate charged per room each day
  effectively summarizes the fundamental objective
  and significance of Innotreks Advanced
  Broadband Technology Installation Service for
  Hotels.
• The pricing strategy is to charge at pricing
  below competition, at a low rate charged per
  room each day.
• Low rate in our context refers to one percent
  of the room charge for each day of usage.
• In addition, upon installation of broadband
  network, professional training conducted by
  Innotreks technical to hotel staff will be
  provided free of charge. Should there be any
  network problems, this will equip hotel staff
  with knowledge and skills to deal with the basic
  situations. For more complicated network
  problems, our staff will be available for
  customer service and maintenance to ensure
  quality of excellence of broadband network usage.
  Such follow-ups are necessary and will be
  provided free of charge. This is a value-added
  service aimed at providing a wholesome broadband
  package for our clients.

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Marketing Strategies- Promoting and Advertising

• Innotrek strengthened its brand name by
  collaborating with DELL Inc.
• Innotrek seeks to provide for clients, a package
  of good quality, by using DELL computers to
  deliver Innotreks patented technology of
  Innotrek Intelligent Broadband LAN System.
• Due to lack of funds, Innotreks current
  advertising strategy is conducted via cold
  calling and spreading by word-of-mouth.
• With more capital in place, more advertising and
  publicity would be done. Innotrek plans to invest
  a portion of capital on brand building, through
  marketing vehicles such as participations in
  exhibitions, demonstrations at hotel themed
  promotional meetings, as well as publications of
  articles on magazines and newspapers

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Marketing Strategies- Place

• Innotreks main office as well as a research
  centre is in Beijing, where our main business and
  bulk of clients lie.
• There are also offices in Shen Yang, An Hui and
  Harbin to manage the businesses at the respective
  cities.
• Hence, the businesses at the various parts of
  China are well-managed and should there be any
  network problems, they could be solved promptly
  by the technical staff in their respective
  office.
• Innotrek places its main office in Beijing, the
  capital of China, where business and development
  in picking up.

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Sales Target

• 80 of all hotels are three stars and below, and
  are categorized under mid range and budget
  hotels.
• Maximum market potential of 320,000, out of the
  400,000 hotels in China
• Attain 10 of the market potential, which is a
  total of 32,000 clients in China, within a time
  frame of five years.

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Finance

• RMB 307 million
• 80 bonds, 20 stocks
• Establishment and completion of the marketing
  channel system
• Establishment and completion of the post-sale
  technical service system
• Product Authentication
• Research and development Centre
• Publicity
• Liquid Capital
• Company operating expenses

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Establishment and completion of the marketing
channel system
30
Establishment and completion of the post-sale
technical system
31
Product Authentication
32
R D
33
Brand Building and Publicity
34
Liquid Capital
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Operating Expenses
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Total Investment Budget Summary
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Profit Forecast- Assumptions

• Assumption 1 The principle of building a
  harmonious society will be followed there will
  be no serious social turmoil
• Assumption 2 Public health will develop normally
  and there will be no serious epidemics.
• Assumption 3 There are no acts of war that might
  affect the present situation

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Explanation of our profit forecast

• Our companys products mainly consist of Innotrek
  switch and terminal modem. We adopt the method of
  requesting additional processing so that
  production scale is not limited by productivity.
• The expense will be highest during the first
  year. In the subsequent years we will be
  developing more agencies eventually. Personnel
  and site fees will also increase, however it will
  not be comparable to the great amount of increase
  in our sales income in the second year. Thus, it
  is a profitable investment.
• Our company is also equipped with talents in
  international trading. Despite the fact that more
  liquids funds are required, the results of
  investments can also be seen quickly, which is
  beneficial to our financial flow.

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Profit Forecast
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Profit Forecast

• Similarly, figures are computing to an average of
  100 hotel guest rooms. Besides paying the sales
  agent 10 000 Yuan, we still provide discounts to
  hotels very 2 months, estimated at 6000 a year.
  It can be given to either the hotel manager or
  the hotels itself, so as to develop the customer
  base of hotel clients.
• We expected that the market development will
  enter a stable state in 5 years time, where
  Innotreks business maintained at 31,000 hotels,
  which is Innotreks target of holding 10 of the
  entire market share.

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Conclusion