lo jack and the micrologic alliance

Presented by:Nazanin Karimi, Minoo Mirhoseini, Mohammad Nikseresht

Founded in 1978 in Dedham, Massachusetts Product: Stolen Vehicle Recovery System

A unique patented system designed to assist law enforcement personnel in locating, tracking, and recovering stolen vehicles

Sales in 1998: $ 74,502,000

U.S.: a distribution network consisting primarily of new automobile dealers (81%)

International: primarily derived from product sales

Licensing: from unaffiliated distributors

• Joe Abely (President and chief operating officer) & Mike Daley (CEO)

• Strategy: expansion into more metropolitan areas, states, and countries where the combination of population density, new car sales, and vehicle theft was highest

Strong consumer confidence in the LoJackbrand

The extensive network of distributors Sales and marketing expertise Experience in the technology of tracking and

position location Excellent financial position

LoJack’s long standing strategic partner in the development and manufacture of the Stolen Vehicle Recovery System

Abely had recently met with senior managers from MicroLogic to discuss joining with them in introducing a new monitoring and maintenance system for construction equipment

Bill Reagan (1977): Owner of a mergers and acquisitions

company Selectman and police commissioner in

Medfield, Massachusetts

Concept of LoJack

Frank Massa: president of a small electronic firm

Help to complete the patent application

Lack of the appropriate technical resources and time

Potential investors: $250,000 in exchange of 40% of the company’s equity

MicroLogic: a ten-person product development firm

MicroLogic’s contribution: Refine the product specifications Design the entire system Work with various government agencies to

obtain the appropriate approvals Convincing the FCC (Federal

Communications Commission)MicroLogic received a total of $350,000 and

90,000 shares of LoJack stock

In 1986, the system became available in Massachusetts as a market experiment

In 1989, the FCC allocated a police radio band for operation of a nationwide Stolen Vehicle Recovery Network

MicroLogic: a contract for manufacturing the police tracking computers

Motorola: manufacturing the transponders that were installed in each automobile

Financing:

$875,000 in 1983

$4.5 million in 1985

Some problems (1986): Most of the money had been spent Product development was not quite complete Distribution system consisted mostly of two

converted garages that served as retail outlets and handful of new-car dealerships

Sales were about 100 units per month Payroll had grown to almost $1 million per year

Reagan resigned

Temporary CEO, Mike Daley Reduce staff by 40% Seek additional capital infusions A new franchising model Florida Ordering 34,000 units from

Motorola at $120 per unit Growth: 450 unit per month, 1987

The concept behind it: quite straightforward while the technology underlying it, fairly complex.

The components of the system includes: LoJack Unit: installed in the car

Registration Database: correlates unique unit codes with each vehicle

Sector Activation System: in the state computer that could activate a LoJack Unit

Police Tracking Computers: allowed police to locate the stolen car

The LoJack system was available in areas where state and local police departments had agreed to support the system. LoJackhas to:

Maintain the registration database

Tie in the sector activation system with the state-wide stolen vehicle reporting system

Install tracking computers in police cars and at strategic locations

When buying new vehicles, customers usually purchased LoJack Units as a $595 option Like other options, could usually be financed

conveniently as a part of the purchase price of vehicle No recurring fee The cost was often mitigated by an annual reduction

of insurance rates of up to 35% LoJack warranted that if a LoJack equipped vehicle

were stolen within two years of installation and not recovered within 24 hours from the time that the theft was reported to the police, it would refund the full purchase price.

The majority of purchasers were buying mid-priced cars rather than expensive cars such as Mercedes or Jaguars

The greatest sector was related to: Honda Accord

The units were “hidden” somewhere in the vehicle so that they could not be removed by prospective thieves.

Thus LoJack maintained full responsibility for installation and warranty service of LoJackunits both for the convenience of dealers and to maintain a high degree of quality control and security over its technology

When a LoJack owner reported to the police that a vehicle was stolen:

The routine processing of a stolen vehicle automatically forwarded a message to the sector activation system.

This in turn sent a unique radio signal to activate the LoJack Unit in the stolen vehicle to begin broadcasting a signal

Police officers who detected the transmissions of an activated LoJack Unit called into the dispatcher for a description of the transmitting vehicle

Police tracking computers, sophisticated radio direction finders each consisting of a radio receiver with a directional antenna array, Doppler signal processor, computer, and a controllable display, then guided the police to the exact location of the stolen vehicle.

Simultaneously, modified designs had been developed for use in helicopters and fixed locations such as toll booths, radio towers, or police communication centers.

Effective tracking: from 1 to 5 miles.

The activated LoJackUnit continued to broadcast until the police sent a properly coded report to the National Crime Information Center (NCIC) that the vehicle had been recovered. At that point, the NCIC computer automatically generated a signal to shut off the LoJack Unit.

Several stages in establishing distribution of the LoJack system in a new region in the United States: The law enforcement agency had to be persuaded to

support the system Franchised new car dealers should offer the LoJack

Unit as an option on both new and used car sales▪ LoJack’s pricing structure encouraged dealers to require that

heir salespeople try to sell LoJack, because a dealer could make several hundred dollars on each installation: Ex. Offer extra commissions to direct the customer to see the finance director in each dealership. Then this person convinced the customer to …

LoJack also marketed vehicle alarms and devices to prevent vehicles from starting under the names “LoJack Prevent” and “LoJack Alert”. The market for these products was decreasing, however since many automobile manufactures were including these features as standard equipment

LoJack’s direct marketing efforts to dealers emphasized the benefits to the dealers and their customers of the LoJack Unit as a purchase option for new and used car buyers

LoJack used radio advertising targeting consumers to generate brand and product awareness and demand.

LoJack developed the CarSearch Stolen Vehicle Recovery System Unlike the LoJack System used in the

United States, CarSearch was not tied in with police computers or national crime prevention data banks.

Till 1998, LoJack had licensees in the countries such as: Argentina, Colombia, Czech Republic, Ecuador, Germany, Greece, Hong Kong, Kenya, Korea, Mexico, Nigeria, Panama, Russia, Slovak Republic, …

Competitors: several, such as Teletrac. Potential Competitors:

using GPS (Global Positioning System) None were compatible with the LoJack System None were operated or actively monitored by law enforcement

agencies, as was the LoJack System Required consumers to pay recurring monthly fees By 1999, several on-board navigation systems such as “on star”

▪ In higher priced vehicles▪ Required separate cellular phone ▪ Required ongoing monthly fees▪ Suffers from the same limitations as other GPS based systems such as loss

of signal when inside a building or on a street with many tall buildings consumer perception, however, were often shaped by

automobile salespeople so that facts were clouded by false perceptions.

Growth opportunities in leveraging its

connections need cash to expansion

The roll of Micrologic in success of LoJack

Connections between these 2 companies such

as hiring forces

Key items in alliance in Aspell’s view

• Trust

• Flexibility

Limitation in developing

• Political oppositions such as state and federal

agencies

• Government bureaucracies

Concentration focus:

• LoJack: Marketing and sale

• MicroLogic: Technology

More growth independency

• People growth

• To unwritten document

Founders with work and study experiments Clients in startup mood with insufficient

engineering and manufacturing capabilities Work conditions inside:

• A “lifestyle company”

• Relaxed atmosphere Decision to cahnge its strateic dimensions to

add marketing and sale• A product

• in an information system business

8% to 10% growth in US Players

• Equipment owners: ▪ Top 5 US companies owned

180000 pieces of equipment over $10000

• Equipment dealers▪ Work between generators and

rental companies

• Large constuction companies

• Large manufacturing companies

Initial revenues gained because of the need of customers to efficiency and better use of their assets

Long term revenue from• Monthly fee for the package

• Individual charges for special inquiries Customers:

• A Large construction company

• A rental construction company

• Submit proposals to companies

More companies Main competitors and products such as

offering a cellular based system Effects:

• Educated potential customers

• Narrowing window of opportunity

No accelerated growth is demanded because the possibility of eroding LoJack’s key strengths

Aspell’s view on Dalley (CEO of LoJack)• Right personal characteristics and

technical skills • Experiment of working as trusting and

cooperative partners• Strong relationship on the top

decreasing the effect of conflicting in lower levels

• Flexible view of them to alliance

Opening and entirely new market to LoJack It might continue to success It might be the time to find a new partner How to structure a relationship

1. Which are the relational actors relevant to the technical and commercial success of the stolen Vehicle Recovery system? Which relational objectives, power positions and arrangements exist between LoJack Corporation and the actors?

2. How would you evaluate the first LoJack-MicroLogic alliance from a discrete organization perspective? And how would you evaluate the alliance from an embedded organization perspective? On balance, would you describe it as primarily embedded?

3. Do you think the arrangements between LoJack and MicroLogicchanged their competitive advantage over time?

4. What advice would you give the LoJack management team on the joint venture proposal by MicroLogic to join them in introducing a new monitoring and maintenance system for construction equipment?