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Sling Aircraft will be exploring the development a 5-seater plane, the team was then briefed to conduct an In-depth analysis on the viability and feasibility of this project These are the areas that the team evaluated/analysed: Problem statement  Key issues - current situation Analysis - current situation Various viable options Financial model (appendix) Comparisons of options  Recommendations  Implementation

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Problem Statement :   Does the current business model support the development and production of a certified 5-seater plane?

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No defined roles / Role clarity ​ No defined structure ​ Inefficient Technology  Undocumented  processes ​ Key man dependency risk ​

Rely on their own perception of what the customer wants​ International market development challenge Ad-hoc marketing strategy​ Marketing and operations not aligned

No Finance management system finances run on Excel Depend on owners’ capital Cost of certification: $6m Source of funding Much higher net operating income on certified aeroplanes Role of distributor

Missed order deadlines Quality issues Lack of stock management system

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Cheaper than competitors  More value than the competitors Success for both the 2 & 4 seater planes

Uncertainties on  the way forward strategic direction Certification  cost R100M Untouched market

Aviation authorities have different regulations per country Impact of COVID-19 has not had an effect on the company growth and sales  Small aircraft are more appealing to the affluent market now due to pandemic Environmental sustainability - an  electric and fuel cell prototype of the Sling  TSi  is being developed Aviation requirements on the certification of aircrafts Strong competition from Cirrus with their SR22/22T

Sling has a strong 140HP engine which is perfect for the 4-seater plane: no competition in the market  No alignment to the vision and mission with regards to the proposed expansion Strengthen their position in the market with a certified aircraft. Regulation always poses an issue in the industry

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Start selling RTF and kit models of the 5-seater at the same time as the certification process begins so that revenue can be generated, and process can be partly funded by profits.  Raise debt for the balance and retain current shareholding.  Retain distributor in the US for both kit and certified sales, marketing and distribution and Sling focusses only on  production .

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​Focus on RTF and kit sales in the developing world (South America, Africa, Australia, Asia) and kit sales to US initially.  Once the company is assured of the market demand for a certified 5-seater (± 2 years) they certify in the US with funds generated partly from sales and debt.

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Find a joint venture partner in the US to share certification and set-up costs and which will be responsible for marketing, sales and distribution under Sling brand only in the US.  Once certified, share operating profit in US on all sales (kit & certified). Sling retains profits from all sales (kit, RTF & certified) in all other regions.  Once the company (Sling) is strongly cash-positive, the company may consider buying out the JV company to take full control in the US.​

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Financial analysis done between the three options Using the given operating profit margins for experimental vs. certified aircrafts Revenues and operating profits are calculated Capital investments are then determined based on the scenarios outlined in the three options together with the associated debt financing Net Present value is calculated on all three options from year 5 to 10 (Assuming ROI of 15%) Based on the analyses option 3 has the superior Net Present Value (NPV)

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The table below  summarises  the NPV calculated for the three options:

NPV Option 1 R84,462,405 Option 2 R80,741,978 Option 3 R87,784,743

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Option 3 is the recommended option: Has the superior net present value (NPV) JV allows for distributed risk on operations and financing costs Sling retains control on all certified sales in all other regions Leaves the option of a buy-out of JV to gain full control of US operations once business is running

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Recommendations for Organisational Design

Structure Develop and implement Organisational Structure that is aligned to strategic objectives

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Technology –  Optimise  use of technology to improve business efficiencies in all areas of Business Operation e.g. Production, Finance, HR etc.

Processes Define operational processes that are aligned with the overall strategic  direction – Low-cost production Document processes for continuity  Document quality processes that are aligned with strategy

ERP Systems Integration   ERP System needs to be configured to support and  drive efficiencies across the entire value chain from suppliers to end users The system needs to be configured to facilitate a pull system i.e., minimal stock buffer to be kept and monitored by the ERP system. System should also be utilized to manage production line performance

Explore the big ideas around complex, interconnected systems | IB Community  Blog

Recommendations For  Addressing Key  Issues

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Recommendations  For  Addressing Key Issues

Competencies and Skills Define key organizational competencies  required for building certified airplanes Develop a strategy aligned workforce plan and identify sourcing strategies Hire key skills needed to drive strategy  enablement

Culture Underpin entrepreneurial culture with  a robust  talent  management strategy   and employee value  proposition   – Recruitment, development, performance management, rewards, retention, succession planning etc..

Marketing Develop and  implement   an integrated Marketing  strategy  that  leverages technology and   is informed by market and customer insights  Participate in more  airshows similar  to Experimental Aircraft Association  but for certified market  Consider hiring  a marketing resource in the US operating from  distribution partner's  premises or hiring a marketing agency for international market development

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Activity Responsible person Timeline  Put Together a team of JV deal makers CEO   2 weeks  Shortlist, Rank, Conduct due diligence for the potential JV partner  JV deal makers  Up to 3 months  Sign agreement with preferred JV partner CEO’s Up to 3 month  Raise funding  CFO’s Up to 2 months  Set up production plant  COO 12 months  Complete prototype ready for certification COO Up to 48 months

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Based on the comprehensive analysis above the 5-seater plane is a viable expansion strategy.  Explore the benefits of alliance partner in pursuing this venture The proposed business model i.e. including a JV partner in the US would support the development and production of a certified 5-seater aeroplane

Case Competition: Syndicate 5

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