Lojack Case Summary

Current Situation (LoJack) and Strategy
“LoJack Corporation markets and licenses the LoJack System, a unique, proprietary system used exclusively by law enforcement personnel to track, locate, and recover stolen motor vehicles.
The problem of vehicle theft has escalated to an epidemic level – estimated to result in an annual loss of almost $8 billion.
The LoJack System has a proven track record of reducing damage, enhancing public safety, and solving serious crimes related to motor vehicle theft, all accomplished within the practical constraints of today's overburdened law enforcement system.” (Daily, 1999) Currently, LoJack has unique patented system
designed to assist law enforcement in locating and tracking stole vehicles. Competition is fierce if viewed with Telematics and GPS tracking devices. However, if you look at vehicle recovery systems, LoJack is the global leader with a law enforcement network that cannot be easily duplicated. This law enforcement network is challenging politically and requires a high degree of local political assistance. Financially, sales are climbing, but year over year growth is declining. The distribution system through auto retailers seems stuck to new car sales.
The LoJack strategy at the present time consists of several discrete variables. LoJack has elected to expand into new geographic areas and markets which is a logical growth strategy for the firm which has established an enviable reputation in terms of asset recovery systems. This company has developed a new tracking unit that permits it to move into new segments such as trailers while simultaneously reducing costs for such units, therefore, establishing itself as a cost leader in the sector. This combined with a strong differentiation of product through law enforcement networks gives LoJack a strong competitive advantage. These are strengths that cannot be quickly or easily duplicated and because of the proprietary technical aspect of this product. Competitors would have to try and find substitute products to compete directly with LoJack.
Competitive Environment

If we use Michael Porter’s 5 forces as a measure of the competitive environment, we see the following:
New Entrants
Teletrec and other competitors were on the market prior to LoJack’s entrance and other competitors are entering the market through GPS based systems such as ‘OnStar’. These systems are not a onetime purchases but incur monthly fees to maintain service and may require the use of a cell phone.
Substitutes
Just as with GPS, there is a threat of substitute products coming on-line through new technology, but this threat should be mitigated by LoJack’s network with local law enforcement agencies.

Suppliers
Suppliers are also a threat as the auto industry is developing its own telematics technology. “The automakers, however, have balked at relying on standards to accelerate the design cycle. Further, their inability to deliver state-of-the-art entertainment, communication, navigation, and other "telematics" (navigation, driver-warning, and communication systems) clearly highlights the manufacturers' reluctance at relying on these standards. The good news is that the automakers appear to have realized their errors and limitations and are participating in the development of new network standards for both mission-critical and convenience or entertainment systems.” (Wright, 1999) LoJack must continue to market its law enforcement advantage to thwart off this threat.
Buyers
At this stage, buyers have relatively limited buying power due to the lack of alternative technology. However, the threat is the heavy reliance on car dealers to sell the product. If there is no incentive to do so, then the buyer may lack the knowledge that would drive the purchase.
Intensity of Rivalry
Although the product is in its growing stages, and there is no clear competition, the increased activity in this sector could be conducive of a threat to achieve a large enough market share to make the implementation worthwhile.

S.W.O.T. Analysis

INTERNAL
STREANGHTS WEAKNESSES
• Impeccable consumer franchise
• Brand strength
• Proven track record
• Law enforcement network
• Proprietary technology • Reliance on alliances for distribution
• Technical backbone outsourced
• Reliance on automotive industry
• Limited distribution systems
• New Markets
• Expanded distribution channels
• Leverage strong brand
• Strategic alliances
• Expand existing technology • New Entrants
• Substitute products
• Local bureaucracy (political environment)
• Shift in alliances
• Telematics
OPPORTUNITIES THREATS
EXTERNAL

Perspective on network level strategy

Both LoJack and MicroLogic embrace the embedded organizational structure.
While they both have proprietary technology, they rely on other organizations to leverage these technologies. Lojack’s technology would not have been possible without the alliance with local law enforcement agencies, Motorola, and MicroLogic. MicroLogic’s existence, until recently, had been to partner with organizations to leverage its technical creativity to further develop the companies that it works for. It would take an equity stand in these companies and “take a long term approach”. In order for MicroLogic to be successful in this venture, it would need to rely on LoJack’s distribution and marketing systems. Not only to sell its products but also to ensure its own financial stability. And if LoJack is to review its long term strategy, it must understand that research and development are not at the core of its operation. Motorola is a key component to both LoJack and MicroLogic and has been a strong partner providing vital assistance. However, moving forward, they cannot be relied on to only provide this technology to LoJack. They are a much larger company and will look to broaden their reach. In the fall of 1999 Motorola was already working to become a driving force in the telematics industry and moved to position itself with the major car companies. “Who can you count on to bring the promise of telematics to the world? The same people who have been changing the way we communicate
on-the-go since 1928. Motorola is driving innovation with telematics — the newest way to take your world with you. Come to think of it — is Motorola reinventing the car radio for the Internet?” (Boroshok, 1999) Motorola is designing the 3rd generation LoJack, and it should be available in the fall however a continued alliance with Motorola could combine LoJack’s strong results with another up and coming GPS capabilities, and LoJack could potentially lose its strong brand if it became a part of a larger offering.
Recommendations
Short Term
LoJack should look to form a loose alliance with MicroLogic. This would allow for LoJack to expand into the new market of construction equipment where need exist and no clear provider exist. An alliance between these two organizations has a proven track record and a proven product that can be marketed.
The first step in the alliance would be to tackle the construction equipment market. This is a market that has a strong need for a location and asset management technology there is no clear market leader.

The combination of Lojack’s proven solution for tracking and the ability of MicroLogic to develop strong asset management software would allow for strong penetration in this market. As in the past, both organizations should look to work in their core areas of expertise. LoJack understands how to market and distribute the products and MicroLogic should immediately assume the R&D function. This will allow both companies to continue to drive down cost. LoJack currently has enough cash on hand to assist the need for cash with MicroLogic. At this point, the cash infusion should be done as a low or no interest loan to MicroLogic. The partnership work well in the beginning, and over time, MicroLogic can determine if this is their core business. If not, they will be able to sell this product back to LoJack just as it did the first time and move in a different direction or become a subsidiary. Motorola is currently working on the 3rd generation LoJack and MicroLogic should work directly with Motorola on this function.

Medium Term
Once a clear hold on the construction market is secured, then the alliance will have the opportunity to move into the trailer market. A proven track record in auto recovery and construction equipment asset management will allow strong credibility and should allow LoJack and MicroLogic to become the market leader. During this stage both organizations will need to determine the structure of the company and if they are able to grow construction equipment sales to the same rate as existing auto sales then LoJack would be in a position to either absorb MicroLogic into the existing organization (assuming this is agreeable to both parties) or turn MicroLogic into a subsidiary.

Long Term
Emerging markets will be critical to the long term success of LoJack.
With a strong foothold on the construction market this area would be a logical first step into emerging markets as contraction equipment would usually surpass new car sales. Immerging markets will provide the strongest revenue growths for the company and is possible this may need to be moved into the mid-term focus depending on the success for the technology.

Critical Success Factors

Industry critical success factors need to include a standard platform for technology on both the asset management device and vehicle retrieval systems. If too many technologies exist, it will become confusion for consumers, and they may abandon products all together.
The following list the critical success factors for a LoJack MicroLogic alliance in terms on timing each holds the same importance.

1 The two companies must have a willingness and desire to form an alliance
2 MicroLogic must be able to finish the work on asset management software in the short term and it must be fully compatible with the existing LoJack technology it must come in-line with existing cost estimates
3 LoJack will need to develop a strong marketing and distribution plan to enter the construction market and a strong foothold must be established to keep back
competition
4 The technology in the construction market must be compatible with trailer and fleet market needs
5 Current US distribution systems must be compatible with overseas markets
6 LoJack must be able to understand and successfully maneuver in immerging markets and it needs first mover advantage to establish itself as the market leader.
Financials
Financial projections are highly dependent on the critical success factors being met and I will only give a small example to the entrance into the construction market as it exists today. With 170,000 to 200,000 pieces of construction equipment being produced in the US each year, I believe that we could start by collecting 5% of that market in the first year and the 10% the following year and leveling out at 15% for the subsequent 3 to 5 years. There are approximately 180,000 pieces of equipment in the rental market today and we should be able to move into this market at the same rate as new sales. LoJack is currently running at a 43% profit margin and had an 8 year high of 53%. We will use the high (53%) for a cost as there will be quite a bit more expenses in rolling out a new product. The unit should sell at the $1,000 usd price point and a $50 per month management fee. Based on these conservative projections, the yearly revenue in this market would level out at $87Mil with and a net income of $4.7 mil per year,

assuming all cost stay in line with current financials. This would add 14% in E.P.S. the first year and 200% the following year finally leveling out at 100%.

Implementation

Because of the history of the two parties and the nature of the work, progress could begin immediately. The matter of a cash infusion for MicroLogic should be resolved quickly as well as the nature of the strategic alignment. LoJack should continue to develop the third generation with Motorola and determine their role, with MicroLogic, moving forward. LoJack should also start immediately with creating a marketing and distribution strategy for the construction market. This will need to be done with MicroLogic in the beginning as they have the relationships, but they should be phased out and the sales department in MicroLogic should be either phased into LoJack or eliminated all together. Further steps will be determined as the technology is developed.

Boroshok, J. (1999). Telematics is Driving Automotive . TechMarcom, Inc.
Daily, C. M. (1999). LoJack Sharholders Report 1999. SEC Filing . SEC.
Meyer, B. D. (2004). Strategy Process, Content, Context. London: West Publishing Company.
Wright, M. (1999, 08 19). EDN. Retrieved 02 02, 2007, from www.edn.com: http://www.edn.com/article/CA46066.html