Dragons Den Target in the Market Environment - Case Study Example

Introduction This paper is a report for Ian and Richard, who recently appeared in Dragon’s Den and who has received the necessary financial backing in order to develop their product at a regional or local level. The report seeks to analyze and evaluate the product and its market place. In doing so, it looks into the issues of the market environment and communication skills required to win in the market and into understanding the profitability of the venture in the future. About Dragon’s Den Dragon’s Den is a television show which started in Japan. The show revolves around business entrepreneurs, who come up with a great investment offer into their product or service in return for some benefits for the investors. In the show the offer is made to the business experts – ‘The Dragons’, who decides on which investor is worthy enough to receive the money investment they require. It is up to the entrepreneurs to do what they have to convince the dragons about the potential of their product or service. This, Dragons' Den is a series, in which entrepreneurs pitch their ideas for the purpose of securing investment finance from ‘The Dragons’ who are a group of elite business entrepreneurs. In the U.K Dragons' Den is broadcast on BBC Two. The show is hosted by Evan Davis, who is the BBC's economics editor. ‘The Dragons’ or the business experts who judge investment offers in the show are Duncan Bannatyne, Peter Jones, Theo Paphitis, deborah Meaden and Richard Farleigh. Since these names and the outcome of the show is going to be brought up throught he paper, it is necessary to have this brief introduction on the show and it’s members. About Coin Metrics Richard and Ian have started a company called Coin Metrics. The company is located in Milton Keynes in the United Kingdom and specializes in offering customers wireless revenue monitoring technology for their fruit and arcade machines. This product makes use of components provided by a company named Merlin Systems Corp and provides information to users using a Microsoft Windows application. This service is rather innovative in nature and has gained a great deal of attention from the Dragons, who thought of it as a very good investment offer and therefore provided Richard and Ian with £200,000, which was what was their financial requirements were, in return for a 25% share in the company. The Marketing Environment Looking into the current trends in the use of fruit and arcade machines, in the U.K, the U.K see a number of vendors using these machines and there exists a need amongst them for equipment which monitors their systems working in order to prevent losses. Richard and Ian feel that their product can make a significant contribution to their customer’s business operations by providing significant return on investment and efficiency savings. Most vendors are looking to using more efficient monitoring system for their gaming machines. Many are seen to be using devices which require cable or which have to be operated manually in order to derive monitoring data. Richard and Ian product resolves all these issues by providing them with an automatic monitoring system, which does not require any cables. The market environment currently, is one which requires technology that will bring more efficiency into the monitoring aspect of their gaming machine. Given the huge popularity in such machines, having an efficient monitoring, will definitely improve the return on investment for vendors using such machines as part of their key business. The current market environment is one which does not have the benefit of utilizing a product that gives them the ability to capture machine errors as and when they happen. That is there is no real-time capture of events which can result in losses for the company, as and when such events happen. Another problem faced by arcade owners is that they are not able to see the cash figure for all the machines they have at the same time or whenever they require it. They have to do all this manually and this results in wasting a lot of time. Vendors using fruit and arcade machines, face the problem of attempted fraud by staff members or people who use their machines. Once again this is a low point for them as they are losing money due to such problems. So there is a real requirement for a monitoring equipment which removes this problem through it’s monitoring features. The above-mentioned points are just a small hint at what the situation in the U.K arcade machines market segment is all about. In order to fully understand what is influencing this market a PEST analysis is required. PEST analysis on product environment PEST analysis stands for the "Political, Economic, Social, and Technological analysis. This analysis blays down the different macroenvironmental factors which affect a businesses growth and development. Since these factors have a great deal of influence on a company’s busienss activities, ithy have to be onsidered when making key busienss decisions. PEST analysis plays an important role in making business decisions because, the “radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization” (Tsiakkiros, 2002). Here a look at the Political, Economic, Social, and Technological factors which influecne the prosperity of coin metrics new product. Political factors which will be influencing the business are environmental regulations, employment laws, tax policy ,trade restrictions and tariffs and political stability. Coin metrics will have to look intot these issues taking legal advice where applicable on their patent and in the development and use of their products. This ia eqaully applicable for emplyee issues in their office. The political or government stablity realy does not have much of an impact on this industry, except in the case of any new laws which go agianst the workings of their business. The economic factors influencing coin metrics business decisions are exchange rates, inflation rate, economic growth and interest rates. Theses factor directly affect what they can get from their invetment into their wireless technology for fruits and arcade machines. Low economic growth means less people wanting to use theirproduct because the number of people wnating to play arcade games will reduce. This is just one small example and in the larger picture of what can happen in the market, any negative economic growth has a huge impact on business ivestments. Social factors which must be taken into consideratin by coin emtrics are safety issues and the attitude of the employee who have to get used to using the new product in their work areas. The machine must not pose any damage to health or be a risk on employee safety. Adequate training and instructions,(even small instructions) must be provided to ensure a smooth transition to using the wireless technology. lifestyle changes are another important social factor which contributes to the use of the technology by vendors, As long as people continue to enjoy arcade machine games, the product will be in much demand by vendors. The technological factors that affect coin metric development of the wireless technology include automation, R&D activity, technology incentives and the rate of technological change. The company must look deeply into doing research and development on their wireless technology and continue to do so to improve and enhance it with upcoming technologies. This way they will not lose out to any competitors trying to bring out the same product. They should equally look into any incentives they can gain through their research activities because this will induce them to keep going into these activities. Looking into these factors it is easy to understand what the company’s strengths and opportunities will be like. This leads us to the SWOT analysis on the wireless technology product. SWOT analysis for Coin Metric’s product SWOT analysis is a strategic planning toll. It helps a company to best plans their strategic initiative by bringing out the Weaknesses, Opportunities, and Threats in their undertaking of a particular project. In the process of performing a SWOT analysis the internal and external environmental factors which affect the organization’s business decisions must be taken into account. Their strenth and opportunities lies in their concept of bringing out a wireless revenue monitoring technology for fruit and arcade machines. This is something that has not been attempted before and is the factor which influenced ‘The Dragons’, Duncan Bannatyne and Deborah Meaden. Duncan Bannatyne could immediately see benefits which their technology had to offer to casinos and Deborah Meaden, who has extensive knowledge in this sector, was highly interested in learning more about what the technology could do and most importantly was impressed by the answers Richard and Ian gave to here questions. The fact that that Coin Metrics could gain the opportunity of receiving the £200,000 investment money shows that their technology has good business prospects. The product aims to do the following: Give an instant picture of what is happening to arcade owners in the slot machine, by giving an instant view of all cash figures. Capture catch machine Errors as they happen. This give the benefit of reducing down time which increase customer satisfaction as they are able to use the machine without delays. Provide a mechanism to monitor hopper levels in real time. Records actions such as refills, collections and all cash operations, that are made by the staff in the arcade . Get into the nitty gritty of catching all fraud attempts. The different modules they provide in their product named ’The Guardian’ are ‘The Guardian System’, ‘The Guardian WDC’, ‘SITE Guardian’, ‘NEY Guardian’. If we look into the ‘The SITE Guardian PC application’, this module gives the benefit of real-time machine performance analysis, fault detection and reporting facilities. It has feature rich, simple to use Microsoft Windows application at gaming site. With different modules, Coin Metric is offering more technological benefits to their clients and client can choose which they want for installing in their site. The threats faced by the corporation are legal issues involved in the working of fruit and arcade machine. In a study in the year 2003, hardware hackers found that most of the UK fruit machines were pre-determined at every turn of the reels. This was done in order to prevent players from winning a gamble in the event of a large payout. Though the industry association which represents fruit machine makers says that these claims are "not true and that they are misleading and asserts that all machines comply with strict guidelines and procedures, nevertheless, it will put a damper on the use of arcade machines. Fruit machines are currently governed by a voluntary code of practice, wherein they make a 70 percent pay-out to the player. An investigation by Fairplay Campaign on the working of fruit machine revealed another side to how this machine works. This campaign reached its conclusions after investigating the inner workings of many different fruit machines by using hardware emulators. What was found was that though fruit machines made a 70 percent pay-out, there is no time limit on when 70% of the money taken by a machine should be paid out. So, the machine will give jackpots just to keep the player interested in playing the game and it gives some win which pay out very low to the player. In the end the player would have lost tens of millions of pounds in prize money because if the hidden limits in the game. This is the real nature of arcade and fruit machine games. So, loss of interest by players in such games due to such investigation can results in loss of revenue for casino owner who use them and hence the usability of Coin Metric’s product come into question. ‘s not a product which is going to keep the player interested in playing fruit and arcade machine, it’s a product which is going to help the owners of the machines to monitor them. Market segmentation and recommended market communications strategies Looking into the history of arcade games in the U.K, what is seen is that as home console graphics started to improve in terms of technology, arcade games had to come up with a way for competing with their advance. Hence came into the fore features such as novel cabinets featuring interactive guns, swords and footpads Such improvements resulted in an increase in price and as a result the popularity of arcade machine seem to go down. To cope with this situation, the industry moved towards brings in gambling with the play of these machines in order to attract more players. Consequently many arcades in the UK today are comprised mostly of fruit machines. Thus, the popularity of arcade games and fruit machines are influenced by technological advances and particularly advancement made in online games or PC games as they will tend to draw customers towards them. This factor in turn affects the use of Coin metrics wireless technology as this product targets casino owners and arcade machine owners, which are providing it to player who want to play them for a gamble. Arcade owners, must find their machines being used often enough to warrant the purchase of this new technology. This roughly sum up where the company stand in terms of the market to which it caters to and what is requires in there for external environmental factors for favorable results in business. In order to get this product going Ian and Richard wanted investment money amounting to £200,000. In return for this they were ready to offer a 15% share in their company. This was the strategy which they employed in order to lure the dragons into investing in their company. The technology was interesting because it offered a unique wireless technology for arcade and fruit machines. Their key strength was that they had a water-tight patent right over their product and this was what convinced the dragons to accept their investment offer. In the end Dragons Deborah and Theo came together (realizing the potential of the proposed technology), and offered Ian and Richard what they were looking for, which is a £200,000 investment money. Ian and Richard realizing that the money they were going to receive s once in a lifetime opportunity, took the 200k cash and accepted to give 25 per cent of their company in return. If Ian and Richard have to succeed in promoting their product to arcade machine owners, they must adopt an effective marketing strategy. Before we come to understand what an effective marketing strategy will be like, it is important to look into what Coin Metrics aims to achieve through its product. Coin Metrics aims to provide cost effective systems, which helps their customers in the amusement and gaming industries to constantly monitor how the financial performance of their gaming sites and assets are going in an easily, at the same time accurate manner. The company has looked into what is happening in the market currently and has come to understand that networking gaming machines with cables and wires is often impractical in a gaming environment. As a result of using such cable, it Is difficult to deploy electronic data capture. They have also looked into the monitoring system provided by their competitors, which requires the use of extensive site cabling to achieve a network. All these reason led them to come up with a revolutionary monitoring system ‘The Guardian’, which provides monitoring services for fruit and arcade machines. The Coin Metrics, wireless technology system is one which measures the financial performance of an entire site, zone or machine over any time period. Additionally, their product seeks to provide textual and graphical accounting reports to the management. These reports provide data, which help management to understand about how each site is performing. The Guardian system provides the benefit of being compatible with all the leading database systems and can be used with software such as Microsoft Access, Microsoft SQL Server and Oracle. The system has the ability to record Coin Metrics understand that in a cash based business, operators need to be vigilant to ensure total financial integrity and security. The Coin Metrics Guardian system records every single cash operation that takes place to ensure financial security. The Guardian System, guards the arcade machine through real-time machine fault detection. This helps to significantly cut down machine downtimes because faults are diagnosed and rectified as soon as possible, without any long waiting gap. If Coin Metrics need to develop an effective marketing strategy, it needs to develop it on the line of the feature and capabilities of its product. Keeping this as the basis of their strategy, they need to develop ads and other visual communication tools to according to the needs of their business. An effective marketing communications strategy includes the following: Making attractive announcement packages for their new product. Putting up information about what the product does in their website. Developing product brochures and flyers for trade shows and marketing staff Making e-Newsletters and special reports a sending it to prospective clients. Writing White Papers which describe the products and customer applications. News releases which announce their product and its features. These initiatives will bring out the feature of Coin Metric new product to its customers in an easy and understandable manner. It will induce them to invest in its purchase for use in their gaming site as it will enhance the businesses productivity. Conclusion Understanding the market environment, the target in the market environment will enable coin metrics to carve its market strategy according to these factors as these factors significantly influence how they promote their wireless technology product. The economy, social and political environment are factors which affect the market to which Coin Metric sis catering. If the there is any new legislation which changes the way in which gaming site function, or the functioning of arcade machine or if there is a general change in the attitude of people towards gambling through casino and slot machines, this will affect the use of arcade machine which will in turn affect Coin Metrics customer need for using a monitoring system. By making a through analysis of the strengths of the products and assessing the threats at the company, they have to devise a strategy to overcome it. For example, one threat is that heir competitors can copy the features of their monitoring system; however, this was pulled off with their air-tight patent rights on the product. This does not indicate that they have no more threats from competitors because competitors are smart and they too want an edge in this market segment. So if Coin Metrics wishes to keep up with it’s objective of being the ‘No 1 supplier of amusement and gaming industry data products’ they need to constantly improve on the capabilities of their product so that they can always stay ahead of the competitor. References Ward Mark, 2003, Just how far off is that jackpot? What is PEST Analysis? SITE Guardian Current trends in slot machine gambling Merlin Wireless., What is SWOT analysis? Fair Play Dragon’s Den PR Tips for the Marketing Communications Consumer Read More