NEWCO - Improvements to Business Plan, Entrepreneurial Strategy, and the Method of Protection - Example

NEWCO CASE STUDY Student’s Name Institutional Affiliation Date Introduction To an investor that intends to yield substantial returns from an investment opportunity, NEWCO presents a perfect opportunity. Being a solar powered charger, NEWCO is able to charge a maximum of six phones at any instant throughout the day. Kenyans living in rural areas face the challenging of charging their mobile phones bearing in mind the fact that most of rural areas in Kenya do not have a connection to the electricity grid. The increase in mobile phone usage in rural areas and the fact that Kenyans living in rural areas waste a lot of time to charge their mobile phones presents an opportunity to the company. Instead of travelling at least 10 miles to the nearest electrified market centre to access the service, local investors will consider NEWCO to be a valuable opportunity because of its ability to offer the service at no extra cost. However, viewing the business from an entrepreneurial perspective reveals several improvements that can improve the performance of the project. Strengths One of the significant strengths of the business is the existence of a strong management team that has substantial knowledge about the local market and the industry. As a result, the management team is certain that NEWCO is the solution to the power problem faced by Kenyans living in rural areas. Currently, Kenyans living in rural areas have not been exposed to similar power solutions in the past. As a result, additional capital investment from investors will enable NEWCO to produce solar chargers in bulk thereby enabling the firm to benefit from economies of scale. Establishing partnerships with Microfinance firm would reduce the price of the product thereby enabling small enterprises to purchase the product. NEWCO also values its customers. As a result, the firm uses direct sales agents that interact directly with customers on the ground. This would enhance customer trust thereby increasing the demand for the product. Using direct sales agents also guarantees increased market penetration on the part of the firm. NEWCO also intends to use its direct sales agents to offer commissions to its customers thereby increasing its sales. The interaction between customers and sales agents also requires effective communication and the understanding of the local language used by customers in rural areas. To attain this, NEWCO has opted to use direct sales agents that understand the local languages used by Kenyans living in rural areas. The understanding of the local language guarantees increased communication between sales agents and customers that further escalates sales volume. In the quest to increase the sales volume, NEWCO has selected strategic hub locations in all provinces that extend into rural areas. Strategic hub locations ensure timely sales of its products soon after the placement of orders from customers. NEWCO has also developed portable products that guarantee the easy movement of products from the strategic hub locations to the customer’s location. Moreover, the solar charger has a high utilization of solar energy. This increases its potential to avail high quantities of the much-needed solar power to customers. Finally, the reliability of the product and its ability to last for five years is a guarantee that customers will be satisfied with the product. Weaknesses In Kenya, NEWCO lacks intellectual property right protection for the product. As a result, the product faces the threat of competition from counterfeit products that offer a similar product using NEWCO’s name. Transporting products from the strategic hub locations to the customer’s premises is also costly. Since it is the responsibility of the company to move products to the customer’s doorstep, it is apparent that the firm will record high costs of running the business. The absence of brand equity at the early stages of developing the product is the other weakness of the company. Investing in rural areas also requires the setting up of new logistics, systems, and processes from scratch. This compels the firm to incur additional costs in running the business. Currently, the business sources its funds from the principal investor. This limits its growth unless it receives additional capital injection from other investors. The absence of trained staffs that have ready expertise in customer service compels the firm to train its direct sales agents from scratch. This increases costs required to run the business. The absence of repair hubs for the products also implies that customers cannot repair the products locally. This compels the firm to invest into the issue as a prerequisite of customer satisfaction. Improvements to NEWCO’s Business Plan The Proposed Idea Identifying an appropriate name for the product is the first endeavor towards marketing the product. A catchy name has the impact of conveying a message to customers at first instant. A probable name would be the Ultimate Power Solution under the NEWCO company logo. One of the recommendations is the need to deal with the weaknesses of the company. The establishment of strategic hub locations in each province is a sound investment strategy. However, it is evident that the use of multiple locations would increase the running costs of the business thereby reducing the profit margin of the business. A possible alternative is the location of a single strategic hub. The hub will also offer office services and other services related to the business such as advertising. The head office in Kenya’s capital, Nairobi, would be responsible for coordinating the activities of the other strategic hubs located in each province. It would be proper for NEWCO to purchase three large vehicles to market its products besides acting as temporary stores for the products. Moreover, the vehicles will conduct roadside shows aimed at creating awareness of the existence of the product to customers. This will also increase the sales volume by enhancing market penetration. The specialized vehicles will also minimize cases of damage to the products and possible theft as it would have been the case had the firm opted to store its products in the strategic hubs. The outer side of the large vehicles used to transport products would contain the company’s name, brand, and logo. The advantage of using transportation vehicles is their ability to reach rural areas that host majority of the company’s customers. The advertisement should run for a period of three months. Within the period, the firm will sell its products to customers that are ready to purchase them. NEWCO should also avail its contact details to individuals living in rural areas to enable them to place orders when ready to purchase the products. At the end of the three months period, the firm should close its strategic hubs in the provinces and use its transportation vehicles to avail products to customers from the head office in the future. This eliminates the need for warehousing costs in the provinces following the expiry of the three-month period. Product and Service The improvement does not recommend changes on the design of the product. However, there is need for adjusting the product delivery strategy. The business recommends two options for delivering the product to customers. In the first option, NEWCO intends to use direct sales agents to sell its products to customers. In the second option, the company intends to use local retail chains to avail its products to customers. Even though each of the options is appropriate, the firm should deliver its products based on the available demand. Using this approach is more appropriate in the case of using direct sales agents. The advantage would be the guaranteed delivery of products to customers that eliminates the need for temporary warehousing services on the part of the company. The other advantages associated with on-demand production and the just-in-time delivery of products is the evasion of potential theft and destruction of the products when stored in temporary warehouses. The other potential area of investment in the business is the introduction of NEWCO mobile phones to the Kenyan market. Apart from selling the kiosks bundled together with the solar charging accessories, introducing mobile phones may increase the returns from the investment. In the quest to increase the sales volume, NEWCO should also offer instant commissions to customers that place orders during its roadside shows. NEWCO should also offer commissions to customers that place orders for more than one complete product to encourage bulk buying and increase sales volume. The final recommendation is the need for the timely delivery of products from the time of order placement to the actual delivery of the product to the customer. Bearing in mind the lengthy process associated with clearing with the customs department in Kenya, customers should receive their products within 10 days following the day of order placement. Marketing Communications Advertising and the use of other media to market NEWCO’s products would contribute significantly towards increasing the sales volume. The company targets 75% of Kenya’s population of 39.8 million individuals that live in rural areas. However, assuming that all individuals living in rural areas will embrace the use of the solar technology to charge their phones lacks substantial evidence. As a result, there is need for the company to determine phone usage levels among individuals in rural areas. This also includes understanding the age ranges of individuals that use mobile phones in rural areas and their readiness to embrace the new technology. Obtaining factual data about these aspects would enable NEWCO to employ strategic advertising that target specific customers of the market. The data will also enable the company to convince kiosk owners to purchase the low-cost power alternative in comparison to the use of electricity. Apparently, corporate social responsibility is the other area that demands NEWCO’s attention. Therefore, the firm should dedicate part of its efforts towards investing in charity in rural areas. This would enhance its acceptance in the region thereby increasing its sales. It is apparent that each business opportunity attracts substantial competition. As a result, NEWCO should capture the rural market as fast as possible to attain competitive advantage prior to the emergence of other competitors. The Financial Aspect Bearing in mind the available opportunities and market size in Kenya, NEWCO’s sales estimates that the company targets to sell 1000 units during the first year of its operation. From the total sales, the firm anticipates to generate revenues worth US$150,000. The positive customer feedback from the sale of two functional prototypes is an indicator of the readiness of the market to accept the new product. The business requires an initial starting capital of US$170,000. At the end of the first five years of its operation, NEWCO expects to generate US$3.5 million from the business. It is evident that the influx of competitors into the business would have a negative influence on its profitability. Reduced profitability would emanate from several causes such as reduced demand because of the existence of substitute products and reduced prices for its products. Staying afloat in the business requires NEWCO to introduce innovative features on its products on a continuous basis. Introducing innovative features on its products would lure customers to continue purchasing NEWCO’s products at the allocated prices regardless of the existence of substitute products. Entrepreneurial Strategy and the Method of Protection Apparently, there are low barriers to entry into the business. Therefore, NEWCO faces the threat of staying competitive in the event that other businesses offer similar products to the market. Moreover, the company’s products are not imitation free. As a strategy of dealing with copyright issues, NEWCO should introduce its trademark that would distinguish its products from those offered by its competitors as well as preventing rival firms from using its brand name on their products. The company should also aim at gaining exclusive rights from the Kenyan Government. In order to gain exclusive rights, NEWCO can include other business objectives such as improving the living standards of individuals living in rural areas as well as doing charity work in the rural areas that it traverses. Having exclusive rights will improve the reputation of the company to Kenyans thereby assisting in the marketing process. Finally, it is evident that the project targets countries in Sub-Saharan Africa, with Kenya acting as the starting point. Upon establishing itself firmly in the Kenyan market, NEWCO should expand its operations into other countries located in the region. Read More