Company description
Intelligent Cycles allow its customers to rent electric cycles through a mobile application. The company has is located in London and allows its clients to roam about the city in their rental cycles. The company is operating locally as it is in the originating stage. The firm is a single ownership firm and the owner is very much enthusiastic about the business. It has been seen that demand for electric bikes has increased due to the increase in ecological consciousness.
Industry analysis
The industry size is very small. There are only two to three firms who supply the same product in London. Apart from local competitors the firm does not face any other sort of competition. Limited being the number of suppliers of electric bikes, there is high level of supplier’s power in this case; moreover intelligent cycles will have to face a price competition for obtaining the bikes (Scarborough, 2016; Watson and McGowan, 2018; Watson, McGowan and Cunningham, 2018; Garrette, Phelps and Sibony, 2018; Nguyen, Phan and Phuoc, 2018). The growth rates estimated by the company are a uniform growth rate of sixty percent of total sales every year. The sales of the firm in the first six months will reach up to two thousand pounds and by the end of the year the sale of the company will reach to two thousand six hundred per year.
Industry structure
The industry is a perfect example of oligopoly, there is only very few players in the market who supply similar products.
Nature of participant firms
The main participants in the industry supplying electric bikes are mainly the local producers of the same product found in London. Each of these firms is very large and they can easily impact the market outcome. Every firm is competing for their market share and they are trying to take into account the actions of their rival firms. The participants act and react considering the actions of the other rival participants in the same industry.
Key factors for industry success
The success of this industry lies in the coordination and the collaboration among the participants who are producing and supplying electric bikes. The number of companies is very less and so only when the participants come together to produce a huge bulk of the product, it would never make a huge market for itself. The product has to be known and demanded so that the market demand is high. In fact as the product is environmentally useful it should make people aware of its benefits and promote better use.
Industry trends
The number of producers and manufacturers of the electric bikes is very few they do not exhibit a predictable historical market trend. The product is currently setting a positive trend with increasing market demand. This product in few years with collaborated industrial efforts will be facing an upward rising market demand curve.
Long-term prospects
The product, electric bikes is one which has great future prospect. Today the entire world is facing the need of eco-friendly products and services as they are environmentally conscious. Therefore the electric bikes can gain a huge market demand in future considering their environmental usefulness.
Market analysis
7 Ps Analysis
Product
The primary product that would be sold by the company would actually be a service which will be given to the customers in the form of rented electric scooters for the age groups beginning from 18 years. The services would be provided to the consumers by the means of a mobile application which they can use in their smartphones and can request for a scooter from any location. The scooter will be delivered to them by an agent who would take the security deposit money as well as the rent charges. The consumers would want to have such services as they would help them to get cheap transportation services at low and affordable prices. Also, the environmental pollutions can be reduced by using such scooters which would run electronically, hence, saving the environment as well as money for the consumers.
Price
The scooter company would incur certain costs throughout their process of input gathering, manufacturing, operations, sales and promotions. After all these costs are estimated and analysed, the final price of the product can be determined. The important factors which would contribute in the decision of the product’s final price are, cost of the electric bikes, cost of other inputs, cost of basic requirements such as land, electricity, water, etc. needed during operations, cost of warehouses for storing the scooters, wages and salaries of labours and employees, salaries of IT experts for application development, price of the substitute products, demand patterns from customers, etc. The final price will be decided on the basis of these factors.
Place
The physical place of operations is an important element in the marketing mix for a brand (Horvath, Kotlebova and Siranova, 2018). It is the place from where the products are sent out for sales and distribution and are accessible to the consumers. The electric scooters will be sold by the company online, that is through its own e-commerce website and a mobile application. However, the physical headquarters of the company would be located in London, United Kingdom.
Promotion
The element of marketing mix which helps in communicating, persuading and influencing the target customers for buying the product is called the promotion mix (Anderson, Sweeney, Williams, Camm and Cochran, 2018). The various ways of promotion of its services used by the scooter company would be Advertisements, public relations, direct marketing, content marketing, emails, pay-per-click marketing, etc.
People
The key people of the company contribute together in characterizing its people mix. These people are, factory labours, employees, engineers, IT experts, software developers, managers, investors, shareholders, board of directors, the Government and the Consumers.
Process
The company’s operations would include the processes where firstly the procurement of the electric bikes would be done by buying and importing from Alibaba suppliers of China. These scooters would then be stored in warehouses. The engineers, IT experts and software developers would develop the mobile application for all platforms of mobile, which are, android, iOS and windows. The services would then be provided to the consumers by the means of these mobile applications which they can use in their smartphones and can request for a scooter from any location. The scooter will be delivered to them by an agent who would take the security deposit money as well as the rent charges.
Physical
This aspect of the marketing mix is related to the predictions and forecasting of the company’s future numbers. It would include determining the total costs that would be incurred by the firm, analyse if these might fluctuate in the nearby future or remain as they are, and forecasting the potential revenues and profits that can be generated by the company.
Market Segmentation
The activities by whose means a consumer or broad market of a specific productor brand is known as the market segmentation (Wedel and Kamakura, 2012). The market segmentation of the company would be as follows:
Demographic
People belonging to the age group of 18-60 years. Teenagers, Adults and senior citizens; Both the gender groups, Male as well as Female; Consumers with all occupation types as the electric bikes would be rent at very affordable price.
Geographic
All the countries of UK, that are, England, Northern Ireland, Wales and Scotland and in all the cities of the same.
Psychographic
Helping in reducing the environment pollution by providing electric scooters, and also providing cheap and affordable transportation facilities to the people as these scooters will be given on rent.
Behavioural
The behavioural aspect of the company should be associated with the production of utility based products, electric scooters on rent at affordable prices.
Target Market Selection
The target market of the product would be selected on the basis of the positioning of the product. Product positioning is known as the image or place of a brand or a product that is occupied in a consumer’s mind and the way in which it differentiates from the its competitor brands (Levy, Weitz and Grewal, 2012). The product positioning is implemented by determining whether the product would be of high or low quality, and also evaluating if the price of the product would be kept high or low (Blatt, Gulbin and Officer, 2018). The electric scooter company would make its scooter of significant quality and they will be given on rent to the consumers at low and affordable prices.
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Figure 1: Product Positioning
Source: (Levy, Weitz and Grewal, 2012)
Estimation of total market sales
The market sales can be estimated from the forecasts about the future market demand. The market can be predicted to some extent by considering the demand it is facing at present. To estimate these market sales for electric scooters, the company can carry out a market survey which will help the company and the industry to get a rough idea of their future prospects in terms of sales.
Marketing Plan
Overall marketing strategy
The Intelligent cycles have adopted their main strategy of highlighting to their targeted customers the benefit of using the electric scooters or bikes over other fuel driven bikes. They are trying to advertise and promote their market product using their eco-friendliness as the USP.
Pricing strategy
The company aims at making their products reasonably and moderately priced so that they can have a good market demand from their customers. They are pricing their product in such a way so that their rivals do not gain any pricing advantage over them. Thus, the company is not gaining any price leadership for their product. The products will be discounted during peak seasons in order to increase their sales, this way the company can manipulate their products demand. The price of the product for Intelligent Cycles have a profit margin of eight percent embedded in the price thus discounting enhances the value for customers as well as the owners. The buyers are able to buy the electric bike at a lower price than their expectation on the other hand the seller also enjoys surplus income by selling huge amount of the product. The owner are trying to cut down the cost of production by simplifying the complex manufacturing units, this way they can increase their profit margin even without raising the price of the product.
Sales process or sales cycle
The sales process or cycle is one in which the first step is creation of brand identity. After the brand identity is created among the industry, the company aims at promoting or advertising their product. Post promotion the sales are increased through better quality assurance and competitive pricing of the product (Donleavy, et al., 2018).
Management Team and Company Structure
Management team
Team management is a very important part of any company’s organisational structure (Walton, 2018). There are various teams working on different projects which need to be managed so that there is coordination, cooperation and collaboration among the team members and also across the different teams or departments.
Board of directors
The Board of Directors or the direct stakeholders of the company proceed with an aim of making their company known and sustaining their business.
Skills base of team
The team members are skilled to produce the electric bikes with least cost and maximum eco-friendliness (Marina, 2018; Olson, et al., 2018; Hunt, 2018a; Hunt, 2018b; Woodbury, et al., 2108). The quality is ensured by the work skills of the employees. The team leaders guarantee proper connectivity and team work with maximum productivity of the employees.
Operations plan
Operations model and procedures
The input of the company would include the introduced capital which is $40,000, the material, which would be the electric scooters bought from China from Alibaba suppliers, the facilities which would be mobile applications on Android as well as iOS devices. The labour would be warehouse handlers, whereas the time taken for intimating the plan would be 6 months. The Environment would include factors such as customers, regulation, technology, suppliers and competitors. The people who want to get cheap and environmental friendly transportation facilities would be the customers of the company (Gear, et al., 2018). The company would be regulated by the Companies Act, the technology used would be e-commerce websites and mobile applications, the suppliers are Alibaba suppliers from China and finally the competitors. As of the current scenario, there are no such companies in the UK that are selling or even renting electric scooters, hence it would be a great competitive advantage to the company for taking over the market.
Product or service design and development plan
Challenges
The company however is facing many challenges today while operating in the industry. The company is facing new entrants in their industry which is increasing the level of competition. There are also new and advanced technologies coming up in the market which are posing threat of competition to the company. The company always has to keep researching and developing their products and making new inventions and additions to their pre-existing products.
Costs
The Intelligent cycles are a very cost effective company which is producing eco-friendly products at a very low price. The cost structure gives the company an added edge over their rivals.
Intellectual property
As the company, Intelligent cycles are producing electric bikes which are a new gift of scientific research and development, this invention needs protection. The product has to get their patent rights and so the Intellectual Property Rights (IRP) of the company gives its invention protection from being copied and at the same time, it is a source of revenue earning (Tjia, 2018).
Financial Plan for the First Year Of Trading
Sources of funding
The initial capital for starting the business is being mobilized through corporate loan from HSBC. The firm is taking a loan of two million pounds for five years. This capital is required to buy the initial cycles and also to develop the mobile application that will allow the customers to book their rides from their homes. Another amount of twenty thousand pounds have been invested by the owner. The bank is charging an interest rate of 7.4% per annum, and by making the investment the owner is losing an interest 6% p.a. that he was earning from an mutual fund investment.
Assumptions made
In order to develop the business plan the owner has made some assumptions which are as follows. The first assumption made by the owner is that the business will experience a constant growth rate all along the first year of the business. The second assumption made by the owner is that competitors will not change the price of their service in order to prevent a new entry in the industry. The third assumption made by the owner is that the political scenario of the country remains stable and thriving for the business. Finally the owner assumes that the exchange system of the country remains stable because if it increases it can affect the export of electric bikes.
Profit and loss account
Figure-1: Profit and loss account
|
Revenue
|
2600
|
|
COGS
|
-12900
|
|
Net sales
|
-10300
|
|
Operating expenses:
|
|
|
contract expense
|
-2500
|
|
marketing
|
-4500
|
|
Total operating expense
|
-7000
|
|
Gross income
|
-17300
|
|
Interest cost
|
-12600
|
|
tax cost
|
-500
|
|
net income
|
-30400
|
|
Loss
|
-30400
|
The firm is earning a loss in the first twelve month of its business. The operating expense is way above the earning of the company. Thus the company has kept in reserves in order to meet the short-term investments that it need to carry out in order to keep the business alive.
Cash Flow Forecasts
Figure-2: Cash flow forecast
|
cash flow from operational activity
|
|
|
sale
|
2600
|
|
initial investment
|
-200000
|
|
contract
|
-2500.00
|
|
net cashflow from activity
|
-199900
|
|
net cashflow from investment activity
|
0
|
|
net cash flow
|
-199900
|
The cash flow statement demonstrates that firm is going to have cash outflow for the first twelve months of the business (Alfonso, Christie, Hollie and Yu, 2018). The business is earning from its sales but has to invest a huge amount of money in the initial stage in order to start the business.
Balance Sheet
Figure-1: Balance sheet
|
current assets
|
|
|
sale receivables
|
2600
|
|
non-current asset
|
|
|
reserves
|
5000
|
|
Electric cycles
|
12900
|
|
total asset
|
20500
|
|
current liabilities
|
|
|
contract
|
2500
|
|
non-current liability
|
|
|
bank loan
|
18000
|
|
total liabilities
|
20500
|
The firm is having equal amount of liabilities with their assets after the first year than the assets earned by it through the year. Among the assets sale receivables are the only current assets, while in non-current assets the company has its cycles and the working capital reserves in their hand. The contract fee paid to the repair shops and bank loan has been treated as the long term liability of the firm. Electric cycles are the costliest asset of the firm while the bank loan is the costliest liability for the firm.
Break-Even Analysis
Figure-4: Break-even analysis
The break-even sale for the firm is 220 sales. The company has attained this sale in May. The variable cost for the business is constantly rising through the twelve month period on the other hand the revenue of the company has non-uniform growth through the twelve month period. This represents the seasonal cycle affects the business of the firm.
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Scenario / Contingency Planning
An organization should focus on the quality of their service as this is the only way to alive in the industry (Abel, 2018). In order to have success in this the firm needs to have repair shops or can enter into contract with major electric shops of the city to maintain their bikes even during when the customer is using it. The firm needs to employ an extensive marketing scheme in order to have a deep penetration into the market (Crowther, 2018). They need to have friendly approach towards the foreign tourists who want to have smooth tour around the city. The owner should have a working capital of around five thousand pounds in order to have five thousand pounds in order to have flexibility in his investment. This is so required to meet some short-run investments that the owner can make in order to increase his sales.
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