New Business Idea Analysis - Essay Example

New Business Idea Table of Contents The New Business Idea 3 2. Market Analysis 4 Market Size and Trends 4 Five Force Analysis 7 Competitors Analysis 9 Analysis of the App Market and Focus on the App Market Linked With Food 10 3. Marketing Plan 11 Product and Competitive Advantage 11 Promotions 12 Place and Distribution 12 Positioning 13 Entry Strategy and Positioning 13 4. Financial Plan 14 Funding 14 Income Statement 15 Revenues 15 Expenses 17 5. Future Perspective 17 Future Project 17 Exit Strategy 18 References 19 1. The New Business Idea Description Many individuals all over the world love to visit restaurants and enjoy their dinner with a variety of food in their palate. They spend a lot of money on the food by visiting restaurants on a regular basis. However, it is not logical to spend money on a regular basis in the restaurants. Thus, my business idea will assist the people to have a variety of foods prepared in their home and provide information regarding the groceries list required. My business idea deals with the food business as I love cooking at my place with variety and moreover the business is deemed to be profitable. Consequently, I am thinking of developing an application linked with groceries appraisal, or cooking receipts with what you have in your fridge which will be a new innovative idea for the success of the business. The application would be easy to access and would provide assistance regarding the food preparation for every individual from kids to adults. It is observed that people get frustrated if they are supposed to have the same food on a daily basis. Moreover, it is frustrating for the people to think what to cook so that people enjoy the food at the dinner. The application linked with the food will be simple and easy to access for every individual having the smartphones. This application will be useful as after the long day of hard work people might not be in a mood to cook food as per the preference of every individual. This application would be one of the effective methods in solving the issue for that you will simply have to open the fridge to comprehend the availability at home and input the ingredients that you can see in the app page. After the inputs are made the application within a few seconds will prompt the best options available that can be prepared by the individual. Besides, a small description will be displayed through the app regarding the preparation of the food so that it will be easier for the people to cook their food. The app will showcase the nutritional value of the food so that the individual is aware of the fact that how much calorie a person is going to intake. The individual will be able to get the best idea regarding the menu from the available ingredients. In case if the ingredients input made by the individual are not complete for a given menu, the app will assist the user to get the items which are required. Furthermore, though the use of the Global Positioning System (GPS) facility the app would assist the individuals to get the nearby location of the supermarket from where the purchase of the goods can be made. This app will be the best source for utilising the best resources available at home for cooking. The innovative idea will be effective as the app will forecast multi cuisine items which would facilitate the users to avail a wider option. I have decided to upload my app to Google Play and Apple App Store so that it reaches a wide range of customer base at a rapid pace. Besides, the revenue will be generated on the number of downloads and by the in-app purchase and through the advertisement royalty. 2. Market Analysis Market Size and Trends It is important to analyse the market trend and size for the business to be successful. For the business to be successful and the idea to be accepted in the market, I had to do various researches regarding the market of the smartphones and the app market. It is of vital importance to evaluate the level of satisfaction of the consumer and their desire towards the apps. It was important for me to analyse the market to consider the future growth and prospect of the idea and the innovation adapted by me as a medium of business. The success of every business depends on the market size and trend analysis to a larger extent. In this regard, the smartphone mobile users and their behaviour is one of the important criteria which is analysed to ensure the future of my app. As per the observation, it is witnessed that the number of people using the smartphone has increased which is beneficial for the success of my application. The smartphones have a prospective market throughout the world and it is normally used by the young and the working class due to the facilities it provides with the features. The smartphones are usually used by the people for the purpose of browsing the internet and searching the apps required for the life of the people to become easier. Smartphones are also used by the people for the purpose of shopping and other activities. In the year 2013, it is observed that the sale of smartphone had risen to one billion and it is projected to grow by 1.7 billion by the year 2017. Therefore, the prospect of the business initiated will be prosperous in the future (AFP, 2013). The top smartphone vendors of the world are exhibited in the diagram to showcase the market strength throughout the world they have through the volume of their shipment. The figure depicts the units in millions. Figure 1 Source: (Market Watch Inc, 2014) Another importance is to analyse the trend of the market by reviewing the app store users. This is vital as the business idea generated is related to the use of the mobile apps by the consumers. It is important for me evaluate the market trend for the app and its user to get a better understanding regarding the use of the technologies. As per the data considered by Portio Research, nearly 1.2 billion people were using different apps in 2013 and it is expected to reach the figure of 4.4 billion users by 2017. The use of the apps is usually observed in every part of the world which shows an upward moving trend (Dot Mobi, 2014). The objective of every business is to generate revenue through the use of apps and the innovative features that the apps offer. For the apps to be used and for the revenue generation, it is important for the users to download the apps. As per the statistics, it is observed that approximately 56 billion smartphone related apps have been downloaded by the end of the year 2013. The apps are usually downloaded from Google Play and Apple App Store where I have the intention to upload my app for a wide range of customer attraction. In the future, it is projected that the apps to be downloaded would increase by 200 billion per year (Dot Mobi, 2014). Besides, by analysing the statistics, I have gained an idea that the revenue generated through the apps linked business will be able to produce reasonable revenue in the initial days. The popularity of the apps will help in generating more revenue in the future depending on the effectiveness and the use of the app by the people in the modern day. With regard to the statistics obtained, it is noted that the apps have generated revenue of US$20-25 billion in the year 2013, globally. In keeping with the forecasts, it is reflected that the app revenue for the market might be triple of the present by the year 2017. For the business to sustain, it is important to make money from the app initiated. It is observed that the users of the apps are usually not willing to pay for the app they use and the benefit they derive from them. Consequently, the publisher of the app uses certain other strategies in order to collect the revenue and gain profit through the use of the in-app purchasing and advertising. The applications which have the free download facility are used by the people more than the paid ones. As stated above, the app which is linked with groceries appraisal, or cooking receipts with what you have in your fridge will be a free download for the people in the initial period. This implies as per the statistics that the apps which are free for downloads have greater market in the present and also in the future (Dot Mobi, 2014). Five Force Analysis For the business to be a success, it is important to analyse the mobile application industry. This will give a better understanding regarding the threats that the environment for the mobile industry possess. The five forces analysis is vital for the launch of the new app which will be effective for the people to assist in grocery appraisal through the use of the mobile application. Bargaining Power of the Supplier: The bargaining power of the supplier is low as the number of suppliers in the mobile app industry is more. There are nearly thousands of app developers and hence the power of the supplier is less. Besides, the input for this industry is easily available at a competitive price. Bargaining Power of the Customers: The app industry is depended on the use of the apps by the customers at large. The bargaining power of the customers is high due to the aspect of switching cost along with maintaining customer loyalty. The customers are in search for the applications which meet their requirements and are not loyal towards any developer. Hence, the power to bargain is high. Barrier to Entry: The threat of the new entrants is high in the field of mobile app industry because of the high number of developers entering the market in the recent past. The cost of entering the market is not very high for the developer as the industry is not capital intensive. The new developers are getting opportunity to enter the market and gain advantage (Jain & Bansal, 2014). However, with the entry of the new developers in the industry, the barrier is becoming moderate as the new developers are taking measures to meet the needs of the consumers. Competitive Rivalry: The market of the mobile app industry is fierce due to the high competition towing to the presence of big players and new developers. The competitiveness in the market can be stated as high with the increase in the usage of the smartphones. Threat of Substitutes: The substitution threat is high for the industry as there are several new developers with the similar kind of apps in the market for the people to choose from. Additionally, the price of the similar apps is relatively similar for the consumers. However, the threat of substitutes for my innovative business idea for apps will be less as it is different from other similar apps regarding the grocery appraisal in terms of range of features and convenience (Jain & Bansal, 2014). Competitors Analysis Competitor analysis is one of the crucial aspects of the marketing plan for the new business. It is important for the business to identify the competitors providing similar kind of applications to evaluate and get the best differentiated products from that of the competitors at relativity less download charges. The available competitors include: 20 Minutes Meal: The app was formed by Zolmo which was awarded the Apple Design Award in 2010 for its features and the recipes they offer to the people. The app is not free and costs US$ 6.99 for its use (App Advice LLC, 2014). Epicurious Recipes: This app is free and can access about 30000 recipes by the keyword. It is formed by the Conde Nast Digital for making the life of the people easy and relaxing (App Advice LLC, 2014). Womans Day Cooking Assistant: This is again a free app with several features. It is a useful app and it is formed by the Hachette Filipacchi Media U.S. for better reach of the people. Internet connection is not required for the app and for the service it provides to the people at work (App Advice LLC, 2014). Ratio: This app has its recipes from the book by Michael Ruhlman. This app is for the people preferring creativity and greater options. However, the app is not free and costs US$4,99 (App Advice LLC, 2014). Therefore, from the market analysis, it is observed that the app I have developed will have to face considerable extent of competition but due to its features and innovative ideas from the others in one single app will make it attractive for the people. Analysis of the App Market and Focus on the App Market Linked With Food In terms of the analysis of the market, it is vital to evaluate the willingness of the people to spend their money on the app and their frequency of using the cooking app. As per the research, it is observed that there are several users of app as reflected below: Figure 2 Source: (Dot Mobi, 2014) Besides, the food and cooking apps as per the report of UK reflected the willingness of the people towards the use of the apps which is reflected below through the graphical representation: Figure 3 Source: (Statista, 2014) These statistics reflect the fact that people are willing to use the app and spend money rather than spending money on the restaurant. Thus, the analysis is reflecting the fact that the app for grocery appraisal will have a strong market in the future. 3. Marketing Plan Product and Competitive Advantage The app designed has several features which is linked with groceries appraisal, or cooking receipts with what you have in your fridge. This app will offer recipes which are innovative, creative and are multi cuisine irrespective of the style of food. The consumers with the touch of their finger can select the ingredients present in their fridge and get the best possible recipes from those ingredients. Moreover, the time taken to display the result will be few seconds and the recipes will be easy to cook. The process for the preparation will be displayed along with the missing ingredients. For the assistance, the nearest supermarket location will be displayed in their mobile for the purchase of the ingredients. The food recipe which will be displayed will reflect the nutritional value it contains with the calorie measure by one touch. The cooking time required for the recipe shown will have maximum of 20 minutes so that the people do not have to append much time in the kitchen. All these features in one app will provide the app with competitive edge over the others. None of their competitors provide all these features as reflected in the competitive analysis. Promotions Promotion is an important aspect for the business to be successful in the market with high competition. The app which is to be launched has no brand name and hence promoting the product is vital for the people to known about the app and its features. The best promotional tool for any product is the word-of-mouth as it helps in exploiting the market at large and at a quick pace. Advertising the app through the most popular options of social media such as Facebook and YouTube for the wider reach of the people would be a key approach. Furthermore, hoardings for the app launch will be a way of promoting which is cheap and effective. These promotional activities will be effective for the application to reach to the wider customer base (Kotler, 2008). Place and Distribution It is important for the app of grocery list to get proper platform for its distribution. Place is not important for the application business as it is not a physical product. However, the important consideration is regarding the choice of the platform. As the top platforms for the mobile apps are Apple App Store and Google Play (Play Store), I will use these as my distribution channel. This is due to the strong customer base and quality that I have opted for these platforms as the distribution channel. These distribution channels have strong reputation in the market because of their organised methods which will make the people use the app. Positioning Positioning is important to influence the perception of the people regarding the product and its effectiveness. The positioning of the app will be done in various aspects such as the product will be user friendly with less complexity. This will be effective in positioning my grocery appraisal application in every segment of the users. The cost effectiveness of the app for the people will be high in comparison with the value it will provide to the customers at large. Entry Strategy and Positioning The most important activity of the marketing plan is its entry strategy, market segmentation and positioning in order to get the market share of the loyal customer. In this regard, I would like to target the niche market as the scope in this segment will be more. This is the target people and the area which is missed out by the most reputed brands of the market. The customers targeted for the entry of the app to be smooth is mainly the working people, the students and also the housewives. They are the people who have the need for this app in order to make innovative foods within the given time with the items which are available in your fridge (Kotler, 2008). The objective of my business is to establish “inside the fridge app linked with grocery appraisal” to be one of the leading cooking recipe apps for the people in the long run due to its innovation in the recipes. This app will be used by the people on a regular basis and with time more items will be provided for the people. 4. Financial Plan In order to initiate a business, it is important to have funds with proper financial planning. There are various expenses and costs which are incurred by the business while setting up the initiative for the long-term future in the market. Thus, financial planning is of significance for the app business to come into existence. Funding For the app business, it is important to fund the idea which is required for the initial set up. Correspondingly, I have estimated the cost that might incur for setting up of the business. Start Up Expenses Estimated Amounts in USD Capital 3000 Licence 4900 Legal Expenses 1400 Patent 1400 Marketing 3500 Promotional Activities 2900 Total Start Up Expenses 17100 The business of application linked with grocery appraisal will require an initial capital of USD3000 in order to set the business running. There are various costs that are necessary for the application to get a stand in the market. The first thing is to buy the patent for the application and have the legal considerations. Licence is another expense which is to be borne by me for using the major platform for my application such as Google Play and Apple App Store. There are other expenses such as the cost of Research & Development (R&D) team and the cost of advertisement which are important tools for the promotion activity. A few of the expenses are related to one time such as the patent. All these costs require fund for the business to set up. Furthermore, the start-up asset for the application will be USD16500, for app development it is USD8000 and others USD 8500. The total start up expense for the venture will thus be USD33600. Hence, for the business I decided upon, the financial structure which is USD 20600 from my savings and the remaining as loan from the bank i.e. USD 13000. Income Statement Revenues Business is operated to gain revenue and it is the most vital factor. The revenue will be generated for the app business through the in–app purchase and from the advertisement royalty that the app will get. The app provided is free of cost and the revenue will depend generated by the number of downloads made. As per my estimation, the total number of downloads per month could be around 150.000. This will help in generating more revenue. According to the consumer trends, it is obvious that very few clients will purchase the app but the up-gradation will be done by many people. In keeping with my estimation, if the cost per upgrade of the app is USD 1.36 then the revenue that might be generated by me in a month will be USD34000. Estimated clients who will upgrade the app are 25000 and the app cost USD 1.36. 25000*1.36 = USD34000 Consequently, revenue that will be generated from one client is 34000/150000 = US$0.23. Subsequently, estimation for two years is represented below: Year 1 Year 2 Clients for Upgrade 25000 60000 Cost per App 1.36 1.36 Total Revenue 34000 81600 The cost per app is kept the minimum in order to attract the customers for further up-gradation for the service the app will provide. Another mode for the revenue generation is through the advertisement royalty. This is when any client will have the intention to have a banner in the app provided by me. The pay per click concept will be used. The more the number of clicks will be the more will be the revenue generated. Besides, the people clicking on the app for recipes and more details will also enable to generate revenue for my app at large with the pay per click concept. Correspondingly, the revenue through the advertisement and the up-gradation will be high than the expenses that have incurred making the business of app profitable for me. Expenses The expenses which are to be borne by the app business are mainly the patent, licence and advertisement expenses have been illustrated above. The other related costs for the business to function are exhibited below: Rent: 1000*12 = USD12000 p.a. Salary applicable after the initial success: USD 40000 p.a. Electricity: USD 3600 p.a. General Insurance: USD 7000 p.a. Thus, from the estimated calculation after proper market analysis, it has been observed that although the competition will be high in the market, the revenue generated will be high as well. Moreover the app created will be indeed be a revolution and help the people in their daily life. 5. Future Perspective Future Project The launch of this project is important for my future project endeavours. I have various ideas which will be implemented by me after the success of this application. I will set up the research and development team who will help in creating technological advancements. The team will help me in understanding the market and create a revolution as per the need of the customer. I will add more menus to the application in order to derive better satisfaction. Furthermore, the next stage for me will be the development of new apps which will be of benefit for the people. Also, adding more features and innovation to the existing product for making it the leading app in the grocery appraisal section will be the key endeavour. My future projects will not only be linked to the cooking segment but other segments such as gaming with innovation and technical advancement as well. I want to make the most popular apps which are easy to access and of high revenue generating for me. I want to create my own brand through my future works and applications with varied features. Exit Strategy Exit strategy for my project is of significance if the application designed by me fails in the market. It is always better to have an alternative strategy for a business in case of any contingency. My business is an application business so in case of any issues my exit strategy will be to sell my rights which is the patent so that I can collect some amount in order to resolve the debts if any. Moreover, I can implement the merge strategy wherein I will collaborate with other brands so that value is added to the product. These exit strategies will create value for me and help in recovering my debts if any. References AFP, 2013. Global 2013 Smartphone Sales to Hit 1 Billion. Downloads, pp. 1-2. App Advice LLC, 2014. Best Cooking and Recipe Apps. Overview. [Online] Available at: http://appadvice.com/appguides/show/best-cooking-and-recipe-apps [Accessed May 07, 2014]. Dot Mobi, 2014. Global Mobile Statistics 2013 Section E: Mobile Apps, App Stores, Pricing and Failure Rates. Best Practices. [Online] Available at: http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/e#appusers [Accessed May 07, 2014]. Jain, S. & Bansal, N., 2014. Mobile Applications. A Consulting Report That Defines the Entry Strategy for Client Company, pp. 3-23. Kotler, P., 2008. Principles of Marketing. Pearson Education India. Market Watch Inc, 2014. Worldwide Smartphone Market Grows 30.2% Year Over Year In The First Quarter Of 2014, According To IDC. Story. [Online] Available at: http://www.marketwatch.com/story/worldwide-smartphone-market-grows-302-year-over-year-in-the-first-quarter-of-2014-according-to-idc-2014-04-30 [Accessed May 07, 2014]. Statista, 2014. Usage Penetration Of Food And Cooking Apps In Great Britain In 2013, By Demographic. Statistics. [Online] Available at: http://www.statista.com/statistics/286480/food-and-cooking-app-users-in-great-britain-by-deomographic/ [Accessed May 07, 2014]. Read More