JetFan Technology Limited Operations and Business Description - Research Paper Example

JetFan Table of Contents JetFan 1 Table of Contents 1 Executive Summary 3 Business Description 3 Marketing 6 Research, Design, and Development 12 Manufacturing/Operations 13 Organisation 14 Critical Risks 14 Financial 15 Milestone Schedule 17 Appendix 18 References 19 Bibliography 20 Executive Summary Why will the business succeed? What do you want to start (or change)? How much money is required? Why is the venture a good risk? The executive summary of the business plan ‘JetFan technology Limited’ has been documented in an excellent way. The author has been able to identify almost all the factors which would bring in success in the commercialization of the technology. Furthermore, the money involved and the risk quotients are also discussed in this part making this section quite attractive and informative. Business Description What type of business are you planning? What products or services will you sell? What type of opportunity is it (new, part-time, expansion, seasonal, year-round)? Why does it promise to be successful? What is the growth potential? How is it unique? Type of Business JetFan deals in commercialization of the application for a pioneering fan impeller or fan blade technology. The company is looking for investors to join in and to contribute further to flourish the business further. It is quite evident that the business type is ‘Partnership’. This seems to be quite correct for the business plan as the start up costs and further expenses would be shared among the owners. Furthermore, the responsibilities and work will get further attention from other owners leading to an appropriate planning and focused implementation of the same. Adding to it, the business risks would also be shared among the partners leading to less probability of default for the organisation. JetFan is quite new to this compact electronic equipment cooling segment, which demands it to make enough alliances with the prominent fan manufacturers operating in this segment. Additional contacts and complementary skills of each partner in a work environment of motivation and mutual support can be used to successfully explore this new segment of compact electronic cooling equipments. In ‘company structure and ownership’ a good deal of information has been provided on the shareholders of this company. Overall it seems that, the business plan includes the type of business; however, it fails to identify the legal term attached with it. Product The organisation is looking forward to commercialize the impeller in the compact cooling electronics segment. The JetFan impellers would be smaller and more efficient than their conventional counterparts. The products would be offering enhanced efficiency than the existing impellers at the same cost as that of the rest. The market application of the product would be in cooling, heating, extraction/ventilation. JetFan Ltd has come up with several prototypes including hand dryers and hair dryers, ceiling fans, vacuum cleaners, fiber optical light source cooling and significant market of compact electronic equipment cooling which also includes portable computers chip set cooling instruments. In this business plan, a description of the product has been included. Although, it does not consist much of technicalities, the significant attributes for the customers and its offering in different segments have been mentioned. Type of Opportunity JetFan has been into the commercialization of its impellers to the compact electronics cooling market. The opportunity is expansion towards commercialization of the products. JetFan Ltd now wants its JetFan technology to enter into different segments of electrical and electronics equipments. The opportunity type is not clearly defined; however, a glimpse of the same has been provided throughout the plan. Promise to be Successful: The Product is Unique The promise of JetFan’s success lies behind the problems faced through the traditional fan impellers. In this specific business plan, the author has rightly identified the issues with the traditional axial and turbine fans leading to the replacement of the same with the JetFan impellers. The traditional impellers are comparatively inefficient with high level of noise. Furthermore, the manufacturing cost of these large machines is pretty high and they tend to stall, which reduced the efficiency of the equipments. The competitive advantages of the JetFan which would pave the way to success for the JetFan have also been described in ‘Why use JetFan and why now’. Some points like miniaturization, stall free, capability to deliver high pressure air at improved flow rate, less power requirements, enhanced cooling efficiency and noise reduction are some of the attributes which have given a competitive advantage to this product over its existing counterparts in the market. The author of the business plan had also identified the product to be unique under the subheading ‘Creating the JetFan Revolution’. The uniqueness of the product is well described in this segment. In this segment, the business plan has included the attributes of the JetFan technology in accordance to the demand of the target markets. A detailed explanation of the JetFan’s offerings has been stated with quantitative figures, which makes this segment quite strong in the entire business plan. A comparison of the traditional technology with the JetFan impellers has been quite helpful to understand the competitive advantages of the later one over the former ones. The Growth Potential The business plan has articulated the growth potential for the business both in terms of the market growth as well as the sales growth of the organisation. In the first year, the market is expected to experience a growth of 15 %. However, the growth opportunities seem to be shrinking in the following years, as in the very next the forecasted growth is 10 % following by 9 %, 7 % and & 7 % in the subsequent years. Apart from that, the author of this business plan has also forecasted the sales value for the next five years, which can also been analyzed to understand the growth prospective of the organisation. Overall, this section has been good as there is some excellent work done to understand the prospective of the product and the uniqueness of the same. However, in some cases like the business and opportunity types are not clearly mentioned with the usage of appropriate terminology attached to the concepts. Marketing Who are your potential customers? How large is the market? Who are your competitors? How are their businesses positioned? How will you price the product or service? What advertising and promotional strategies will you use? Potential Customers In this segment, the author has identified the prospective market segments for this business. In this business plan, significant market segments have been identified to commercialize the JetFan technology. Compact electronic equipment cooling (CEEC), computers and communication equipments, heating, ventilation and cooling of the vehicles and the buildings and domestic appliances including vacuum cleaners, hairdryers and hand dryers etc are the key segments of this industry. As of now, the indentified market for launch is the JetFan technology is the Compact electronic equipment cooling equipments market. So, it can be understood that the prospective customers would be the electronics equipment firms manufacturing household and other electronics organisations. The JetFan technology can commercialize its technology to the fan manufacturers and CPU chip manufacturers. However, the business plan has failed to include a detailed discussion on the prospective customers. The Market Size The business plan stated that as per conservative approach, every year around 350 million of small fans are manufactured. The growth prospective for this specific market has been estimated to experience an average growth of 15 % per year. However, a further inclusion of other prospective markets could have explained the market size in a better way. Competitors In this business plan, the author has included a detailed discussion on the competitors. The target market, the compact electronic equipment organisations procure the cooling fans from the expert fan manufacturers which include NMB (Japan), Sunon (Taiwan) and Papst (Germany). All these leading fan manufacturers have their own in house manufacturing unit to produce fan impellers, fan motors and fan chassis. If the organisation decides to manufacture entire fan units by purchasing the fan motors, it would have to compete directly with the fan manufactures like Papst, Sunon and NMB. On the other hand, if the organisation focuses only on the manufacturing of the fan impellers, it would not have no direct competitor in the market. Over the last 40 years, there have been a considerable amount of advancements in the fan impeller designs. All the in house manufacturers have access to the generic technology. The direct competition of the company can be against the manufacturing facilities of compact electronic equipment manufacturers. Although JetFan has been offering superior product attributes like size, cooling ability and quietness to all the existing market of compact electronic equipments. The organisation can have to face the competition from the manufacturers of the fan impellers using alternative technologies to curb out the requirement for the cooling of compact electronic equipments. The company products would also have to face competition from the prospective substitute products, which has the possibility to evolve with the enhancement and advancement in the technological arena. The author has also talked about such researches based on new technologies including 'thermoelectric coolers'. Furthermore, there are many other technologies which can be used to cool the electronic and electrical equipments. In this case, the author has used detailed technicalities to understand JetFan’s competitors and the area of competition for the same. Positioning of the Business The product has come up with superior benefits and competitive and lower production costs. The organisation, JetFan Ltd is well positioned to compete against the fan manufactures which have their own production unit of the fan impellers. Under the heading of ‘Pricing’, the author has also mentioned that the products would be positioned as a premium product and would target the niche market of quality products. Price of the Product The business plan has articulated a detailed explanation of the product pricing. The price of product is important as this would be based on the appropriate calculation of the cost as well as considering the profit marketing. Furthermore, the author has included the forecasted revenue amount. However, it would have better if the business plan would include the forecasted demand of fan impellers and the price for each. The pricing of the fan impellers would depend on the competitive advantages of JetFan’s products, which would increase the bargaining power of the organisation. This is pretty important for the organisation, as the manufacturers, by using the JetFan technologies, would be able to increase its profit margins. As the OEMs would have interests to pay premium for the fans which would have enhanced cooling performance, JetFan can ask for higher price for its technologies. It is pretty obvious that the price would be positively related to the value added in the products and the products manufactured by JetFan Ltd have enhanced attributes of miniaturization, noise reduction and effective and enhanced performance. Another strong point is that, the business plan has referred to the researches carried out till date to decide on the product pricing. OEM and CPU manufacturers in North America and Asia have expressed their willingness to pay higher price for enhanced airflow, i.e. improved air cooling in the instruments. A technology with 40 % more airflow compared to the traditional ones will fetch 40 % higher price than that of the others. As of now, JetFan can leverage on its technological enhancements and improved product attributed to use its bargaining power to position itself as premium product in the market. Another significant advantage of this business plan is that it has carried out enough research before deciding on the price matter. The author has mentioned that the market research interviews of the fan manufacturers as well as the computer OEMs have revealed that “a fan which enables more powerful laptop computers to be produced will easily command a significant premium, up to $10.00 or more per unit indicated one manufacturer” (Business Resource Software, 2011). As of now, the smallest CEEC fan costs its buyers around $6. The prospective fan manufacturers have already indicated that they are willing to pay $ 2 for this enhanced technology of JetFan. Although this would increase their unit production cost by $ 2, from $ 5.4 to $ 7.4, the gross profit of the manufacturers are expected to see an increase from $ 0.6 to $ 2.6. The increase in the profit margin would be from 20 % to around 26 %. At this time, the pricing of JetFan technology has taken a value added approach by positioning itself as a premium product. However, with the new advancements in technological arena, the price will take more of tradition cost plus margin model. The price reduction strategy of the company would enable the company to further reduce its cost and hence its price and enter into more markets of appliances and equipments. Advertising & Promotion The business plan has not mentioned anything about the product advertising a good deal has been included in the ‘promotion’. The same approach has also been articulated in the ‘Strategic Market Entry’ section. JetFan Ltd would collabourate with the CPU chip manufacturers and further would establish strategic alliances as well as long term supply arrangements with the prospective market of fan manufacturers, Furthermore, the organisation would also fault off the advantages of its products to the OEMs. The author has arranged a brief discussion on each of these promotional activities to increase the attractiveness of its products and reach to the target customers. As of now the organisation would only approach to the prominent fan manufacturers to establish strategic alliances with them. The prominent fan manufacturers in every market segment have been identified and would be approached first. Even, it has been mentioned that the preliminary discussion has already been started with Sunon, Delta and Sanyo. Furthermore, collabouration with the CPU chip producers is expected to reap further results for JetFan and it is expected to be a significant step to commercialize its impeller technology. In the case, it has been mentioned that JetFan has been talking to the Intel to make them realize the potential benefits offered by the JetFan technology compared to the traditional ones. The author has also mentioned that the Intel engineer is convinced and willing to use the technology in their upcoming products. So, these facts reveal that the promotion strategy, the organisation has adopted, has offered enough leverage to JetFan Ltd. Furthermore, JetFan would adopt relationship marketing and frequent contact with the industry key decision makers to promote its products’ benefits directly to the OEMs. These are surely going to reap good results for the organisation. However, taking part in the trade fairs flaunting electronic goods, offering discount at the first stage to build up relationship with the leading industrial players in the target markets and sponsoring some industrial talk shows could have been beneficial for the organisation, which are not included in this business plan. Overall, this segment is good as in some places like pricing, market size, competitors the author has put a detailed explanation. However, things like mentioning the demand unit and the price per unit for its products, the advertising activities would have contributed further to the enhancement of the business plan. Research, Design, and Development Have you carefully described your design or development? What technical assistance have you received? What development needs do you anticipate? What are the costs of development? The research and development strategy of the organisation is well formulated in this business plan. Furthermore, JetFan wants to be in a business where the significance of technology is huge and this is quite visible from the business plan. The research and development strategy of JetFan is to adopt the present technology in various applications. Moreover, it has been mentioned that the research and development would be an in house division for the company which would be more equipped with the collabouration and alliance with the leading manufacturers in the industry. In this way, the organisation would be able to maintain its integrity regarding its intellectual property of applications, technology and the process itself. Furthermore, the author has also considered the learning through in house research and development and using the same to improve the product quality. The business plan also includes the investment in research and development and pretty sure about the introduction of various applications over five years period. In the very first years around 53 % of the total revenue would be invested in the research and development. From the 2nd year till the 5th, the investment would vary from 6 % to 12 % of the total revenue amount. In this segment, there is a clear description of the investment as well as the desired infrastructure for the same. So, it would not be wrong to say that in this segment the author has included a considerable amount of facts and figures. Manufacturing/Operations Where will the business be located? Why? What are your facilities needs? What are your equipment needs? Are there other needs for production? What activities are required to produce your product or service? Who will be your suppliers? What type of transportation is available? What is the supply of available labour? What will it cost to produce your product or service? Per unit? The business has not included any information in this segment. There is no information on the location of the business. Moreover, there has not been any information on the required facilities and other activities of the production. The author has not mentioned anything about the transportation and the suppliers. No discussion has been carried out to comment on the required labour and the cost per unit of fan impellers. Overall, the segment is quite poorly articulated providing no detailed and even sometimes no information on the related fields. Organisation Who will manage the business? What qualifications do you have? How many employees will you need? How will you structure your organisation? What are your plans for employee salaries, wages and benefits? What consultants or specialists will you need? How will you use them? What legal form or ownership will you choose? Why? What licenses and permits will you need? This business plan has articulated a detailed discussion on the organisation and related people. Although the author has not mentioned anything on the required number of the employees, still a considerable amount of information has been provided on the shareholders and management personnel in this organisation. Furthermore, no information has been provided on the employee salary, wages and benefits. However, significant management personnel and their qualification and expertise have been articulated. The business plan has also included an organisation chart which has shown the board of directors and the management team. The management teams include people who are qualified, experienced and skillful for their existing roles in the organisation. Critical Risks What potential problems could arise? How likely are they? How do you plan to manage these potential problems? The author has rightly identified attached risks for this project. Furthermore, the author has also articulated the risk reduction strategies to manage the potential problems. Although the business plan does not state any probability for all these risks, the segment is well written and detailed in this case. One of such issues can arise when the technology fails to perform as expected. To manage this kind of problem the organisation would be investing more in the research and development divisions, although the testing of the existing products does not reveal any possibility of malfunctioning. Another issue can arise if the new entrants start pouring in a more frequent way, the organisation would ensure highest penetration before moving to the next market segments. If the pricing seems to be incorrect, the organisation would try to increase the economies of scale and enhance the manufacturing processes further to minimize that. The organisation would establish employee agreements and equity participation to reduce the risk of loss of the significant employees of the organisation. The main competitive advantage of JetFan is its technology. The main issue would arise when another company would be able to copy the same technology. However, JetFan has come up with the solution by keeping the in house manufacturing unit, opting for patent infringement insurance and keeping alliances with high profile people in the industry to fight these kinds of fraudulence. Overall, the section is well documented and an excellent discussion of the relevant information. Financial What is your total estimated business income for the first year? Monthly for the first year? Quarterly for the second and third years? What will it cost you to open (expand) the business? What will your personal monthly financial needs be? What sales volume will you need in order to make a profit during the first three years? What will be the break-even point? What will be your projected assets, liabilities, and net worth on the day before you expect to open? What are your total financial needs? What are your potential funding sources? How will you spend it? How will the loans be secured? A new start up venture is always exposed to a number of risks in comparison to an established business organisation. Business risks and financial risks are major risks that intensify the threat to an organisation’s long term sustainability. Therefore, it becomes a priority task for an organisation to assess these risks level before entering into a new venture. However, the, major risks are arises from the financial activities as it is considered to the back-bone of a business (Brigham and Daves, 2009, p.520). On the hand, the primary objectives of preparing a business plan are to convince the potential investors and to identify and plan the factors to taken into considerations. Many critics and entrepreneurs have identifies it as “basis of business plan” (Singla, 2007, p.235). In order to prepare the forecasted financial model for new business, realistic financial assumptions are inevitable. These assumptions make the financial planning more logical and relevant that strives to achieve higher accuracy level. Moreover, for taking these assumptions, the financial planner must have the basis accounting knowledge and clear idea of the prevailing and probable economic condition of the country in which the new venture is supposed to operate (Nah and Dawodu, 2007, p.60). There certain areas in financial activities like credit policies, investment policies etc that needs to be pre-determined for better financial projection and for better operational process. On the other while making the financial calculation for projections, it is also necessary to adjust the amount with inflation, currency, interest rates, time value of money etc. The planning for the working capital management is another major criterion for undisrupted financial operating process. Effective working capital planning and managements is very crucial factors for the better control and evaluation process (McCann, 2000, p.123). For an efficient working capital management, entire financial transactions and operational activities must be designed optimally and the working capital policies like credit and inventory policies etc must be properly communicated with suppliers and buyers (Bhattacharya, 2004, p.138). In this case, the business plan has included several financial assumptions. The author has also attached some key ratios and the forecasted cash flow statement for the project. However, the business plan has failed to answer questions like the cost incurred, the total amount of assets and liabilities. Furthermore, the personal financial statement of the owners, the break even analysis is not included in this business plan making it poor work in this segment. Milestone Schedule What timing have you projected for this project? How have you set your objectives? Have you set up your deadlines for each stage of your venture? Is there a relationship between events in this venture? The author has not mentioned anything regarding the duration of the project. Furthermore, the business plan has also failed to identify the objectives and the tenure to satisfy each of the objectives. In this segment, the work is very poor. It would have contributed more if the author would have included a Gantt chart or another graph or discussion to show the activities, objectives and the expected duration to satisfy the same. Appendix Have you included all important documents, drawings, agreements, and references? The author has identified certain significant information which is put into the appendix to make the business plan stronger. This segment is moderately good as financial forecasts, action plan, technological process and resumes of management team are attached with the business plan. References Bhattacharya, H. (2004). Working Capital Management: Strategies and Techniques. PHI Learning Pvt. Ltd. Business Resource Software, Inc. (2011). JetFan Technology Limited. [Online]. Available at: http://www.businessplans.org/jetfan/jetfan05.html [Accessed on May 01, 2011]. Brigham, U. F. and Daves, P. R. (2009). Intermediate Financial Management. 10th ed. Cengage Learning. McCann, P. (2000). Strategy & Business Planning of Privately Held Companies. Trafford Publishing. Nah, S. and Dawodu, E. O. (2007). Establishing private health care facilities in developing countries: a guide for medical entrepreneurs. World Bank Publications Singla, R. K. (2007). Business Studies. FK Publications. Bibliography Baker, M & Hurt, S. (2008). The marketing book, Volume 2003. USA: Elsevier Ltd. Best, N., Dalton, C. & Allan, W. (2005). Integrated Management. Butterworth-Heinemann. Bodie, Z., Merton, R. C. and Cleeton, D. L. (2008). Financial Economics. 2nd ed. Pearson Education India. Brigham, E. F. and Houston, J. F. (2009). Fundamentals of Financial Management. 12th ed. Cengage Learning. Burande, M. D. (2008). Drug Store and Business Management. Pragati Books Pvt. Ltd. Drummond, G., Ensor, J. & Ashford, R. (2008). Strategic Marketing: Planning and Control. USA: Elsevier Ltd. Drummond, G., Ensor, J. & Ashford, R. (2008). Strategic Marketing: Planning and Control. USA: Elsevier Ltd. Gitman, L. & McDaniel, C. (2008). The Future of Business: The Essentials. USA: Cengage Learning. Henry, A. (2008). Understanding Strategic Management. Oxford University Press. Hooke, J. C. (2010). Security Analysis and Business Valuation on Wall Street + Companion Web Site: A Comprehensive Guide to Today's Valuation Methods. 2nd ed. John Wiley and Sons. Koller, T. et al. (2010).Valuation: Measuring and Managing the Value of Companies. 4th ed. John Wiley and Sons. Mathur, S. B. (2007). Working Capital Management and Control: Principles and Practice. New Age International. Read More