SMS Service Provider - Case Study Example

THE BUSINESS ENTREPRENUER: SMS SERVICE PROVIDER Budget and Cash Flow Assumptions about sales CM is a telecommunication company based in the Netherlands. The company was founded by two IT gurus Jeroen van Glabbeek and Gilbert Gooijers who saw an opportunity in mobile phone SMS services. At the helm of the student life in University, the two students who coincidentally were acquaintances saw the potential for growth and profitability of the service. When a chance came for them to provide SMS service for clubs and other institutions, they ceased the opportunity without any hesitation (Poulbere, 2005). Interestingly, the two students had predicted correctly about the growth of the service and its profitability. Within a limited time frame, clubs and joints embraced the service. Furthermore, the SMS service started being used as a strategy to lure customers to revisit the clubs. CM outsourced the service to club owners at a fee a method that paid them well. The industry grew rapidly and started attracting new entrants. Although, CM dominated the market for some time, the entry of competitors posed a serious threat to the organization.CM could not hold its grip any longer, slowly; it lost its leadership to competitors who came with innovative and sophisticated products and services (Poulbere, 2005). However, with time the business entity managed to regain its lost glory. The management reviewed their products and services and came up with better products than those offered by competitors. Having regained its leadership position in the SMS services, CM currently seeks to enter new markets. The current management wishes to extend the services to the international market. Given the reputation that the organization now enjoys, the management believes that entry into the European market will be a strategic move (Poulbere, 2005). Cash Flows 2007 2008 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Profit and Loss Revenue Net Sales Cost of Goods Sold 132 70 333 160 689 344 880 470 1,060 575 1,106 602 3,000 2,270 4,600 3,552 8,850 7200 25,500 22,162 86,444 30,000 98,000 32,000 Gross Profit 62 173 345 410 485 504 730 1048 1650 3338 56,444 66000 Advertising Cost 46 78 200 237 257 186 380 549 562 871 890 900 Salaries 50 82 83 89 91 93 96 100 102 104 107 110 Total Operating Expenses 96 160 283 326 348 279 476 649 664 975 997 1010 Earnings Before Interest and Taxes (34) (34) 62 86 137 225 254 399 986 2363 55447 64990 Tax 0 0 6 8.6 13.7 22.5 25.6 39.9 98.6 236.3 5447 6499 Net Profit (34) (34) 56 77.4 123.3 202.5 228.4 359.1 887.4 2126.7 50000 58491 CM estimated budget Name Category Budget Remarks Advertising Marketing £10,000 Overhead HR £8,000 Licences Legal £7,700 Supplies Procurement £6532 Transportation Logistics £8000 Miscellaneous £2,000 Total £42,232 Source: The Story of the SMS global Market Development The cash flow of the business indicates the business has a high chance of succeeding in the new market. The financial report is used by business to evaluate the potentiality of a business in a new market. According to the figures that have been given, CM has the potential to capture customers in Europe and generate profits (Kaplan, 2005). Development and Actions CM has the technological and financial muscle needed to prosper in the new market. The technical capacity has enabled the business enterprise succeed in the Netherlands. The management of the organization also seeks to employ the same strategy in its entry in the European market. CM intends to introduce new products and services in the market. Part of the culture of the organization that has been instrumental in its success is active involvement in introducing new products in the market. Furthermore, the new products meet the needs of particular market segments (McDougall and Oviatt, 2000). CM strives to introduce new products and services on a daily basis to meet the escalating needs of customers. The company pioneered an SMS service that could enable customers send bulk SMS within a limited timeframe. The company purchased a new system that can process the SMS within a short time. Currently, there are suggestions for the introduction a ClubDVD. The new concept seeks to start the production of DVDs that have contents of customers when they were attending a club session. Although the idea had been previously tried, the results were discouraging forcing the entity to stick to its core business operation. Furthermore, the organization has also adopted a number of strategies in a bid to ensure that it retains its market share. For, instance, the services are custom made to meet consumers expectations (Kaplan, 2005). McKinsey provided a number of tools that can be employed for companies such as CM to succeed in new markets. The growth decomposition tool will assist CM succeed in the new market. The tool helps companies enter a new market without much difficulty. It analyzes the anticipated cash flows from the new market that is used to predict the possibility of it succeeding. In addition, it is used in evaluating the geographical environment so that the new firm can readily adjust to geographical changes. In addition, the tool has a set of information that have been used previously by other companies and succeeded in the market. CM also developed another product that could enable customers mail SMS. The new service could allow customers send bulk SMS at a cheaper fee. The technology was introduced to meet the emerging needs of clients. Customers could send SMS via email (Kaplan, 2005). The Ansoff Matrix will be an appropriate tool for the company to employ for it to succeed in the new market. The matrix gives possible strategies that can be used by firms to enter new markets. The management at CM should apply the matrix for it to succeed in the European market.CM has to use the matrix that suggests firms should consider the following approaches in penetrating new markets. Ansoff’s matrix proposes the application of market penetration, market development, product development and diversification (Jarratt and Stiles, 2010). The firm must add value to its current products and services for it to succeed in the new market. Adding value to the existing services will help in attracting prospect customers in Europe and the neighbouring countries. Furthermore, the firm should seek to capture new market segments in Europe that have not been exploited but have the potential generating revenues for the business entity. Moreover, the Ansoff matrix suggests that in order for a firm to develop the new market, it must introduce its existing products to the new market. Although Europe may having competing firms that offer similar products, CM should offer a distinct product that that will help the company differentiate themselves from the rest of the industry players (Jarratt and Stiles, 2010). Ansoff Matrix Existing Products New Products Existing Markets Market Penetration Product development New Markets Market Development Diversification Source: Methodologies and tools framing managers SWOT of the business model One of the strengths that the organization has is that has embraced a high level of technology and innovation. Innovation and technology have been the key drivers of the success of the organization in the Netherlands. The two factors are likely to spur the business enterprise to grow in the new market amidst stiff competition from established industry players (Dyson, 2004). CM may have a weakness during the introduction of new products. New products may have defects something that might cost the organization while introducing the product in the European market. The weakness may become a factor that may lead to the failure (Dyson, 2004). Opportunities exist in the European market. Sending text messages has become a common trend in most countries. Furthermore, with the advent of social media and other internet applications, the demand for SMS services has escalated within a short period (Jackson, et al., 2003). Technology is a major threat to the success of the organization. Technological changes can render a service or a product obsolete. Furthermore, competitors may come up with better products and services than those offered by CM. Such changes may have serious impediments to the success of the organization (Dyson, 2004). Individual Reflections Entrepreneurs possess unique skill and attitudes that make them succeed in their ventures. Entrepreneurs have a strong urge to attain remarkable achievements. Furthermore; they are always willing to try out new business ventures where the level of risk is very high. One of the characteristic that is vital in entrepreneurs is that they are passionate in what they do. As business owners, they enjoy their responsibilities and also love solving challenging tasks. In addition, they are always willing to sacrifice their time to ensure their ventures are successful. Having equipped with university education, as a student, I believe that education has given me management skills, problem-solving and analytical skills. The skills are very imperative for any entrepreneur (Ooi and Ali, 2005). A personal trait that entrepreneurs possess includes excellent negotiation skills, they are good at planning, have passion in what they undertake, manage their finances well and are always serious in what they undertake. Having gone through graduate school, my career ambition is to start a business. Education is supposed to make a difference in the lives of the students. Education gives students the power to use the knowledge they have gained in creating jobs for others instead of being job seekers (O’Gorman, 2001). Outline of career Source: Author Test SOURCE :( Delmar and Davidsson, 2000). The test outcomes show that entrepreneur tendencies are very high. The feedback suggests that a person who has entrepreneurship tendencies have a strong desire to make achievements that can make them distinguishing people in the society. In addition, entrepreneurs are very flexible and always ready to adopt new changes in the business environment. Entrepreneurs a tendency of going an extra mile in whatever they are undertaking. Managers of most organization prefer investing in markets where they are certain that they will recover the initial cost outlay. However, entrepreneurs are daring and take risks in environment where the payoffs are unknown. Furthermore, in case they fail, they evaluate themselves and take a second short (Delmar and Davidsson, 2000). Reference List Delmar, F., and Davidsson, P. (2000). Where do they come from? Prevalence and characteristics of nascent entrepreneurs. Entrepreneurship & regional development, 12(1), 1-23. Dyson, R. G. (2004). Strategic development and SWOT analysis at the University of Warwick. European journal of operational research, 152(3), 631-640. Jackson, S. E., Joshi, A., and Erhardt, N. L. (2003). Recent research on team and organizational diversity: SWOT analysis and implications. Journal of management, 29(6), 801-830. Jarratt, D., and Stiles, D. (2010). How are methodologies and tools framing managers strategizing practice in competitive strategy development? British Journal of Management, 21(1), 28-43. Kaplan, R. S. (2005). How the balanced scorecard complements the McKinsey 7-S model. Strategy & Leadership, 33(3), 41-46. McDougall, P. P., and Oviatt, B. M. (2000). International entrepreneurship: the intersection of two research paths. Academy of management Journal, 43(5), 902-906. OGorman, C. (2001). The sustainability of growth in small-and medium-sized enterprises. International Journal of Entrepreneurial Behavior & Research, 7(2), 60-75. Ooi, Y. K., and Ali, H. (2005). How inclined are lecturers to teach entrepreneurship at University? International Journal of Management and Entrepreneurship, 1(1), 41-48. Poulbere, (2005).The Story of the SMS global Market Development. [22.4.2015]. Shane, S., and Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of management review, 25(1), 217-226. Read More