NewCo Business Strategies - Example

NEWCO Business Plan Name: Institutional affiliation: Due Diligence Case of NEWCO Business Plan Statement of Investor NEWCO is a solar powered charger that has the ability to charge six mobile phones at the same time, and it targets to reach the un-electrified rural area, especially in rural areas in Kenya. The initial investment capital is US$170,000. The financial objective of the investment is to generate enough revenue that can finance all the expenses leading to profit optimization. The company, therefore, intends to maximize financial returns at an acceptable level of risk. At the same NEWCO has the social responsibility of ensuring that people living in the un-electrified rural areas in Kenya can conveniently charge their phones at an affordable price to connect to the world. NEWCO targets at least 42% of 29.85 million who actively use the mobile phones but have challenges in charging their phones due to lack of readily available electricity. NEWCO's target market, therefore, are kiosk or shop owners living in un-electrified rural in all eight provinces areas in Kenya. NEWCO intends to sell 1,000 units in the first year of operation, which will generate US$150,000 to the company in that particular year. NEWCO intends to generate a net income of US$ 3.5 in its fifth year of operation. NEWCO has the option of expanding to other areas or sell the company to bigger companies in the industry like GO Solar System Limited after its fifth year in operation. NEWCO, therefore, can engage in a short or long-term investment time horizon. Strengths and Weaknesses of NEWCO Business Plan Market Analysis Generally, the business plan has relatively strong market analysis. It has clearly identified the geographical location of the target market, the challenges and the number of the number of customers that it can reach in the market. For instance, 12.5 million mobile users in Kenya live in un-electrified rural areas in Kenya and 589 million people living in un-electrified rural areas in the Sub-Saharan region. This is strength in the business because it knows the exact number of customers it can reach and it also gives it a bigger picture of the market. The plan has also identified challenges in the market like cost and long distances that people in un-electrified areas travel to Charge their form. It can, therefore, turn the challenges to opportunities (Wrigley, 2014). However, the business plan has no clear characteristics of the target market, especially the end consumers, which is a weakness. For instance, it does not define the behavior and preference of the end consumer regarding the use of solar to charge their phone. The end consumers may face all the challenges, but they still prefer to walk 10 miles and spend US$0.17 to access electricity instead of using the solar powered charger. The plan, therefore, should clearly define the characteristics of the target market to be sure that the investment is viable and sustainable because it is the end consumers who determine the success of a business. Clear definition of the end consumers would help the investors to known why they will prefer their products to that of the competitors in the market (Wrigley, 2014). Another weakness is the lack of a clear analysis of the trends in the target market. For instance, the plan does not consider Kenyan government plans and programs towards rural electrification, which can also serve as a threat to the viability of the investment. An area may not have electricity today but in three months it can be electrified through government electrification programs. NEWCO business plan, therefore, should consider rural electrification programs by both local and national government of Kenya to be sure of the sustainability of the investment. Consequently, there is a need for in-depth market analysis regarding the characteristics of end consumers and the trends in the market to be sure of the investment (Wrigley, 2014). Competition There are no businesses without competitors regardless of the size location, and, therefore, the business plan should clearly identify the competitors in the market (Porter, 2008). The plan has a weakness because identified the real competitors in Kenyan market. It has only identified competitors in the wider market like Uganda where it has identified potential competitors like Motorola Motopower project and Sony Ericson solar charging stations in Uganda and other parts of Africa. The plan does not cover specific competitors in the un-electrified rural areas in Kenya regarding their market size and position, and their strengths and weaknesses. Therefore, has a weak understanding of the potential competitors in the un-electrified rural areas in Kenya. Even though the market has is not saturated, and it has a few competitors, it is necessary for the investors to have a clear understanding of competitors so that it has a clear position in the market (Porter, 2008). Despite the fact that the business plan has a weak understanding of the competitors in the market, it has clearly analyzed the industry through Porter's five forces model. Clear analysis of the industry through the model is strength in the plan because it enables investors to know the nature of the internal rivalry, the understanding of buyers and suppliers, threats from new entrants in the industry, and the substitutes in the market (Porter, 2008). Another strength of the is elaborate and comprehensive SWOT analysis that explains the opportunities, strengths, weaknesses and threats that the investors are likely to encounter when operating in the identified market. A comprehensive SWOT analysis is important because it gives investors a clear way of operating in the market to optimize profit while at the same time mitigating the potential risks that can bring the business down. Comprehensive SWOT analysis is, therefore, strength in the business plan. Marketing NEWCO has a well thought out marketing plan and strategies that can have significant positive impact on sales volume and sales revenue. Direct sales are the best way to reach people living in the rural areas because the majority of them do not access Radio, TV and internet (Shimp & Andrews, 2013). The plan to employ sales people speaking local dialects is a plus because people in the rural areas only understand their local language. Use of local sales people can also reduce the apathy the target market can have towards the investment or the products. Use of direct sales is, therefore, strength because of its potential for increasing sales volume and return. The use of local radio that communicates in local dialect will also bridge the language barrier, and it can reach as many target market as possible. Also, the use of leaflets, posters, and the internet to communicate the benefits of the product can also improve the acceptance of the solar charger in the rural areas (Shimp & Andrews, 2013). Therefore, the marketing plan and strategies in the business plan is effective and can yield more returns to the business. However, it should find ways of reducing cost by identifying the most effective marketing channel and narrowing in it stead of using many channels. Using one or two effective marketing channels can reduce the cost of marketing while at the same time reaching the wider market. Management The plan does not say much about the management apart from talking mentioning the CEO, design and engineering team, and sales people. An investment may be viable, but without effective management it can easily collapse (Deloitte & Touche 2003). The business plan does not say much about how the business will be managed, the qualification and experience of the personnel, and how they will coordinate and handle day-to-day operations to ensure the success of the investment. Also, it does not even specify the qualifications of sales people who will be employed to reach the target market. The sales people will play a crucial role in the investment because they will directly be in touch with the target market and the success of the business will largely depend on them. Therefore, the plan shows some weaknesses by failing to disclose the qualification and experience of the sales people. It should also show that the management is effective and efficient by disclosing the people the details of the people who will manage the business (Deloitte & Touche 2003). Financials The business plan has clearly shown its financial status by disclosing on how it is going to finance the investment and the revenue it is going to generate during the operations. Financially, it can be said that the investment is viable because the financial statements show that the investment is profitable and sustainable. It shows the total fixed and variable cost from the year 2011 to 2015. The business plan, therefore, has shown all the necessary financial documents that are needed to determine the financial viability of the business. It has a realistic income and expenses projections, which gives it strength (Deloitte & Touche 2003). Proposal on How to Improve the Business Plan Proposal on how to improve NEWCO business plan will be based on the identified weakness in the above section. Some of the weaknesses that have been identified in the business plan include an inadequate definition of the behaviors and characteristics of the target consumers, poor analysis of the trends in the target market, and inadequate management plan. Clear Definition of the Target Market A well-defined market is important for the success of any form of business due to the stiff competition and the state of the economy across the globe. Targeting a specific market help a business to develop a specific brand to specific customers that make the business affordable, efficient and effective (Porter, 2008). According to NEWCO business plan, it targets anyone in the un-electrified rural areas in Kenya with a phone. This means that it targets anyone interested in the solar powered mobile charger in the un-electrified rural areas. Even though the plan stipulates that the target market is kiosk or shop owners, it also talks about entrepreneurs interested in the business. Therefore, I would propose that it identified a specific market to increase efficiency and to reduce the cost of doing business. Even though its primary target markets are kiosk and shop owner, it should also consider the end consumers who will determine the success of the investment. It should select a specific demographics by considering factors like location, ethnic background, income levels, education levels and age of the target consumers. It should also consider the psychographics of the target consumers like the lifestyle, behaviors, attitudes, and personality. A Clear understanding of the specific target market will improve effectiveness and efficiency of marketing strategies because it will help in designing marketing message (Deloitte & Touche 2003). Also, the concentration of the people using mobile phone differs from one province to another. NEWCO, therefore, can find itself focusing in provinces low density of people using mobile phones instead of other areas with high density of mobile use. Even all the un-electrified areas in Kenya seems to be in need of power, having a specific market in reducing the cost and time wastage. NEWCO needs to identify specific target market by analyzing its demographics and psychographic, which is lacking in the business plan (Deloitte & Touche 2003). Analysis of Trends in the Market The business plan can also be improved by understanding and analyzing the trends in Kenya, especially regarding infrastructure development programs like electrification set by both local and national government. It should access information regarding rural electrification and the areas that the government has given the priority. This will help the investors to focus on areas where the government has no immediate plan to implement rural electrification. The information should be captured in the business plan (Deloitte & Touche 2003). Sound Management Plan Further, to improve NEWCO business plan, it should have a section discussing how the management will be carried out. No business can be successful without sound management plan and strategies. The plan should list the personnel who will be involved in the management, their qualifications, and experience in the industry. The management part should also include the structure of the business and how decision-making will be carried out by mentioning ways and channels of communication (Deloitte & Touche 2003). Effective management will positively influence the performance of sales people because they will feel motivated to work. However, this will only be possible if the sound management team is running the operations of the business. The plan, therefore, needs the inclusion of management part for it to look more viable. References Deloitte & Touche. (2003). Writing Effective Business Plan. Retrieved from http://www.mcafee.cc/Classes/BEM106/PDF/Deloitte2.pdf Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster. Shimp, T., & Andrews, J. C. (2013). Advertising promotion and other aspects of integrated marketing communications. Cengage Learning. Wrigley, N. (2014). Store Choice, Store Location and Market Analysis (Routledge Revivals). Routledge. Read More