Selling Oil Rigs in Mena Region - Essay Example

?Business plan to sell oil rigs in MENA region Table of Contents Introduction 3 2.Product Feature and its Advtantage 3 3.Company and Formation 4 4.Market Analysis and Target Market 4 5.Revenue/Cost analysis 5 6.Timeline 6 7.Conclusion 6 Reference 8 1. Introduction Development of a new business is a changeling task and previous evidences of success rate of business are quite low. The reason behind this fact is that a start up business has always been exposed to multiple risk sue to its vulnerable nature. However, the success rate of a new business is expected remain high, if entrepreneurs is able to develop a realistic and achievable business plan by analysing and assessing the associated risk and by framing a set of effective and plausible strategies. This paper will present a brief business that will include product and company features, market and cost analysis with project timeline of the start up business. 2. Product Feature and its Advtantage The product is the start business is the oil rig machines which are basically a drilling machine to explore the underground oil and natural gas. These machines are huge in size that creates hole within the Earth. Oil rigs are installed and used at site where oil is supposed o deposited under the ground. Generally, the oil rigging machines are available in different sizes run by any of the one power system i.e. diesel engines or electrical generators. The oil rig offered by the new start up venture will be very help for the oil exploring companies as it will be able to run on both types of power system in accordance to the available resources. Besides, its new technology used for rotation system and for circulation system will be very cost effective as installation cost will be very low and will be quite productive in term of its cost including its maintenance cost and power cost. 3. Company Description and Formation The name of the new start up company is OilTech Pvt. Ltd and it will be engaged in the manufacturing and selling of the newly develop oil rigging machines. Primarily, OilTech will be based in MENA region and will also be situated in this region as a large number of buyers will be available in this region. OilTech Pvt. Ltd will be formed by joint venture with an existing engineering company who is engaged in manufacturing of the heavy engineering products. OilTech and engineering-based company will have 40% stake each and rest 20% of the capital will obtained through loans from banks or other sources. Certain amount of loan will be very helpful in tax benefits and higher return on equity. Joint venture with engineering-based company will very helpful for the OilTech as it will be able to use the technological expertise. 4. Market Analysis and Target Market MENA region includes the Middle East and North African countries and these countries are highly enriched with mineral oils and gas. The most of these countries are oil-based economies and hence, a large of buyer of oil rigging machines will be available. However, market competition this region is expected to remain high as a number of oil drilling company companies and seller of oil drilling or rigging are present. Moreover, many oil and natural gas producer companies buys the oil drilling machines from the other countries like China, Germany, U.S. etc. Some of the potential and key competitors for OilTech are Allegheny Crane, Focus Oil Tools, Korea National Oil Corp, Parker Drilling, Proforma Safety LLC etc. These competitors also offer services for oil drilling and maintenance services to the oil exploring companies (Rigzone, “Website Listings”). OilTech is newly formed company and hence, it will enter in the market by targeting the small oil and gas producing companies. Considering the features of the product offered by OilTech will be low cost and will also incurs lower maintenance cost that strives to add value to profitability and efficiency. With the increasing demand of the oil and gas in the World economy, the demand of the oil drilling machines is expected to rise and major many believe that oil reserves in Mena region is yet to be explored fully. Hence, the oil producing companies are focused on advance technology for oil drilling (World News Media, “Demand Driven Drilling”). This indicates very high probability of success for OilTech in Mena region. 5. Revenue/Cost analysis Cost and revenue analysis for a newly start up company is mainly based on the projected cost and forecasted sales. In this respect, OilTech must analyse market and demand for sales forecast. Besides, it is also necessary to determine the sales price of the oil rigging machines by considering competitors’ price and cost of product. Oil rigging machines are very expensive that can be bought only by the institutional buyers. At the initial operating years, OilTech will not be able to sale any product but it will be engaged by in promoting its products and in creating contacts with potential buyers. However, cost of oil rigging machines will also includes services cost that for next three year after the sales. The present sales price of the product is determined at $200 million and cost of product will remain nearly 65% of sales price. In the first operating year, it will start manufacturing product for product demonstration and will invest significantly on promotional and marketing activities. 6. Timeline Staring the business of manufacturing and selling oil rigging machines is very channelling as it includes very high sunk cost and it also required very stringent planning process before starting the proper operations. The timeline for this business is given below. Figure 1: Timeline for the business plan The above table represents the time line for the business plan using a Gantt chart. Each of the periods has been divided into a quarter and entire process is expected to complete within 4 years. 7. Conclusion This paper has attempted to present a brief business for a new start up company, OilTech which is expected to engage in the business of manufacturing and selling oil rigging machines. The product of OilTech is oil rigging machines which capable to run by electric as well as on diesel generators. Besides, this product is very cost effective die lower maintenance and fuel cost and also quite productive. Mena region is highly enriched oil and hence, OilTech will set up its business in this region by entering into joint venture business with 40% stake. Entire business process and other pre-operational activities are expected to complete by fourth year. Reference Rigzone. “Website Listings”. 2009. O&G Directory: Drilling. June 28, 2011. . World News Media. “Demand Driven Drilling”. (Apr 19, 2010). World Finance. June 28, 2011. . Read More