Business Concept and Model for Moped Rental Service - Report Example

Business Concept and Model for Moped Rental Service Table of Contents Introduction 4 Business concept and model 4 Company overview and start-up summary 4 Company location and services 6 Vision, Mission, objectives and key success factors 7 Vision and Mission 7 Objectives 7 Key success factors 7 Market analysis 7 Market size and trend 8 Market growth driver 8 Market competition and profitability 8 Industry cost structure 9 Distribution channel 9 Business strategy and implementation 9 Marketing strategy 10 Sales strategy 11 Implementation 11 Management structure 12 One year’s projected cash flow and break even 12 Break-even analysis 12 Projected cash flow 14 Strengths and weakness of the concept 15 Strength 15 Weakness 16 Feasible business concept 16 Conclusion 16 Reference List 17 Appendices 18 Group evaluation 18 Introduction The report is based on designing a start-up business plan for university moped rental services in Bradford University, UK. The company will be known as Bradford Moped Rental Inc. Bradford Moped Rental Inc. will be focused on providing a low cost transportation solution to the students of Bradford University. This business initiative is mainly targeted to provide a transportation facility to the students of the university during their term papers. It will also assist the students of the university to have their own low cost transportation medium throughout the year. This facility can certainly reduce their travelling time. This business concept possesses a number of advantages such as low maintenance and operation cost and less fuel consumption. The further discussion will provide an elaborated view on the business concept and model of Bradford Moped Rental Inc. It will also detail the market analysis and business strategy for this initiative. A projection of one year’s cash flow and break-even analysis will be designed for the start-up business. Finally the strengths, weaknesses and feasibility of this business idea will be discussed. Business concept and model Company overview and start-up summary The business concept of Bradford Moped Rental Inc. within Bradford University is focused on providing transportation assistance to the students of the university within a limited cost structure. The targeted consumer strength of this business initiative includes 13,750 postgraduate and undergraduate students of Bradford University. This facility will be also open for providing moped rental service to the total of 1820 academic and administrative staff as well as the visitors of the university (University of Bradford, 2015). A large number of students and faculties of the organisation are regularly commuting to the university from different parts of the city as well as outside of the city. The major transportation options for these students and staff are the city transport system, personal vehicle, rental car, bike, bicycle and scooter. Bradford Moped Rental Inc. will provide cost benefit to the regular commuter. The sole focus on the university students and staff will also ensure 24 hour availability of moped service. Therefore, it has been forecasted that this initiative can generate profit within its first year of business venture. Before setting up the business the initiators need to calculate the start-up capital and total funding for the business venture. The organisation has planned to purchase 560 mopeds to start their business by supporting the transportation requirement of at least 4% of the university students. The major financial support for this initiative is dependent on the investment of local investors and the business loans. According to the following table the projected start-up capital for the business will be approximately £160,000. The total funding for the business venture should be over £390,000. The cost for the business start-up mainly involves the expenses of advertisement, legal cost and inventory charges. Requirement for the start-up business Start-up expenses Amount (GBP) Legal £ 550 Occupancy (Rent) £ 1900 Stationary £ 230 Brochures £ 90 Consultant £ 0 Insurance £ 600 Advertisement £ 1000 Loan Payoff £ 45000 Research and development £ 400 Equipments £ 1850 Others £ 0 Total Start-up expense £ 51620 Start-up asset Amount (GBP) Required cash £ 28000 Inventory £ 60000 Short-term asset £ 32000 Long-term asset £ 220000 Total asset £ 340000 Loan/borrowing Amount (GBP) Short-term loans £ 55000 Interest free short term loan £ 0 Long-term liabilities £ 220000 Total loan/borrowing £ 275000 Investment Amount (GBP) Investor 1 £ 150000 Investor 2 £ 65000 Others £ 0 Total Investment £ 215000 Required start-up capital £ 163380 Total funding £ 391620 The distribution of start-up fund Company location and services The brand name of the organisation will be Bradford Moped Rental Inc. The business will start with only one rental location which will be closely situated to Bradford University campus. This location will assist the marketers to easily serve the targeted consumers. The business will provide renting services on daily, weekly and monthly basis. The main focus of the service is to promote the monthly based rental system. Therefore, the monthly moped rental charges will provide discounted value to the consumer. Apart from moped rental, the organisation will also provide different moped accessories, such as seat cover, moped cover and carrier, on rent. Rental limits Charges (GBP) 1 day £8 1 week £50 1 month £210 Vision, Mission, objectives and key success factors Vision and Mission The vision of the start-up business is to provide economic transportation rental facility to the students and staff of Bradford University. The primary mission of Bradford Moped Rental Inc. is to serve the student of Bradford University. The mission of the organisation targeted to provide quick, cost effective and quality transportation facility to the consumers. The mission of the organisation also describes their tendency to generate desired profit within a specific frame of time. Objectives The major objectives should support the vision and mission of the organisation. The objectives of this start-up business include: Set up a fully functioned and profitable moped renting business for Bradford University. Increase the moped renting capacity by 700 units by the end of the year. Introduce road safety and security classes for the students of Bradford University in terms of utilizing the moped renting services. Key success factors Low cost and affordable vehicle rental service. Easy access to the target market. Proper customer services and value added business procedure can certainly ensure increase in consumer database and consumer loyalty. Market analysis A Market analysis procedure can be considered as one of the important parts of the start-up strategy of businesses. This analysis enables organisations to analyze the attractiveness of a market segment within a business sector. The market analysis procedure provides a detailed view about the market size and trend, growth driver, market competition and profitability, industry cost structure and distribution channel (Hollensen, 2015). Market size and trend The market of the start-up business is mainly focus on the student of Bradford University. The university contains a total of 13,570 students. Almost 22% of the students live within the city and they avail different kind of transportation facility to reach the university. The local as well as the foreign students of the university possess very little budget for their day to day activities. Most of them generally avail the public transport, rented car, bike, scooter and bicycle. Most of these students are looking for cheap but convenient transportation system for their day to day commuting procedure to the university. Though the business is targeted to serve a huge market size of university student, they also have the opportunity to extend the services to the staff members of the university. Market growth driver The increased gas and fuel charges are the major driver for the growth of the moped renting market. The gradual hike of the prices of gas and fuel has limited the utilization of various cars and luxury automobiles within the students of the university (Roy, et al., 2014). Therefore, the demands for fuel efficient mopeds are rapidly increasing within the students. The yearly increase in student database of Bradford University can be considered as another attribute to influence the growth of the moped renting business. The increase in the number of student also broadens the target market of the business. This situation is also reducing the capacity of the parking facility within the university premises. Hence, the demand for small but easily accessible vehicle is increasing within the regular visitors. Market competition and profitability The Porter’s five force model analysis will assist the marketers to assess the profitability and attractiveness of moped renting services within the students of Bradford University. The analysis also evaluates the strength and position of competitors (Porter, 2008). Rivalry of existing competitors: The market of Bradford possess very little to no competitors in terms of providing rental services of moped (Shaheen and Cohen, 2013). Therefore, it can be said that the pressure of business rivalry within the existing competitors is very low for Bradford Moped Rental Inc. Strength of new entrants: The initial cost on setting up Bradford Moped Rental Inc. is moderately low. The equipments are of affordable prices and the service requires very small number of manpower. Therefore, the threat of new market players is moderately high. Bargaining tendency of consumer: The rental services of mopeds offers very low charges to the consumers due to the minimum service and maintenance charges. This rental services will also provide cost and space related advantages to the consumers. On the other hand, the limited spending power of students may deny the usage of this service in exchange of little other cheaper transportation system. Therefore, the bargain power of consumers is moderate in this scenario. Substitutes: The pressure of substitute is moderate in the selected market. The substitute includes car, bike, scooter etc. All these vehicles require expensive maintenance and high gas or fuel support. Therefore, moped can be considered as a better choice for the consumers (Roy, et al., 2014). Though the cost of renting bicycle and public transport is comparatively lower than moped, these services may cause inconvenience in the daily commuting process. Power of suppliers: The power of suppliers is also very low in the targeted market due to the scarcity of other major players (Roy, et al., 2014). Industry cost structure The vehicle rental service cost structure in the UK market mainly focused on competitive pricing strategy. Though most of the organisations follow the best offered rental charges in the market, the higher operating and maintenance cost of the vehicles restrict them to focus on economic pricing policy (Shaheen, 2013). The limited maintenance charges of moped can allow Bradford Moped Rental Inc. to offer economic rental charges. This situation can assist them to attract young and student community of their operated location. Distribution channel Most of the two-wheeler rental organisations in Bradford utilize different bus stands and tube stations to create their rental service stations. They also establish their service stations near different traveller spot (Shaheen, 2013). Business strategy and implementation The strategy for Bradford Moped Rental Inc. includes the marketing and sales strategies. The well-structured marketing strategy or marketing program of any start-up organisation mainly evaluates different marketing mix elements such as product, price, distribution and promotion. The service providing organisations can also evaluate other important elements such as people and process (Wilson and Gilligan, 2012). Marketing strategy Product strategy: Though Bradford Moped Rental Inc. will be involved in rental service delivery procedure; their product line will consists of rental mopeds, vehicle accessories and vehicle insurance. In the initial level, the product strategy of the organisation need to be focused on providing services to at least 4% of the students and staffs of the university at a time. Pricing strategy: The pricing strategy need to be focused on the affordability of the students of Bradford University. The company must offer economic pricing for the vehicle rental. The rental charge for a day (16 hours) will be £8. The rental service will be focused on offering monthly membership to the students. Therefore, descent discount will be offered on the monthly price package to attract maximum number of consumers. Distribution strategy: Initially the service distribution strategy will influence the consumers to rent moped from the shop near the university. On the long run, the company will also establish rental station within the nearby bus stand and tube station. Promotional strategy: The promotional procedure of the company will be targeted to generate the awareness of students and staff related to the offered services and price structure. Due to the limited budget of the project the company need to select less expensive but influential promotional procedure. The most important procedure of promotion is to publish the advertisement in various campus brochure and publication. The company also need to frequently distribute pamphlets within the students. Organising road safety awareness campaign within the campus of the university will also assist the company to improve their position. People: The proper execution of the rental service business will require efficient employee structure. The service marketing strategy also needs to focus on recruiting efficient mechanics, helper and service provider. Process: The service delivery process strategy can be considered as one of the important part of service marketing mix (Mudie and Pirrie, 2012). The service delivery process will majorly focus on the students of the organisation. The process strategy will follow a properly designed distribution procedure to eliminate vehicle lost or damage. Sales strategy The company will not require any personal selling and direct selling procedure as it is totally dependent on the rental requirement of the students. The company need to hire a limited number of sales persons to communicate with the students regarding the benefits of using moped for transpiration purpose. The sales persons can also assist customers to choose appropriate rental package. Implementation The implementation of business plan will be targeted to establish a sustained business structure within the span of a year. The following chart will provide the details regarding the important landmarks of the business plan. Landmarks/ Time May 15 June 15 July 15 August 15 September 15 October 15 November 15 December15 January16 February16 March16 April16 Market analysis and consumer segmentation                         Establishing shop within campus                         Sourcing required equipments and accessories                       Setting up pricing and distribution strategy                         promotional activities                     Initiation of liability repay                         Management structure As Bradford Moped Rental Inc. is a small business structure, it will not contain any managerial hierarchy. The management will only include the owners of the company. The business will include total worker strength of 8 people. The management need to hire 4 shop helpers for the rental procedure. During the initial phase the management will require 3 mechanics for the servicing and maintenance of the vehicles. The shop will possess one sales person to communicate with the students regarding usage and requirement. One year’s projected cash flow and break even Break-even analysis The break-even point will determine the point of vehicle rental where the revenue received will be equal to the cost associated to it (Tsorakidis, et al., 2011). The estimated fixed cost of the business is £17,500. The variable cost of the business will be £12. FIXED COST Wages £ 9400 Rent £ 1900 Property tax £ 3500 Insurance £ 600 Misc. fixed costs £ 2100 Total fixed costs per period £ 17500 VARIABLE COSTS Commission per unit £ 0 Material handling cost per unit £ 7 Transport cost per unit £ 0 Misc. cost per unit £ 5 Total variable cost per unit £12 SALES Monthly rental charge per unit £210 Volume if rent per period 560 Total sales £ 117600 The business can achieve the break-even point between month two and month three of its operation. The break-even point can be achieved after renting the 88th moped and receiving the booking of 89th vehicle. Calculation Table Sales volume analysis month 1 month 2 Break-even month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 Units rented per period 0 50 89 150 200 250 300 350 400 450 500 550 560 Monthly rental charge per unit in GBP 210 210 210 210 210 210 210 210 210 210 210 210 210 Fixed cost per period in GBP 17500 17500 17500 17500 17500 17500 17500 17500 17500 17500 17500 17500 17500 Variable cost in GBP 0 600 1068 1800 2400 3000 3600 4200 4800 5400 6000 6600 6720 Total cost in GBP 17500 18100 18568 19300 19900 20500 21100 21700 22300 22900 23500 24100 24220 Total sales in GBP 0 10500 18690 31500 42000 52500 63000 73500 84000 94500 105000 115500 117600 Net profit (loss) in GBP -17500 -7600 122 12200 22100 32000 41900 51800 61700 71600 81500 91400 93380 Break-even chart Projected cash flow The table of cash flow will provide the details about the difference between the cash inflow and outflow of the company within the given period (Brooks and Mukherjee, 2013). Projected Cash flow Year 1 Receipts   Cash sales £586391 Collections from credit sales £0 New equity inflow £0 New current borrowing £0 Other £0 Total Receipts £586391     Payments Fixed Cash Spending (Wages, Property Tax, Insurance etc) £210000 Bill payment £104267 Sales Tax, VAT, HST £0 Payment of current borrowing £0 repayment of other liabilities £0 Repayment of long-term liabilities £19616 current asset purchase £0 Long-term asset purchase £0 Dividends £0 Office supplies £6305 Advertising £45530 Miscellaneous £0 Other £0 Total Payments £385718 Cash flow Surplus £200673 Strengths and weakness of the concept Strength The business concept of Bradford Moped Rental Inc. is fresh and new within the chosen market. Currently there is no moped rental facility within Bradford market. The student strength of Bradford University is increasing every year. This situation has increased the chances of profitability of the business. The spending power of selected market segment is very low. Therefore, the low cost renting facility of moped will allow the marketers to attract a huge number of consumers. Weakness The company can face lower traffic of consumers due to their preferences towards the other highly functioned two-wheelers. The scarcity of service centres for moped can cause inconvenience to the consumers. This situation can reduce the consumer traffic. Feasible business concept The business concept of Bradford Moped Rental Inc. within the students of Bradford University can be considered as a feasible option. This is a new business concept within Bradford market which has the capacity to attract huge consumer traffic within the span of a year. The initial investment is lower than any other vehicle rental operation. The maintenance cost is also very low for the vehicles. Therefore, this situation will assist the marketers to easily generate profit within few months of the business inception. The market promotional procedures will also incur very limited expenses to the organisation. According to the break-even analysis, the business can initiate profit generation within the third month of their business operation. Therefore, the group can positively peruse the business venture. The proper execution of the business plan will assist the group to sustain the business operation while repaying the liabilities on time. Conclusion The report has evaluated the business plan for Bradford Moped Rental Inc. The discussion has detailed the company structure, services and set-up costs. The study has provided detailed analysis of the market which includes the projected market growth and trend. The market analysis has also illustrated the intensity of competition and customer demand within the desired market. The study has evaluated the different elements of marketing mix to discuss the essential business strategies. Therefore, the report has provided the break-even analysis as well as the one year projection of cash flow. Finally, the discussion has elaborated the strength and weaknesses of the concept as well as the feasibility of this business venture. Reference List Brooks, R. and Mukherjee, A. K., 2013. Financial management: core concepts. London: Pearson. Hollensen, S., 2015. Marketing management: A relationship approach. London: Pearson Education. Mudie, P. and Pirrie, A., 2012. Services marketing management. London: Routledge. Porter, M. E., 2008. The five competitive forces that shape strategy. Harvard business review, 86(1), pp. 25-40. Roy, D., Pazour, J. A. and De Koster, R., 2014. A novel approach for designing rental vehicle repositioning strategies. IIE Transactions, 46(9), pp. 948-967. Shaheen, S. A. and Cohen, A. P., 2013. Carsharing and personal vehicle services: worldwide market developments and emerging trends. International Journal of Sustainable Transportation, 7(1), pp. 5-34. Shaheen, S. A., 2013. Introduction shared-use vehicle services for sustainable transportation: carsharing, bikesharing, and personal vehicle sharing across the globe. International Journal of Sustainable Transportation, 7(1), pp. 1-4. Tsorakidis, N., Papadoulos, S., Zerres, M. and Zerres, C., 2011. Break-Even Analysis. London: Bookboon. University of Bradford, 2015. Making Knowledge Work: Undergraduate prospectus 2015. [pdf] University of Bradford. Available at [Accessed 17 April 2015]. Wilson, R. M. and Gilligan, C., 2012. Strategic marketing management. London: Routledge. Appendices Group evaluation You Group Member 1 Group Member 2 Group Member 3 Attractiveness of idea The business idea is quite attractive. This idea is very new to the market of Bradford. Hence, I believe it have the potential to achieve a huge market share. I have enjoyed the process of designing the business plan. The idea of renting services of moped sounds very attractive for the Bradford market. I liked the business idea but some portion of this concept has generated confusion for me. I think the availability of skilled employees is quite limited in the market. Ability to undertake I have the skills to conduct the business plan. My knowledge about the renting cost and maintenance procedure of moped will assist me to guide the business concept in a profitable direction. I believe I am quite capable of handling this business properly. I own a moped and I am very knowledgeable regarding the servicing and maintenance process of it. Therefore, I can utilize my knowledge to train and lead the servicing department. The ability to undertake the business requires proper advertisement and promotion process. I should use my business management skills to assist my team for proper marketing and promotion. Practicality The business concept is very realistic and result oriented. The requirement of low cost transportation system is very prominent within the students of Bradford University. The idea is quite practical. The huge charges of fuel will surely shift the focus of students towards rental vehicles, mainly moped. The business concept certainly provides a realistic approach. The increased utilization of local transport system has indicated the affinity of the students towards the low cost transportation facility. Therefore, this business venture can positively attract the attention of consumers. Potential market demand The rising charges of fuel and gas is increasing the demand of vehicle with low fuel consumption. This situation can certainly influence the market demand for moped. The market demand in the initial phase will not be very high due to lack of knowledge about moped facilities. I think promotional campaign is very essential to generate market demand. Students are the main customer. So I think they will certainly buy this service. On the other hand the preference for high speed and high fashion vehicle can also reduce the expected demand. Ability to combat competition There is very limited competition due to the availability of bicycle renting facility. The inconvenience of using bicycle for long distance journey can reduce the intensity of competition. There are a number of competitions within Bradford but I think the company can neutralize the intensity of competition with proper rent charges and maintenance facility. The competition is very high in the Bradford market. If we only concentrate on the demand of student then the competition is not so intense. Alternatively the low rental and maintenance cost of bicycle can provide tough competition. Ability to differentiate The business can be differentiated in the moped accessories market. It can also provide vehicle insurance and road safety training. The scope for differentiate is low as the limited profit of the business will restrict the further investment. The business can be differentiated in various ways such as road safety courses for students, moped selling, bicycle renting and vehicle accessories selling. Price potential Apart from price, low required parking space and ease of handing will also attract potential consumer. The ease of availability of the renting service within the campus of Bradford University will enable the business to gain competitive advantage. Price is the main competitive advantage for the business concept. Therefore, avoiding the price competition is quite impossible for this business. Resource availability The resources are readily available within different parts of the UK. It can be easily delivered through freight carriage. Moped and its accessories are the main resource. This can be availed easily from neighboring locations of Bradford. The resources to set up a rental facility are very easily available. We can use student of Bradford University to work on pert time basis on the rental facility. The sourcing of moped may cause higher than the expected cost due to their unavailability in the local market. Read More