Business Plan for New Electronic Product - Case Study Solution

Question: Discuss about the Case Study for Business Plan for New Electronic Product? Answer: Introduction Smart mirror is one of the ultimate innovation in electronics as well as premium decorative products in the market. The products like mirror television, art television and bespoke designed TV and specially disguised mirrors for the ultra-modern homes throughout the world. The innovation of smart mirror has allowed the designers to design the electronic products using the technology in a similar fashion. However, the main chance for the companies in the electronics market has become to manufacture the luxurious products using the ultimate technologies. Company History PicturFrame.TV produces the smart TV using the smart mirror as the base technology. The manufactured TVs are based on the LED panels and reflective transparent glass. The LED based technology incompatible with smart mirror is also combined with the internet applications and picture enhancing software. However, this disguised television is usable as the mirror when the television is non-operating. The television are handmade with stealth and strong tensile strength technologies. Products and services There are three types of products for the customers from PicturFrame.TV mirror TV, art TV and bespoke design. The mirror TV is the main products for the company as the demand of the product is at the highest level in the UK as well as in some other countries too. The products has shown to use all the latest technologies in internet, LED and smart mirror technology to draw attention of the smart customers. The design of the art TV is analogous with the mirror TV but possesses great picture or art to carry the best dcor. The art TV is the way to hide the TV with the art of the home and enhances the beauty of the room. The company is also engaged in designing the tailor made products for the customers specific orders. Current status The company is currently a leading seller and manufacturer in the UK as it has the highest market share in the country for the last couple of years. The company is using the UHD picture quality LED panel with the quad core processor. The TVs are assembled with the USB port and additional application based feature to watch movie online. Industry analysis Industry definition The industry belongs to the electronics and luxurious home dcor products in the world. The industry has solid backbone in the developed countries as the customers can afford the price of the smart mirror and TV in their home. Additionally, the industry is connected with the luxurious products where the niche orders come frequently. Industry size The size of the industry in the UK is different as it has different domains in business. The revenue of the electronics industry in the country was 16 billion in 2015 (Electronics and IT Hardware in the UK: investment opportunities - GOV.UK 2014). The revenue of the luxurious products in the country was 32.32 billion in 2013 (Armstrong 2015). Thereby, the size of the market is almost 3% of the total GDP of the country. Industry growth The electronics industry has the growth of 4.4% for the last four years. In this regard, the luxurious products have not witnessed much growth in its business. The luxury business has forecasted a growth of 40% employment by 2019 as it may see the growth of revenue by 54 billion in that year (Armstrong 2015). Sales projection The sales projection of the companies in this industry can be measured through the projected values of revenue published in the articles and in the magazines. The projected revenue of the luxury brands and the electronic products are totally based on the trend analysis of the recent five or ten years result in the market. Industry characteristics The characteristics of the industry has been seen as the steady market for the luxurious products in the UK as the people like to taste the luxury in their life. Further, the requirement for the electronic products and the appliances have grown since the last decade (Chaffey, Ellis-Chadwick and Chaffey 2012). Thereby, the characteristics of the luxurious electronic products in the country is robust and may touch new horizon during the next five years. Industry structure The industry is based on the supply from the well-known electronic goods manufacturers in the world. Samsung, Google and Apple are providing the required LED for the smart mirror and the sensor technology to the various companies in the country. Additionally, the global brands like Gentex Corporation, Magna and Mirrus are also acting in the UK for the last few years (Smart Mirror Market: Global Industry Analysis and Forecast to 2015 to 2021 2016). Nature of participants The participants are providing different types of products in the market. The majority of the providers in the country are providing smart mirror employed with the internet technology for the viewers. The mirror may help them to provide suggestions regarding fashions and the looks suitable for the viewers. However, the new technology enabled mirrors are providing the customers report on weather as well as outside world news. Further, some of the manufacturers are using the technology in providing the smart dcor for the home with panelling television with the mirror. Key ratios The success of Oral-B has been tasted in the industry for the last few of the years where the companys success was associated with the higher percentage of reduction of beauty products [almost 15%] due to suggestion from the smart mirror. The key ratio in this aspect is the reduction of useless buying of beauty products as well as the value proposed to the customers. Key success factor The main success of this industry is to add value to the customers in different sectors like beautification and the fashion industry. Further, the mirror is also used in the healthcare sector like in the dental skin treatment areas (Smart Mirror Market: Global Industry Analysis and Forecast to 2015 to 2021 2016). The health sector is using the mirror to get the body temperature, blood pressure and heart rate of the patients. The people may know the traffic status, sports scores, emails, news etc. the smart mirror is used in the automotive industry too. The experience of the drivers using this mirror has been enhanced by a lot as the mirrors are attached with the smart sensors. Industry trends The trends of the industry is to reach the highest point of the mirror using the smart mirror as it is providing the users a luxurious avenue for their life. In this perspective, the people are trying to buy the smart mirror in many aspects for meeting different needs of the lifestyle. The major change in the trend was seen due to the change in the taste of the people and it was in line with the projection of increment in the sales in future (Chaffey Ellis-Chadwick and Chaffey, 2012). Long-term prospects The long-term future of the product is unavailable at the moment as the faster change in the electronics technology cannot let us predict anything for the future. However, the product has lucrative market in future in different developing markets due to growing numbers of rich people. Additionally, the production cost of the mirror may be reduced by several times after having severe demand in the market. Market analysis Market segmentation and target market The UK market has no specific geographic market segmentation for the smart mirror or the mirror TV. However, the demographic segmentation was observed for this product. The young people like the mirror TV more than the old people. But, the people of age between 45 and 55 like the smart art mirror as they like it as a dcor of the home. The attitude of the consumers in the UK has been found to use the luxurious products heavily in the past years. Additionally, the change in the lifestyle of the UK people is also involved in segmenting the market. The change in the personal psychographs has helped the companies to segmenting the market in a planned manner. Thereby, the target market is the rich people as well as the young generation for the mirror TV while the aged people with strong income base are the target for the boutique products and art dcor mirror TV. Estimating target market size It is difficult to estimate the market size of the smart mirror. The technology and the products are still under the beginner stage of the industry. However, from the viewpoint of beauty and personal care products, the market has grown by 10% in 2015 while the market of health care products have increased by 11% recently (Health and Beauty Specialist Retailers in the United Kingdom 2016). However, the smartphone sells in the UK has been trimmed during the last couple of years as the demand of consumer electronics was the least despite improving the customers confidence (Consumer Electronics in the United Kingdom 2016). The luxury fashion market of the UK has been improved to Euro 398 million recently via online while it may increase to 780 million in future (McKinsey: Online luxury fashion market booming | Consultancy.uk 2015). Consumer behaviour The consumer behaviour of the people towards the smart mirror and related products are mainly consumption of the luxury brands. Therefore, the behaviour of the customers could not be assessed in this situation as there are only few of the people are using this technology and the products in the entire country. Further, the research data showed that online help from the mirror and the mirror TV incorporated with the smart features like peripheral information regarding the traffic, temperature and consultancy related to the beauty and healthcare etc. Competitors analysis The smart mirror TV has not much competitors in the country as the product is suitable for few people among the entire population. However, the increasing demand in the market may show the industry players to produce the product for acquiring the market. In this respect, the competitors like Android devices and Apple made mirror devices may become the main competitors for Picture frame TV. Further, the companies like Gentex and Magna are the global players in smart mirror segment. They may start producing the smart mirror TV in future and sell it in the UK market (McKinsey: Online luxury fashion market booming | Consultancy.uk 2015). Estimate annual sales and market share The market share of the company is 22% of the total smart mirror sales while the company is the leading brand in the country. However, the sales of the mirror TV is the highest in the country as the company is the biggest brand in this segment. The market share of the company is 52% [assumed] of the mirror TV in the UK. The estimated annual sales for the company is 506000 in 2018 while the current revenue of the product is 294000. Marketing Plan Overall marketing strategy The marketing strategy will employ two types of tactics by the management of the company. The first one is to provide the cushion to the customers. It will help them to increase the market size fast in the country. They may implement the mass production strategy for producing the mirror TV. The hand-made mirror TV requires more time than the technology based mirror TV. Thereby, the machine production may reduce the lag time of the operation as well as may reduce the expenses related to the labour cost. The product differentiation like medical and healthcare products using the smart mirror technology may provide the management to differentiate the products of the company. It may increase the revenue of the company in future. Positioning strategy According to Shankar and Carpenter (2012), branding is the main USP of positioning a luxury product in the market. He also found that luxury product had the base of selective choices from the customers for mirror TV. They like to buy the boutique products as per their choice as well as they also buy the art dcor for their home incorporated with the mirror TV. Therefore, spreading the products and the brands of servicing the customers will become the main positioning strategy for the company. The branding of the products among the rich and the higher middleclass people in the country may yield more sales orders for the company. Therefore, the management needs to employ branding strategy like positioning of the brand to establish the product in the country. In this regard, the company must meet the promises made to the customers and generate more flexibility in boutique products. Points of differentiation The differentiation may be possible by employing the order intake of niche and customised mirror TV as per the design required by the customers by Picture frame TV. The differentiation will provide the management a chance of targeting the different segments of the customers in the UK. The differentiation may be present in products too. it will help the customers to select the products from the market. Pricing strategy The basic strategy of the company Picture Frame TV will be to earn more from one piece of TV as the products are nearly niche product in terms of presence of the market. Further, the high price of the products will make it an icon among the luxurious products in the country. However, the basis of measuring the price of the TV will be based on the cost based strategy where the 35% cushion must be provided with the entire expense of the mirror TV. However, there will be non-uniform pricing strategy for the boutique products as the requirements of those cannot be evaluated before the order has been placed. Sales process The sales process of the mirror TV has been employed by Picture Frame through its showroom in the Middleton. The company must go on with this process as the product needs the special attention from the sales person as well as they have to understand the requirements of the customers. The boutiques strategy is suitable for the company as the products is appropriate for few of the customers. However, it must avail its products in online market displaying the detailed features of the products. Promotional mix The niche products cannot be sold by pushing strategy. It must be sold through pulling the customers drawing their attention with the exclusive features of the products (Pride and Ferrell 2012). Thereby, the mirror TV must be sold through puling the customers by drawing the customers towards its features. The promotion of the mirror TV must be displayed through its websites and the social media portal to increase the customers interest towards the products. Distribution and sales The sales distribution strategy is not applicable in this case as the company is going to distribute its products through its own show rooms. Therefore, the company will not seek for any traditional distribution channel for the products. Additionally, the products related to the boutique orders from the customers may be sold through order in taking at the showrooms as well as online websites. The distribution of the products through third party will not be viable as the mirror TV is a niche product. Management team and company structure Management team The management team of the company is new as they do not have much experience in the electronics products. However, the management has the hands on experience of installing the hidden TV in the market. The luxury works done by the company throughout the country may be observed as the monumental work for the date. Skill profile and gaps in management team The team is professionally stable with their knowledge in installing the hidden TV in the UK. But, the management lacks the skills like operating efficiency development and sourcing funds to spread the business in a boutique way. Ownership and compensation The ownership of the company might be reduced by several percentage by employing the funds from the venture capitalists or managing the private equity. The sources of the funds may help them to develop the business throughout their own showroom as well as may spread their business in pan Europe. Board of directors The board of the directors must possess the efficiency of running the operation. The companys history states that the board has already possessed this type of skills. But the board must possess the skills of expanding business as well. Thereby, they need to be professional and well versed in expanding the sales in different regions for growing the business. Board of advisors It may accompany any associates or the consultancy firm to grow in the foreign soils. The consultancy may be required for legal and financial advice mainly. However, they also need to understand the needs of the customers and the different cultures in the different soils during their expansion programme. Other professionals The line staff is the main requirement. However, Picture Frame TV needs the staff functions like accounts and administrative officers to maintain the compliance related to company act for future. The accounts department is necessary for payment of the vendors as well as collecting payment from the customers. Company structure The structure of the company may be isolated with low numbers of employees in the company. The structure does not need to be complicated unless it becomes bigger than that of current status. Further, they may apply simple linear structure of command for appropriateness with the operating ease. Operation Plan Operation model and procedures The operating model of the business may be order intake and then proceed for the production for the boutique products. However, the business has some regular products. Thereby, the company has to follow a regular manufacturing process of hiding TV mechanism in its workshop. But, the majority of the operation is done on the onsite of the operation. Therefore, the operating model will be based on the reactive tactics as the orders from the customers will enable Picture Frame TV to employ the labours in manufacturing the hidden home TV. Business location The main showroom of the company is in Middlesex of Surrey, UK. However, the company has tie up with many of the boutiques to take order and sell their customised products in the country. There are 24 more boutiques throughout the country where a customer may buy the product of Picture Frame TV. Facilities and equipment The facility in the business of Picture Frame TV does not required much as they need to install the products onsite of the clients desire. Therefore, the facilities like training of the new recruited people and the technicians is necessary. In this regard, the facility for the employees like recreation is not possible due to small setup cost for the company. Additionally, the charge of the equipment can be leased from the market for reducing the initial capital expenditure on them. Operations strategy The operation strategy of the company will be in two ways as they need to meet the two types of requirements. In this way, the management may get the chance of reducing the loss in order intake. Further, the strategy of operation of Picture Frame TV must include to flowing the orders regular production of designed TV for the home dcor. However, the customised products order from the special customers may be intake from time to time for getting special types of orders as well as the increase the profitability of the business. In this regard, the strategy of the management must be of two types to meet the customers needs proactive for the regular operation and reactive for sudden customised special order intakes. Product design and development plan Development status and task The designing of the products needs the customisation as the product of home dcor requires special needs the special attention at the time of designing. The home dcor mirror TV requires the idealistic design from the viewpoint of the customers. In this regard, we have found that the taste of the customers in the UK is different. The differential strategy for designing the customer centric products needs the well surveyed information regarding the taste of the customers. The strategy must be to match the customers needs in decorating the home with smart mirror as well as match its thickness with the wall fitting colours. In this regard, the company must design the product including the special features like internet facility, application based technology and sleek body for the mirror TV. In addition to this, the customised home based art TV may be the difficult task for the company as the art has involvement with the intellectual property rights of the artists or their forums. Challenges and risk The main challenge for the management is to reduce the cost of different design and the wastage of the manufactured products. The designed products may not encourage the customers to buy them for their home. Thereby, the products designed or built up already may not meet the taste of the customers. Further, the customers may not be interested in the tailor made product much as they may wish to pay extra for their luxurious adventure of TV in the home. Therefore, the company needs to be cautious while designing the tailor made product. The risk of additional cost and damaged cost due to unwanted design of the mirror TV may hold a significant cost of goods in manufacturing. This reason may reduce the operating efficiency of Picture Frame TV in the due course. The risk of losing the market is another one that may hamper the expansion program of Picture Frame TV. There are many players working in the UK for decorating the home mirror TV segment. However, the pricing strategy and the spec ial customisation has become the main advantage for this company. Thereby, the management has to protect its design from invading by other competitors in the market by protecting the intellectual property rights. Costs The cost associated with the program of designing the product will be the part of the RD cost of the company. The cost of the design may affect the profitability of the business as the company may face the challenge of high sunk cost in delivering the profitability in terms of return on investment. Further, the risk associated with the additional cost associated with the manufacturing of the products due to failure of satisfied design for the customers may reduce the profitability in operation. Intellectual property The design of the customised products and the design of the art dcor TV are the intellectual property for the company. Therefore, the customised design and its patent must be protected by the company to compete with the big players like Google, Samsung in the UK as well as throughout the world. The intellectual property may provide the company an edge of reducing the cost associated with the design of the products and the management may increase its income from other income by providing lien of the design to other companies. In this due respect, the business of Picture Frame TV may find a different vertical of income in this industry and may become potential competitor to the big brands by controlling the overall market price (Hooley, Piercy and Nicoulaud 2012). Financial projections Assumption sheet The assumption of the revenue as well as the expenditures are being made in the B-plan. The assumed data has no original value or association with the real life data. Additionally, the profit margin of the company has been projected for the next four years. The Profit and loss statement Income statement 2015 in '000 2016 '000 2017 '000 2018 '000 revenue 198 252 275 326 COGS 102 126 134 153 gross income 96 126 141 173 operating cost 25 36 41 52 operating income 71 90 100 121 interest paid 6 5 7 6.5 PBIT 65 85 93 114.5 Tax 9.75 12.75 13.95 17.175 PAT 55.25 72.25 79.05 97.325 Table 1: income statement Cash flow statement Cash flow opening balance 32 26.25 19 11.05 Cash from operating activities 55.25 72.25 79.05 97.325 Trade payables 12 14 15 17 add: depreciation 8 8 8 8 add: amortisation 2 3 4 5 total inflow 109.25 123.5 125.05 138.375 Outflow 82 103 112 127.5 receivables 7 7.5 8 6 Inventory 8 9 7 8.5 Interest cost 6 5 7 6.5 Cash in hand 6.25 -1 -8.95 -10.125 Table 2: Cash flow statement Balance sheet balance sheet 2015 in '000 2016 '000 2017 '000 2018 '000 Current assets Cash in hand 12 14 13.5 15.6 Inventory 8 9 7 8.5 receivables 7 7.5 8 6 Total CA 27 30.5 28.5 30.1 Current liabilities Trade payables 12 14 15 17 Loan 8 5 8 7 Total CL 20 19 23 24 CA-CL 7 11.5 5.5 6.1 Assets Equipment 14 18 22 34 Store 65 65 65 65 Intangible assets 20 18 16 14 Total assets 106 112.5 108.5 119.1 Liabilities Mortgage 30.75 20.25 9.45 1.775 Equity 20 20 20 20 net worth 55.25 72.25 79.05 97.325 Table 3: Balance sheet of Picture Frame TV Break-even analysis The break-even analysis of the business of mirror TV of Picture Frame TV can be achieved from the income statement. The business had faced the challenge of negative cash flow due to high cost of goods and inventory cost. Further, the cost of operation will become higher to retain the technicians and janitors. In the midway of the income statement, the operating revenue shows that the company will fulfil the target of meeting the operating cost. This is the main reason of meeting the BEP every year as well as the company will reach the breakeven point of sales for the three next years. Ratio analysis The financial ratio of the company shows that profitability ratio of the company might produce positive profit margin as estimated for the next three years. Further, the profitability measurement of the company during the period may touch the sky due to better revenue projection of the business in the UK. However, the business may face trouble in maintaining the cash in business. The liquidity measurement of the business showed that Picture Frame TV must take care of the cash in the business. Further, the debt-equity ratio of the business will be reduced and the chance of solvency of the business by 2018 will be almost nil. From this point of view, Picture Frame TV must expand its business throughout the world to reach the global market. It will be the right moment for the company to take more loan from the lenders and venture in the risk of moving to the foreign soils. Further, in this point, the management may decide to open new showrooms in the UK of their own where they may provi de better customise design to its customers. Ratio analysis 2015 2016 2017 2018 Gross margin 48% 50% 51% 53% net margin 28% 29% 29% 30% ROE 276% 361% 395% 487% current ratio 1.35 1.61 1.24 1.25 quick ratio 0.95 1.13 0.93 0.90 debt-equity ratio 0.41 0.22 0.10 0.02 Table 4: Ratio analysis of Picture Frame TV Milestone and exit plan Goals and vision The goal of the business is to be the leading company of mirror TV in the market of the UK for the next decade. The vision of the company is to generate customised design to make the customers satisfied and loyal to retain the market share throughout the UK. The future vision of the company is to expand the business in all the developed countries including Europe for developing its business. Strategies The management must take the strategy of retaining its customers in the UK. Further, the strategy must be to employ the trained and skilled employees in serving the customers. The strategy must be to sustain and hold the current market share; hence to increase the market share of the company in the UK. The strategy of the company must be to employ the sustainable activities in its business so that they may control the adverse situation of the business aroused due to change in the economic and business environment. Priorities The priorities of Picture Frame TV must be to sustain in the home country and retain its market share competing with the big players in the UK. Further, the company must give the priority to the loyal customers to retain its position in the business. Future milestones The company must have future milestone of having positive cash flow from the home grown business market. Further, the management must follow their vision of meeting the expansion plan globally and making it as a milestone for the business. Risk evaluation The risk evaluation of the business shows that completion in the UK market is the major risk. Further, the cost of designing customised mirror TV is another one as there will be huge cost associated with the RD expenses for the company. Exit plan The business may have troubled due to attaining the maturity level or due to available of different technology in the electronics world. The business needs to have an exit plan. In this case, the company may exit the business by selling its intangible assets as well as reduce the liabilities in the market by letting big companies acquiring them in future. Corporate Social responsibility and sustainability Strategies Being a very small company, there is no obligation to Picture Frame TV to make any CSR expenditure to the society. However, providing the customers value and meeting their requirements by changing the design may become the CSR strategy for the company. Analysis and assessment The strategy may provide Picture Frame TV an advantage of retaining the customers as well as to make the loyal customers. Further, the analysed data provides the information regarding holding the current market share in the UK where the company may boom its profitability for the next three to ten years. Benefits The benefits of availing the strategy of CSR for the customers will value add their service as well as the cost associated with the intangible assets may be reduced by the time. The company may achieve the sustainability in its business due to benefiting from stable and loyal customers demand in the UK market. 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