Bandtech is a new company that wants to venture in the energy sector. The company has invented a charging device that obtains its energy from body heat. The gadget is supposed to be worn as bands on convenient places of the body such as arms and legs. It is unique in that there is no other gadget in the energy sector whose functionality is the same as the bands. The plan is to start the business in the UK and expand its operations if it becomes stable. This paper provides a breakdown of the plan including advantages and weaknesses that are likely to be encountered during the operational stage.
Macro-analysis (PESTEL Analysis)
The government has made the environment conducive for trade by making policies that support trade and innovation. Well established companies and upcoming ones are not biased in favour of the other; hence, business activities go on without government interference. The energy sector is among the most thriving and affected due to pollution and environmental conservation policies set by the government. Entrepreneurs who manufacture non-polluting products are unaffected by rules that limit the extent of their operations as compared to those whose goods and services have harmful effects on the environment (Sun, Venkatesh & Hall 2016).The Bandtech Company is planning to manufacture wearable bands that absorb heat from the body and transform it into electric energy, which can be used to charge mobile devices such as cell phones. The company fully complies with government policies. Besides, there is no political instability or threats that are likely to interfere with the business.
The rate of inflation is not high in the country and interest rates are relatively low. The average rate of inflation is 1.6% and is projected to fall to about 1.25%in February and March (Young, Hood & Hamill 2017). There has been an increasing integrated demand for portable chargers, which contributes to economic growth without causing inflation. Being a new business, the organisation is not likely to be affected by inflation in the short run owing to the current stable economy. There are no imposed financial barriers that discourage entry into the energy sector, especially for new companies, in terms of the minimum capital required to venture into the business. The current minimum capital requirement (MCR) should not be less than the total basic operational funds (Hisrich & Ramadani 2017; Abor 2017). The organisation is planning to meet the stipulated requirements through a funding request plan.
Social fashions change with new products having better features than the previous ones. There has been an increasing trend of people acquiring portable chargers for convenience purposes. They avoid carrying chargers or looking for charging spots when the batteries of their devices are low. Brandtech’s unique product not only allows the user to charge portable devices such as pocket cameras and mobile phones but also has a provision for converting body heat into electric energy. It has been specially designed for the convenience of the user by integrating fashion, power supply, energy conservation, and recycling. There are no social criteria or class for users of the product. Factors such as age, gender, ethnic background, and/or the level of education do not limit anybody from using the product since it is meant to make life better by cutting energy-related costs.
Technology is quickly advancing in the UK with new products coming into the market at a fast rate (Barringer, State, & Ireland 2015; Rettberg 2016). Many companies manufacture portable charging devices, a situation that presents the challenge of competition. The company’s product has been made uniquely to feature in the technological forefront ahead of other charging devices. Whereas other portable chargers and power packs rely on solar power or have to be charged to store electric energy, Brandtech’s device only needs to be worn on arms or any other convenient parts of the body. It gets its energy by absorbing body heat, which is transformed to electricity that is used to charge electronic devices (Rettberg 2016). This feature will enable the wearable band to gain a competitive advantage over other charging devices owing to its uniqueness and efficient functionality.
Bandtech is intended to be a privately owned corporation whose owners and shareholders have the right of accessing all information about the company including but not limited to financial trends, management structure, and manufacturing processes. The company will publish its financial reports annually to conform to transparency requirements. There are policies that cover energy companies in the UK by requiring them to be insured. The legislation on reinsurance such as Article 2(8) of the Directive 2002/87/EC requires companies to present their operation schemes and show evidence that they will be able to raise funds enough to cater for the solvency capital requirement (Hisrich & Ramadani 2017).The Bandtech Company is ready to comply with various legislations such as employee social security funds, cover against risks, safety precautions, and non-toxic manufacturing methods.
Bandtech is set to manufacture wearable bands that have been designed to comply with green energy requirements. The manufacturing process has been modelled to apply procedures that do not emit toxic compounds in the environment. Processing plants will be powered by electricity, and there are no liquid or gaseous by-products that will be emitted to the surrounding environment. There is an elaborate waste disposal procedure that fully complies with environmental protection policies such as applying for the Industrial Emissions Directives (IED) permit. The company is committed to follow other regulations such as the Radioactive Substance Regulations (RSR) for non-nuclear plants.
Micro-Analysis (Porter’s Five Forces)
Threat of New Entrants
Entry barriers are privileges that existing companies enjoy above new companies (Porter 2008; Rothaermel 2016).The limitations that the company faces include its novelty in the industry and specialisation in its operations. This position poses a big challenge to Bandtech because it is likely to face competition from financially established companies Stella Staffing or Hello Tech, which have been in the industry for a long time besides having diversified products. These established companies enjoy economies of scale (supply-side) in which they incur low costs in every manufactured unit due to the ability to stretch costs over many units (Rothaermel 2016).
Power of Suppliers
Suppliers running big companies have a huge operating profit used to manipulate trade in favour of their business operations (Rothaermel 2016). For instance, powerful suppliers can overprice their products, limit the quality, or move costs to the industry players. This move limits the profitability of manufacturers who cannot distribute the rising costs to the prices of their products. Nevertheless, strong supplier unions are likely to regulate commodity prices and prevent shifting operational costs to the prices of commodities (Storey & Greene 2010). Besides, Bandtech products are unique and do not have direct substitutes so there is no risk of making losses.
Power of Buyers
Powerful buyers are customers who actively demand for better quality products or lower prices of the commodities. Their actions usually put industry players against each other. Buyers usually have strong negotiating power if they are keen on commodity prices, and use their influence to push for price reduction. If prices are too high, buyers can threaten to boycott and manufacture the goods themselves (Scarborough & Cornwall 2015). Being a new company, Bandtech has studied commodity prices and come up with the most convenient prices after consultations with relevant stakeholders including members of supplier and consumer unions.
Threat of Substitutes
Substitute commodities are the biggest threat Bandtech’s new products. They are mostly power banks that serve the same purpose as the company’s wearable device. Winning over customers who have enjoyed the experience of using power banks will most likely be a difficult task. The company will need to use a competitive marketing strategy to win over such clients and sensitise to them the importance of acquiring the new product (Love & Roper 2015). The threat of substitute products is in the scale of 5. The advantage that Bandtech has over these substitutes is the uniqueness of the product in terms of technology and convenience.
Rivalry among Competitors
Aggressive competition occurs when some companies struggle to gain a bigger market share than the others. Although competition is healthy for the benefit of consumers, manufacturers tend to design and produce matchless products to gain a competitive edge in the market. Seemingly, the Bandtech Company will face a significant challenge because most rivals are financially stable companies capable of manipulating the market. However, the company avoid being caught up in the rivalry through maintaining quality standards and setting pocket-friendly prices that consumers can appreciate.
The strength of this business is that the company’s new product is matchless. It does not require conventional recharging, which makes it efficient in terms of energy conservation. The weakness of this project is that both the company and its product are both new in the market. It will take much time and money for the product to gain popularity in the UK. Nevertheless, there are still many growth opportunities for the company because of the increasing demand for portable charging devices not only in the UK but also in other parts of the world. In fact, the total market cost is projected to reach £692.32 billion by the year 2020 (Dobbs, Manyika & Woetzel 2016).Thus, there is a high chance of growth in the long-term. The major threat that Bandtech is facing is competition from well-established companies in the market that can manipulate prices posing a threat to any new businesses. As a result, the pricing of the Bandtech Company’s commodities will mostly likely be influenced by market prices of substitute products.
Market studies show that there is an increasing demand for portable charging devices both in the UK and the rest of the world (Agnolucci 2007). This demand can be attributed to the ever-increasing usage of mobile devices. Therefore, this venture is viable. The uniqueness of the product and its cost efficiency will sway the attention of many users to purchase it. This trend will ease penetration to the market (Vaughan 2011). The product costs have been carefully set affordably, and the expected profitability is fair enough for the venture.
- Build a manufacturing plant that meets set standards
- Conduct sales and marketing campaigns to reach a big number of customers
- Intensify advertising to create awareness about the new product all over UK
- Invite shareholders to invest in the company so as to increase its capacity
- To expand the manufacturing capacity of the company by gaining a market share of 3% in the first year and increase it to 5% by the second year
- Expand manufacturing and distribution of products to the whole world
- To be the leading company in the production of energy-recycling gadgets
The management structure is the functional system headed by the Chief Executive Officer (CEO), who is the inventor of the gadget. The functional structure consists of the marketing department that will be headed by the marketing manager, the sales department headed by the sales manager, and the production department led by the production manager (Mann & Thompson 1988). Employees of each of these departments will be responsible for all the operations delegated to their respective departments.
The Bandtech Company will use the Ansoff’s Matrix to conduct intensive marketing for the new product all over the UK to penetrate the market. The sales department will conduct intensive advertisements through different channels such as social, print, and broadcast media. This growth matrix will help the firm to promote strategic marketing with a view of increasing product’s sales.
|MARKETS||Present||Market penetration||Product development|
|New||Market development||Product/market diversification|
Table 1: The table shows the Ansoffs Matrix
Marketing promotions aimed at reducing the prices of commodities will be conducted during direct sales to consumers. The company targets people of all ages and social classes. It is likely to be appealing to physically active individuals whose bodies generate a lot of heat. In the near future, the company will adopt diversification to manufacture other products such as power banks, smart phones, and tablets among other electronic devices
The Bandtech Company will price its products affordably without compromising quality to attract customers. The price of each band that produces 20,000mAh will be £19.55, which is lower than the price of a high-quality power bank that produces the same amount of current at a retail price of £29.59. The annual revenues for mobile charging devices and electronics are estimated at £2339285.6 (ITC 2017). The company’s plan is to gain a market share of 3% in the first year and increase it to 5% in the second year. The company is likely to make losses of up to £1403571.36 during the first year in business owing to massive expenditure on marketing and fixed costs, and a sale of £701785.68. In the second year, the company targets to increase its sales to about £2807142.72 after intensive marketing. In the third year, the sales projection stands at £1169642.8. The cost plan for the first 3 years is illustrated below.
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