Introduction and Background of the Business Idea
The purpose of this business proposal is to describe the business type, objectives, activities, location, unique selling point, market environment, and business needs. Besides, the proposal reviews the rationale for the business, target market, customers, and key competitors. The company will be called the LeBanze Automotive and will be based in Riyadh in Saudi Arabia. The mission of the company is to provide customized SUVs and pickup trucks that are affordable and very durable to clients within the Gulf region.
The business strategy will be market orientation through product proliferation, product modification, and product diversification to meet the market demand. The business intends to penetrate the Gulf automotive market within one year. The business is established as a private company that will meet the local market demand for sports utility vehicles in the Gulf region. The core business sector is the motor vehicle manufacturing industry, which also focuses on designing and customizing the SUVs to clients.
The business will be located in the city of Riyadh and will serve clients within the Gulf region. The business will be operated from a centralized location at the headquarters in Riyadh with regional stores being opened annually in each of the nations in the Gulf area. After successful establishment of stores in the targeted markets within the Gulf region, the business will embark on an expansion of these stores to other regions within each of the targeted market to ensure that product visibility is increased by 80%. After five years, the expansion programs of the company will be based on the market needs and sales statistics in each region.
Description of Product and Demand within the Gulf Region Market
The demand for the customized SUVs is high since every family in the Gulf region family needs to travel within the rough terrain and hostile climate in the most comfortable way possible. Currently, more than thirty million families across the Gulf region are users of imported SUVs that are not customized to the specific demands of the climate and rugged terrain. The proposed business will be dealing with customizing these SUVs and trucks to fit within the climate and terrain in the region. This means that the demand will be high since every family will want to the customization services for their SUVs. The demand will remain steady and sustainable since the blueprint of the business is to meet the individualized needs of each client in line with the budget and class for every model or type of SUV or truck.
In order to diversify market operations, the LeBanze Automotive Company has created multiple SUV products from the same product with different coloration, sizes, and customization. This will create an environment of own competition and block other competitors from encroaching into the company’s customized automobile market. These sub-products will be differentiated by features, price, and the difference in quality.
As forecasted in the market research, this strategy will be successful towards dominance as it offers a variety of options to consumers, while at the same time maximizing benefits of economies of scale in Saudi Arabia (Jin, Suh, & Donavan, 2008). The same strategy should be adopted in the expansion strategy within the Gulf region. This will guarantee business sustainability within the regional automobile industry as more customers will embrace the products and services of the company.
Target Market and the Macro Environmental Analysis
Target Market
The LeBanze Automotive products target male and female clients in the low-end and high-end of the economic classes. These markets are selected because the groups are characterized by high disposable income and high demand for customized luxury vehicles that attest to their social status, and fit the climate conditions in the Gulf region (Jin, Suh, & Donavan, 2008). Despite the fact that the market for the SUVs have been in existence for a long time, there are very few companies that offer customization services that satisfy the demands of the targeted classes of clients in the Gulf region. The targeted groups are further divided into customers in the age group of late thirties, who are the main users and customers in the age group of twenties, who are in the minority segment in terms of demand for the customized SUVs.
Macro Environmental Analysis
Legal Environment
The LeBanze Automotive Company will be a registered business entity that is licensed to operate in Saudi Arabia. The company will remit taxes to the government as a legal requirement and the funds go a long way to finance activities such as building and improving infrastructure, financing public goods, paying salaries, and buying necessities such as medicine. As a legal requirement, the company is expected by the regulatory authorities to be tax compliant. The taxes are remitted directly to the government in Riyadh. In Saudi Arabia, the laws of commerce, a certificate of compliance for taxes is issued to a business that remits its returns accurately from which taxes are deducted (Jin, Suh, & Donavan, 2008).
Political Environment
The close economic relations in the Gulf region will benefit the LeBanze Automotive Company’s business performance for a long time. The region enjoys political stability, which is a perfect environment for doing business. This is a good assurance for shareholders, both domestic and foreign, that their investment is safe and it is an incentive to them to add even more (Jin, Suh, & Donavan, 2008). With continued political stability, the LeBanze Automotive Company is poised to grow and expand even more as many investors are assured of safety in the event that they decide to put their money into the venture.
Economic Environment
The Gulf region offers an economically sound environment that is good for business activity. The World Bank acknowledged the Gulf region as a rich sub-continent in 2012 while the region’s GDP hit the $ 9 trillion mark in 2013. The region has one of the highest Purchasing Power Parity (PPP) in the world (Dagnino & Rocco, 2009). The region has very low inflation and interest rates with one of the best infrastructure networks.
The Gulf region’s stable economy with higher living standards of her population portends a lucrative market for LeBanze Automotive Company’s business performance. More clients within the Gulf region have a high demand for SUVs due to the region’s rugged terrain and enough disposable income that can afford the automobiles. The region’s improved demand for SUVs will prove substantial for the overall performance of the LeBanze Automotive Company.
Strategic Analysis
Business Model
Product Proliferation
The company will adopt the product proliferation strategy to penetrate the customized automobile industry within the Gulf region. Through this approach, the business will become a market share leader and automatically have the discretion to reap maximum benefits ahead of its closest competitors (Dagnino & Rocco, 2009). For instance, this strategy will be beneficial for the business when it became the first company in the region to provide online customization and automobile order services. As the first in the online customization-order services, the company will reap from the first mover advantage and expand to the countries surrounding the Gulf region.
Product development entails the innovation process aimed at modeling the existing product or improving on it to balance with the changing preferences of the customers. As a result, the older version will be phased out of the market as preferences change (Winchester, 2006). The business will be the automobile company in the Gulf region in terms of design and innovation.
The company will be associated with new innovations and attractive designs that appeal to the vast customers across. The LeBanze Automotive Company will benefit from this strategy in terms of market expansion, especially among its early adopter customers. Specifically, through product development, the business will be in a position to optimally exploit opportunities available in the innovation market segment and has gained a significant share in the customized automobile market in the Gulf region (McKinney, 2005).
Cost leadership strategy is vital in business management, especially in an industry with stiff competition. Reflectively, the concept, as proposed by Porter, is a mean of establishing a sustainable competitive advantage over other player in the industry. The LeBanze Automotive Company will also adopt the cost leadership strategy to improve its efficiency through streamlining operations. As a result, this venture will develop a cumulative experience, optimal performance, quality assurance, and full control of the operational chains.
In order to cut down the cost of production and marketing, the company will embrace the modern technology in its online sales, human resource management, purchasing, and dispatch departments. The company will enter into a partnership with dealerships rather than engaging its resources in obtaining raw materials and selling to its customers (Roberts, 2005). As a result, the general overhead cost of operation will be reduced substantially. Besides, the issue of under-performance will be minimized substantially.
Rationale for the Proposed Model
Globalization has created a serious impact on the automotive sector with an innovative and deviating period of economic activities. These activities include the development of technology, increasing market demand, production and workflow, investment and trade patterns, competition among the rival companies, as well as facing the threats of global financial. With lean production and outsourcing, the automotive parts industry is increasingly becoming more important for global production chains.
The LeBanze Automotive Company is going over to modular assembly in which the main components manufacturer coordinates the design, manufacture, and installation of the major parts or systems of the car or truck. The value chain of the industry may suffer from declining wage rate due to competitive pressures in less developed countries with comparatively lower per-capita income (Liu, Liao, & Peng, 2005). Therefore, the product proliferation strategy may cushion the business from such forces.
As the international automotive market is getting more and more competitive in terms of producing environmentally friendly products and capture the market as well, the LeBanze Automotive Company should recheck the strategy of the competitors to develop a product range. It should develop an integrated marketing communication system in order to inform people about the positive side of Eco friendly cars for the environment within the Gulf region.
In addition, the LeBanze Automotive Company should increase expenditures for the R&D, which would help to produce new Eco friendly, creative, and differentiated vehicles. The LeBanze Automotive Company needs to increase its integrated marketing communication effort in order to aware customers about the positive side of its products and the importance to use of Eco friendly products to reduce global warming within the Gulf region (Jin, Suh, & Donavan, 2008). Fortunately, the product development strategy will take care of the above needs.
Why the Model will be Successful
Efficiency monitoring in distribution, sales, cash flow management, labor, and diversification as employed by the LeBanze Automotive Company is particularly suitable for the firm as it is more of a precautionary measure that shields the firm from effects of redundancy and underutilization of production variables. Despite rivalry in the SUV industry, the LeBanze Automotive Company will be in a position to monitor all its operation chains and periodically evaluate the same as a means of reducing overhead cost due to underutilization and poor balancing of the costs (Farooq & Jan, 2012). As a result, the LeBanze Automotive Company will manage to transform its portfolio and capital structure since most of operation lines are optimally utilized.
Conclusion
As the governments in the Gulf region seek to re-invent their economies and restore investors’ confidence, the region enjoys a relatively peaceful and economically stable business environment. Thus, it is recommended that the LeBanze Automotive Company should maximize the available opportunity to establish a structurally feasible marketing program. Apparently, the business has the advantage of knowledge of the Gulf market and the demand trends.
References
Dagnino, G., & Rocco, E. (2009). Competition strategy: theory, experiments and cases. New York, NY: Rutledge.
Farooq, F., & Jan, Z. (2012). The Impact of Social Networking to Influence Marketing through Product Reviews. International Journal of Information and Communication Technology Research, 2 (8), 627-637.
Jin, H., Suh, J., & Donavan, T. (2008). Salient Effects of Publicity in Advertised Brand Recall and Recognition: The List-Strength Paradigm. Journal of Advertising, 37 (1), 45-57.
Liu, S., Liao, S., & Peng, C. (2005). Applying the technology acceptance model and flow theory to online consumer behavior. Information System Research, 13 (2), 205- 223.
McKinney, L.N. (2005). Creating a satisfying internet shopping experience via atmospheric variables. International Journal of Consumer Studies, 28 (3), 268- 83.
Roberts, J. (2005). Defensive marketing: How a strong incumbent can protect its position. Harvard Business Review, 83 (11), 150-210.
Winchester, M. (2006). Positive and negative brand beliefs and brand defection/uptake. European Journal of Marketing, 42 (6), 553-570.