«Case Study: NEWCO A&M» Essay Sample

Case Study: NEWCO A&M

With the aim of easing mobile phone charging challenges faced by the people living in the rural areas of Kenya, NEWCO has developed a solar powered mobile charger. The product features the capability to charge up to six mobile phones throughout the day. The following paper encompasses a case study of NEWCO A&M from an investor’s perspective. The current paper will explore the strengths and weaknesses of NEWCO business plan and will provide a proposal for possible improvements to the business plan. 

As articulated above, the business plan will regard the general situation of the company and incorporate the analysis from an investor’s perspective. According to NEWCO market research, there are 587 million people in Sub-Saharan Africa without the adequate access to electricity. In Kenya, 75% of 39.8 million people live mostly in un-electrified rural areas (NEWCO, 2009). For an investor, it is noteworthy to state that 42% of people have an active mobile SIM card. There is also an apparent and significant influx of mobile use in the rural areas of Kenya. Furthermore, the mobile users keep facing a daunting task of having to travel an estimated 10 miles to the closest electricity source to charge their phone at a price of 15 Kenyan shillings. The amount translates to approximately USD 0.17 per phone. Additionally, the users have to wait two hours or more to charge their phones. There is a dire need for a service or product, such as NEWCO, fashioned to satiate this need and ease the lives of mobile-using Kenyans in rural areas (NEWCO, 2009). Ergo, for a potential investor, there is an apparent and lucrative business opportunity and a chance to change lives.

Considering that the number of mobile users is increasing despite the challenges that they face, a product designed to solve the charging problem would amplify the rapidly expanding mobile user community. NEWCO business module endeavors to address the problem of charging phones. Furthermore, its target market includes the kiosks located near the electrified areas and entrepreneurs who want to start a mobile charging business. Ultimately, based on NEWCO success in Kenya, the plan is to target the reported 587 million people without electricity in the Sub-Saharan region (NEWCO, 2009). The vision is to provide an imperative platform for the end user to charge their mobile phones locally and on a regular basis. The product will aid kiosk owners in generating incremental revenue by providing charging services. Moreover, the product could create an entrepreneurship avenue for small start-ups. To this end, the business plan envisages a micro-finance loan option that could help the kiosks purchase the product and the individuals who wish to run a mobile phone charging venture (NEWCO, 2009). With NEWCO and its loan facility, the people of Kenya will improve their financial and social position.

From the technical perspective, the product is essentially a solar panel that converts sunlight into electric power. It features a simple electronic circuit that harnesses the collected solar energy into suitable levels, requisite for charging mobile phone batteries. Furthermore, the product includes a rechargeable sealed lead acid battery that stores excess power unutilized during the day (NEWCO, 2009). Consequently, it makes mobile phone charging feasible during the night. The product is easily marketable. For starters, it is efficient. It utilizes multi-crystalline solar cells known for high efficiency in converting the solar energy to electric power at reasonable costs. Secondly, it is robust. The feature is necessary for a product designed for the Sub-Saharan market. Ergo, it operates in the shade and sunny conditions and has a battery that acts as storage and backup. Thirdly, the product promises no maintenance. The solar panel has a purported longevity of 25 years, while the battery has a lifetime of 5 years (NEWCO, 2009). Finally and crucially, the product is affordable. It is well within the reach of its target market.

As articulated above, there are an estimated 12.5 million mobile users in rural Kenya. Speculatively, if the users utilize NEWCO to charge their phones once every four days and the kiosk charges ten phones each day, an estimated 313,000 NEWCO products are required to meet and satiate the demand (NEWCO, 2009). Furthermore, based on the stipulated market size and opportunity, the NEWCO business plan forecasts a baseline sales projection of 1,000 units in its first year, which translates to USD 150,000 in revenue. Over a five-year timeline, NEWCO anticipates a significant market share and a cumulative net income of USD 3.5m. Ergo, the company could leverage its current network and brand reputation to expand into other Sub-Saharan African countries (NEWCO, 2009). For example, 50% of 151 million people in Nigeria live in rural un-electrified areas. For this reason, there is an invaluable opportunity for an investor to receive high returns on investment and an incremental market share potential. In addition, the pioneering product could pave the way for other innovative and potentially lucrative products such as charge lamps. The company could also collaborate with mobile network operators in a synergy that promises to increase revenue (NEWCO, 2009). Moreover, there is an opportunity for direct sales to government bodies, for example, local government agencies, which would stimulate the emergence of young enterprises and mitigate poverty levels. For a potential investor, there is no greater calling than the ability to alleviate poverty, present the impoverished regions with the access to global wealth, and connect them to the external world. By providing this product and encouraging entrepreneurship, the company will create jobs. Moreover, the product saves time wasted for traveling miles and waiting for the phone to charge. Ergo, farmers who majorly constitute these areas, have more time to undertake their business (NEWCO, 2009). To this end, NEWCO UK seeks an investment of USD 170,000 to cover first-year operational expenditure and its fixed and variable costs. Ergo, the company offers 20% equity to a prospective investor.

 
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While the business plan suggests a noble and lucrative venture, the analysis of its inherent strengths and weaknesses is a necessity for any investor.

Strengths

For starters, in the Kenyan market, the product lacks competition. The invaluable uniqueness of the product stems from multiple charging points: it is universal to any mobile phone brand and allows charging through USB compatible electronic devices. Moreover, it encompasses value on top of its basic functionality by gifting a warranty and after-sales service. NEWCO units run on an infinite resource, solar power. Ergo, the company will experience incessant revenue inflow minus impeding operating costs (NEWCO, 2009). The product is a source of revenue and financial support for families living in the rural areas, and it will encourage the growth and development of the society. The product itself makes the world a better place by promoting the use of renewable energy sources. Moreover, the product is exceedingly sustainable and scalable. The module could incorporate additional features through minor modifications. Furthermore, the business model could efficiently encompass similar products, for example, charged lamps, and expand to other markets. The business plan features a crucial opportunity for economies of scale (NEWCO, 2009). NEWCO will source quality materials at a low price from China and elevate the company bargaining power by buying the components in bulk. The product design allows portability. In addition, the chosen business execution model of direct sales to kiosks (or individuals) offers several benefits. Firstly, there is a potential for higher profit margins as compared to sales using a distributor network due to enhanced market penetration. Secondly, the direct contact with clients offers unique branding opportunities and a platform for advertising. Thirdly, a commission compensation structure will generate greater sales volumes. Finally, the company will have a crucial direct feedback avenue that gifts the opportunity to fortify its value proposition.

The microfinance facility guarantees affordability of NEWCO. As it relates to the opportunity, the business module suggests a realistic potential for expansion into the greater Sub-Saharan region (NEWCO, 2009). The company also has an invaluable opportunity to leverage its experience and existing network accrued from its Kenyan operations. There is also the ability to source cheap materials and labor costs in relation to manufacturing (from China) and operations (in Kenya). Subsequent business growth will help develop and augment brand equity for NEWCO in its market arena. Finally, there is the potential for improved profit margins in the future via improved supplier deals and economies of scale.

Weaknesses

The prime weakness is the lack of a comprehensive intellectual property right protection for the product in Kenya. Therefore, there is a possibility of counterfeiting. In order to achieve success in moving units from a manufacturer to a point of sale, an increased transportation cost emanating from the underdeveloped infrastructure that plagues the rural areas has to be considered (NEWCO, 2009). The NEWCO logistics system and processes will experience teething problems as they are setup from scratch. Furthermore, the staff, including sales agents, will need training. Consequently, the company will need copious amounts of time and cash to launch their venture. In addition, the absence of brand equity at the initial stage and a budget that heavily relies on investments will affect the ease of company operations.

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Possible governmental projects such as rural electrification schemes will reduce the target market drastically. Additionally, attracting efficacious and loyal direct sales agents is a difficulty worth consideration as it will necessitate training costs and may precipitate dismal sales (NEWCO, 2009). Furthermore, political instability and arbitrary legislation changes in Kenya could impede business operations and sales. Fluctuating exchange rates could negatively affect profitability and costs. Dependence on microfinance may affect sales in the event of the global economic crisis. The company also faces the risk of theft from an internal and external front. Finally, the product is decidedly vulnerable to duplication and reactive attacks by key players in the market. 

Improvement Proposal

The NEWCO product is an innovative and vanguard concept in the African market. However, it may lack a technically superior component that allows the formulation of new patents. Furthermore, imposing patents in African nations is a formidable exercise. Therefore, stringent trademark registration for NEWCO is a crucial necessity. As it relates to reactive attacks, the company should create synergies and partnerships with key players whenever possible. The price of collaboration is cheaper than the competition (Khana et. al, 2005). In addition, the product should have requisite features that will propel the product to the zenith of originality and deter sales from losses in the inevitable event of counterfeiting. The business plan needs to enable product synonymy to excellent quality, competitive prices, and tailored features. For example, since the product is for the people in rural areas, it should not have a premium price. Instead, the price should engender accessibility to the point where it is still the best option in the event of competition from other energy sources, such as diesel, and government projects (Khana et. al, 2005). It is an ill-advised strategy to wait for new competitors to reduce their prices because it may be too late. Furthermore, the product feasibility and price should attract not only clients in rural areas but also in urban areas. Its excellence and affordability should precipitate brand reputation so that customers have no choice but to remain loyal (Khana et. al, 2005). Additionally, it will augment the difficulty for suppliers trying to sell similar products directly. With more sales and a propensity toward personalized advertising, the NEWCO brand will find itself fortified. While the company and its business plan remain focused on NEWCO units, the plan should launch other products such as charged lamps alongside the NEWCO units to provide alternative revenue sources and diversity for its market (Khana et. al, 2005). As a result, the company will supplement its budget and meet its operational costs. The company should also feature requisite security measures and action plans in the event of political instability (Blunden & Thirlwell, 2012). To this end, the business plan should feature an allowance for focus groups to test its intended market. Subsequently, the business plan will be in a better position to mold the product and meet the expectation and need of its target market and culture. Studying the personal and professional customs of the market will ensure a respectable brand image, formulate appropriate marketing strategies and budget, and resolve marketing issues (Blunden & Thirlwell, 2012). Crucially, NEWCO UK should gather information on Kenya’s historical value fluctuation to avoid blind speculation. Finally, the company should consider hiring an expert on Kenya’s legislation governing business. Preferably, NEWCO UK should have local representation from an individual who could help the company navigate unanticipated obstacles and elucidate contract terminology and provisions requisite and relevant in Kenya (Blunden & Thirlwell, 2012). It is imperative to understand the legalese of the Kenyan jurisdiction before formulating and assenting to legally binding agreements.

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