Business

Market Analysis And Strategies

Marketing strategy is driven by the motive of gaining high market share with increased revenue and profitability. Market-oriented strategies are framed keeping in mind all the short term and long term operations related to marketing(Viorica, Sorin and Cristina, 2013).

Market Analysis

The marketing plan includes evaluation and study of various factors in the market and formulation of strategies to deals with the same. For conducting the market analysis, Porter's five forces model is applied(Rachet, 2014).

• Competitive Rivalry: Company will face stiff competition from the existing players such as Atlas, hero cycles and Hercules which have a strong customer base in the market. These companies spend huge amounts of product promotion and innovation to attract customers.
• Supplier Power: Bargaining powers of the suppliers is moderate in bicycle industry as there are limited number of the manufacturer. Suppliers of raw material required such as rubber, tyre, battery and metal industry.
• Consumer Power: Consumers are rationally aware of the prices range as there are only 3-45 companies popular in the bicycle industry. Therefore they can easily switch over from one to another.
• The threat of new entrant: Potential threats from domestic companies existing in motorbike manufacturing may enter the bicycle market. Also foreign entrants with better technology and eco-friendly techniques.
• Threat Of Substitution: Further threat from substitution is very high. As various sport solar powered or electric two wheeler bikes may hamper the market. Moreover, fitness clubs or geared cycles or automatic exercise equipment have the calibre to replace bicycles.

Marketing Strategies

The focus of strategies is based on maximising profits through gaining competitive advantages in the market. Advertising is the major area where attention is placed to promote the product and grab the attraction of customers. Advertising through booking slots on new channels is the cheap and effective source(Mullins, 2012). In addition to brochures in newspaper, internet should be used beneficially. Social media needs to be explored for promoting the electric bicycles by catchy slogans and spreading health and fitness consciousness among citizens. It deals with product designing, customer targeting, branding, pricing and considering publicity of product(McDonald,  2013).

 In-house manufacturing will require an additional cost on research and designing and adoption of expensive technology. On the contrary, if the business opts for outsourcing the design work to the experts it will be benefited in two ways. Firstly, the agency will design the best framework because of its experience and the expertise(Chwolka and Raith, 2012). Secondly, the initial cost for designing will be very high if the company perform the task on its own. Therefore it should be given to experts to prepare the detailed design and its full proof projection which will support the manufacturing process of the company.

Annual Financial Statements/ Annual Cash Forecasting

Table 1: Projections of various variable factors.

Â	Year 2016	Year 2017
Particulars	Amount in  £	Amount in  £
No of units projected to be sold	485	600
Selling price  per unit	 540	 540
Cost per unit	410	430

Assumptions :

1: No of units sold of electric bicycles gradually in the second year as the product will become familiar in the market. However, selling price will remain same for both years.

2:  Cost per unit is increasing at 5% on inflation rates.

Table 2: Projected Income statements for two proceeding years.

Assumptions :

1. Huge Marketing expenses will be incurred at the time of launching the product on advertising and testing performed however will reduce in next year.
2. Salary in wages will increase from current year due to the hiring of skilled workers.
3. Depreciation will be increased from current year due to additional machinery purchased for supporting the production.
4. All the other expenses will be growing at the rate of 5% in respect to the inflation rate.

Table 3: Projected Balance Sheet for proceeding two years

Â	Year 2016	Year 2017	Â	Year 2016	Year 2017
Liabilities	Amount in  £	Amount in  £	Assets	Amount in  £	Amount in  £
Equity Share Capital	35300	35300	Goodwill	10000	10000
Reserves	2500	5000	Furniture	25000	25500
Long term debt	25000	28000	Plant and Machinery	20000	25000
Provision for bad debts	200	210	Investment	5000	4200
Trade Payables	4100	4590	Trade receivables	4800	5900
Â	Â	Â	Cash in hand	2300	2500
Â	67100	73100	Â	67100	73100

Assumptions:

1. There is a significant increase in long-term debt to support the production of the innovative bicycle.
2. A further increase reserves due to rise in profits.
3. The increase in Plant and machinery is due to the installation of technology.
   
   

Cost And Break-Even Analysis

Table 4: Cost analysis for the upcoming two years

Â	Year 2016	Year 2017
Particulars	Amount in  £	Amount in  £
Sales	261900	324000
Less: COGS	198850	258000
Less: Variable Cost	Â	Â
Marketing expenses	7000	2000
Administration expenses	2100	2205
Salary and wages	25000	26250
Other operating expenses	2730	2866.5
Contribution	26220	32678.5
Less: Fixed costs	Â	Â
Finance cost	2500	2625
Insurance	950	997.5
Rent	800	840
Depreciation	22000	23100
Net Operating Profit	-30	5116

 Cost analysis of the two years depicts that there is significant shift or reduction in the marketing expenses due to initial product launch in the first year. Further depreciation has increased due to additional machinery purchased to support the production of electric bicycles. Other operating expenses include various commission and electricity which varies in the proportion of production units.

Table 5: Calculation of Break-even point in sales units

Â	Year 2016	Year 2017
Particulars	Amount in  £	Amount in  £
Fixed cost	26250	27562.5
Contribution per unit (Total contribution/no. Of Units)	54.06	54.46
Break-even Point (Fixed Cost/Contribution per unit)	486	506

Break even analysis refers to the no of units sold which covers the fixed cost of the company. In the year 2016 company will have to sale 486 units to cover the fixed costs whereas in the year 2017 it will have to make sales of 506 units in order to cover the fixed costs.

Swot Analysis

SWOT analysis refers to the analysis of internal strength, weakness, threats and opportunities to the company(Yuan, 2013).

• Strengths: Strengths are the uniqueness or core competencies possessed by the companies. Bicycle company has the electric bicycle which is almost energy free and also does not need driving licences.
• Weakness: However bicycle manufacture face the challenge of high prices, and also seasonability of business and limited target customers are the weakness of the
• Opportunity: Since the awareness about eco-friendly means of commuting is rising opportunity can be grabbed. Moreover, the increased trend of health consciousness will generate the demand.
• Threat: Company will face a threat from online bicycle sellers and also large discount chains as pressure will increase from mass merchants.

Gantt Chart

Table 6: Sequence of activities and time duration

Â	Activities	Duration in weeks	Preceding activity
1	Designing the  bicycle	6	Â
2	Staffing	4	1
3	Arranging Finance	2	1,2
4	Manufacturing	20	2,3
5	Packaging	5	2,4
6	Marketing	3	1,3

Gantt chart depicts the detailed schedule of the project in series. It states the sequence of the project and relation between activities regarding preceding or succeeding(Grünig and Kühn, 2015). It also shows the start and terminal activity of the project.

Critical Path of the Project = 1-2-3-4-5 = 37 weeks

Critical path method evaluates the maximum time by which project can be delayed. Any delay in the activity on the critical path will delay the entire project and increase the cost and time of project(Chadwick,  2013). Bicycle company will take 37 weeks maximum to complete all the activities concerned with electric bicycles.

From the above analysis and study it can be concluded that electric manufacturing of bicycles will be a profitable project in long run and company will p[roper due to this.

References

• Chadwick, G., 2013. A systems view of planning: Towards a theory of the urban and regional planning process. Elsevier.
• Chwolka, A. and Raith, M.G., 2012. The value of business planning before start-up—A decision-theoretical perspective. Journal of Business Venturing. 27(3). pp.385-399.
• Grünig, R. and Kühn, R., 2015. Strategy Planning Process. In The Strategy Planning Process. 67(2). pp.90-205.
• McDonald, M.H., 2013. Ten barriers to marketing planning. Journal of Product & Brand Management. 9(3). pp.109-145.
• Mullins, J., 2012. The new business road test: What entrepreneurs and executives should do before writing a business plan. Pearson UK.
• Rachet, B., 2014. PESTEL analysis and Porters Five Forces For Innocent Drinks Company. Docs. school Publications. 5(3). pp.89-108.
• Viorica, B.F., Sorin, D. and Cristina, N., 2013. Business Plan As A Management Tool. Annals-Economy Series. 1(2). pp.164-169.
• Yuan, H., 2013. A SWOT analysis of successful construction waste management. Journal of Cleaner Production. 39)3). pp.1-8.