As part of the primary research the Delphi technique will be adopted by interviewing the sales manager at Snows BMW Portsmouth has been arranged. The aim of this interview is both to assist on sales forecasts and car sales patterns in the UK. In addition to this a visit to Thacham Research Centre has been arranged. Thacham is responsible for approving car related products before they can be released to the UK market.
Competitor Analysis
To analyse potential competition that either exists in the market now or could arise after the launch of remote car starters in the UK. A worldwide trusted business guru, Sir Michael Porter believes to analyse the competition a firm faces they must consider 5 different factors. He developed the ‘Porter’s Five Forces’ model, which is shown below:
Figure 4.1: Porter’s Five Forces Model
#1 Threat of Entry
There is a high threat of entry in this venture as there is the possibility of making large profits. If this is so then other firms that are likely to enter this new market. They could have better supply chains and capabilities to sell to a wider market, thus presenting strong competition to Start Me Up Before You Go-Go.
#2 Power of Buyers
The initial investment and whole strategy at All Systems Go is based on a hunch. There is no guarantee that it will succeed, as common in business. The idea could both mature rapidly and reach saturation in a matter of months, which would mean big profits and generous returns to stakeholders. Or the opposite effect could prevail, thus resulting in a loss for stakeholders as the idea flops and they could loose their initial investment.
#3 Threat of Substitutes
Out of the five forces the threat of substitutes does not exist at present, the only alternative is not to purchase a remote car starter. This would relate more to the power of the consumer, people are far less likely to purchase something they no nothing about than a familiar item like a loaf of bread. This is why awareness needs to be raised about remote car starters; the primary research aims to uncover the product’s awareness in the UK.
#4 Power of Suppliers
This threat is again low as there is only one supplier who happens to be a family friend. The risk would exist more in the transportation of the remote car starters overseas from Canada to the UK. The transport would be by air and then they would be subject to customs charges when they enter the country, these are all costs that will be accounted for in the costing statement later in the project.
#5 Intensity of Competitive Market
At present the only competitors are sellers on eBay and US retailers. As stated in the introduction, these individuals offer the product as a unit without installation and no verification of their legality in the UK. This is why a visit to Thatcham Research Centre would be most useful along with emailing the sellers of remote car starters to help with sales forecasting and if they can be installed in the UK. This is known as the Delphi technique. Results of this interview are displayed an a transcript in the appendix.
Figure 5.1: Current Competitors
Analysis of Primary and Secondary Research
Primary research consisted of twenty-five questionnaires asked to passers by at Fareham Shopping Centre in the afternoon of 14th February 2006 and a further twenty five asked to shoppers on the high street in Winchester in the morning of 28th February 2006. The questionnaires presented to volunteers were the same as the sample in the appendix (reference Figure A.1). Further notes were made on observations of the type of potential consumer, for example white collar workers, children with them etc. evidence of this can be seen in a specimen questionnaire in the appendix (Figure A.2).
The graph below shows the awareness of remote car starters amongst the twenty volunteers questioned.
Figure 6.1: Consumer Awareness of Remote Car Starters
As predicted in the introduction, product awareness among potential consumers is relatively low. People do not currently own a remote car starter as they are not aware of their existence, but most of those who had no knowledge of such a product wanted one after just a two minute interview, this is an indicator to take into account when forecasting sales. This pattern is displayed graphically overleaf.
Figure 7.1: Interest in Remote Car Starters
Out of the fifty members of the public questioned 62% were interested in purchasing a remote car starter; half of those interested in buying one had no prior knowledge of their existence but in just two minutes were already intrigued. This identifies a factor that a successful launch of remote car starters to a UK market depends heavily on effective marketing. To create a need for the product and meet that need with product that delights and is not priced too high. The pricing strategy to be adopted by All Systems Go will be based on these findings and stated in the sales forecast.
The two graphs overleaf give an early indication of the target market. It covers both gender and age group of the potential consumer.
Figure 8.1: Gender of Potential Consumers
Figure 8.2: Consumer Age Groups
Generally, the target market appears to be males aged between 36-45 years. They tend to own more than one car and have a family. This assumption was made both from their answers to the questionnaire and who they were with.
Key Conclusions on Market Analysis
After conducting extensive market analysis four key points can be drawn both about the potential consumer and the market:
- There is low competition currently in the UK, its only existence being in US websites and eBay
- The target market has been identified as males between the ages of 36-45 years
- There is relatively low awareness in the market of this innovative product
- It was mentioned in the interview that remote car starters have been available in Canada for about 12 years and are considered old technology among North Americans. They are a product that continues to be developed for new car models though, and that has kept demand constant over their life cycle
- Thatcham have not yet approved the use of remote car starters in the UK so at present they are not a legal accessory to install to your car. They did however give consent to Vodafone for the use of this technology in mobile telephones where a user can start their car from outside using their Vodafone handset. This was later quashed by the Police force though, who did not like the idea of keyless entry to an automobile using a mobile phone, they claim that mobile phone theft is so high it could then have a direct impact on automotive crime.
Calculating Costs for ALL SYSTEMS GO
For any business start-up it is essential to account for all the costs involved and be able to cover them. By budgeting for these costs early on a new business can increase its chances of success. A costing statement is made up of both start-up costs and running costs of the business. Start-up costs include everything that is required to start the business, for instance purchasing capital like new premises. Running costs on the other hand incorporate expenses like staff salaries and utility bills that need to be paid regularly.
Figure 10.1: The key to business success is rooted in a strong start up
Costing Statement for ALL SYSTEMS GO
Start-Up Costs
Laptop Computer (for buying stock): £374.99
Initial Stock: $ (Canadian) 59.99 (per unit) × 50 = $2999.50
$2999.50 = £1512.65
(Exchange rate correct on 6/3/2006 at 0.504301 Canadian Dollars to GBP Sterling)
Taxes Applicable: Import Tax from outside the EU: 17.5%
Import Tax = £264.71
Price including Import Tax = £1777.36
Initial Advertising and Publicity: £150
Total Start-Up Costs: £2302.35
Variable Running Costs
Stock: Total cost per unit = £30.25 + Import Tax (17.5%)
= £35.54
Payment per fitting: £20.00
Total Variable Running Costs (per unit): £55.54
Fixed Running Costs (to be paid every month)
Broadband Internet Connection: £14.99
Mobile Phone: £30.00
Advertising: £50.00
N.B. As the remote car starters will be sold in person to consumers no overheads exist in terms of sales and advertising will occur through word of mouth. Additional money will be invested in publicity though and this works out at £50 a month.
Forecasting Potential Sales
The data collected from analysing the market can be used to predict prospective sales; this is an important procedure in determining the feasibility of a business start-up. Its main aim is to reduce the risk of investment for stakeholders, which is why it will be implemented in this feasibility study for ‘All Systems Go’. To do this effectively two methods of sales forecasting will be used they are demonstrated below.
Method 1 – The 90/30 Rule
This method aims to estimate market share by taking 90% of the definitely category and 30% of the yes probably category of the total questionnaires answered. Although highly useful in forecasting sales it is only a prediction; there is no guarantee that the predicted figure of units sold will match the actual number sold.
90/30 Rule for ALL SYSTEMS GO
Question: “Would you be interested in purchasing a remote car starter?”
Answers: Definitely Yes, Probably
30% 32%
(30% × 90% = 27%) + (32% × 30% = 9.6%) = 36.6% of the 50 volunteers questioned will actually buy a remote car starter
By multiplying this figure by the combined population in Winchester and Fareham it is possible to see how the pattern seen in the questionnaires corresponds to the market as a whole.
107 222 + 107 977 = 215 199 (Figures collected from official Census 2001 data)
36.6% × 215 199 = 78,762 people will buy a remote car starter
The second part of the 90/30 Rule to be used for this study will calculate the price consumers are most likely to pay for the product.
Question: “How much would you be prepared to pay for a remote car starter?”
Average Price = (75×0.22)+(125×0.14)+(175×0.20)+(225×0.26)+(275×0.08)
= £149.50 – This price will be the selling price
Method 2 –
Cash Flow Forecasting
A cash flow forecast is a Management Accounting document, which outlines the forecasted future cash inflows (from sales) and the outflows (raw materials, wages, etc) per month for a business over an accounting period. For this method I shall use the data collected when analysing the market to calculate three different cash flow forecasts; the best outcome, the most likely outcome and the worst outcome over the first 6 months. The first six months will only be considered in this prediction to correlate with the primary objective of breaking even in this first interim.
Cash Flow Forecast for ALL SYSTEMS GO – Best Outcome
Cash Flow Forecast for ALL SYSTEMS GO – Expected Outcome
Cash Flow Forecast for ALL SYSTEMS GO – Worst Outcome
Conclusion: Is it feasible to sell Remote Car Starters to a UK Market?
