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GreenIt Ltd.’s Entrepreneurship and Innovation Essay


Executive Summary

Entrepreneurship requires a high level of creativity and innovation. An entrepreneur must be capable of identifying a need in the market and then coming up with a product that meets it in the best way possible. GreenIt Limited is a new green energy consultancy company that is headquartered in Dubai. The founders of this company noted that solar energy has a huge potential as society moves towards renewable energy. They also found out that the demand in the market exceeds the supply by a huge margin, leaving an attractive gap that this company seeks to fill. The opportunity in the renewable energy industry is huge and GreenIt will in the future venture into other alternative energy sources such as wind and biomass. It will also need support from other investors to facilitate its expansion plans

Business Description

General Description of Business

GreenIt Limited is a new consultancy and renewable energy services company that seeks to transform energy production and consumption in residential, commercial, industrial, and governmental entities in the United Arab Emirates. The company will be headquartered in Dubai city. The energy sector has been an area under intense scientific research as the stakeholders struggle to find ways of reducing the emission of greenhouse gases caused by the use of fossil fuel. Renewable energy has come out as the main solution to fossil fuel-related pollution. Countries all over the world are now promoting the production and consumption of renewable energy as a way of ensuring that they reduce environmental pollution and improve the sustainability of their energy sources.

Homeowners and companies in most of the European countries such as Germany and Spain are now encouraged to participate in the production of renewable energy using photovoltaic (PV) systems (Roehrkasten, 2015). This trend has given rise to the concept of self-consumption where residential, commercial, industrial, and governmental entities produce their energy to reduce their reliance on the national grid. The concept is increasingly becoming popular in developed countries as they try to go green in their energy production and consumption. Germany is a good example of a country that has moved a step ahead of others by coming up with a net-metering system that allows domestic and commercial entities that produce more energy than they need to supply the excess energy to the national grid and be compensated for the value of their production.

GreenIt seeks to borrow a business model that has been in use in these developed countries and modify it to fit into the local Emirati context. The firm will work closely with the leading solar companies in the country and relevant government agencies to ensure that homes and companies start ambitious projects of producing and consuming their energy with the help of PV systems. The company will have a team of experts who will be responsible for the installation and maintenance of the system for clients. The United Arab Emirates is one of the countries that receive regular sunlight throughout the year and solar energy production can be more successful than it is in Europe (Young, 2014). A city like Dubai has become a global business hub and a tourist destination center, which means that the need for energy is on the rise.

Residential, commercial, industrial, and governmental entities are now struggling to manage their monthly bills by optimizing their energy use. However, their attempts are often yielding limited benefits in terms of reduction of monthly bills. This company offers them the best way of dealing with this challenge. By installing the right size and number of solar panels, these entities can fully rely on their systems to meet their energy needs. The firm will also enable companies to reduce their reliance on energy supplied from the national grid by the government. Working closely with the solar manufacturing companies, government agencies, and environmental conservation groups, this company will not only be making profits through the installation and maintenance work but also help these other entities achieve their goals. It will play a significant role in ensuring that the United Arab Emirates’ energy sources are sustainable and that the country slashes its emissions of greenhouse gases.

Industry Background

Global energy

Energy demand at the global level has been on the rise. Industrialization, urbanization, and modernization are some of the major factors that have led to a massive increase in energy demand. According to Tagliapietra (2016), oil, gas, and coal have been the major sources of energy for the past several decades. However, in the recent past, there has been an increase in the demand for renewable sources of energy. Chart 1 below shows the increasing demand for energy at a global level.

Chart 1: Increasing energy demand globally. This figure shows a global increase in energy demand

Global Increase in Energy Demand
Source (Bradshaw, 2014)

Global supply and demand

In the past, there has been a massive supply of coal, oil, and gas from various parts of the world. However, a report by Hasan (2012) shows that fossil fuel may not last long. Most of the global oil reserves in various parts of the world may be depleted within the next century, which means that alternative sources of energy will be necessary. Renewable sources of energy will be critical in meeting energy needs shortly. The chart below shows the past and projected future energy supply from various sources.

 Past and projected energy supplies. The chart below shows the demand and supply of renewable energy.
Chart 2: Past and projected energy supplies. The chart below shows the demand and supply of renewable energy. Source (Bradshaw, 2014).

As shown in the above chart, solar energy, wind energy, geothermal, and nuclear energy are going to be very important sources of energy. These energy sources will be expected to meet the increasing energy demand.

Production gap and opportunity identification

According to Hasan (2012), before investing in any business, it is important to identify the gap. Quantifying the gap in monetary terms makes it possible for an investor to know what to expect in the market. Regionally within the Middle East, the level of renewable energy production is still below the demand, which means that there is a renewable energy production gap, which should be addressed by existing companies. In this project, the focus is to invest in solar energy, which is one of the energy sources growing in popularity in the United Arab Emirates. Graph 1 below shows the energy production levels of renewable energy, the demand levels, and the gap that a company such as GreenIt Limited can target.

Graph 1: Renewable energy production gap in the UAE. The graph shows the gap in renewable energy production
Graph 1: Renewable energy production gap in the UAE. The graph shows the gap in renewable energy production. Source (Bradshaw, 2014).

As shown in the graph above, the level of renewable energy production is way below the level of demand in the United Arab Emirates. Solar energy, which is the area of interest in our project, is under-produced in this country. Major cities such as Dubai and Abu Dhabi have witnessed an increase in the demand for solar energy as people turn to green energy, especially at home and in the industrial sectors. However, their demand cannot be fully met with the existing levels of production. The quantity demanded, in monetary value, is over three times what is produced currently, which means that there is a massive gap. The gap provided a business opportunity that GreenIt Limited seeks to tap. It offers this company an opportunity to enter this market with great success. It is clear that most of the middle class educated members of society are becoming concerned about environmental conservation. The need to reduce global warming has made them embrace the use of renewable energy sources (Tagliapietra, 2016). It is a clear indication that the future of the renewable energy market is getting brighter.

Goals and Potential of the Business and Milestones

GreenIt Limited is a new company that seeks to achieve success in the green energy market in the United Arab Emirates. It is important to outline the goals, potentials of the business, and milestones. The following are the goals of this new firm:

  • To reduce the level of reliance on fossil fuel by promoting the use of solar energy in the United Arab Emirates;
  • To offer consultancy services on how to use photovoltaic systems at home and in the industrial sector to produce and use solar energy;
  • To become the leading and most preferred provider of PV installation services in the United Arab Emirates.

The management must understand the potential of the business to determine the ability of this firm to achieve success in the market. The identified potential of the business in this market are as follows:

  • The United Arab Emirates is home to about 9 million people;
  • All the residents of this country use some form of energy at home or in the industrial sector;
  • Fossil fuel, which for a long time has been the main source of energy for the domestic and industrial sectors, is quickly becoming less desirable and unsustainable shortly;
  • Most of the people living in the United Arab Emirates are gainfully employed in various sectors of the economy;
  • It is estimated that more people are going to embrace the use of renewable energy shortly;
  • Solar energy is one of the most important green sources of energy that is very reliable in the United Arab Emirates because of the regular sunlight we have throughout the year.

As a new project, it is necessary to define the milestones so that investors can know what is expected of them and how their investments will be used in the project. The following are the already completed milestones:

  • Conducting comprehensive market research in the local Emirati market;
  • Identifying the market gaps and business potential;
  • Identifying the relevant stakeholders who will play different roles in ensuring that the desired success is achieved in the market;
  • Identifying the appropriate office in Dubai where operations of this firm can be run;
  • Determining the estimated budget for the project.

The following are the activities which are still in progress and will be completed soon:

  • Equipping the office and hiring the necessary workforce for the project;
  • Conducting comprehensive promotional awareness to help promote the GreenIt brand and its products;
  • Identifying business partners who can invest in this project and expand the sources of income.

The uniqueness of Product or Service

It is important to appreciate that the field of renewable energy has attracted some stakeholders in the United Arab Emirates (Sayigh, 2014). Several companies already exist in this market offering various products to meet the varying needs of the customers. To achieve success, this company should ensure that its products are unique in the market. The following are some of the factors which make the products offered by this company unique in the local market:

  • The consultancy services offered will be based on empirical studies conducted both locally and in other countries such as Germany, Spain, the United Kingdom, and the United States;
  • The company is keen on hiring experts from countries such as Europe and North America. These experts will be able to help in implementing best practices in the production and consumption of solar energy;
  • The officers who will be sent to install or repair the solar energy production systems for our clients are highly qualified experts who understand what is expected of them.

Marketing

Marketing will be one of the most important activities that will be conducted before the operations begin and during the operations of the company. The marketing department will be one of the most important departments of this firm. This department will be responsible for ensuring that clients are located and convinced to purchase the products of the company. To do this, promotional campaigns will be important. The department will develop television commercials that will be run in major television stations in the country. It will also use newspapers to promote the firm’s brand and products in the market. According to recent studies, social media marketing is increasingly becoming a popular way of reaching out to customers.

In the United Arab Emirates, most young adults and middle-aged people use Twitter and Facebook, something that was very rare when social media started emerging as a means of communication about ten years ago. This department will use Facebook, Twitter, and YouTube to promote the brand in the market. It will also reach out to organizational buyers such as major real estate developers in Dubai, Abu Dhabi, and other major cities so that the firm can win a contract to install and maintain PV systems (Swain & Jägerskog, 2016). The department will be responsible for conducting regular market research in the country to understand the changing tastes and preferences. It will work closely with other departments to ensure that the firm’s operations and services are in line with what customers expect in the market.

Research and Analysis

GreenIt assembled a team of marketing experts to conduct comprehensive market research within the United Arab Emirates to help identify the gaps and possible pitfalls that the firm should be ready to deal with once it starts its operations. The team of experts focused on understanding the current needs in the green energy market, how the current players in the industry are meeting these needs, and how this new company can fit into the market and achieve the desired result. The comprehensive research also looked at the target market for this firm, trends, and the market size, level of competition, and estimated market share that this firm must target within its first year of operation. The following are the important facts gathered from the market:

Target market identified

The research revealed that the most appropriate target market for GreenIt Limited’s consultancy services is mid-sized companies offering PV systems for the production of solar power within the Emirati market. The mid-sized solar PV system manufacturers and distributors need to understand the emerging trends and best practices in this industry. GreenIt intends to offer them the consultancy services they need at a fee. The chosen target market has the potential to pay for the services that will be offered, making it attractive for this company. After six months of operation, the company intends to introduce a new line of services: installation and maintenance of PV systems for clients within major cities such as Dubai and Abu Dhabi. The research revealed that current players cannot meet adequately customers’ needs.

Market size and trends

The research revealed that the market size of green energy is relatively big. Energy is needed both for domestic and commercial use. The fossil fuel that has been in use over the past several years is not only becoming undesirable because of its impact on the environment but also it will soon become sustainable when the oil wells run dry. As such, more people are going to turn to renewable sources of energy in both the domestic and commercial sectors (McDaniel, 2015). The emerging trends show that the production and use of solar energy are increasingly becoming popular not only in the United Arab Emirates but also in other parts of the world. These factors are likely going to expand the size of the market because locally solar energy is one of the most reliable energy sources.

Competition

Competition in the market is often determined by the number and size of the players. An industry that is dominated by numerous large companies is likely to be more competitive than one where there are only a few players. In the United Arab Emirates, the renewable energy industry is still in the development stage, as was revealed by our market analysis. Although several companies offering products similar to that of GreenIt exist in the current market, they have not been able to meet the demands of customers in the country. A market gap still exists that this company should fill as it expands its market share. The market research revealed that the following are some of the companies that offer similar or closely related products as GreenIt which make them the competitors:

  • Masdar
  • CLS Energy Consultants
  • TQM
  • City Solar and
  • DuSol Industries

Estimated market share

Our market research revealed that almost 85% of renewable energy needs are not met in the United Arab Emirates. The existing players are still struggling to find ways of delivering their products in the market in the best way possible to expand their market share. The research revealed that if GreenIt can meet the expectations of its customers in the best way possible, it will not be difficult to expand its market share. It is expected that after the first two years of operations, the company will have 25% of the total market share for solar energy.

The outcome of the research revealed that there is a massive gap in terms of what customers needs and what the current players offer. It came out clearly that customers’ needs far outweigh what the market offers. The research also revealed that the emerging trends in energy use, especially the growing popularity of green energy in the United Arab Emirates is likely to result in the growing demand for the products that GreenIt will offer. That is why the owners of GreenIt got strongly convinced that an investment made in this industry cannot go wrong. It also makes it possible for the owners to assure potential investors that money invested in this project will surely yield impressive returns.

Marketing Plan

To achieve the set targets, the company should come up with a clear marketing plan that will be used once the operations are begun. Issues such as the marketing strategy, pricing policies, advertising, and promotional plans should be outlined in clear terms.

Market strategy

Sales and distribution at GreenIt will be done uniquely given that we will majorly be a consultancy firm in the initial stages of operations before expanding our product line. Some clients will come to our offices, but in most of the cases, our experts will visit the firms to offer the needed services. We intend to use both vertical and horizontal integration in the future to expand the product size for the company. The integration strategies are meant to reduce the reliance of this company on suppliers and distributors and to improve its profitability in the market. When GreenIt starts offering PV systems to its clients shortly, we will ensure that our products are directly delivered to the customers

Pricing policy

According to Drucker (2015), pricing is one of the most important tasks that a firm has to define before starting its operations. When products are priced below the market average, then customers are likely to associate the products with low quality. On the other hand, when products are priced way above the market average, then a section of the customers will be unable to purchase the products. It is a clear indication that the pricing policy must carefully take into consideration the purchasing power of the customers and the perception that customers may embrace if the product is priced in a given manner. Our products will be priced slightly above the market average to emphasize the high quality that the company offers.

Advertising and promotions plans

The marketing team has planned for comprehensive promotional activities for the company (Bessant & Tidd, 2015). Before commercialization, the marketing team will use social media, especially Facebook, Twitter, and YouTube to promote the GreenIt brand. Mass media- television and radio- will also be critical, especially a few days before introducing the products in the market. The company will continue using social and mass media platforms periodically to continue with brand and product promotions for the entire time that it will be operational.

Operations

The operations department will be responsible for two main factions. The first function will be to manage the supplies. The officers in this department will identify the suppliers who can offer this company high-quality PV systems at the best price possible. The department will ensure that there is a regular supply of the PV system kits as per the demand the firm will be handling at that time. The second function will be the actual installation and maintenance of the systems. Once the systems are purchased, the team will coordinate with the marketing officers who will hand over the clients to them. The operations department will install the PV systems as per the needs of the customers. Once the installation has been made, the department will work closely with the marketing department to know when and where repair and maintenance services are needed.

Identify Location

Identifying the appropriate location determines how successful a firm is in achieving market success. For a service company such as GreenIt, the location should be as close as possible to the customers. That is why the city of Dubai was identified as the best location for the company’s headquarters. Most of the targeted customers are in this city. A regional office will also be set up soon after in Abu Dhabi, which is the second most attractive market for our products because of the population size and the purchasing power of the customers.

Advantages

The following are the benefits that this company will get by choosing the locations identified in the section above during its operations:

  • It will be easy to maintain a personal relationship with the customers because of the closeness in terms of geographic locations;
  • Any issue that may arise between the firm and the client can be addressed within the shortest time and in the best way possible, further strengthening the close relationship;
  • The firm will be able to understand the changing tastes and preferences of its customers in the market because of the close relationship;
  • It will be easy to engage the clients in the market in case there are emerging trends in the production or use of solar energy based on global trends.

Zonng

GreenIt will need to zone the market when it starts its operations. Zoning will enable it to expand its market share systematically. Zoning will be done based on geographic location. The following is how the company intends to zone its operations:

  • Dubai will be the first zone that this company will target when it starts its operations. It will be the Zone A of the company and it is expected that by the end of the first year, the company will be controlling at least 30% of its market share;
  • The emirate of Abu Dhabi will be zone B. The firm intends to establish its offices in zone B in its second year of operation. It will target about 35% of the market share of solar energy in Abu Dhabi by its second year of operations;
  • The other emirates will all be classified as zone C and they will form the target market for the company in the third year of its operations. At this time it is expected that the firm will be self-sustainable in its operations.

Taxes

Currently, there are no taxes in UAE for companies operating in the green energy sector. Sometimes the government issue incentives to promote investment in this sector. GreenIt will, therefore, enjoy the tax holiday offered by the government when it starts its operations. However, there might be taxation in the future. The firm will prepare itself to start paying tax when the government issues a directive that they should do so.

Proximity to Suppliers

The choice of location was made because it is also close to the suppliers, especially when the firm will start offering its installation services. Some PV system distributors exist in the city of Dubai. It will be easy and less costly for this company to get access to these supplies and deliver them to the customers for installation. The closeness with the customers will also make it easy for the firm to ensure that its supply chain is reliable.

Access to Transportation

Dubai has one of the most advanced rail and road systems in the world. The metro system is very efficient in the transportation of people and goods within the city. The movement of goods and personnel will be efficient and less costly for GreenIt when operating in this city. Problems such as constant traffic snarl-ups are not very common in the city. The fact that the firm is located close to suppliers and customers further lowers the cost and time of transportation.

Management

Management Team and Key Personnel

The topmost management team will be the board of directors. On the board, there will be chairman and chief executive officers. The management team will also include departmental heads for finance, marketing, supply chain, human resource, and operations departments. The human resource department will play a critical role in the operations of this firm. Currently, several skilled employees have already been identified. However, the firm will need to hire more skilled, semi-skilled, and unskilled employees to work in different areas within the company. Skilled and semi-skilled employees will be needed in the field to do the installation and repair. They will also be needed in the office as strategists, accountants, secretaries, finance officers, among other areas. Unskilled officers will be needed for functions such as cleaning the compound and offices of the firm. It is the responsibility of the human resource department to ensure that all the needed human resource is made available. The department will need to work closely with other departments to know the nature of the skills needed.

Legal Structure

GreenIt is currently owned fully by the four directors who contributed equally towards the establishment of the company. In its legal structure, these four employees have equal power in determining the future of the company. They each hold 25% of the company’s shares. The employees are hired on the agreement that they shall be paid salary and that the ownership of the company is in the hands of the directors. During its operations, the company may need more capital to expand its operations. It may look for investors to become part of the shareholders on terms that will be agreed upon based on the forces that will be prevailing within the firm and in the market at that time. In the future, there will be a possibility of inviting the public to the ownership of the company through an initial public offering.

Board of Directors, Advisors, and Consultants

The board of directors, which is the highest management unit of this company, will be composed of the four owners who have already contributed their resources and time towards the initiation of the company. However, the size of the board may expand with time. The firm currently does not have advisors and consultants, but the board members have made proposals that it might be necessary to partner with industry experts to help expand the knowledge of the market.

Financial

Financial Forecast

The management needs to have a clear understanding of the financials of the company before and after starting operations. The pro forma financial statements will help in forecasting what should be expected in the market once the operations begin.

Profit and loss

The profit and loss statement will help in estimating how the firm will perform financially once the operations begin. Table 1 below shows an estimated profit and loss statement for the first five years of the firm’s operations. As mentioned before, the government has offered a tax holiday for companies in the renewable energy sector. However, this may not last forever and it is not known when the government will consider introducing a tax. As such, the financial analysis has included tax, based on the estimates in other related industries.

Table 1: Table Profit and loss statement. The table is a profit and loss statement.

Year 1(AED) Year 2(AED) Year 3(AED) Year 4(AED) Year 5(AED)
Total Sales 788,944 1,411,492 1,772,390 1,835,664 2,051,404
Total Variable costs 563,044 601,653 625,676 650,658 676,638
Contribution Margin 375,900 959,840 996,715 1,035,005 1,074,766
Total Fixed Costs 708,276 704,152 705,062 706,009 706,994
Total Income before Tax (332,376) 255,688 291,652 328,996 367,772
Tax Expense 0 69,035.66 78,746.09 88,828.93 99,298.48
Net Income (332,376) 186,652 212,906 240,167 268,474

Cash flow. Cash flow estimates will help in determining the financial soundness of this project and how well it will be capable of meeting its short-term financial obligations. The table 2 below shows the estimated cash flow within the first five years. Tax expenses have been included in the estimates just in case the government decides to introduce it.

Table 2: Cash flow analysis. The table below shows the cash flow statement.

Year 1 Year 2 Year 3 Year 4 Year 5
Sources of Cash
Total income 788,944 1,411,492 1,772,390 1,835,664 2,051,404
Capital from owners 500,000
Loan from bank 100,000
Uses of Cash
Cost of raw materials 188,586.66 196,130.13 203,975.34 212,134.35 220,619.72
Depreciation on equipment 30, 69.20 3,069.20 3,069.20 3,069.20 3,069.20
Salaries 348,636 362,581.44 377,084.70 392168.09 407,854.81
Employee benefits 21,887.2 22,762.68 23673.20 24620.12 25,604.92
Utilities 24,000 24,000 24,000 24,000 24,000
Other Fees and Costs 23,473.60 39,037.30 40,559.76 42,141.59 43,785.11
Inventory holding costs 93,350.40 155,584.00 161,651.78 167,956.20 174,506.49
Advertising and marketing 15,000 10,000 10,000 10,000 10,000
Rent 630,000 630,000 630,000 630,000 630,000
Insurance 1,000 1,000 1,000 1,000 1,000
Interest 13,320 13,320 13,320 13,320 13,320
Taxable Income (423,379) 104,007 134,056 165,254 197,644
Taxes 35,362.51 45,579.17 56,186.37 67,199.03
+ Depreciation (Non-Cash Expense) 3,069.2 3,069.2 3,069.2 3,069.2 3,069.2
Net Cash Flows 29,690 (78286) 241,546 262,137 433,514

Break-even analysis

Based on the proposed financial statements above, the break even analysis for GreenIt will be as shown in the graph below.

Break-even analysis.
Graph 2: Break-even analysis. The graph shows the break-even point.

As shown in the above analysis, the breakeven point will be achieved in the mid-second year when the investors will start reaping the profits.

Cost controls

The management of this company will be keen on cutting down the cost of operation. Any expenditure must be properly justified before it is approved. As a new company, it will be necessary to manage the expenses to ensure that we maximize our profitability. However, our cost control measures will not mean that the management will under-spend on important projects.

Budgeting plans

The management has come up with an estimated budget for various activities as shown in the financial statements shown above. The investors will be expected to support the operations of this firm fully in the first year. Within the second year, it is expected that the revenues of the firm will be capable of paying for all the expenses.

Investors Returns

GreenIt Limited will need investors to help it expand its operations in the market. However, these investors need to understand the benefits that they will generate from their investment. Under normal circumstances, investors would prefer to have their money in the bank to earn a little interest then to invest in a project that cannot generate meaningful value. To determine the financial benefits that the investors will get, it is important to calculate Return on Investment (ROI) for the first five years of the firm’s operation.

Return on Investment (ROI) = Net income/Investment

Where net income = sales revenue

Investment = Owners capital+ loan from bank (500,000+100,000)

Assuming that no further investment is made within the first five years

Year 1 ROI

-332,376/600,000 = -0.554 or -55%

Year 2 ROI

186,652/600,000 = 0.311 or 31%

Year 3 ROI

212,906/600,000 =0.355 or 35.5%

Year 4 ROI

240,167/600,000 =0.400 or 40%

Year 5 ROI

268,474/600,000 =0.447 or 44.7%

The analysis shows that in the first year, the ROI will be negative. However, that is expected because of the heavy investments needed and low sales as the firm penetrates the market. However, everything changed in the second and subsequent years as the financial benefits keep rising. For instance, in year 2, investors will get 31% more for every dollar they invest in the firm. If they invest AED 100,000, they will have AED 131,100 by the end of the year.

How much is needed from investors

This is a very ambitious project and the initial investors believe that the market has massive potential if the right decisions are made and appropriate capital injected into the project. As such, AED 2,000,000 will be needed from the investors within the first five years. AED 500,000 will be needed each year, from year 2 to year 5 to help in the expansion plans.

Critical Risks

Potential Problems

The management of this firm is keen on ensuring that it understands the potential problems that it may face when it starts its operations. One of the problems that may be faced is the limited sources of capital. As a new business venture that is just starting its operations, it is possible that it will not get the financial support it may need from financial institutions. Another anticipated problem is the limited experience we have as a firm. There are unique challenges that may only be determined when the firm starts its operations. They may include highly demanding customers, highly demanding suppliers, or any other such operational challenge.

Obstacles and Risks

Besides the problems identified above, other obstacles and risks exist which may affect GreenIt Limited when it starts its operations. Although competition in the market is not very stiff now, it is expected that other investors will be attracted to this industry and that may stiffen competition. The existence of other alternative energy sources such as wind and biogas may also eat into the market share of solar power companies. The management should also be sensitive about the following factors:

  • Possible fluctuation in pricing in the market that may have a significant impact on its profitability;
  • Powerful clients, especially the organizational buyers, who may want to dictate price market in their favor;
  • Powerful suppliers who may price their supplies in a way that is unfavorable to this company;
  • General inflation in the economy that may diminish the value of profits that the firm makes.

Alternative Courses of Action

The company will need an alternative course of action just in case the set plan does not generate the desired level of profits for the company. As mentioned above, the firm’s primary product when it starts operations will be consultancy services. Later in the year, the firm plans to introduce the second product, which is the installation of the PV system on the premises of the clients. It will soon be followed by the maintenance of these PV systems. In its vertical integration strategy, it will start importing directly or even manufacturing the PV systems to eliminate the suppliers. In case the consultancy services are not generating profits at the desired rates, this company will start the project of PV installation and maintenance within the first two months of operation instead of the six months. It will also be necessary to explore other alternative energy sources such as wind energy to expand the firm’s profitability.

Harvest Strategy

Transfer of Asset

It is important to appreciate that it is possible, along the way, for the business to become less viable that it previously was or as was anticipated. It is, therefore, necessary to come up with an appropriate exit strategy. In case of dissolution, all the assets of GreenIt Limited will be liquidated and all the debtors paid first. Then the remaining assets will be shared among the shareholders. In case one or more of the investors are interested in continuing with the business, the other stakeholders who want to quit will transfer their shares to them and be paid the value of their shares in cash.

Continuity of Business Strategy

The current owners of GreenIt do not anticipate a situation where this company is forced to stop its operations. Instead, there will be a continuity of business strategy where the company will move from offering the current unprofitable products to other alternative products. The following are some of the areas that will help ensure that there is continuity in the operations of the company:

  • Exploring the wind energy industry;
  • Investing in biogas production, especially for domestic use;
  • Expanding our green energy consultancy services beyond solar power.

Identity of Successor

It is realistically possible that the investors of GreenIt, for one reason or another will want to exit this business. Although it is very unlikely given the lucrative opportunities that exist in this industry, it is important to be open to any eventuality. In case such a situation may arise, we will need to identify a successor. The shareholders will come up with a plan on how to get the value of their investment in the firm. A successor who will be willing and capable of meeting the terms of these investors will be the successor. All the shares of the company will be sold to the investors after settling the agreed-upon payments. The initial shareholders will cease claiming ownership to this company as soon as they receive payment from the successor. The following are some of the possible reasons why a successor may be needed:

  • In case the initial investors want to exit this business for personal or any other reason;
  • In case the business fails to be as profitable as was anticipated and therefore it becomes necessary to stop operations;
  • In case the cost of operation is increased drastically because of factors such as inflation, making the current investors unable to run the business.

Milestone Schedule

Timing and Objectives

The current management has identified the activities that should be carried out to ensure that the business becomes a success. Each of the individual activities identified in table 3 below. Each of the activities has a specific timeline within which it shall be started and the expected completion date. The following are the objectives that the managers will be keen on achieving:

  • To ensure that a proper location is identified that is appropriate for this company;
  • To ensure that necessary systems and structures are put in place to facilitate the operations of the company;
  • To have a team of employees capable of undertaking various activities within the company;
  • To promote the brand and products of this company in the market;
  • To introduce the products of this company in the market using the best approach possible.

Deadlines and Milestones

Table 3 below identifies the activities that should be done and their set deadlines. Some of the activities such as identification of location have already been completed. Equipping and hiring of staff is work in progress. The promotion of the brand and products of the company will start before commercialization. It will continue even when the firm becomes operational, as shown in the table below. Sourcing for funds is also likely going to be a continuous process as the firm expands its operations locally and even regionally in the future.

Table 3: Scheduled operational activities. The table shows activities in the project. Source (Developed by author).

April 2017 May-June 2017 July-Aug. 2017 Sep 2017 Oct 2017 Dec 2017
Sourcing for funds X X X X X X
Identification of location X XX XX XX XX XX
Equipping the office X XX XX XX XX
Hiring the staff X XX XX XX
Intensive marketing campaigns X X X X X
Commercialization (Consultancy services) X X
Introducing PV installation & maintenance services X

Relationship of Events

The events identified in the table above are related, but as indicated above, they will be treated as individual projects undertaken by different groups. The office and premises from which operational activities will be conducted can only be equipped if the process of locating and renting has been done. Paying for the premises, equipping the office, hiring the staff, engaging in commercial promotional campaigns, and delivering the products to the customers all depend on the ability to get the needed finance. The proper promotion will define how well the brand is known in the market and the volume of sales that will be made. Sales volume in turn defines how well the firm is capable of getting more funds for expansion.

References

Bessant, J. R., & Tidd, J. (2015). Innovation and entrepreneurship. Hoboken, NJ: Wiley & Sons.

Bradshaw, M. J. (2014). Global energy dilemmas: Energy security, globalization, and climate change. Hoboken, NJ: Wiley & Sons.

Drucker, P. (2015). Innovation and entrepreneurship. London, UK: Routledge

Hasan, S. (2012). The Muslim world in the 21st century: Space, power, and human development. New York, NY: Springer.

McDaniel, B. (2015). Entrepreneurship and innovation: An economic approach. New York, NY: Cengage.

Roehrkasten, S. (2015). Global governance on renewable energy: Contrasting the ideas of the German and the Brazilian governments. Wiesbaden, Germany: Springer

Sayigh, A. (2014). Sustainability, energy, and architecture: Case studies in realizing green buildings. New York, NY: Springer.

Swain, A., & Jägerskog, A. (2016). Emerging security threats in the Middle East: The impact of climate change and globalization. Lanham, MD: Rowman & Littlefield.

Tagliapietra, S. (2016). Energy Relations in the Euro-Mediterranean: A political economy perspective. London, UK: Palgrave Macmillan.

Young, K. E. (2014). The political economy of energy, finance and security in the United Arab Emirates: Between the Majilis and the market. London, UK: McMillan.

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