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New Venture Internal & External Analysis Report

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Updated: Jun 29th, 2022

Internal analysis

Jim Poss has teamed up with like-minded individuals and they are determined to capitalize on an emerging opportunity in the market. The team has identified the need for organizations to embrace superior and much more efficient alternatives of energy. This is about organizations’ heavy reliance on oil-based energy and products that is uneconomical especially with their volatile prices. They have therefore designed the Big Belly solar-powered trash compactor that would go a long way in aiding organizations to increase their levels of profitability by cutting the costs of acquisition and maintenance of such products.

The customers that are targeted include tourist sites, beach and ski resorts, parks, university campuses, hotels, stadiums, and retail and food outlets. These businesses characteristically have high levels of wastes whose disposal poses serious challenges to the organizations. The compactor could therefore be of immense value to them by providing efficient mechanisms in the management of such wastes. The customers also stand to generate solar energy which is much cleaner and could go a long way in reducing their costs (Zohoor and Zaeem, 2010 pg 40).

About the competing products, the solar compactor has several competitive edges. It is cheaper to obtain and maintain. They will only need to harness solar energy which can also be stored to cover for cloudy days. Control of costs continues to block organizations’ efforts in increasing profitability level and could turn out to be its major selling warrant at the expense of competing products (Schleich and Gruber, 2008 pg 450). However, it also has some weaknesses in the form of ineffectiveness on cloudy days and during winter seasons. Maintenance services are not yet available and as an innovation, the users could find it rough in the event of breakdowns. All these have been identified in the appendix.

The idea only makes sense to the customers as the compactor could trim down their costs. The innovators still have a long way to go as a genuine business opportunity has not yet been presented even with the product’s massive potentials. Their first product has already sold at a loss and they will only attain profitability should they contain the costs of manufacturing as well as successfully convince many customers to make purchases.

External analysis

The business is still new and members are relatively inexperienced in terms of implementing ideas. Their concepts are undoubtedly well founded and could be successful with careful and well orchestrated implementations. The only and major setback is their lack of production capacities to meet consumer demands. On the other hand, the competitors are in much better positions to meet consumers high demands as they can supply them with their products in much shorter lead times as it is the case with large organizations with production lines (Kara, Hadi, and Yakup, 2010 pg 1690). With the current state of affairs they do not stand any chances against large competitor organizations. Should they be able to convince investors to channel resources their way then they can easily outdo any competitor owing to their excellent ideas.

The next issue is concerns the team’s level of preparedness to undertake the venture. Its members are mainly students with theoretical skills but little experience for complementary purposes. Were it not for the assistance they received in the production of the first compactor, they would have missed the deadline by a far wider margin. It is also evident that they need additional skills as they only resorted to learning computer aided design after securing their first order which is not professional. But due to the fact that they are students they still have higher chances at success as all they need is experience from mentorship as well as investor funding.

The team also needs a lot more resources to effectively implement their ideas. For once the price of steel has increased and could inflate the production costs. They therefore have to reduce the steel parts or better still source substitute raw materials for steel. Production capacities are all that they need at this time and it is safe to say that the opportunity is not yet right for the team owing to the challenges they are facing and their expertise.

Overall potential

The venture does not rate fairly against the Timmons Quick Screen that has to be found in the appendix. In terms of the market, the venture has a high potential as there is a need in the market for which they offer effective solutions. The customers are also reachable and could form a large market with high growth rates. The product being a machine also provides an extended product life which can allow the recovery of their investment. Costs on the other hand are the only setback here as it does not augur well for the profits.

The numbers do not add up as expected for the investment. The profits are negative therefore a negative return on equity. They will also need longer durations to break even as the capital commitments are obviously higher in such kinds of ventures and there is no possible easier way out. The costs have already been identified as weaknesses for the team as they have little funds to sustain effective production, marketing, and distribution (Scholleova, Jiri, and Lenka, 2010, pg 1030).

In addition to costs, their prices and distribution channels are also not competitive and melt down to insufficient contacts and networks as all investors they have approached have not been willing to fund the venture.

The team however has advantages in patent protection that they have already acquired. Theirs is a new segment and they will experience absolutely no barriers of entry. The team is also composed of intellectuals with fresh ideas and can do it with sufficient funding from investors.

The venture has medium potential as in terms of making money it is not yet profitable but does not harbor risks as they have partnered with customers who provide funds upfront and the little they have channeled personally is not that much to cripple them financially.

Recommendations

As an individual investor I would not hesitate to channel resources towards this noble project. The idea has been well thought and could offer solutions to the energy challenges that organizations face. Almost every organization faces energy related challenges which shows how viable the project can be should it be well supported (Najafi, Amir, and Hosseinali, 2010 pg 90). The only problem is that the team has yet to acquire resources to match the demands of such a venture. Otherwise the rewards that could emanate from the project are worth risking any amount of money.

Had I been a member of the team, I would not have been fast to seek customers like in their case. What they were doing can be defined as experimenting on a customer’s order. Though it could have been difficult, they ought to have first developed a sample product that could have been used to demonstrate the viability of the venture to the customers and investors. This could also have equipped them with the much needed experience to be able to come up with better models when time to take customer orders came. They should therefore rely on this to charter their next move. Having received feedback from their first customer they should utilize the recommendations to develop a better model that they can use to seek investor support.

Reference list

Kara, Y., Hadi, G., and Yakup, A. 2010. “Balancing parallel assembly lines with precise and fuzzy goals.” International Journal of Production Research 48, no. 6: 1685- 1703. Business Source Complete, EBSCOhost (2011).

Najafi, H., Amir, A., and Hosseinali, N. 2010. “Value Engineering and Its Effect in Reduction of Industrial Organization Energy Expenses.” Proceedings of World Academy of Science: Engineering & Technology 62, 88-94. Academic Search Complete, EBSCOhost. (2011).

Schleich, J., and E. Gruber. 2008. “Beyond case studies: Barriers to energy efficiency in commerce and the services sector.” Energy Economics 30, no. 2: 449-464. ScienceDirect, EBSCOhost.

Scholleova, H., Jiri, F., and Lenka, S. 2010. “INVESTMENT DECISION MAKING CRITERIONS IN PRACTICE.” Economics & Management 1018-1023. Business Source Complete, EBSCOhost .

Zohoor, H., and Zaeem, M. 2010. “Increase in Solar Thermal Energy Storage by using a Hybrid Energy Storage System.” International Journal of Mathematical, Physical, & Engineering Sciences 4, no. 1: 39-44. Academic Search Complete, EBSCOhost.

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