Making a successful entry into a market for a new firm require a detailed understanding of the market. In this paper, a detailed marketing and financial plan have been provided for Scholar VR that will enable it to achieve success when it starts its operations. The plan looks at a comprehensive analysis of the market, opportunities and threats, appropriate marketing strategy, implementation plan, and evaluation processes needed.
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Scholar VR is a small virtual reality (VR) planning company that has its headquarters in Manchester, United Kingdom. The firm offers VR services for gaming, music, films, food, and tourism. VR technology is increasingly becoming relevant in modern society. Technology is playing a central role in transforming our society and companies, irrespective of their size, are under pressure to embrace the emerging technologies to ensure that they remain competitive (O’Doherty & Einsiedel 2013). VR technology has been around for some time, and it has proven to be an effective way through which firms can plan their projects and general operations. However, it is apparent that although this technology is approaching its maturity stage, many companies are still unable to use it, especially the small and medium-sized companies.
It is, therefore, critical to find ways of ensuring that this technology is made available eve to small firms which are still unable to invest heavily in it (Mihelj, Novak, & Begus 2013). Scholar VR comes up with a product it believes will make VR technology affordable to small and medium companies. The technology will transform the way these firms operate. The firm’s primary market is the United Kingdom. It will target gaming arcades, theme parks, bars, concerts, music festivals, film art students, low-budget film companies, and advertising agencies in the countries. These firms were selected because the nature of their activities requires the use of VR technology, but their low budget makes it almost impossible to embrace the technology. Making this technology affordable will enable them to use it in improving their operations and competing favourably with larger companies.
This new company seeks to change the approach that companies have taken when it comes to the use of VR technology. This form of technology has been around for some time, and as such, it should be affordable to as many businesses as possible (Stanković 2016). It should not be a preserve for large financially-empowered companies. The following are the objectives of Scholar VR:
- To make VR technology affordably to low-mid-end companies within the United Kingdom
- To promote the use of VR technology services among small and mid-sized companies within the country.
- To ensure that the small and mid-sized companies in the United Kingdom understand the leverage they can get by using VR technology.
When coming up with a business idea, there must be an opportunity that a firm seeks to tap within the market (Kent 2012). Scholar VR has noticed that there is an opportunity within the market which can be tapped with the right products. Idea generation is often the first step when planning to come up with a new company. This idea was generated when the researcher participated in planning a music festival. During the planning of this festival, we faced numerous challenges that could easily be addressed with the help of VR technology (Madden 2012). It took us a long time to come up with the final plan. The event made the researcher interested in finding ways of making this technology affordable for small and medium companies. A mini-market research revealed that theme parks, gaming halls, film art students, bars, and vocal concerts are other entities that really need VR technology services but cannot afford the current high prices. Scholar VR saw an opportunity in the market worth tapping. It was on this background that this company was created, to provide VR services that small and medium companies can afford to improve their operations.
The initial research shows that there is a lucrative market for the products that Scholar VR will be offering in the market. However, it is important to note that the initial research was conducted in only two cities: Manchester and London. However, the management of this company is interested in offering this product in the entire country. It is, therefore, important to conduct further research that is more comprehensive than the initial one that will focus on the entire country (Khan, Raouf & Cheng 2012). The research will look at the appropriate target market that the company should focus on, the nature of products they need most, how to deliver the product to them, and effective promotional campaign platforms that will be used to reach them (Kardaras 2016). The new research should help this firm to come up with a comprehensive business plan that will be implemented once Scholar VR starts its operations.
The Big Idea
Scholar VR will be selling its products to business entities. The initial plan is to target small and medium-sized companies within the United Kingdom. It is important to note that the current players in this industry have ignored this market segment. As such, the initial operational activities of this new company will face little competition (Westerman, Bonnet, & McAfee 2014). It may take a while for the big industry players to realise that we are present in the market and may pose a serious competitive threat in the market. The big idea is for this firm to gain its footing in this industry by targeting market segments that other competitors have ignored (Dörner, Broll & Grimm 2014).
After gaining market experience and revenues that can support its expansions, Scholar VR intends to widen its market scope in future. It will be necessary to expand its operations beyond the borders of the country. After five years of operation, the management believes that Scholar VR will be the leading provider of VR technology services to small and medium companies in the region. Targeting small and medium-sized companies was a strategic decision that was made by the management. The segment is very attractive, not only because other existing companies ignore it, but also the fact that there are numerous companies in the country falling under this category. According to Choi, Dailey-Hebert, and Estes (2016), the United Kingdom has more small and mid-sized companies than large Multinational Corporation. With the right products, this market segment offers this new company opportunity to grow and to become sustainable in its operations.
Feedback from Industry
It will be critical to get feedback from the VR entertainment industry to help the management of this company plan its operations. Once Scholar VR starts its operations, sustainability will be determined by its ability to offer products that meet the expectations of its customers in the best way possible. It means that it will have to adjust its products and product delivery methods in line with the changing environmental forces (Weiss, Keshner & Levin 2014). To do this, it will need to understand the changing tastes and preferences in the market where it operates (Pimple 2013). It will need to maintain close communication with the clients to know what pleases them better and ways in which this firm can improve to serve them better. Within the marketing department, customer care unit will be responsible for collecting the needed feedback. Customers will be capable of communicating directly with the representatives of the firm working in the customer care unit. Any complaints or compliments will be addressed to this unit (Cellary & Walczak 2012). Other than ensuring that issues raised by the customers are addressed within the shortest time and best way possible, the department will also send these complaints and compliments to the relevant departments to ensure that there is continuous improvement.
According to Khaled (2012), when a new firm is planning its market entry, it is important to have a comprehensive understanding of the market itself. Launching products often involve spending a substantial amount of money. Without a proper understanding of the market, a firm can bring to a halt its operations because of cases such as low profitability, unaffordable operational expenses, inability to meet the demands in the best way possible, or any other market factor that was ignored before launching the product. Closing down operations after starting for whatsoever reason not only leads to loss of resources but also damaged reputation as there will be a failure tag even if the firm will be strong enough in the future to reinitiate its operations. Market analysis helps in understanding the market forces and eliminating any mistakes that may be very costly for the firm.
The market overview is critical in enabling Scholar VR to understand the market concept (Bates-Brkljac 2012). The VR technology market is increasingly becoming relevant for firms, especially when it comes to planning. It enables firms to create a scenario of what is going to take place in the market if a certain decision is made. It creates some kind of a laboratory that helps in predicting how people will act and how their actions will affect the firm. As such, VR technology has become almost a basic tool for planning. However, it is unfortunate that the cost of this technology has remained unaffordable to small and medium-sized companies. Although these companies know that new technology is important in their planning, the issue of cost has forced them to continue using traditional planning tools. This is so because most of the existing companies offering VR technology products have ignored this segment of the market (Yeoman & Yu 2012). There are numerous small and medium-sized companies in the country, which means that there is an opportunity for this firm’s growth. Scholar VR is getting into the market clearly understanding the segment it should target and the forces that it should expect.
Scholar VR must understand the market trends to offer products that meet the specific needs of the customers. Initially, VR technology was very popular for gaming services. However, there is an emerging trend where this technology goes beyond gaming (Huang, Alem & Livingston 2013). It is now used in various other platforms, top of which is planning. An emerging trend where VR technology is actively used in planning activities is becoming common. Companies have realised that this technology can be used, not only in the entertainment sector but also in the field of management and decision-making. It helps in assessing various options that have to be made and selecting the most appropriate ones based on the projected outcome (Chishti & Barberis 2016). It remains a very important aspect of entertainment and plays a critical in modern-day management. Scholar VR must be capable of offering products that can be used in these contexts to ensure that the needs of its customers are met in the most appropriate way possible.
In market analysis, one of the most important factors that must be considered is the external environmental forces. PESTEL analysis helps in ensuring that a firm clearly understands these forces and is capable of aligning its internal operations with them (Jeong, Yen & Park 2014). The political environment in the United Kingdom has been stable since the end of the Second World War. A firm needs a stable political environment where it is assured of security and the rule of law. Handing over power from one regime to the next has always been done smoothly, which shows that the country is one of the leading democracies in the world. Scholar VR is assured that unpredictable political instability is very unlikely in this country. According to Riener and Harders (2012), the leadership of the United Kingdom always has any direct interference in the operations of private companies. It is unlikely that the political class may come up with policies and regulations intentionally meant to hurt operations of this new company. Such a supportive political environment is critical in ensuring that the firm achieves the desired success in the market.
The economic environment is also important to analyse before Scholar VR starts its operations. The economic environment helps a firm to determine the purchasing power of the market and whether the targeted customers will find the product affordable. The United Kingdom is one of the leading economies in the world with a very high per capita income compared with other nations. It has the fifth-largest economy in the world and the second-largest in the European Union after Germany. The country’s economic growth has been impressive after the 2008 Global Economic Recession ended. A report by Westwood (2013) shows that the purchasing power of most of the small enterprises often relies on the financial capability of their owners. This is so because most financial institutions are often reluctant to lend money to firms with no history and lack of collateral (Simakova 2013). The fact that the per capita income in the country is high means that the owners of these businesses can easily get additional funds from family and friends to expand their operations (Baldwin 2016). For medium-sized companies, the financial market in the United Kingdom has been growing consistently. These firms can easily get funds from the financial market to sustain or expand their operations.
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The socio-cultural factors may sometimes have a significant impact on the operations of a firm in the market. The purchasing pattern of customers is often defined by the socio-cultural forces (Anumba & Wang 2012). The social environment in the United Kingdom has been influenced largely by emerging technologies. The culture makes it easy for business entities to embrace new methods of operation. They understand that to manage stiff competition in the market. They have to find better ways of operation. They hand to use modern means of planning and VR offers exactly that. With such a mindset in the country, it is easy to predict that the socio-cultural environment in the United Kingdom will act in favour of this new company.
The technological environment is also important, specifically because this new company is a technological firm. The United Kingdom is a first world country where technology defines people’s way of life. The country is one of the main global hubs for emerging technologies (Blascovich & Bailenson, 2012). It means that Scholar VR should be ready to be an innovator in this market to survive. Technology has also redefined marketing and finance activities. Social media marketing through platforms such as Facebook, Twitter, and YouTube has completely changed the approach that firms are taking to promote their products. Technology is also changing accounting activities as firms are under pressure to be precise and timely in managing the accounts.
The global leaders are becoming concerned about the need to protect the environment and ecology has, therefore, become one of the most important factors that may influence the operations of a company. The United Kingdom has been working with other countries globally to ensure that emission of greenhouse gases and other activities that lead to environmental degradation are reduced (Lloyd 2014). The country, working closely with other European Union nations, has come up with policies that regulate the number of greenhouse gases a firm can emit per given time. The activities of Scholar VR do not pose any significant threat to the environment. As such, this firm is sure that there will be no interference from the government or environmental agencies in regard to environmental pollution. However, the management must ensure that it protects its immediate environment by managing wastes properly and engaging in environmental conservation activities.
The legal environment is the final actor in this model that the management of Scholar VR cannot ignore. As Lanier (2015) notes, a firm cannot operate in a lawless environment. The laws and regulations help in determining how a firm relates with its customers, suppliers, competitors, government, members of the public, and other relevant stakeholders. The United Kingdom also has laws that define the process of registering a new firm and how it should operate after registration. The management of Scholar VR will need to ensure that it follows these laws and regulations once it starts its operations to avoid any legal battles.
Brand positioning is critical in terms of creating a strong appeal to a specific segment of the market. A perceptual map helps in diagrammatically identifying the position that a firm should target in terms of quality and price. As Wagner (2012) notes, when the price is set very high, then a section of the market may not afford the product, and as such, it will only target the rich. When quality is compromised, then customers- irrespective of their purchasing power- will try to avoid the product. There must be a compromise where the price is set at affordable rates without lowering the quality. In figure 1 below, this company will occupy position E.
Position E was selected because it shows the firm will strive to offer products of very high quality but at relatively lower prices compared with what other firms offer. As Lanier (2015) says, offering clients high-quality products at a fair price is one of the best ways of winning their loyalty. The affordability of the products offered is one of the fundamental premises upon which this company was developed. Blippers offer high-quality products, but at high prices, hence they fall in position A. In position B is Pebble studios, which offers relatively good quality products at fair prices. Vitalis prices its products below market average, but clients often complain about quality, which means that it falls in position C. Among the companies reviewed, none of them falls in position D, a firm that offers poor quality but charges high prices.
It is important to identify one competitor that stands out among the rest and analyse how it operates and the nature of the threat that it poses to our new company. Blipper is the competitor of choice. Founded in London in 2011, Blippers currently offers its products in 11 cities in Europe, North America, and Asia-Pacific. This company has grown very fast, and it is currently offering its services to global brands such as Coca Cola Company, PepsiCo, Unilever, Heinz, Time Inc, Proctor & Gamble, CNN, Forbes, Fast Company, CNBC, and Jaguar among other top brands (Hedengren 2012). Its success is attributed to its team of highly dedicated and skilled employees, understanding and flexible management, and top quality products. Scholar VR seeks to follow the path that this firm has followed to its current glory.
Porters Five Forces
The industry within which this firm will be operating can be analysed using Porters Five Forces. This model identifies five sources of threat that a firm must be ready to deal with in the market. Figure 2 below shows the model.
The first factor in this model is the threat posed by stiff rivalry among the existing competitors. Scholar VR will face some level of competition in the market despite the unique market segment it has selected. It is expected that some of the leading players in this industry will gain interest in this market segment that they have been ignoring the moment they realise that a new firm is thriving in it. As such, they make the top competitors expected once this company starts its operations. Blippar and Vitalis are the primary competitors that this company will have to deal with because they offer similar products, although their current focus is the multinational corporations within the country. Inition is another competitor that this firm will have to deal with in its operations.
The threat of new entrant is another factor that this company will have to deal with in the market. According to Christensen (2016), the threat of new entrants is often determined by government policies, the level of investment required, and the nature of expertise needed. The government of United Kingdom has often avoided barriers to trade, which means that companies offering the same products can easily operate in this market (Penichet, Peñalver & Gallud 2013). With the emerging technologies, the cost of starting a similar company has significantly gone down, making it easy for other companies to enter this market. The number of IT experts graduating from various institutions of higher learning locally and internationally is also growing. These factors are very favourable to new entrants. It means that the threat posed by new entrants is likely going to increase, and the management of Scholar VR will need to find strategies of managing it.
The bargaining power of the customers can pose a threat, especially in cases where they have the power to dictate the price. Scholar VR’s primary market will be other companies that may need to use VR services in their operations. As Crawford (2015) notes, sometimes organisational buyers may have bargaining power, especially when they have a number of choices to make. It is expected that other new firms will emerge, further increasing the alternatives for these buyers. It is expected that their bargaining power will be strong.
The bargaining power of the suppliers is another issue that Scholar VR must be ready to deal with when it starts its operations. When a firm has a number of suppliers to choose from when planning to purchase a product, it becomes easy to request for better deals from them. However, when the suppliers control the market, then they become the determinant of price in the market. For Scholar VR, it can get its supplies from a number of suppliers, which means that their power is relatively low. However, it is important to note that the current state, in reference to the power of suppliers, may change in case the number of suppliers goes down.
The final factor in this model that the management of Scholar VR needs to understand is the threat posed by substitute products in the market. If the substitutes can meet the needs of the customers just as much as the products of this company would, then they may pose a serious challenge in the market. The main substitute of VR is AR (Augmented Reality). The two products have a number of similarities in terms of immersing the users into the virtual world. However, AR blends virtual reality with real life, making it a very powerful alternative. Scholar VR must appreciate the power of these alternative products and be ready to deal with this threat in the market.
Strength and opportunities
After analysing the external environment in which Scholar VR will operate, it is now important to focus on internal analysis of the firm to determine how capable it is to operate in the market. The main strength of this firm is its team of a highly skilled workforce capable of understanding forces in the market and delivering products which are in line with its expectations. The small size of this company also plays a critical role in making it flexible to changes within the environment. The firm can easily adjust its operations whenever it is necessary (Bryan 2014). The market presents opportunities that Scholar VR should take advantage of when it starts its operations. The existing players in this industry have often ignored the small and mid-sized companies by charging very high prices for their products. Targeting this segment will offer this firm an opportunity to grow. The growing size of the country’s economy also means that the purchasing power of this firm’s client is likely going up.
Weaknesses and threats
The firm’s main weakness is its limited experience in this market. More experienced companies that have stayed in this market for a while may have a better capacity to understand market forces and deal with them in a better way than this new company (Rasmussen 2014). The firm currently has limited sources of finance, which is another weakness that may make it unable to conduct a regular comprehensive study. The market presents a number of threats the firm will have to deal with, top of which is the expected competition. The competitive rivalry in the market may make it difficult for the firm to achieve the level of success it so desires.
Scholar VR will need a very strong brand in the market to achieve the desired success in the market. Customers often associate the brand with the quality it offers. As such, this new company will need to come up with a comprehensive plan that will enable it to strengthen its brand within the United Kingdom.
Scholar VR offers virtual reality services for gaming, music, films, food, and tourism within the United Kingdom. The primary target of this company will be the small and medium-sized companies which need VR services but are unable to afford these products because of the high costs. This company has identified the opportunity that it will take advantage of in this highly competitive business environment.
Mission & Vision
Defining the mission and mission of this company as it seeks to develop a strong brand in the market is critical. The management must ensure that the mission and vision statements reflect its long term goals in the local or even regional market. As Craig (2013) notes, the vision statement makes it easy for the stakeholders to peep into the future by explaining where the firm seeks to be at after a given period. The following is the vision of Scholar VR.
To be the leading supplier of virtual reality services for gaming, music, films, food, and tourism within the United Kingdom.
The mission statement should explain the path that the company is going to take to achieve a set vision for the firm. Based on the above vision statement, the operations of this company will be guided by the following mission statement.
Continuously offer high-quality products to the customers in line with the changing technologies, tastes, and preferences in the market.
The vision and mission statements developed above will enable the firm to overcome challenges in the market and become one of the most trusted VR companies within the country.
Brand identity will help this company to create a perception among the customers, which is favourable to its success. Creating brand identity may be complex, but when done properly, it creates a permanent image in the minds of the customers that will constantly remind them of the products offered under the brand. The identity should pass a strong and memorable message. The following are critical when developing a brand identity.
The brand must have a name that is simple and easy to remember. The chosen name is Scholar VR. The name passes strong messages to the customers. The use of the name scholar is a reminder that at this firm, there is continuous research as the firm seeks to deliver the best to its customers. Using VR as part of its name emphasises on the fact that our main products will be virtual reality services.
A brand logo is also important because it creates an image that customers will always remember every time the brand name is mentioned. Customers will be looking for this image in the market every time they purchase a product from this company.
Brand colours are also important. When developing the brand image, the firm should take into consideration the need to come up with specific colours that will be appealing to the target customers. The chosen colours should help reemphasise the quality of products that the firm will be offering in the market.
A brand slogan is another factor that the firm should come up with and should clearly bring out what the firm seeks to remind its customers. The slogan must be simple and straightforward. It must pass a message about the brand and its products. Based on the vision and mission statements developed above, the following brand slogan will be used.
Your trusting, caring partner in the VR world.
Brand essence, according to Ma, Jain, and Anderson (2014), is the heart and soul of a brand that is used across all the category of products in the market. It should be stated in two or three strong words that customers will always remember at all times. The following is the proposed brand essence that the management should consider using.
We are you
The above statement shows that this company is committed to its customers. Its success is intertwined with the happiness of its clients.
The management will need to embrace a guideline for its brand that will make customers develop unique preference towards it (Bauman 2013). The brand attributes should work closely together in passing a message to the audience that products offered by this company are of very high quality. The colour, slogan, essence, and logo should all create an image of a company keen on meeting the needs of its customers in the best way possible.
Scholar VR will need to embrace a business strategy that will make it gain a competitive advantage in this business over its market rivals. The firm must be ready to deal with the expected competition in the market. Coming up with a unique strategy will require this firm to start by understanding the forces in the market and how they can be manipulated to achieve the desired results in the market.
It is necessary to outline the objectives that this firm seeks to achieve by developing an effective marketing strategy. The following are the specific objectives that this company seeks to achieve using the marketing strategies stated in this chapter:
- To gather marketing knowledge in regard to the tastes and preferences of customers within this industry
- To come up with strategies aligned to the identified tastes and preferences in the market
- To ensure that both strategic and operational strategies embraced by the firm are flexible to the changing environmental patterns
- To gain a competitive edge over major market rivals within the United Kingdom
Unique Selling Proposition
The unique selling proposition, also known as a unique selling point or simply as USP, involves making a proposition to the customers about what a brand offers in a way that is superior to other existing brands (Alem & Huang 2012). Scholar VR’s unique selling proposition will be quality and low price. The products that this firm will be offering to its customers will be of very high quality. The firm also promises its customers, through its marketing campaigns, of low prices that can be affordable to small and medium-sized companies. For a long time, VR services have majorly been at the disposal of large financially-empowered companies. However, this new company is going to create a new environment where this technology will also be available to small and medium companies within the United Kingdom.
When developing a marketing strategy, the management must have a detailed analysis of the potential risks that the firm is likely to face when it starts its operations (Lipiński & Świrski 2012). Risk assessment makes it possible for a firm to be ready for the possible forces in the market that may affect it in various ways. The biggest risk factor is competition from rival firms. Stiff competition may narrow the market share of this firm, making it difficult to make meaningful profits in the market. Other risks such as inflation, insecurity, changing technological environment, among others, may also have a significant impact on the operations of this firm. The management must come up with a comprehensive plan that will be used to manage these risks.
The target market for Scholar VR is the gaming arcades, theme parks, bars, concerts, music festivals, film art students, low-budget film companies, and advertising agencies in the countries. The firm target small and medium-sized companies in the above categories because the nature of their work makes VR technology critical in ensuring that they are successful. The segment was targeted because it was revealed through market research that the players have ignored it and instead focused on the big multinational companies. Competition is less stiff, and the growing number of these targeted consumers of our products will create an opportunity for rapid growth. This firm will offer these consumers within the targeted segment’s products that meet their expectations in the best way possible.
B2B Marketing Overview
The targeted customers for this company are business entities discussed in the section above (Dill 2012). The firm will, therefore, employ a business-to-business model of marketing when dealing with these organisational buyers. Organisational buyers tend to differ from individual consumers. They have a relatively huge purchasing power and often buy in bulk. As such, marketing strategies employed must focus on maintaining a close relationship with them. Direct marketing will be one of the best strategies when handling these customers. Sending the firm’s representatives to the management of these targeted firms so that a meaningful discussion and mutually beneficial agreement is achieved will be necessary. The direct contact with the customers will make it possible for the clients to ask for clarification on our product and give their views that will help in promoting continuous improvement. It will also create a unique bond between our company and the clients that it serves within the United Kingdom.
When developing its marketing strategies, primary marketing mix elements of product, price, place, and promotion should not be ignored. These elements must be looked at individually and collectively to align company products with market needs.
Scholar VR’s product will be a VR planning service studio for small and medium-sized gaming arcades, theme parks, bars, concerts, music festivals, film art students, low-budget film companies, and advertising agencies in the countries. The product will enable these companies to take a completely new approach when it comes to planning (Zoukis 2014). The product will be installed on the premises of the clients when they purchase it from our company.
Our unique selling point is affordable quality products. As such, the management was keen on offering our clients prices that they can afford based on the needs and nature of their business. The set price is below what most firms offer because the targeted market segment has low purchasing power. The products will range from £ 1050 to £ 2500 based on the needs of individual customers. The set price is affordable to the target market.
The place element is also critical when defining marketing mix elements. Given that the VR planning service studious will be developed at the premises of the clients, this firm will have a team of experts who will be moving from one place to another installing it at the requested sites. Once a customer pays for an order, a team of experts will be dispatched to their sites for the installation.
The firm will invest in promotional campaigns to popularise the brand and products of this company. Social media marketing will be an appropriate platform through which this firm will popularise its products. In the United Kingdom, Facebook, Twitter, and YouTube are popular social media platforms that will help Scholar VR to popularise its brand and products. The firm will also use mass media, especially television and radio, as platforms to promote its brand.
Internal and Business to Business Communication
When implementing the plan, one of the most important factors will be to have an effective communication platform. Internally, there should be a platform where employees can easily communicate amongst themselves and with the senior managers (Portnoy 2012). Externally, the firm should develop a platform that will enable it to communicate with its customers. Using emerging communication technologies may be necessary as further discussed in the section below. Business to business communication may sometimes be easier than communicating with individual consumers. The marketing department can easily make direct phone calls to organisational customers or even visit their premises whenever it is necessary to make clarifications or pass important messages.
The management should have an effective media planning strategy to enhance communication with external stakeholders. The public relations department will be responsible for non-promotional media relations, especially if an issue arises that may have a significant impact on the public and customers of this firm (Antonelli 2012). The plan should ensure that this company is capable of communicating with external stakeholders in a way that protects its integrity and promotes its brand and products.
Marketing activities identified in the above section will require funding. It is, therefore, necessary for the management to come up with a clear budget that will be used in all the marketing activities. The marketing budget is often determined by marketing needs. As a new firm that is just getting into the market, this company needs to invest a lot of financial resources in promoting brand and products of this company. However, limited resources mean that the marketing budget must be planned very carefully. In its strained budget, the firm has set aside £ 250,000 for advertisements in its first four months of operation. As time goes by, more will be invested in this area in a way that is sustainable.
When implementing the strategy, another important factor that the firm will need to consider is creativity (Bainbridge 2013). As a new, relatively small firm that is just getting into the market, this firm should be creating in its operations. It should embrace an approach of delivering its products that is unique compared with what other rival firms do in the market. It should use its team of talented employees to develop new products or product delivery methods in the market. Innovation should be highly valued as a way of enabling this firm to achieve a competitive edge over rival firms.
Communication Time Plan
The management should come up with a communication time plan that will be used in the market. The following table shows a guideline that can be used to guide communication activities that the firm will use once it starts its operations.
Table 1: Communication time plan. Source (Developed by author).
|General brand promotion||X|
|Direct contact with clients||X|
|Feedback and re-communication||X|
As shown in the table above, communication activities are clearly outlined, and the time within which they should be carried out is stated in the plan.
Brand and Financial Management
In this section, the focus will be to conduct a comprehensive analysis of the financial plans and expectation and the management strategies that will be used to promote Scholar VR brand in the market.
The primary source of finance for this new company will be the owners. The owners are expected to make financial contributions to the creation and development of this company. The owners may also borrow from friends and family members to help create additional sources of capital in its initial years of operation. However, as the firm gains a reputation in the market, it is expected that Scholar VR will be capable of earning profits which will form an important source of finance. When necessary, the firm will get more funds from financial institutions in the form of loans. In case the company achieves the planned growth, then public offering will be another important source of income when it starts selling shares in the capital market.
Key Start-Up Costs
As Kipper (2012) notes, when starting a new business, it is not easy to have an exact prediction of all the costs that will be needed for the start-up. Some miscellaneous costs often arise that were completely unplanned for initially. As such, it is always advisable to have a budget that can cover unplanned costs. Table 2 below shows the costs which are needed to start operation. The next section will focus on a comprehensive financial analysis of this new company.
User Forecasts: Financial Analysis
- All figures are in GBP (Starling Pound)
- This pro forma income sheet and balance sheet are prepared in contribution format.
- Contribution income and balance sheet statements break costs down the line items in these statements.
- Salaries will vary according to sales and that the company may hire or fire depending on business volumes.
Table 2: Profit and Loss Analysis.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Total Variable costs||563,044||601,653||625,676||650,658||676,638|
|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|
Table 3: Balance Sheet Analysis.
|Period Ending:||Year 1||Year 2||Year 3||Year 4||Year 5|
|Cash and cash equivalents||214762.17||(139079.06)||(452287.09)||(723812.62)||(952566.08)|
|Total Current Assets||308,112.57||16,504.94||(290635.32)||(555856.43)||(778059.59)|
|Machinery and equipment||42,611||39,542||36473||33,404||30,335|
|Less – accumulated depreciation||(3069.20)||(3069.20)||(3069.20)||(3069.20)||(3069.20)|
|Liabilities and Stockholder’s Equity|
|Current portion of long-term debt||13,320||13,320||13,320||13,320||13,320|
|Total Current Liabilities||13,320||13,320||13,320||13,320||13,320|
|Long term liabilities|
|Long term debt||86,680||73,360||60,040||46,720||33,400|
|Total Liabilities||100,000||86,680||73, 360||60,040||46,720|
|Paid in capital||500,000||500,000||500,000||500,000||500,000|
|Total Liabilities and Stockholder’s Equity||267,624||773,332||786,266||800, 207||815, 194|
Table 4: Cash Flow Analysis.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Sources of Cash|
|Capital from owner||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|
|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|
|Add Back Depreciation (Non-Cash Expense)||3,069.2||3,069.2||3,069.2||3,069.2||3,069.2|
|Net Cash Flows||179,690||71,714||91,546||112,137||133,514|
Table 5: NPV Analysis.
|Year||Year 1||Year 2||Year 3||Year 4||Year 5|
|PV of cash flow||179,690||65,793||77,053||86,590||94,585|
|Net Present Value||503,711|
With a positive NPV of GBP 503, 711, it means that the business project is economically viable and should be undertaken.
Table 6: ROI Analysis.
Return on Investment (ROI) indicates the profitability of the business investment. It is computed by dividing the company’s net profit by its total assets for each of the five years. Net profit is derived from the profit and loss account, while total asset figures are derived from the balance sheet. The table below provides a summary of the results.
|Year 1||Year 2||Year 3||Year 4||Year 5|
Based on the table above, ROI for the business is 24.41% in year 2 and improves consistently over the next three years to reach 32.93% in year 5.
Table 7: ROCE Analysis.
Return on capital employed (ROCE) is a measure of profitability that indicates the efficiency of the business in generating profits from the capital invested. In particular, it indicates how many starling pounds in profit each the capital generates. ROCE = Net operating profit/ Capital employed; whereby capital employed equals to Total assets net current liabilities. From the profit and loss account, we get the net profit figures for the five years. Similarly, from the balance sheet, the current liabilities for the five years are deducted from the total assets figures. The table below summarises the results and the ROCE values for the five-year period.
|Year 1||Year 2||Year 3||Year 4||Year 5|
Due to negative net income in the first year of operation, the ROCE for the first year is negative. However, from year 2, the ROCE is positive. For example, in year 2, for each starling pound invested in capital employed, the company generates 0.25 cents of profits. The ROCE constantly improves year after year to reach 0.33 cents in the fifth year of operation.
The matrix helps in identifying the strategy that a firm should take in the market to make it unique from its competitors. It provides four main approaches that a firm can possibly, and they include market development, market penetration, diversification, and product development, as shown in figure 3 below.
Scholar VR has its market clearly defined and as such, market penetration will be the best strategy in its initial years of operation. It will focus on getting more clients for its existing products within the United Kingdom’s market.
Scholar VR, just like any other new firm, must grow in the market to remain sustainable. The management must come up with a growth plan for the new company. In this plan, the initial focus will be for the firm to penetrate the current market with its products. As its market share expands, the firm will shift its focus to diversification as a way of expanding sources of revenue flow. The next move will be market development where this company will start targeting new regional or even international markets as an expansion strategy.
Operations Time Plan
The following are the specific operational activities that will be undertaken as the firm prepares to initiate its operations.
Table 8: Time plan. Source (Developed by author).
|Activity/time||April 2017||May 2017||June 2017||July 2017||Aug 2017|
The objective of the evaluation process is to ensure that the strategies and planned activities can help in achieving the desired outcome. Through the evaluation, it will be possible to identify areas of weakness and come up with remedies.
Every activity has a set timeline within which it should be completed and goals that should be achieved. There will be a critical review of every activity to determine if the intended goal has been achieved within the desired timeline. Each department will be evaluated independently to ensure that the overall goals and objectives of the firm remain achievable (Kurubacak & Altinpulluk 2017). In these reviews, every employee and every department will be made to understand what the firm expects of them and what they can do to improve their performance (Ndubuisi 2012). Every review must outline strengths and weaknesses at every stage of evaluation so that the weaknesses can be addressed.
Scholar VR is a new company that will be offering a VR planning service studio for small and medium-sized gaming arcades, theme parks, bars, concerts, music festivals, film art students, low-budget film companies, and advertising agencies in the countries. This new company will have its headquarters in the city of Manchester. It will use unique marketing strategies to help it achieve desired success.
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