PeTech’s Strategy: Smart Pet Solutions

Executive Summary

PeTech is a newly founded and developed business idea and company that produces and sells Smart collars for pet owners. These collars are designed to help the pet owners to monitor their pet’s whereabouts as well as their effective vital signs at any point on time thereby enabling improved pet health and well being. The company targets pet owners, trainers, animal breeders, veterinarians, as well as animal shelters. The company maintains a significant business strategy of producing unique products which also double to solve customer problems of pet cares thereby filling a significant gap in the economy. Through effective design and development the company indulges in production of Smart Collars which are sold at a break even within the first two years. Through a sells of over 5000 units at a unit cost price of £200 the company is able to effectively recover its capital of £1,000,000 within the first two years and as such operate profitably afterwards. The company also looks to enhance its product range through effective innovation and thereby maintain its profitability.

Operation Performance Analysis

Key Activities

Some of the Key activities the company will be involved in to impact revenue collection and profitability include: Manufacturing of technological products for ensuring safety of Pets beginning with Smart collars. The company will also be involved in programming of these products effectively so as to ensure they are effective in monitoring pet vitals and ensuring pet safety. Other major activities will include research and development of other technologies that can be used with a significant vision of developing more effective micro chips and trackers. The company will also be involved in its own marketing and distribution of the products across the country and eventually globally.

Key Partners

The company’s major partners in the development and production of the pet technology include software companies Google Store and Apple store. These companies are essential to enable the operation of the Smartphone apps to enable pet owners to keep track of their pet’s location and vitals. The company will also partner with Pet stores and Pet clinics to market their products among pet owners who are regulars in such locations.

Value Proposition

The company offers highly modern and effective pet care products that are unique and guaranteed to improve the pet owners experience and relationship with their pets. Products such as the smart collar are effective and easy to use in combination with the Smartphone App. Pet owners can easily track their pet’s location through GPS on their own phones as well as effectively monitor the pet’s vitals to ensure their effective health. Further pet owners can track their pets eating habits and set up care routines to ensure effective health and well being of their pets. This increases the experience for them as well as the pet.

Customer Relationships

The company will engage in significant marketing techniques including traditional methodology such as newspapers, television and magazines. Further the company has a website developed to effectively enhance the building of personal relationships with its customers. Any feedback and communications can be done directly to the company through customer personal accounts attached to the company’s website. The company will engage online marketing as well through the use of social media Ads to further reach a broader audience and create a market base. Most effectively however, the company will also organize pet showcases and competitions to bring pet owners together with an aim of developing an effective organization culture and maintaining effective customer relationships.

Customer Segment

The company targets a wide variety of customer segments, however for initial operations, the primary target segment are pet owners who are most likely overwhelmed by taking care of their pets. The smart collar significantly enhances the pet care process and experience, ensuring the pet’s effective health and well being. The company however also targets pet stores, animal breeders, veterinarians, animal shelter, pet trainers and virtually any institution that deals directly with animals. The smart collars can be customized for any animal and used for adequate and effective protection and care.

Key Resources

The key resources include software developers as well as designers and manufacturers. Designers are required to develop different aesthetic but subtle smart collars after which software developers program them to ensure effective monitoring and care of the pets. The company will also require manufacturing resources to enable effective production of the collars and their marketing and distribution for eventual productivity. Also to maintain autonomy and competitor advantage, the company will also require copyrighting the product and acquiring the various relevant licenses.

Channels

The company’s website will serve as the major channels for contact and distribution of products among its customers. The company also has an established distribution network that will be effective in distribution in other parts of the country as well as globally in the near future. Further the company also engages other pet stores as distribution channels through partnerships and will rely significantly on Word of Mouth by its various customers. In addition the Smartphone apps will be available through the Google play and Apple store making these two significant channels of distribution.

Cost Structure

The company will significantly require a starting capital of £900,000 to cover some of its initial costs which include Fixed and variable costs. Some of the fixed costs include rent for operation headquarters, cost of manufacturing the collars, employee salaries as well as the App launch. The variable costs on the other hand include: Advertising and marketing costs of the collars and app, App maintenance and updating costs as well as commissions to App stores for app purchases.

Revenue Streams

Eventual revenues are set to be earned from the sales of the companies various pet technologies including: smart collars, microchips and smart apps to enable effective tracking, care and protection of pets. The company will also gain significant revenue from in app advertising within both Apple store and Google play further complementing its revenue streams.

Operations Analysis

The business was set to be operational within 8 months and to gain a break even status in its sales by the end of its second year in operation. The first month included meetings for extensive research and development of prototype designs and functions of the smart collar, the company’s main product. The research in the first month also enabled the analysis of the most effective target market as well as marketing and distribution techniques that were likely to result to effective productivity and profitability. The research in the first month was also directed towards value proposition and competitive research in order to determine an effective and competitive average unit price. A cost of £150-£200 was even agreed on A big part of the second and third month was effectively used in the development of the initial prototype designs and programming specifications and techniques in line with customer needs and requirements within the market. The fourth, fifth and sixth months were entirely used for the development and manufacturing of the actual designs at a cost of £300,000 enabling the production of the initial batch of products to kick of the company’s operations. The three months, also involved intensive marketing techniques both on and offline to familiarize the target market with the incoming products and effectively build a market base in advance. The seventh month various testing of the product were conducted on different pets and different meetings convened to agree on the effective sales channels and market for the products. This led to the launching of the product and its subsequent distribution across the country in the seventh and eighth month to offset the beginning of the businesses operation and incoming revenue streams. An analysis of the products performance in the market was also reviewed after the first month to further streamline on the distribution of the products in the areas with most demand so as to capitalize on sales and achieve the break even by the end of the second year in operation.

Financial Performance and Analysis

Cost of production and setting up the company

Fixed Costs

Variable Costs

The development of the company required an initial capital of up to £900,000 to take care of the fixed costs as well as the variable costs as highlighted above. Assuming other costs are negligent the owners took out a loan of £1,000,000 based on the partners’ collective credit scores and abilities to contribute. Each of the four member team contributed £250,000 in guarantor fees as such for the access of the loan for starting the business. The extra £ 100,000 making up for the various contingencies involved in the business development progress.

Break Even Analysis

According to the calculation of the Breakeven point above, it is implied that the company will begin making profit on its product sales after the sales of its 4500th unit of the smart collars. Given the significantly limited competition as only one company exists within the whole of UK with rivaling pet care technology and the significantly large number of pet owners in UK, the company should be able to effectively break even in just 15 months with a projected sale of more than 300 units of the collar every month. This implies the sales of at least 10 collars a day. Through the targeted marketing of the over 50 million pet owners and pet stores as well as veterinary clinics with high volume and traffic of pet owners and careers within different cities in the UK attaining this number should be relatively easier impacting the company breaking even before the end of the second year of operations and as such a significant success.

Balance Sheet

The balance sheet represents the companies continued performance in the second year of business leading to the breaking even and subsequent profitable operations. The balance sheet shows a positive balance of the businesses assets and liabilities by the end of the second year indicating effective performance and as such significant shareholder equity. Further the positive break even by the second year indicate that the business is in a healthy shape and is likely to be more profitable in the third year effectively leading indicating the effective working capital within the company and its effective subsequent operations. Despite this however the investment back into production and various aspects are guarantee to increase the companies liabilities going forward leading to the possible occurrence of negative values in the balance sheet within the third year.

Cash Flow

While the company was able to break even effectively in the second year, which showed significant positive revenue flows due to the familiarity that the customers had with the products being offered, in the first year sales and revenue as well as cash flow were not that significant. Despite the forecast of selling up to 300 units per day, within the remaining five months of the first year as well as the firsts five months of sales, the sales were often short of the targeted mark and as such impacted limited cash flows. In the first year the cash outflows heavily and significantly exceed the cash inflows given the high cost of development and production of the smart collar products. The costs of research and development as well as actual manufacturing, advertisement and distribution of the products across the UK effectively outweigh the cost of incoming cash. However within the second year limited cash is used in maintaining and updating the App as well as continued marketing and advertisement. This in comparison to the incoming cash flow from the revenue of smart collar sale was significantly low and led to the balancing of cash flow by the end of the second year.

Financial Forecast

The sales of the smart collars have shown significant and constant increase in the second year with more and more customers buying these products and suggesting them to their friends. While the initial response in the first year was significantly limited given that only 50 collars were bought in the first month of sale, in comparison to up to 550 units sold by the last month of the second year shows a significant improvement in sales and consequent productivity.

Number of Unit sales in the First 2 years

The graph represents the growth pattern of the smart collar sales by the company over the last 17 months. While the company significantly struggles to make sales of their product in the first 5 months barely making 100 sales on a daily basis, upon the start of the second year the sales of the smart collar effectively picked up a growing trajectory. The number of sales significantly rose to 400 units within the first 6 months of the second year exceeding the projected monthly sales for an eventual break even in 15 months. The last three months of the second year show another significant increase in sales adding up another 100 unites in the monthly sales to peak 550 units sold in December of the second year. Overall, the company managed to sell over 5000 units in the first 2 years exceeding the previously set growth rate. As such it is forecasted that the sales of the smart collars will continue to increase in the next year to peak 700 units sold per month by the end of the third year earning the company an almost 100% profit.

Further Business Plan

Throughout the first three years of its operation, the company will make significant changes and improvements in the initial business model and strategies of operations. A few sectors of the business model canvas will as such be updated with the intended improvement strategies for the business to enhance its continued success. For instance the company intends to diversify its product base. In addition to the smart collars for tracking and monitoring ones pet and their vitals, the company also plans to introduce Smart pet toys, Smart chips, as well as develop technologies for effective care and breeding of farm animals. The company also looks to enable data syncing with Veterinarian Clinics, implement a caretaker finding search system and develop an in-App forum for uniting their customers and connecting with other pet owners.

Conclusion

The various aspects of developing and maintaining a tech business such as PeTech are effectively outlined in the report including business and financial operations. The report significantly highlights the importance of effective decision making when it comes to the development and maintenance of a business. For instance developing a marketing strategy that ensures continued increase in revenues from sales is significant in ensuring eventual faster business success. In addition planning for business growth and improvement overtime illustrates the significance of research and innovation which ensures the maintenance of a business brand and its subsequent growth overtime.

Reflection

Learning about the business model canvas and how it can be utilized in strategizing and development of a business plan has been one of the major highlights of this course. Engagement in this course has further taught me a significant amount with regards to business management and financial and operational analysis. PeTech as a case study enabled the visualization of an actual business environment and how it can be shaped and effectively impacted by good decision making leading to profitability and business success. As such this course has been quite a delight for me to be a part.