Description of the Business Concept
The proposed UNIK AutoCare Services Limited is an auto repair business that aims at offering quality and unique auto repair services at competitive pricing for customers within the city of Riyadh. The business will specialize is Engine and body repair for all types of automobile. There are few auto repair garages within the city of Riyadh with ability to offer customized auto repair services at competitive price. Since the proposed UNIK AutoCare Services Limited will be based on the model of uniqueness and affordability (Barringer & Ireland 2012), it is predicted that the company will quickly penetrate the expansive market since nearly every household within and without Riyadh is a potential customer.
Market Research
Industry
Saudi Arabia has become a green pasture for car manufacturers because of the high demand for automobiles in this region. The country has a unique market and taste for cars, and this means that there is the need for auto repair companies to understand the issues that affect the consumer preferences. As the world automobile industry grows at 1.5%, Dubai’s rate is 19%, which means that this region is experiencing rapid growth in the automotive industry (Shihab 2014).
The average income of most people in this region is SAR18, 248.60 (Trassard 2014). Therefore, most people have cars, and some even two or three of them because they can afford (Burns 2010). Thus, the demand for auto repair services is equally high since these cars must be serviced regularly. From the above, analysis, it is projected that the company will easily penetrate the sector with very minimal challenges due to high demand and it proposed competitive pricing strategy (Cone 2011).
Competitors
UNIK AutoCare Services Limited faces very strong competition from established auto garages within the Riyadh region since it operates in a market where few strong brands dominate. The main competitors for the UNIK AutoCare Services Limited are summarized below.
Riyadh Garage Master
The Riyadh Garage Master is the leader in the industry with a market share of 25%. In addition, Riyadh Garage Master has become tantamount with quality automobile repair services brands. In fact, Riyadh Garage Master has over one hundred branches all over the country. The firm has distinct trademark as well as efficient delivery personnel. Riyadh Garage Master’s product philosophy is cantered on quality and consumer satisfaction thereby gaining competitive advantage over rivals (Cheverton 2010).
New Millennium AutoClinic
New Millennium AutoClinic has diversified its operations in over 65 branches within and without Riyadh. The current market share of the company is 22%. The business brilliance of the firm’s management has led to its rapid expansion within the country.
Further, New Millennium AutoClinic low-price strategy has been vital in the attraction of consumers. The firm has also received various international quality accolades thereby amassing numerous consumers of automobile brands such as Audi, Mercedes Benz, Range Rover, and other high end vehicles (Ira 2009). Moreover, New Millennium AutoClinic has been experiencing an increasing trend in revenues leading to augmented levels of growth.
Despite competition from the other brands, the above analysis indicates that UNIK AutoCare Services Limited has potential of penetration, growth, and expansion in the Riyadh automobile repair sector. This summarized in the table below.
Customer
The target market for UNIK AutoCare Services Limited will mainly consist of youthful car owners interested in customized auto repair services between the ages 25-50. Studies show that this group represents approximately sixty-five percent of the total population. Young car owners, especially between the ages of 25-50 will also be major market target for UNIK AutoCare Services Limited due to their elastic reactions to marketing as indicated in the findings of the research survey below (UAE Automobile Industry 2014).
The target market is divided into young digerati and prism segments as discussed below.
Young Digerati: Youthful customers
The strategy entails active marketing the UNIK AutoCare Services Limited, product to the youthful customers since this group has low expenses, but with discretionary income and are very much interested in differentiated automobile maintenance services. Through the digital marketing strategy that stresses on proactive connection to customized auto service lifestyle, the company will be in a position to penetrate this market without having to alienate other customers (Dagnino & Rocco 2009).
Prism Segment: Middle-aged customers
This group consists of middle-aged customers who are the largest users of the proposed customized automobile repair service. This group has active online lifestyle and own majority of the cars. This group is ethnically diverse and has high disposable income. Therefore, e-marketing strategies will be effective in reaching this segment to promote the UNIK AutoCare Services Limited products (Mullins 2011).
Projected Cash flow and Breakeven
UNIK AutoCare Services Limited
Cash flow budget statement. For the three year period ended 31st December.
Breakeven Analysis
Breakeven point in units is computed by dividing fixed costs with contribution per unit. The calculation of breakeven point for the year ended 31st December 2017 is presented below.
- Fixed costs SAR498, 000
- Contribution per unit SAR15.06
- Breakeven point = Fixed costs/ Contribution per unit
- 498,000/15.06
- 33,068 units
This would imply for the costs and the revenues to match with the costs, the company will have to produce, 33,068 units. There would be no profits or losses at this point.
Breakeven point in sales value = BEP in Units x Sales price
- 33,068 × SAR 25.1
- SAR 830,006.8
Breakeven point as a percentage of capacity = BEP in Units x 100/Capacity in Units
- 33,068 × 100 / 50,000
- 66.14%
Group Evaluation of the Business Concept
Strengths and Weaknesses
The proposed business will be located at the business district centre where most of the potential clients visit almost daily. Besides, to survive competition, UNIK AutoCare Services Limited might implement three pricing categories for the high-end, middle, and low-end customers to tap demand for its products from different categories of customers. The business has a large untapped market with very minimal hurdles as established in the market research.
The weaknesses that might slow down the business are stiff competition and high capital intensity of the proposed investment. From the analysis of competitors, UNIK AutoCare Services Limited may fail to attract potential customers. Given high competition and increased possibility of new entrants into the market, the business may fail to attract reasonable quantity of clientele that would enable it sustain growth in returns. The business must have at least SAR498, 000 to breakeven within a year. This is summarized in the table below.
Business Concept Feasibility
The business is feasible considering the fact that the breakeven period is within a year. Besides, the concept of customized auto care clinic is relatively new in the targeted market. This means that the business will be in a position to penetrate the market and generate profits within a short time.
Decision to Pursue the Business or Not
On the basis of the new business concept, competitive pricing, and shorter breakeven period, the proposed business will be pursued. Besides, the unique approach to auto care services will give the business a competitive advantage in the market.
How the Concept has evolved
In the course of the research, the customized auto care business evolved from a simple idea into a concept that is supported by figures and market research. The use of financial gearing and market research has confirmed that the business idea is a feasible business concept.
Reference List
Barringer, B & Ireland, R 2012, Entrepreneurship: Successfully launching new ventures, Pearson, Harlow.
Burns, J 2010, Entrepreneurship and small business, Palgrave MacMillan, London.
Cheverton, P 2010, Key marketing skills: strategies, tools, and techniques for marketing success, Sterling, Kogan Page, London.
Cone, S 2011, Steal these ideas: Marketing secrets that will make you a star, John Wiley & Sons, New York.
Dagnino, G & Rocco, E 2009, Competition strategy: theory, experiments and cases, Rutledge, New York.
Ira, K 2009, Marketing: What went wrong and how to do it right, K&A Press, Los Angeles.
Mullins, J 2011, The new business road test, Prentice Hall, London.
Shihab, M 2014, Economic development in the UAE. Web.
Trassard, P 2014, Mobile and automotive industries: New business models needed to promote collaboration. Web.
UAE Automobile Industry 2014, Overview of the Industry. Web.