The Proposed UNIK AutoCare Services Limited: Quality Auto Repairs in Riyadh

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.

Competitors Market share Selling points Weakness
New Millennium AutoClinic 22%
  • Specializes in dealer brands
  • Strong brand image
  • Targeting the high-end customers only
Riyadh Garage Master 25%
  • Extensive market coverage
  • Diverse services
  • Only deals with Europe and American cars

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.

Age/How Often customers who often require customised auto repair

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.

Year 2017
Particulars Start up Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Estimated Sales Units 6000 11500 13000 19,500 50,000
Sales Revenue 153000 293250 331500 497,250 1,275,000
Cash Inflow
Accounts Receivable 153000 293250 325125 465,375 1,185,750
Initial capital 154,000 0 0 0 0 154,000
Total debt 534,000 0 0 0 0 534,000
Total (A) 688,000 153000 293250 325125 465,375 1,873,750
Cash outflow
Accounts Payable 61100 143600 167200 175,500 547,400
Worker wages 39900 39900 39900 39,900 186,000
Factory Rent 24900 24900 24900 24,900 99,600
Electricity and Utilities 4260 4260 4260 4,260 17,040
Other Admin expenses 3060 3060 3060 3,060 12,240
Sales Promotion 8240 4120 4120 4,120 20,600
Interest 13350 13350 13350 13,350 53,400
Property, Plant and Equipment 348,000 0 0 0 0 348,000
Rent advance 99,600 0 0 0 0 99,600
Loan Repayment 0 0 0 154,000 154,000
Total (B) 447,600 154810 233190 256790 419,090 1,063,880
Net cash (A) – (B) 240,400 -1810 60060 68335 46,285 431,270
Opening balance 698040 794300 974555 1,281,960 496,155
Closing Cash 240,400 696,230 854360 1042890 1,346,245 431,270

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.

Strengths Weakness
Unique product and market Stiff competition
Competitive pricing High capital intensiveness
Strategic location Changed customer preference

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.

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StudyCorgi. "The Proposed UNIK AutoCare Services Limited: Quality Auto Repairs in Riyadh." October 16, 2020. https://studycorgi.com/unik-autocare-services-ltd-s-business-feasibility/.

References

StudyCorgi. 2020. "The Proposed UNIK AutoCare Services Limited: Quality Auto Repairs in Riyadh." October 16, 2020. https://studycorgi.com/unik-autocare-services-ltd-s-business-feasibility/.

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