Venture Project FINAL

Digi-Home Presents: Digi-Note

Venture Project

BMAN70421 Strategic Marketing and New Product

Development

Alliance Manchester Business School

Word Count: 6,778

Charlotte Banks, Elvin Ibishli, Meeral Siddiqui,

Sidrah Ahmed, Richard Johnson

Digi-Home, Venture Project

Table of Contents

1. Management Summary............................................................................................... 3

2. Business Objectives...................................................................................................... 4

2.1 Marketing Objectives................................................................................................ 4

2.2 Financial Objectives.................................................................................................. 4

3. Product/Market Background...................................................................................4

3.1 Unique Selling Points................................................................................................ 5

3.2 Critical Success Factors............................................................................................6

4. Market Analysis............................................................................................................. 6

4.1. Market Analysis Results.......................................................................................... 7

4.2 Segmentation of our Target Market.....................................................................8

5. Marketing Strategy....................................................................................................... 9

5.1 Product.......................................................................................................................... 9

5.2 Promotional Activity..............................................................................................12

5.3 Pricing Strategy........................................................................................................ 13

5.4 Distribution Channels............................................................................................ 14

6. External analysis- Macro Environment...............................................................14

6.1 Porters 5 forces........................................................................................................ 15

6.2 PEST Analysis............................................................................................................ 17

7. Internal Analysis....................................................................................................... 19

7.1 SWOT analysis.......................................................................................................... 20

7.2 Corporate Structure and Employees.................................................................21

7.3 Use of Technology in Business............................................................................23

8. Controls and Evaluation........................................................................................... 23

9. Profit and loss statement/ Cash flow analysis..................................................24

9.1 Two Year Quarterly Cash Flow............................................................................25

9.2 Profit/Loss Statement............................................................................................ 26

10. Operational Considerations.................................................................................27

11. Reference List........................................................................................................... 28

12. Appendix..................................................................................................................... 33

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1. Management Summary

Digi-Home is a UK based company, located in Greater Manchester that provides

digital accessories and applications for the Connected Home. Our mission is to

deliver innovative and seamless digital appliances for the Connected Home, offering

convenience, organisation and integration. The business currently has one flagship

product in its portfolio, Digi-Note, which is a digital notepad for the Connected

Home. The unique position of this product is its innovative, connective and stylish

nature.

The following business report analyses the key internal and external factors that shape

our strategy for business start-up, combined with both primary and secondary

research. Results from our primary research indicate a strong demand for Digi-Note,

with 97% of respondents demonstrating an interest in purchasing our product. This is

supported by our secondary research which suggests there is sufficient purchasing

power within our target market.

From these analyses, Digi-Note’s marketing strategy is constructed on the premise of

it’s niche application and unique offering. Our marketing strategies describe how

Digi-Home will achieve its marketing objectives. We also address the financial

implications of this business venture, including a two-year cash flow analysis and

profit and loss statement. Our analysis confirms the feasibility and value of Digi-

Note, with a net profit of £11,950,526.18 in the second year.

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2. Business Objectives

2.1 Marketing Objectives

Brand awareness: Create brand awareness and increase this year on year.

o This is key in such a developing market, the perception and prestige of

the brand will have a direct impact on both sales and market share.

Increase sales: To increase sales year on year.

o This allows greater feedback into research and development, which

Digi-Home must sustain in order to maintain competitive advantage as

an innovative Connected Home accessory provider.

Increase market share: Establish a strong position within the Connected Home

accessory market.

o This will increase brand recognition/visibility and credibility, which in

turn will facilitate the acquisition of new customers.

2.2 Financial Objectives

Establish an initial profit margin.

Limit expenses increase.

Increase profit by 30%.

o As we increase the production of Digi-Note by 40% in the second year,

a 30% profit increase is viable.

3. Product/Market BackgroundDigi-Note is the first digital notepad for use in the Connected Home. The Connected

Home is made possible through the ‘Internet of Things’ (IoT) – a concept first

theorised by Mark Weiser in 1991. The IoT refers to the wireless connection of

objects and products. IoT will offer the integration of every object via embedded

systems (Xia et al, 2012).

A high interest in home automation developed in the 1990s, leading to the creation of

the INTEGER Millennium House as a showcase of home automation technology. Due

to high cost, the market was mainly focussed at hobbyists and the rich. These products

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have now become grouped within ‘Smart Technology’ due to their communication

with other devices. Smart Technology is moving forward at an ever-increasing rate,

leading to the Connected Home becoming a viable option for consumers. According

to Cisco, the Connected Home is developing 5 times faster than electricity and

telephony. Business Intelligence predicts over £40 billion in revenue this year alone

through Smart Technology, developing to 1 billion devices sold in the year 2020

(Business Insider UK, 2014). This leads to the conclusion that it is a matter of when,

not if, we will all be living in a Connected Home.

Digi-Note takes advantage of this increasing development and awareness of Smart

Technology. Digi-note will initially act as a central hub for information dissemination

around the home – a physical input that captures anything written or drawn on it. This

allows the user to input calendar events, notes, reminders, drawings and many more

into the Connected Home system. These functions then link with other devices around

the Connected Home including fridges, digital mirrors, televisions, and transportable

goods such as mobile phones and cars. Digi-Note will also allow users to choose how

they wish information to be distributed and to which devices. (See Appendix A as a

guide for the visualization of the product). For example, an individual living in the

connected home is writing a supermarket shopping list. The user could write a list on

the Digi-Note through the physical interface, and choose to synchronise this list with

their connected fridge. When the individual notices they are running low on certain

items, or have a particular need for certain products, they can add and amend this list

through the digital interface of their connected fridge, where the list will be clear and

readily available due to the synchronisation from their Digi-Note.

3.1 Unique Selling Points

Innovation is key to Digi-Note’s USP. There are no competitors in the market, and as

such Digi-Note is at the forefront of information dissemination within the Connected

Home. The unique connectivity of Digi-Home’s software integrates with every other

Smart Device’s operating system - linking to all other devices owned by the

consumer. As such, Digi-Note can become the hub that links all of your integrated

devices.

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Finally, style is distinctly important within the home. Digi-Note is made of

lightweight aluminium and glass with an aluminium-cased stylus, contributing to a

simple and elegant design. In a world where aesthetics are of increasing importance,

such classic styling means that Digi-Note will appeal to all generations and fit into all

homes.

3.2 Critical Success Factors

Digi-Note, as with the entire Connected Home market, has two main critical success

factors: Price and Security. As a developing technology market, price has been high

within Smart Technology and the Connected Home. This has been a barrier for

customers, as it narrowed the appropriate market considerably. Production costs have

begun to decrease due to advances in production and connective technology, creating

greater interest.

Security is still a vital issue within the Connected Home. Hacking and Data theft is a

regular topic on news sites, leading to a high level of consumer interest in the area. As

the Connected Home and Digi-Note rely on the transfer of sensitive data throughout

the home, the security of this system must be highlighted.

4. Market Analysis

It is imperative to identify our target market and gain an understanding of their

specific wants and needs, as a focused market orientation has a positive effect on

business profitability (Narver and Slater, 1990). Therefore, we undertook both

primary and secondary research to identify these, which influenced key decisions with

regard to our product and marketing strategies. We created a questionnaire using

Qualtrics Survey Software (Qualtrics, 2015) which asked questions surrounding

respondents’ awareness of the Connected Home, their interest in a digital notepad for

the Connected Home, required functions of the product, interest in purchasing the

product and how much they would be willing to pay for this product. Participants

were gathered using a voluntary sample of 76 adults.

4.1. Market Analysis Results

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Our primary research indicated that 60% of respondents had an awareness of the

Connected Home, which by inference, would suggest their awareness for Connected

Home applications and accessories such as Digi-Note. It is important to recognise

that a large proportion of our respondents were aged between 18-24yrs, which could

introduce bias and also limit the generalizability of our findings. When we split the

data by age, we found that, on average, respondents aged 25 and over had a greater

awareness of the Connected Home than respondents aged 18-24, demonstrating an

awareness of 71% and 57% respectively. See Figure 1 and 2 for an illustration of

respondent’s awareness of the Connected Home, split by age.

Figure 1. Respondents aged 18-24yrs percentage of awareness of the Connected

Home

Figure 2. Respondents aged 25+ percentage of awareness of the Connected Home

Participants indicated the features they would most value in a digital notepad for the

Connected Home would be notes, reminders and calendar events. On average,

respondents indicated they would be willing to pay £116.37 for Digi-Note, with £250

as a maximum value. Assuming participants lived in a Connected Home, 97%

indicated they would be interested in purchasing Digi-Note, reflecting a strong want

in the market for our product.

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4.2 Segmentation of our Target Market

Segmenting the market can help distinguish the proportion of consumers who have

the means to live in a Connected Home, and therefore purchase Connected Home

accessories such as Digi-Note. Whilst it is acknowledged that there is presently a

small number of Connected Homes in the UK (Joseph Rowntree Foundation, 2000),

the market potential is currently predicted to be just short of £50 million (BSRIA,

2013) and Connected Home device shipments are predicted to grow at a CAGR of

67% over the next five years [See Appendix C] (Business Insider UK, 2014).

Due to the nature of the product itself, it is unsuitable to target lower social grade

brackets, as it is less likely that individuals in this segment would currently live in a

Connected Home. Therefore, we position the Digi-Note as a Veblen good, targeting

higher earning brackets, including lower middle, middle and upper middle class,

representing 53.52% of the UK population (See Table 1 for Approximated Social

Grade Brackets in the UK as stated in the ONS 2011 Census), indicating a strong

purchasing power. The Smart Homes Report (BRISA, 2013) revealed luxury villas

and houses comprise 50% of the smart home market size customer segment in

Europe, and luxury apartments accounting for the second largest segment of 30%.

This would appear to support the decision to target higher approximated social grade

brackets.

Therefore, based on our primary and secondary research, we have segmented the

market. We will target Generation Y, technology enthusiastic adults aged 25 and over,

and families, who are occupants of a Connected Home, within the lower middle,

middle and upper middle social grade brackets. The purchase motivations of our

target market will be an increased desire for convenience within their Connected

Home, technology innovation and widespread connectivity.

Table 1. Approximated Social Grade Brackets in the UK as stated in the

ONS 2011 Census

Approximated

Social Grade

Occupation % of Population

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AB (Upper Middle –

Middle)

Higher and

intermediate

managerial /

administrative /

professional

occupations

22.69

C1 (Lower Middle) Supervisory, clerical

and junior

managerial /

administrative /

professional

occupations

30.83

C2 (Skilled

Working)

Skilled manual

occupations

20.77

DE (Working –

Lowest levels of

subsistence)

Semi-skilled and

unskilled manual

occupations,

unemployed and

lowest grade

occupations

25.71

5. Marketing Strategy

5.1 Product

We believe Digi-Note meets the needs of our target market, as respondents who

participated in our primary research indicated they would most likely use a digital

notepad for notes, calendar events and reminders; which are the primary functions of

our product. The unique selling point of our product is its innovative, connective and

stylish features. Digi-Note is innovative in its nature; as smart home technology is an

emerging industry. Also, Digi-Note is currently the only digital notepad within the

Connected Home accessory market. Our product offers unique connectivity solutions

and the style of Digi-Note is classic and unassuming, in order to complement any

Connected Home.

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The Digi-Note will be launched as one standalone flagship product in black, made of

aluminium and glass, with approximate dimensions of 200 mm × 135 mm × 7 mm.

These dimensions were chosen to reflect the shift towards small and portable

technology devices (Tech News World, 2014). The packaging will be sleek, simple

and compact, to distinguish the product in a visually agitated market (Forbes, 2014),

and also to reflect the simplicity of the product itself. We decided to name our

product Digi-Note for two reasons. Firstly, this explicitly reflects what our product is

– a digital notepad. Secondly, as Digi-Note is a product of Digi-Home, the

synonymous link between our product and brand name maintains brand consistency,

reinforcing the identity of Digi-Home, which in turn should encourage trust and

positive sentiment.

Whilst Digi-Note has no direct competitors in terms of its exact product offering, the

Livescribe Wireless Bluetooth Pen (Livescribe, 2015) presents itself as a competitor,

in the form of a substitution product. The Livescribe Pen offers a similar function to

the Digi-Note; it is a Bluetooth pen which captures writing and drawing,

synchronising with iOS and Android mobile devices. The Digi-Note differs from the

Livescribe Pen in a number of ways, which we believe demonstrate the competitive

position of our product. Firstly, the Livescribe Pen requires specialized paper, which

consumers must subsequently purchase after each notepad is used (Livescribe, 2015).

In contrast, there is no paper involved in the use of Digi-Note due to the digital

interface, which in turn results in a cost saving and increased convenience for our

users. This also upholds our environmental values as a business. In addition, the

Livescribe Pen synchronises solely with iOS and Android mobile devices (Livescribe,

2015). The Digi-Note is an accessory for the Connected Home and is therefore

compatible with all digital devices, encompassing a wider range of connected

products. Digi-Note provides increased benefits to its consumers, as it enables users

to differentiate which connected devices they would like each individual feature (i.e. a

note or reminder) to be synchronized with, instead of synchronising automatically

with every device in the Connected Home; offering increased privacy and security.

It is important to consider the product life cycle (Harvard Business Review, 1965) in

the marketing planning of our product. During the introduction and growth stage of

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the product life cycle, we will maintain our single flagship product strategy. When

Digi-Note reaches the maturity phase, we will apply strategies from the BCG growth

share matrix (Boston Consulting Group n.d.) to extend this stage of the product life

cycle, including market penetration and market development. With regards to market

penetration, Digi-Home will re-launch Digi-Note in the same original target market,

offering a variety of colours to suit the preferences of each individual user. We also

hope to engage in market development, where we would look to expand into the B2B

market.

Whilst our product is at the core of our business, it is necessary to develop a strong

aftersales service and improvement plan. Aftersales service adds further value to our

consumers (Rainer and Cegielski, 2010), acting as a source of revenue, profit and

competitive advantage (Saccani, Johansson and Perona 2007). This is increasingly

important when today’s digitally empowered consumers are equally as demanding

about aftersales service, as they are about what they purchase (Accenture n.d.). We

believe our aftersales activities primarily include warranty, education/tech support,

and operation system updates.

Digi-Home’s warranty shows a commitment and responsibility for our business to our

consumers, that our product is reliable and of a high quality, ensuring it will function

and demonstrate superior longevity in comparison to competing products. Due to the

digital nature of our product, it is important to offer tech support and education for our

users, as this will resolve any issues users may have and also enable them to maximise

the utility of their Digi-Note. We will equip each Digi-Note with sensors, GPS and

communication devices to transmit their location, usage and condition data, which

will enable Digi-Home to engage in remote monitoring and predictive maintenance

(Accenture n.d.), enabling a more efficient service provision from our tech support

team. This will also allow Digi-Home to notify each user when system updates are

available.

Whilst our engagement on social media platforms is part of our promotional activity,

it could be used as an additional means of providing service from our support channel

to handle micro-service requests, offer educational guides, hints and tips and also

ignite consumer to consumer forums surrounding tips, self-service maintenance and

repair.

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5.2 Promotional Activity

Promotion creates a channel for communication with the targeted consumer base,

comprising any activity an organisation uses to engage the consumer in motivating

them to purchase the product (Harris, 2003). Primarily, advertising is the most

suitable promotional method for Digi-Note, enabling reach to a potential mass-

audience. Advocating this one-way form of communication, advertising can build

awareness by creating an identity and purpose for the Digi-Note within the market

(Robbin, 1999). Television, magazine and radio advertisements are a few of the many

methods to be used, creating an interest for consumers and ensuring the consumer

places the product as something that is unfulfilled to them. [See Appendix B for a

provisional example of a magazine advertisement].

Moreover, online platforms including trending websites such as ‘Digital Trends’ and

‘Tech-insider’ would be beneficial with regards to promotion. These platforms

advertise new high-tech developments into the market that can further stimulate a

demand for the product and may follow additional feedback from interested

consumers. Receiving insight about product perspectives from consumers would be

advantageous for a product like Digi-Note that is new to the market, as this can

further enhance R&D. Similar to online platforms, a strong social media presence is

imperative to allow us to showcase Digi-Note within the digital sphere. Closely

communicating with consumers reflects a source of trust that creates a strong brand

image (Harris, 2003).

Thirdly, promotion at the Consumer Electronics Show (CES). CES is an international

electronics and technology trade show. It attracts major companies and professionals

in the electronic industry (Belch, 2003). In 2015, connected home products were the

trending topic of CES. This promotional strategy would be ideal for Digi-Note as it

enables insight into new high-tech developments within the industry, giving in-depth

insight to similar products and creating awareness for Digi-Note within the market

(Belch, 2003).

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Lastly, personal selling is a promotional strategy that involves a direct and personal

relationship between the consumer and corporate (Barton, 1999). This will be offered

through retailers such as John Lewis and Currys PC World. Due to Digi-Note being

an innovative high-tech product that is new to the market, consumers may require

further product information. Personal selling aims to directly educate consumers

about the product with regards to its usage, benefits and features (Barton, 1999).

5.3 Pricing Strategy

Price defines what the value of the product is to the consumer (Palmer 2004). When

deciding an appropriate pricing strategy, the factors taken into consideration reflected

the cost of production and perceived value of product. With regard to the survey

conducted using primary research, consumers were asked to comment on their

perceived value for the product, expressing how much they were willing to pay. An

average price of £116.37 was indicated through our primary research. It was

important to consider that pricing the product below the perceived value can result in

a potential loss in revenue. In addition, the consumer could assume a low product

quality as a reflection of its price (Xin, 2003). However, pricing the product much

higher than the perceived value can lead to consumers losing interest in the product.

This is due to pricing affecting consumer’s impressions of a product (Best, 2009).

A price of £119.99 was set, just above the average perceived price. Premium pricing

was considered the most suitable pricing strategy as it reflects the exclusivity of Digi-

Note within the market (Xin, 2003). The benefits of premium pricing are based on the

assumption of high price creating an association with the consumer of high quality

goods. As Digi-Note is a new, innovative, high-tech product competitive pricing was

unsuitable, largely due to the lack of competition. (Best, 2009).

5.4 Distribution Channels

In order to reflect our premium pricing strategy, enhancing the products exclusivity

within the market, an exclusive distribution channel was selected (Gavil, 2004). This

reinforces Digi-Note’s exclusive brand identity in offering a limited amount of

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products to retailers such as John Lewis and Currys PC World. These retailers were

carefully chosen due to their strong and trusted brand image, further enhancing Digi-

Note’s credibility within the market (Flavian, 2005).

We have selected both in-store and online channels of distribution, as they cater to

different target audience preferences. In-store distribution methods require consumers

to physically enter stores and speak to sales representatives about Digi-Note’s features

(Gazzoli, 2008). The ability to view and test the product may influence the consumers

decision-making process.

Online platforms create convenience for consumers who are already familiar with the

product and its features. Allowing the consumer to purchase the product online can

create a simplistic and quick way of purchasing Digi-Note, satisfying needs of

accessibility (Flavian, 2005).

6. External analysis- Macro Environment

Due to the innovative and unique nature of Digi-Note, Digi-Home operates in a niche

market. Leduc (1998) describes a niche market as “a group of potential customers

who share common characteristics making them specifically receptive to a product,

service or an opportunity” (Dalgic, 2006, p. 26). The digital market has experienced

rapid growth in the past few years, with the UK currently showing one of the highest

levels of digital consumerism in the world (Innovate UK, 2015). Data from GWI

Device report (2015) asserts that close to 50% of internet users personally own a

tablet, with a desire for more flexible technologies for the future (Mander, 2015). It

has been forecasted that investment will rapidly increase in smart technology over the

next few years, with more consumers adopting digital platforms. Data compiled by

Ofcom illustrates penetration into smart technology, with the consumption of tablet

computers rising to 44% and 61% of adults in the UK using smartphones (KeyNote,

2014).

6.1 Porters 5 forces

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Porters 5 forces is essential in assessing a firm’s industry framework and the strategic

processes involved. The model illustrates how effectively corporate policies manage

the opportunities and threats in an organisation’s external environment (Yilmaz,

2009). The five forces analysis, however, is not without its limitations. Despite the

model providing an in depth understanding of the macro environment the business

would operate in, the model does not consider micro-economic factors such as target

segment and market size. Whilst the model assumes barriers in all industries,

contemporary industries are increasingly unrestricted (Bohari, Hin, & Fuad, 2013).

Moreover, in a dynamic market, the focus has diverged from the business towards the

consumer. Porter’s model does not take into consideration the factors that would

influence the customer, in comparison to models such as PEST (Indiatsy et al., 2014).

Therefore, Digi-Home’s macro assessment includes both Porter’s 5 forces and a PEST

analysis.

Threat of Entry: Moderately Unfavourable

The electronic’s industry requires a large amount of capital investment, making

it difficult to enter.

Since status quo is essential, a new firm would have difficulty establishing its

name in the current market. To rectify this, Digi-Home will need to invest

heavily on advertising to create an awareness for Digi-Note and secure repeat

customers (Schiavone, 2011).

A new entrant has to face a cost disadvantage, keeping prices low and

maximising output. However, our primary research indicates customers are

willing to pay a good price for the innovative benefits of Digi-Note, which

would suggest Digi-Home could have a first mover advantage (Markides &

Sosa, 2013).

Supplier Power: Moderately Favourable

Access to distribution channels are important. As large players in the industry

(i.e. Apple) have already established mainstream distribution channels, Digi-

Home would find it hard to locate shelf spaces in stores to sell their products.

Digi-Home would need to build strong relationships with retailers such as

John Lewis to secure shelf spaces (Oh & Sambamurthy, 2012).

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The company will rely on suppliers for key components of the digital notepad

at competitive prices. Strong relationships with a contracted design house

need to be maintained over time to achieve economies of scale and ensure

high quality. An intermediary such as Red House Global would ensure easy

and efficient outsourcing of the production process to China and

simultaneously certify high standards (Ma, Kaldenbach, & Katzy, 2014).

Threat of Substitute: Highly Favourable

There are a few companies that sell digital notepads in Manchester such as

Apple and Samsung, however no device offered by these competitors provides

features compatible with the Connected Home.

In addition, Bluetooth and Wireless pens such as Livescribe (Livescribe 2015)

present a threat of substitution, however these products are limited in their

compatibility and do not present applications for the Connected Home.

Digi-Note is a highly differentiated product which acts as an accessory to the

Connected Home, delivering integration between home appliances through a

physical input (Drnevich & Croson, 2013).

As Digi-Home offers high-tech innovation which enhances consumer

lifestyles with significant value for money, there is a major opportunity for

Digi-Note to tap into the market.

Buyer Power: Moderately Favourable

Results from our survey demonstrate that customers are willing to pay a good

price for Digi-Note. With rapidly changing market dynamics, consumers

demand products which make their lives easier, providing a unique and

flexible experience. They desire services, which offer value and organisation

within their fast paced lives.

A segment of consumers have a great dependency on technology (Ratchford &

Barnhart, 2012). This would suggest there is a market of individuals who will

appreciate the value of Digi-Note, and be willing to pay for the benefits this

product will offer them.

It is acknowledged that due to low switching costs through digital channels,

Digi-Home will have to continuously innovate to establish brand loyalty and

attract new customers (Tung, 2012).

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Intensity of Rivalry: Favourable

At present there are few companies that have tapped into the Connected Home

Industry.

Whilst Apple have introduced Home kit and Samsung offer a Smart Home

service (KeyNote, 2014), no competitor has launched a device with the same

product offering as Digi-Note. This gives Digi-Home a competitive advantage

and will undermine the position of its potential rivals (Wu, 2012).

In addition, Digi-Home has secured a patent and Intellectual Property Rights

for Digi-Note, allowing the business to gain a competitive advantage over it’s

competitors.

6.2 PEST Analysis

Political:

Government actions have a major influence on the digital industry and its

consumers. Government setup clusters and organisations such as Tech City aid

digital entrepreneurs to grow and survive in the constantly changing market

conditions, providing access to efficient resources (Brewer & Rees, 2015).

To stay at the forefront of digitally developing economies, the UK government

intends to invest approximately £30m to support businesses and institutes

involved in digital innovation. The government foresees the potential of the

digital economy increasing the overall UK GDP, therefore encouraging

businesses and innovators focus on enhancing consumer’s user experience

(Innovate UK, 2015).

However, the government has set standards for quality surrounding

sustainability, as customers show increasing concern for environmental

factors. Movements towards eco-innovation have gained a lot of attention and

the government has set regulations for businesses to implement this in their

operations (Horbach, Rammer, & Rennings, 2012). Nevertheless, these

standards are not difficult to adapt to.

Economic:

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Inflation rate has been close to 0 in 2015 and is expected to rise to about 2%

by 2017 (Milliken & Schomberg, 2015). The increase in purchasing power

will encourage spending and boost consumer confidence to invest in the latest

technological developments. Additionally, outsourcing production will be

highly cost-effective for the business because of the appreciation in GBP value

(Elliot, 2015).

Social:

Social trends in technology adaptation illustrate individuals becoming more

digitally savvy in the UK (Mintel, 2014). With the world becoming more

globalized and connected, consumers desire a unique experience which

connects them to a distinctive environment between people and digital

devices.

Users of digital products are demanding flexibility and control. Advancements

in digital equipment have consequently led consumers to desire products

which deliver an improved standard of living with effortless functionality.

Ofcom reports show individuals spend an average of 11 hours on their

electronic devices, which is more than the amount of time people spend

sleeping (Ofcom, 2014). Therefore, this indicates a potential demand for the

consumption for digital Connected Home products, presenting a promising

opportunity for Digi-Note.

Technological:

There has been an accelerated growth in technological advancements over the

past few years. Features and benefits most sought through technologies such

as the Connected Home include ease of use, portability, appealing design, and

convenience.

There are some products which offer these desired features, however there are

very few innovative technologies which allow multi-tasking on different

devices (Barrett et al., 2015). Thus, failure to innovate in technology will

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separate Connected Home suppliers from the development powers of the free

market. Digi-Note delivers all of these benefits to its users.

However, in order for Digi-Note to reach consumers with minimal lead time,

Digi-Home should look to adopt simultaneous engineering.

Moreover, eco-innovation and sustainability has become a major concern for

digital entrepreneurs, since the UK government has urged businesses to

minimize externalities (Alves et al., 2014). The physical interface of Digi-

Note upholds Digi-Home’s environmental stance, where previous forms of

note taking would require paper consumption. Digi-Home must demonstrate

its commitment to corporate social responsibility and sustainability through its

material selection, distribution channels and general business practices.

7. Internal Analysis

Internal analysis of Digi-Home illustrates the understanding and evaluation of

capabilities and the potential of resources within the organisation (Baines, Fill, and

Page, 2011). However, this analysis should not focus on the relative strengths and

weaknesses of particular resources. As Thompson (1990) mentions, “resources are not

strong or weak merely because they exist… their value depends upon how they are

being managed, controlled and used”.

The SWOT analysis is used to evaluate the factors that build on strengths, eliminate

weaknesses, exploit opportunities and counter threats (Dyson, 2004). It is considered

an essential tool in strategic marketing analysis, which helps to form a company’s

marketing plan based on objectives and strategy (Bernnan et al.). Consequently,

analysis of Digi-Note’s marketing strategy will emphasize its role in the complex,

dynamic and competitive market environment.

7.1 SWOT analysis

Strengths

Strengths are the features of a business that help it to operate more effectively

than its competitors (Bernnan et al.). The core competence of Digi-Home is

that it offers a new state-of-the-art product, with excellent engineering and

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practical applications that will enhance the capabilities of the Connected

Home, to create smarter and more efficient standards of living. Our primary

research indicated a public interest in the product, with the majority of

respondents willing to buy it. In addition, Digi-Note is an environmentally

friendly product that contributes to eliminating the usage of paper products

and embracing digital notes instead. This will help us to position the company

as an eco-friendly organisation. Finally, Digi-Home’s leadership in the market

with this new product will support our future growth opportunities while also

increasing our profit margins.

Weaknesses

Weaknesses are the aspects of a business that negatively affect the value an

organisation can offer, which can create competitive difficulty (Bernnan et

al.). While there is a great deal of public interest, we are also aware of

significant market challenges. There remains a lack of customer information

about the industry, meaning we need to invest heavily in order to create

awareness. Another weakness of Digi-Note is that it can only target a niche

segment - the people that are already living in the Connected Home and have

an income level suitable to purchase this exclusive product.

Opportunities

Opportunities are the attractive factors of an external environment that, if

successfully implemented, give an organisation the chance to grow (Bernnan

et al.). One of the key opportunities for Digi-Note is that it operates in the

rapidly developing technology market, which will allow us to further enhance

product capabilities and offer new functionalities as well as supplementary

products for the Connected Home industry. For example, investing in

Artificial Intelligence during the next product development stage will be

significant in order to launch a new, smarter Digi-Note that learns from its

user and is capable of intelligent behaviour. Moreover, Digi-Home has another

opportunity to move its operation into new business areas, segments and

markets, while also collaborating with technology giants such as Samsung,

Apple and Cisco to offer the product as a supplementary device to their whole

Connected Home package.

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Threats

Threats are factors stemming from the external environment that are beyond

the control of an organisation, creating danger to a business and its strategy

(Bernnan et al.). In reference to Gartner’s (2015) Hype-Cycle model, one of the

vital threats to the success of Digi-Note is if the market growth is highly

overestimated, as there is a lot of hype surrounding the Connected Home. This

could result in short-lived demand and rapid decline. In addition, the product

failing to meet customer’s expectations may also have a negative effect on

demand. Another major threat is that Digi-Home must successfully protect its

product rights with IPRs, otherwise competitors will easily eliminate our

competitive advantage. The final threat originates from common issues in the

smart technology market - an inability to secure the device from hackers. In

order to prevent hacking attacks, our company must provide software that

works in a secure environment with the help of up-to-date antivirus programs;

it is also important to keep our security protocols at the highest level. In this

way, it is possible to prevent unauthorised parties from attempting to attack

our system.

7.2 Corporate Structure and Employees

It is argued that people are the most valuable asset of any organisation and they make

critical differences when it comes to organisational performance, competitiveness,

innovation and business success (Bakker and Schaufeli, 2008). As a newly established

company with an innovative product and limited resources, Digi-Home must

constantly consider its corporate structure in order to reduce irrelevant costs and

improve productivity. Figure 3 demonstrates the structure of our corporation, which

we plan to achieve within next two years.

Figure 3. The corporate structure showing the division to be achieved within

the next 2 years.

Excecutive Management

Group

Business operationsPublic and media relations

Government relationsHuman resources activities

Managing company and other departments

Sales and Marketing

Product management,Sales in different

markets,Marketing activities,Customer Services.

Finance

Financial planning and reporting,

Treasury, Internal audit.

Research and Product

DevelopmentRTD,

Software and hardware

development, Bug fixing.

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Initially, we plan to hire one skilled employee within our sales and marketing

department, who will be responsible for marketing activities such as product

management, sales in different markets and customer service. We will also have one

employee who will be responsible for financial planning, reporting, and internal

auditing. Our Research and Technology Development team will carry out activities

such as software and hardware development, bug fixing, as well as continuously

producing innovative ideas to enhance the capabilities of our offerings. Initially we

will hire three people to work in the RTD team. In the beginning, the remaining

managerial activities will be distributed throughout these three departments, however,

within next two years, a new executive management group will be created who will

be responsible for activities such as HR, public, government and media relations (see

Figure 4). Considering the intensity of the work employees must carry out, the

company will ensure that they have relevant benefits in return and are rewarded

generously. Employees’ starting salary will be £26, 000 annually.

7.3 Use of Technology in Business

As we offer a highly advanced product to the market, we believe our business should

embrace the use of innovative technologies during business operations. One way to

achieve this is the introduction of SAP products, which will help Digi-Home interact

with a common corporate database for a wide range of applications. This tool will

help the organisation to easily manage its resources and capabilities with applications

for customer relations, marketing, sales, product design and services, as well as HR,

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payrolls, workforce management, finance and accounting. SAP products are widely

used by companies to improve their productivity, to cut costs and to bring about

creative business solutions.

8. Controls and Evaluation

We will implement a number of controls to evaluate the position and success of our

brand.

Customer Feedback will help analyse areas for improvement within our service

provision and our operating system interface. We will also receive feedback via

professional reviews from websites such as Digital Trends and TechInsider. The

monitoring of these reviews and comments is essential to keep our customers happy,

ensuring a positive experience throughout the products life.

Target Market Sales will help us evaluate the direct success of our product. Due to the

relatively low number of initial units produced (250,000), we can expect a majority to

be sold. This should be similar in the second year, with a production increase of 40%.

Our target market is technologically enthusiastic individuals and families within

Generation Y. If sales decrease we will need to analyse our market further, including

a possible demographic breakdown of sales. This requires the assistance of our retail

partners.

Market share is our final control. Our market share should be high within the

immediate competitor market due to our unique product. However, increasing market

share within the Connected Home market will be crucial for the development and

success of future products and endeavours. Therefore, we need to keep a positive

increase in our market share of the Connected Home. If the positive increase is not

consistent within a year, we must investigate why our plan is not producing

significant results.

9. Profit and loss statement/ Cash flow analysis

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Digi-Note production costs and sales make up the majority of our expenses and

income. We make a significant profit on each unit made, due to the comparative price

expected from the product after primary research.

In the first year, we aim to sell 250,000 units, each of which costs £66.72 to make.

This profit margin of £53.27 equates to an income of £29,997,500 over the year.

Increasing the number of units produced by 40% in the second year increases our

income by a proportionate amount. During the second year we will incur greater

expenses. This is due to the expected hiring of staff to consolidate and increase the

brand’s growth. We will also funnel more profits into Research and Development in

order to stay ahead of competition. This R&D budget will allow Digi-Home to expand

services and products quickly and innovatively.

We can expect some income from Intellectual Property Rights and Patents in the

future. It is difficult to predict this amount, as it relies on uptake and interest from

other companies to enter this area of the market. However, due to the innovative

nature of our product, we can expect to eventually earn a strong revenue stream from

current and future IPRs and Patents.

9.1 Two Year Quarterly Cash Flow

Year 11st Q 2nd Q 3rd Q 4th Q

Cash Inflow

Sales £7,499,375.01 £7,499,375.01 £7,499,375.01 £7,499,375.01

Interest

Income

£4,026 £2,524 £3,386 £2,452

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Expenses

Operating £4,609,122.01 £4,618,196.01 £4,607,696.01 £4,609,778.01

Personne

l

£37,247.43 £37,247.43 £37,247.43 £37,247.43

Year 2 1st Q 2nd Q 3rd Q 4th Q

Cash Inflow

Sales £10,499,124.9

9

£10,499,124.9

9

£10,499,124.9

9

£10,499,124.9

9

Interest

Income

£4,346 £2,586 £2,453 £2,503

Expenses

Operatin

g

£7,439,233.99 £7,448,632.99 £7,446,181.99 £7,457,000.99

Personne

l

£50,247.42 £50,247.42 £50,247.42 £50,247.42

9.2 Profit/Loss Statement

INCOME This Year Next Year

Digi-Note Sales £29,997,500 £41,996,500

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Interest Income £12,388 £11,888

Potential Income

IPR Royalties @ 5-7% of revenue1 Unknown Unknown

Total Income £30,009,888 £42,008,388

Expenses This Year Next Year

Personnel £217,430.96 £266,811.92

Office £87,431 £84,812

Payroll £129,999.96 £181,999.92

Operating £18,444,792 £29,791,050

Advertising £95,865 £91,738

Delivery Costs £80,426 £81,995

Legal and Auditing £85,083 £93,837

Office Supplies £77,345 £95,877

Utilities £8,733 £5,603

Digi-Note Production £16,730,000 £23,422,000

Research and Development £1,367,340 £6,000,000

Total Expenses £18,662,223.96 £30,057,861.92

OVERALL TOTAL £11,347,664.14 £11,950,526.18

10. Operational Considerations

The company’s main operational concerns will include managing the supply chain

efficiently and providing sufficient aftersales services for Digi-Note. The logistics

process for Digi-Home’s supply chain is demonstrated in Figure 4.

1 Analysis Group, as quoted in Parr, R. ‘Royalty Rates for Licensing IP’

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Figure 4. Logistics process of Digi-Home’s supply chain.

With research and development and technical support based in Greater Manchester,

UK, Digi-Home’s production is outsourced to China due to lower labour costs,

extensive capabilities in assembly and manufacturing and lower restrictions on goods.

These factors illustrate the benefits of subcontracting production to China, which is

subsequently the most cost-effective strategy (Wei, Zhou, Sunc, , & Lin, 2012). Red

House Global will support the company in this and Digi-Home will ensure good

relationships are built to maintain mutual benefits for both parties. Digi-Note will be

delivered back to the UK and launched into the market directly and indirectly through

retailers.

Conforming to the company’s business strategy, Digi-Note must have the highest

quality, providing excellence. ISO 9000 and Total Quality Management will be

implemented in the operations and supply chain to deliver a superior quality product

to the consumer (Vouzasb, Psomas, & Fotopoulos, 2010).

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12. Appendix

Appendix A. A visual representation of Digi-Note.

Appendix B. Provisional sample of a magazine advertisement for Digi-Note

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Appendix C. Forecasted Connected Home Device Annual Shipments (Business

Insider UK 2014)

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