NMO S4 SPRINT ONE | BUSINESS CASE SCENARIO - 04 | Airway Delivery: A New Business Opportunity
Submission BCS
Finance
Submission Date & Time: 2022-01-28 12:15:13
Event Name: NMO S4 Sprint One - IIM Kashipur
Solution Submitted By: Sachin Gupta
Assignment Taken
Cost Analysis and Revenue ProjectionsCase Understanding
Since rise of e-commerce, hyper-local delivery models have seen steep adoption among businesses and added to customer's ease. The next big thing in hyper-local delivery is use of drones, which is largely in experimental phase. According to the Print, the Indian drone market size is set to grow steeply from $1.21 billion in 2021 onwards. Hence, this is a ripe time for Pushpak to make presence as a drone enabled courier company in the market. The drone division is working to achieve breakeven in year 1, establish brand and capture market size in the process. For breaking even in the first year of operations our major business model will be focused on B2B services in which we will tie up with major food delivery partners, pharmaceuticals, and other 3pl providers. The IT systems are hence required to be robust and flexible to allow different user groups to use the services. The IT systems shall also assist digital marketing efforts to establish brand and capture large market size as a first mover.BCS Solution Summary
Understanding the cost requirements, break even achievement in 1 year and revenue projections over the years.Solution
|
Sr. No. |
Particular |
Quantity |
Cost / per unit (INR) |
Remark |
|
1 |
Short Range Drones |
4 |
125,000 |
150 Km range on full Charge, Max. Weight Bearing Capacity:10 KG |
|
2 |
Long Range Drone |
1 |
400,000 |
650 Km range on full Charge, Max. Weight Bearing Capacity:25 KG |
|
3 |
Qualified Drone Operators |
4 |
50,000 |
Per Person Per Month Salary |
|
4 |
Management Team |
5 |
100,000 |
Average Salary Per Person Per Month |
|
5 |
Software |
1 |
2,500,000 |
(end-to-end drone operations and management system) |
|
6 |
Software Development Team |
2 |
70,000 |
Average Salary Per Person Per Month |
|
7 |
Support Staff |
4 |
20,000 |
Average Salary Per Person Per Month |
Budget : ₹10 crore
Payback Period : 1 year
The Initial Investment the company will make for next one year :
Fixed Cost : 4*125000 + 400000 + 2500000 = ₹3,400,000
Variable Cost : 4*12*50000 + 5*12*100000 + 2*70000*12 + 4*20000*12 + 12*30000 = ₹11,400,000
Total Given Cost : ₹14,800,000
Expenditure of Different Departments:
IT Department : ₹2,82,000
HR Department : ₹33,700,300
Marketing Department : ₹24,000,000
For expansion of operations, we would need make capital expenditure to buy more drones. As per the requirements, we recommend further buying 12 short range and 3 long range drones.
Cost of buying more drones : 12*125000 + 3*400000 = ₹2,700,000
Total Cost : ₹75,482,300
For Break Even in First Year, the company needs to have a revenue equal to more than the above total cost which is ₹75,482,300.
Indian Logistics market in the coming years is expected to grow between 10% - 15% CAGR. We can use this as a proxy to estimate revenue growth of the company in the near future.
Since this is a start-up, we assume high growth in the initial years and later on assimilate in the industry.
|
Revenue in First Year |
7,54,82,300 |
|
|
|
|
|
|
Industry Growth |
10%-15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Projections |
in million ₹ |
|
|
|
|
|
|
|
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
|
|
75 |
|
|
|
|
|
|
Optimistic View |
|
|
|
|
|
|
|
Revenue Growth (Assumptions) |
|
100% |
75% |
50% |
25% |
15% |
|
Revenue |
|
150.96 |
264.19 |
396.28 |
495.35 |
569.66 |
|
Pessimistic View (Same as Industry Growth) |
|
|
|
|
|
|
|
Revenue Growth (Assumptions) |
|
15% |
15% |
15% |
15% |
15% |
|
Revenue |
|
86.80 |
99.83 |
114.80 |
132.02 |
151.82 |
Conclusion
In this age of digital revolution a lot of technology companies have been able to successfully operate their business with good growth in revenues. This drone delivery service has the similar potential to achieve great growth in revenues and bring a revolution in logistics industry especially cities.Attached File Details
View Attachment file (Team Valorant_NMO.pptx)Comments
Article Type: Business Case Scenario, Case Study Solution Submission
Business Case Detail
Title: NMO S4 SPRINT ONE | BUSINESS CASE SCENARIO - 04 | Airway Delivery: A New Business Opportunity
Type: Case Study
Stream: Management
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