Leadership - Overall Strategy Solution

Assignment Taken

Leadership with General Management and IT department solution

Case Understanding

Mohit Singh and Parth Mittal, the directors of PM Clean Air Solutions Private Limited (PMCASPL), have been friends since their B.Tech days in Bengaluru. Manoj started his career as an Air Quality Analyst, with an MNC in Gurgaon and Parth joined Patliputra Port Trust, a shipping company in Kolkata. While working for the Air Quality company, Manoj developed a concept to build a hybrid product, a combination of natural plants and machines, to improve the air quality. Manoj and Parth then decided to resign from their respective jobs and start their own company PMCASPL in Bengaluru to work further on this concept. They both invested in the company as directors with 50% equity stake each. Both the directors spent 9 months in the research and development of the product. 

The final product developed, consisted of 3 separate units of which two are physical units and one software, all synced as one single device. The units are-

1.Air Sense- 

Type: Physical Unit

Function: To sense the air quality of approximately 1900 sq. ft. area and pass the data to AQMS. 

Size: 5 in * 5 in

2.Air Quality management System (AQMS)- 

Type: Software Unit

Function: Analyse data received from Air Sense and send suggestions to users on how to effectively use Air Loop. 

Size: Centralised server

3.Air Loop- 

Type: Physical Unit

Function: To purify air up to 1500 sq. ft. closed wall area. 

Size: 48 in * 24 in

PMCASPL further hired software developers, web designer, mobile app developer, field executives and rented a place for office. PMCASPL approached angel investors and got SAIF capital to invest INR 10 Cr in the company for 5% equity stake. They also visited television programme for investment and got the judges to invest INR 10 Cr. INR 5 Cr for 5% equity and INR 5 Cr as term loan for 3 years carrying ROI @12% p.a.

PMCASPL has tasked our consultancy firm to advise marketing plans, pricing strategy, IT development and business analysis, HR management along with new production site set up and its operations. We have given a limited budget of INR 10 Crore for FY 2022-23 to work with, so we would be going ahead with the following suggestions.

BCS Solution Summary

For the new production set-up of PMCASPL, our consultancy has suggested Haryana as it is a well developed industrial state and is adjacent to Delhi, where we are planning to launch the product initially. We would be targeting urban cities like Delhi with huge issue of air pollution first and then move to capture market of semi urban cities. Although an air purifier has become a necessity in states like Delhi it is still not considered a basic need in majority Indian states. So, we are targeting upper middle class and high class population with an average income of 12 LPA and above who can afford this product as a luxury. We have priced the product at a competitive pricing model by studying the already existing products in the market. As air purifier is not a very new product and there are existing players, we suggest to low ball the pricing to capture a good market share. We have come up with marketing strategy and financial budgeting to cover all the operations, new production set up, human resource and launching the product in the market. We have also designed the initial organisational structure on the basis of functions which is described further in this document and as per the company’s growth further changes would be imposed. We would have the market research and research and development team work alongside to detect and incorporate consumer demands quickly into PMCASPL’s products. The company’s expansion to different states and cities would be backed up by an IT team to manage IT infrastructure like website, mobile apps, AQMS, support and cope up with the fast changing technologies in the market. We have also suggested an excellent HR team to provide the best HR policies and manage the employee to company relationship. We will be outsourcing human resource for the factory and manufacturing work from companies like SparrowHR to ease our work.

Solution

Business Model Canvas-

Unlike creating a traditional business plan, we want to present PMCASPL a concise and focused one pager that will help the company a competitive edge by focusing on important aspects apart from product development. It has nine components –

1. Value proposition- The answer to a customer's problem that no one else does. PMCASPL provides “ A hassle free natural plant and machine based Air purifier for pure and fresh air”.

1. Customer segments- These are the customers who are willing to pay for the product that resolves their problem of polluted air. We suggest PMCASPL to primarily target households, working individuals, offices and hospitals.

1. Key Resources- The necessary resources for running the company are employees, equipment, production facility, distribution network, IT infrastructure, sales force and customer relations team.

1. Customer Relationship- PMCASPL is suggested to manage its relationship with customers through suggestions and recommendations, complaint system and feedback surveys.

1. Key Partners- Resources available outside of the company that aid  business model of PMCASPL are suppliers, distributors, technical experts, and reverse logistics.

1. Channels- Channels through which PMCASPL sells to its potential customers are D2C, retailer and e-commerce.

1. Key Activities – Key activities PMCASPL needs to perform are research and development, vendor selection, procurement, production and quality check, sales and distribution, marketing and promotion and after sales service.

1. Cost Stream- The major areas which contribute to PMCASPL’s fixed and variable costs are research and development, procurement, production, operations, sales & marketing, customer acquisition, human resources, website hosting and support.

1. Revenue Stream- The main source of PMCASPL’s revenue generation is sales to customers, sales to offices and hospitals, after sale services and extended warranty, and repair services.

Launch strategy:

We performed a google survey (results of which are attached), on the basis of which we have developed our launch strategy.

Target Market- The target market will include the upper middle-class and high class income of the society who live in urban and semi urban cities of India.

Promotional Activities- 

• Free product demo at public places like malls, airports, hospitals.
•  Offers on online sale
• Focus on area coverage and use of natural plants in our product
• Warranty and servicing

Distribution Channels- We will be selling our product-

• Via our website (D2C)
• Via E-commerce websites (Amazon, Flipkart)
• Via Retailers to end user

Positioning Strategy- Easy, compact and high performance air purifier which covers 1500 sq. ft. of closed wall area to give you pure and germ free air.

Pricing Strategy- Competitive pricing strategy is opted and the product is launched at price @27599/-

Looking further into why to set up production in Haryana-

• Close to Delhi
• Reduction in logistics cost
• Lower cost of living as compared to Bengaluru thus providing cheap labours
• Haryana is ranked 3rd in “Ease of doing Business” due to government’s business-friendly policies
• Good electrical supply
• Online Application System
• No Objection Certificates (NOCs)

*The State Government of Haryana has been committed to creating a progressive business environment. The state offers a wide range of fiscal and policy incentives for businesses under the Industrial and Investment Policy, 2011. Haryana ranked the third best state in the country under ease of doing business in the Business Reforms Action Plan 2017. As of October 2020, the state had seven exporting Special Economic Zones (SEZs).

Legalities:

Before beginning production in Haryana, factory owners must first register their establishment with the appropriate government agency. The Factories Act of 1948 governs the process of registering factories in India.

**Documents required to obtain Haryana factory registration are as follows:

• Form No. 2
• Original Licence
• Treasury Challan in original
• Stability Certificate, duly signed by the Chartered Engineer.
• A resolution passed by Board of Directors.
• Copy of power sanction certificate

Applicable Fee schedule is attached as an image below.

Application for factory license can be done in both offline and online mode. As both the directors reside in Bengaluru we suggest to apply through online process which is as follows-

**Step 1: Firstly, the applicants have to go to the official Portal of Haryana Labour Department Portal to apply for the Factory License online.

Step 2: You have to click on the “Online Registration Under Factory Act” that is visible on the home page.

Step 3: Then you will be taken to the instruction page where you need to the acknowledgement box and then click on the submit button.

Step 4: Now you need to check whether your factory is already registered under factor act or not, by entering the factory name or application id.

Step 5: If you’re not registered then click “Click here to fill the Basic Information Form”.

Step 6: Now you have to fill all the required information in this registration form. After filling all the required details, you need to tick the declaration box and click on the submit button.

Step 7: Once the account is activated, you can use the user ID & Password to login and click confirmation.

Step 8: Login into Labour Department Portal by providing the appropriate username and password on the application.

Step 9: A Factory would need to obtain a Building Plan Approval from the L&E department before applying for factory registration.

Step 10: After getting the approval for the building plan from the concerned department, you can apply for the new factory registration.

Step 11: You have to click on the License tab that is visible on your dashboard.

Step 12: will be directed to Form No. 2 and can apply for a license for one year or 5 years. Already provided details will be added automatically.

Step 13: Now, you have to fill the following information in the form.

Name of Factory

Factory License Number

Maximum number of workers

A maximum amount of power (HP) installed

Occupier Details

The proprietor of the factory

Director in case of a Public firm/ proprietary concern

Shareholders

Owner of the premises details

Step 14: Then you have to provide workers details.

Step 15: If any kind of amendment you need to select yes or no to do any updates in the form.

Step 16: You have to upload the photocopy of the documents (Only .jpeg, .jpg, .png, .gif, .docx, .pdf of maximum size 2 MB are allowed).

Step 17: After you click on the “submit” button, a one-time password will be sent to the registered mobile number, and then you have to enter that OTP as shown below.

Step 18: Then you have to pay the requested fees, which is auto-calculated based on the Number of Workers employed.

Step 19: Then you have to click on the “Pay Now” button. On clicking on the button, you will be directed to the bank secured window, and the fees will be paid through credit/ debit/ net banking.

Step 20: Once you have done with the payment, you will receive the message stating “ Applications for Factory License Submitted Previously”.

Step 21: You can download or print the form in .pdf format and can view the fee also.

Organizational structure:

The rationale for Organization Structure:

• HRM - HR will be an essential component to the company’s success by recruiting people with good knowledge about products and services thereby reducing the training cost and managing people relations for creating a motivating environment to work in. HR department is supposed to directly report to the directors of the company, as the company is in its starting phase.

• Marketing - Advertising on television, social media, the website, brand management, and the sales force are all tasks that will be handled by the marketing team. Market Research must be a constant focus for any business that hopes to succeed. Hence a marketing team is a necessity for the company which will directly report to the directors and will work initially from Haryana to be close to Delhi and understand the customers for a big and successful launch.

• Operations – PMCASPL needs to develop a strong network of distributors and retailers to enter into the market for which it requires to have an operations team who will also manage the production unit. The team will directly report to the directors during the initial stage of the company.

• IT and Research & Development – IT department is required to first build and support the AQMS and then build and handle the website and mobile application. This team will function from Bengaluru office along with Research and development team and report directly to the directors of PMCASPL.

• Finance – This department is an essential to manage all the financials and budgets of the company. It will function from Bengaluru office and will directly report to the directors.

Finance & Operations-

The solution is basically aimed at deciding the optimal budget for setting up the operations in the new production set up. The allocation of budget is the pre-requisite and the most crucial part all the departments to perform to their maximum efficiency without facing any difficulties. 

Break even analysis of Pure Air Ultra 200

• Population of India = 1.4 billion
• Middle Class population of India = 28% of 1.4 billion (392million)
• Upper Middle-Class Population of India = 3% of 392 million (11.76 million) (TAM)
• People that want to buy that product = 40% of 11.76 (4.7 million) (SAM)
• People that will buy the product = 10% of 4.7 million (4700k) (SOM)
• Fixed cost = 2,11,10,000 Rs/-
• Variable cost per unit = 9721 Rs/-
• Break Even Point = Fixed Cost / (Selling Price-Variable Cost)

=2,11,10,000 / (17878)

 = 1,180 units.

• The break-even point can be achieved as SOM is higher.
• Break-even analysis tells you how many units of a product must be sold to cover the fixed and variable costs of production.

We have distributed the budget of INR 10 Crores as follows-

INR 1,40,00,000 to HR, for hiring and giving incentives to the employees.

INR 1,50,00,000 to IT, to expand and support the IT infrastructure.

INR 2,00,00,000 to Marketing, for a thorough market research and promotional activities 

INR 4,45,00,000 to Operations

 ** A detailed financial budget is provided in the Financial & Operations Report **

IT-

AQMS, IT policies for employees, websites, apps (Android and iOS), social media accounts, cyber security, servers, networks, hardware and software support, as well as data backups, are all within the purview of the IT department. To that end, the IT department will offer technical assistance and creative solutions that add value to the company and boost operational efficiency.

** A detailed IT plan is provided in the IT Report **

Marketing-

The proposed solution from marketing department entails a strategic planning of promotion of the air purifiers which would help the company earn the trust and confidence of consumers and become one of the leading manufacturing and marketing companies to help sustain business development. Since a field-tested strategy permits marketers to recognise expected business and creation issues, we conducted a random sampling method of market survey to analyze the current market opportunities, customer awareness and the consumers’ benefits as well as about their increasing concern about the effect of pollution, mold and dust miles on their health.

1. Market Positioning Strategy-We will plan to approach our potential customers with the “more for more” tactic. The customer will end up getting more than what they have paid for the air purifier. We will be positioning our air purifier as a current necessity in the lives of our potential customers that they will be compelled to rethink on their buying decisions.
2. Brand Positioning Strategy- The brand positioning strategy will be in line with the market position strategy as the company will be in the early stage of business expansion.
3. Promotional Strategy- We have to position our company as a trustworthy, high-quality, impactful brand and thus our promotional activities must guide the customers to move from one phase to the next to ultimately purchase stage. Our marketing channels will include mass advertising campaigns, personal selling, direct marketing, collaborations with influencers and cross partnerships, sales promotion and campaigning through electronic media.
4. Acquiring New Target- The target areas of the launch and subsequent expansion of our business are urban and semi-urban areas where population density is more and pollution levels are very high. To encourage quick scaling of customer base, we will do collaborations with influencers, celebrities, schools, colleges, and corporates. 

** A detailed marketing plan is provided in the Marketing Report **

HR-

Human resources (HR) plays a critical role in a company's success because it is responsible for hiring workers who are already knowledgeable about the company's products and services, thereby lowering the company's training costs, and for managing employees' relationships in order to foster a positive and productive workplace. HR team will also ensure a easy onboarding process for all the employees and help them with health & safety. Compensation and benefits will be designed to include all the monetary and non-monetary benefits that will be given to all the employees.

** A detailed HR plan is provided in the HR Report **

References-

*https://www.ibef.org/states/haryana

**https://www.indiafilings.com/learn/haryana-factory-registration/

Conclusion

With the strategy we have curated for PMCASPL, the company should be able to gain 10% of market share in one year will soon reach the break even point and start making profits. Further the strategy needs to be continuously updated according to the changes in the industry and environment so that the company does not fail.

Attached File Details

Video

https://youtu.be/E9-MKPMicLw