gb plan 4
Global Business Plan Project – Section 5
In this GBP component, you will be researching the financials of your proposed company to include projected income and expenses as well as potential profitability.
This week, you will be working on section V, FINANCIALS
*(SEE COURSE GLOBAL BUSINESS PLAN ASSIGNMENT OUTLINE FOR REFERENCE).
In a word document, answer the following questions in the prescribed outline format (be sure to use a title page so I know what paper belongs to whom).
I only expect a few paragraphs for each section, not a complete book. A paragraph is 5 – 7 complete sentences. Please use footnotes to show me the source where you researched the information from. Sample output from previous reports are provided in the background section following these instructions.
A. ECONOMIC ENVIRONMENT
Discuss the influence of the country’s infrastructure and economic conditions (inflation, currency exchange rate, interest rates, unemployment, personal income) on startup costs and the financial potential for this business enterprise.
B. START-UP COSTS
Identify expenses (and estimated amounts) that would be necessary when starting this global business enterprise. (Be sure to consider equipment, buildings, vehicles, infrastructure improvements, training costs, consultants, legal fees, and licenses.)
C. FINANCING SOURCES
Compare the availability and costs associated with different sources for funding this global business enterprise. (Large companies may sell stock, issue bonds, and obtain loans. Smaller organizations might make use of personal investors, small business loans, venture capital sources, or government-guaranteed loans.)
D. THE ECONOMIC ENVIRONMENT
Identify economic factors (personal income level, inflation rate, taxes) that might influence pricing decisions in this country. (In many countries, people may not be able to afford products that are considered minor purchases in industrialized nations.)
E. COST ANALYSIS
Estimate production costs and other business expenses that would be encountered when offering this product or service. (The total cost of providing an item must include both direct production costs as well as administrative and overhead expenses.)
F. DEMAND ANALYSIS
Analyze the potential demand for this product (or service) based on the current and expected market. (As a product gains in popularity or a country’s economy improves, demand for various items is likely to expand.)
G. COMPETITOR ANALYSIS
Compare your pricing plans with those of any competitors that may be providing identical or similar products or services.
Upload your completed report into the week 5 dropbox provided.
Background References
Resources
Web links:
· Global Edge CyberSite: http://www.globaledge.msu.edu/
· Business Around the World Atlas: https://highered.mcgraw-hill.com/sites/0078137217/student_view0/business_around_the_world.html
(Works best with Firefox.)
GBP SECTION V EXAMPLE
V. Financials
A. ECONOMIC ENVIRONEMNT
B. START-UP COSTS
Lyft will incur project startup costs in the form of regularity, licensing, and operating costs. The firm will be responsible for obtaining any necessary government authorizations and licenses. Operating costs will include insurance, system integration, advertising and marketing, driver’s acquisition, mobile technology, and internet infrastructure. The firm will also incur fixed costs in the form of building space acquisition as it seeks to expand its presence. While the firm is not responsible for fixed costs associated with vehicle ownership on the driver’s behalf, it is, however, responsible for monthly fixed costs associated with the firm’s agreement with Select Express Drive Partner who provides a fleet of vehicles for Lyft’s drivers to rent (Lyft,Inc). The firm bypasses regulatory costs associated with professional drivers, taxi medallions, airport expenses, etc. On behalf that the firm contracts its drivers, they incur minimal employment responsibility costs. Combined all together, the expected costs to globalize Lyft in Australia is three million dollars.
C. FINANCING SOURCES
As Lyft seeks to expand its presence into the Australian market, the firm has the opportunity to obtain outside financing to invest in the firm’s growth. It can obtain financing through either debt or equity. Through equity financing, Lyft would raise money from a third-party investor and sell them a piece of the business in exchange for the capital they provide. Through debt financing, the firm would borrow money from a lender to help invest in the firm’s growth. With Lyft seeking to establish a wholly owned subsidiary, and the firm not being in the early stages of the company, as well as carrying minimal risk, we believe obtaining financing through equity financing would be the most beneficial route to pursue. Doing this will allow the firm to retain full ownership of the company, as well as provide a lower interest rate on the loan in comparison to the return on equity investments.
D. THE ECONOMIC ENVIRONMENT
The economic factors of Australia including unemployment, personal income, inflation, and interest rates will each have an impact on the overall financial potential of the firm. In general, the country’s low unemployment levels will be positively correlated with the financial success of Lyft on behalf that lower unemployment levels equal higher incomes which, in turn, results in a significant increase in consumer spending. With Australia being ranked as having the largest median wealth in the world, personal income will significantly influence the pricing decisions of Lyft as they expand into new markets. Consumers with higher income levels tend to spend more on convenience purchases such as those offered by Lyft, so in essence, the higher the income level of the consumer segment, the more Lyft will be able to charge in that particular market. Australia’s low interest and inflation rates will allow the firm to competitively market their services to attract an increased demand by not only improving customer retention, but also customer acquisition rates.
E. COST ANALYSIS
As Lyft seeks to expand into the Australian market, there will be a variety of costs the firm will incur. Overhead costs will include accounting and legal fees, administrative salaries, insurance premiums, as well as government and licensing fees. The firm will also incur rent, utilities, and property tax expenses. Advertising and marketing expenses will also be encountered by the firm as the expand their rideshare service offerings. The company will also be responsible for monthly fixed costs associated with the fleet of vehicles available for rent to the firm’s drivers in an agreement made with Select Express Drive Partner. Additionally, the firm will incur costs related to both driver and customer retention rates. Although costs will vary depending on demand, the annual expected total costs to market Lyft in Australia is fifteen million dollars.
F. DEMAND ANALYSIS
Over recent years, ridesharing services have become a lucrative market across the globe. The abundance of available cost-efficient, on-demand ridesharing services via mobile application drives and is expected the further drive the growth of this market. The flexibility the firm has over its dynamic pricing strategy plays a vital role in this. Having the flexibility to fluctuate its prices based on periods of peak and off-peak demand allows the company to not only undercut competitor taxi services, but also increases profits and attracts a larger customer base. As the firm develops its presence throughout the country’s popular cities, the demographic market is expected to continue to grow and illustrate a positive correlation with the firm’s expansion. With this said, however, the firm will need to strategically market itself to stay ahead of its competitors who have already made a strong presence in the country.
G. COMPETITOR ANALYSIS
The largest competitors we believe we will encounter as we enter into the Australian ridesharing service market are Uber, Ola, and DiDi. Similar to our plan to utilize the dynamic pricing strategy in which we currently use throughout North America and Canada, Uber, Ola, and DiDi currently each utilize the dynamic pricing strategy throughout Australia. With this in mind, we will need to adapt our strategy in order to build a sustainable competitive advantage over these firms. In years prior, the surge pricing strategy set these companies apart on behalf that while Uber was essentially unapologetic in the utilization of this strategy and often times got accused of price gauging due to not have a pricing cap during peak periods, Lyft, on the hand, placed a two hundred percent or 3x pricing cap in their policy during these high demand periods which they refer to as Prime Time. However, in late January, Lyft eliminated this policy as a strategy to attract more drivers so that they could fulfill the user’s demand base and to be able to compete with Uber. The pricing cap has adverse effects on these companies due to that if they cap the price they can charge, then demand will increase, but the supply of available drivers will be adversely affected by a significant decrease on behalf that these drivers will flock to the competitor’s platform where they have the opportunity to earn more profit. While keeping the aforementioned in mind, as we globalize Lyft in Australia, our pricing strategy will be similar to our competitors of Uber, Ola, and DiDi and we will execute a dynamic pricing strategy without pricing caps in an effort to acquire and retain both our driver and customer base.
DON’T FORGET TO INCLUDE SOURCES