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PhonETic “Green” Phone Accessories - Case Study (Amended)

Introduction to the Company

Emily Tan is a phone accessories entrepreneur. After completing her bachelor’s degree at Sydney University (in BIS) she wrote to her family in Hong Kong to see if they would stake her in a start-up business in Australia. As she explained to her mother and father, when shopping at her local shopping centre in Broadway, she noticed the lack of “green” phone accessories outlets. In order to build her start-up company Emily decided she could combine her business and IS knowledge and love of the environment to fill this market gap. She knew a lot about:

1) Business and systems from her degree training; 2) Production of “green” phone accessories, within the Chinese market (Emily’s

cousin Eric has a phone accessories manufacturing plant in Guangzhou that utilizes recycled plastics and metals); and

3) Environmental issues. Since moving to Australia Emily had become a member of the Australian Conservation Foundation https://www.acfonline.org.au

After many telephone conversations and development of an initial business plan, Emily’s parents were eventually convinced of the merit and worth of idea and they organized a business loan and line-of credit for her with a local bank.

Together with another University of Sydney student and close friend Anthony (Tony) Ibrahim (who had also just completed his BCom in Marketing), Emily founded PhonETIc late last year. Emily and Tony found themselves having to organize everything that included:

1) Registering their business and domain name; 2) Renting, and outfitting their head office (which also included space for storing

inventory) and shopping centre kiosks; 3) Dealing with information systems and technology issues; 4) Hiring and paying staff; 5) Keeping track of inventory and shop orders; 6) Managing customer data; 7) Dealing with suppliers (not just Emily’s cousin); 8) As well as compliance with accounting standards and government business

regulations.

Emily and Anthony spent some time deliberating over a suitable name for their phone accessories business that could incorporate their names in a creative way and they finally settled on PhonETIc i.e. PhonEmilyTan(also Tony)Ibrahimc. They were finally on their way in the business world!

PhonETIc Staff

Luckily, Emily was able to recruit an experienced office manager (Sara) who had left a larger and more stable and secure manufacturing organization for the opportunity to work

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in a dynamic small business start-up environment.

Located at their Head Office in Ultimo are:

 1 partner (Emily) who owns the business and looks after the information systems and technology platforms;

 1 partner (Tony) who also owns the business and looks after sales and marketing issues;

 1 full-time office manager (Sara) who co-ordinates all aspects of the business (a bit like an “orchestra conductor”);

 1 full-time receptionist (Keith) who answers the phones and looks after the store orders;

 1 part-time Accountant (Linda) who looks after accounting requirements and government compliance; and

 1 part-time Purchasing Manager (Bart) who deals with suppliers and product orders.

PhonETIc also rents 5 shopping centre kiosks from Westfield at CBD, Bondi Junction, Parramatta, Miranda and Chatswood. These kiosks are staffed by10 casual personnel who are given monthly rosters detailing the number of days/hours they are to work and in which location. These staff members are generally university students, working mothers and semi-retired older workers who identify with PhonETIc’s green corporate philosophy.

Quote from Phil (PhonETIc Casual Employee)

I really like working at PhonETIc. Emily and Tony have established a great business with good corporate values that makes me also feel like I am making a contribution to making the world a better place. When I retired from the bank I thought I had retired from work for good, but working for PhonETIc is not only good for the pocket but it’s good for the soul.

While the business is reliant on the knowledge and experience of the partners it wouldn’t be able to function without the Office Manager (Sara) who is very experienced in managing all aspects of a business in its entirety. She understands various aspects of accounting and legal compliance, how to manage staff and the problems and issues that accompany balancing business risks with adequate management controls. Having had experience in the manufacturing sector, Sara understands what can go wrong with revenue and procurement cycles and processes and how organizational efficiency and effectiveness can be impacted as a result.

Quote from Sara (PhonETIc Office Manager)

As a start up business, Emily and Tony will need to take care that they establish sound, efficient and effective business processes right from the start. As a small business they will not have the luxury of having access to huge amounts of working capital and so will need to spend their start up funds carefully and establish a stable customer base quickly. Establishment of an adequate and stable cash flow to meet the expenses of the business will be a key focus for them in the first year of operation.

The following outline gives us a “window” into the everyday working business that is

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PhonETIc. We are able to see what motivates the partners (Emily and Anthony), office staff (Sara, Keith, Linda & Bart), the casual staff and PhonETIc suppliers and customers, against the backdrop of the phone accessories industry.

The Business Model

Core to the business model is sourcing and selling green and fashionable phone accessories to end consumers, by offering an incentive of donating a percentage of all sales to green not-for-profit organizations like the Australian Conservation Foundation.

Quote from Emily (PhonETIc Business Partner):

I have always had a dream to start a green business. My parents taught me that we have to share this planet with all other creatures to which we have a profound obligation to keep everything in balance. By combining these values with my business education I hope to make a difference to the quality of all life on the planet.

PhonETIc currently sells phone accessories to walk in customers (many of them return customers). Emily and Tony are also finding that many of their existing customers are also referring new customers to their business. Casual store staff feedback, highlights that PhonETIc market share is on the increase. PhonETIc prides itself on sourcing and supplying fashionable green phone accessories to its customers, maintaining close and ongoing customer relationships via a rewards system that donates a percentage of a customer’s purchase to a green not-for-profit organization.

Customers

A typical customer identifies closely with green and environmental values. PhonETIc customers (to date) have been young urban professionals and university students. Emily and Tony have been making an effort to source accessories manufacturers who mainly use recycled materials (metal and plastic) but who also have paid close attention to product design and quality elements. They have been active in establishing their green credentials through their customer incentive program, by developing relationships with green not-for-profit organizations by donating a percentage of PhonETIc sales to them on a quarterly basis.

Quote from Eleanor (Phonetic Customer)

I shop at PhonETIc because the staff are professional and friendly, but also because I like the idea of my purchase making a contribution to cleaning up the planet. It gives me some control and a say over the end result of my purchasing decisions, at a time when climate change is a big problem.

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Potential Customers

PhonETIc is keen to develop other types of customers and to expand its presence in the marketplace. Key to this strategy is to attract older customers who may value PhoneETIc’s dedication to a cleaner and greener environment (for their children and grandchildren) and who may want to purchase accessories for both themselves and their offspring. Tony is currently working with Bart and some of the casual employees, on a sales and marketing strategy to increase sales to the over 40’s demographic by 50%, by the end of the calendar year.

Suppliers

A PhonETIc supplier is a typical small manufacturer. Some of their suppliers focus solely on the manufacture of phone accessories (like Emily’s cousin Eric) but others produce a range of products including phone accessories, computer accessories, bags, plastic containers etc. PhonETIc will only deal with suppliers who use at least 70% recycled materials (generally plastics and metals) in their production processes. Tony and Bart have spent a great deal of their time identifying manufacturers who comply with this requirement but who also produce good quality and stylish accessories that are suitable for, and attractive to, their current customer base. With the development of their new marketing strategy, Tony and Bart realize that they may have to review their current supplier list to meet the demands of their potential client base (older customers).

Quote from Bill (PhonETIc Supplier)

I have been in phone accessories manufacturing business for many years. I have seen production processes become greener and cleaner over the years, providing companies are willing to invest in the technologies and staff to achieve these outcomes. It is expensive to upgrade your manufacturing business and then you must invest in the people to run the equipment, and designers who can work with recycled materials and produce good quality products. All of these costs must be managed and either absorbed by the business and/or passed on to our customers, however, we do make some savings by using recyclable materials, so our product costs are dependent on recycled material availability and costs. This is somewhat variable as it depends on collection and extraction processes of the recycling companies. Thankfully the staff at PhonETIc, understand the variability of the market for recycled materials are willing to work with us (and our variable material cost structures). We have established a close working relationship with them to achieve our (and their) strategic objectives.

Potential Suppliers

With a new customer base will come a requirement for different types of product designs. For example, whereas younger customers may want to “keep up with fashion trends” and will regularly purchase a new or multiple phone covers, older customers may want a more robust and “classic” design that will last longer. Older customers may also want to purchase “trendy” products for their children and grand children for special occasions such as birthdays and so will also want access to, and advice on these products.

Phone Accessories Supply Chain

The PhonETIc business model is essentially a finished goods (phone accessories)

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purchase and distribution model, which is based on retail customer sales, word�of� mouth customer referrals and social media recommendations. The company does not invest any significant amounts of money in traditional advertising. PhonETIc operates a “green” high quality business model at the upper end of the market, with “green aware” customers, based on their personal relationships. Tony is very outspoken about how he perceives traditional advertising.

Quote from Tony (PhonETIc Partner)

“Our products speak for themselves. Our customers are valued and discriminating consumers who know what they want. Once we have a customer we want them for life. Key to this is our ability to align our company values with those of our customers. This requires us to ensure that our entire supply chain is working towards “clean and green” products and that we also pass on some of our profits to organizations that are caring for and doing something about our environment. We need to be able to effectively tell this story to the marketplace. We have achieved our market share so far, by establishing a high profile web presence where potential customers can learn about our company values and view our products, as well as our relationships with not-for-profit environmental groups who refer their members to us. We also get strong referrals off friends and relatives of our exiting customers.

Moreover, PhonETIc prides itself on its approach to nurturing relationships with customers and suppliers. For example, every year they run two special customer events at their Head Office where they invite selected customers to a lunch and then run focus group discussions on current product feedback and future product development. In addition to this they also regularly meet with their suppliers via Skype to get their input on current market trends (that they are seeing in sales to their customers) as well as supplier suggestions as to how to make their products more “green and clean”.

Typical Products

PhonETIc focuses on fashion accessories (not batteries or complex hardware) in their product range which includes:

 Cases and covers;  Screen protectors;  Stylus pens;  Decorative phone jewelry;  Arm bands;  Ear buds;  Car holders and cradles;  Selfie sticks; and  Tripods

They work closely with their suppliers on differentiating their products from those of their competitors paying strict attention to innovative product design, quality and green materials and construction. Tony and Bart are also always on the look out for new and innovative products (in current product categories but also in new categories) that can be added to their range.