Business Financing at Sonny Ericsson - Case Study Example

? Economics Introduction A business start up begins with the inception of a business idea; the idea is later transformed to a product or service. After the product or service has been identified it is vital to carry out a comprehensive financial and legal planning. Whereby, both internal and external factors that affect a small business start up should be taken into consideration. The first step for starting a business involves preparing a business plan, this plan acts as a blue print for guiding an entrepreneurs on how to start, operate and terminate a business. The second step entails getting training that may help an entrepreneur to identify the most suitable sources of business financing (U.S.Small Business Administration, 2013). Therefore, Sonny Erriccsson phone was identified as a product of study, whereby, its life cycle and future market scope has been discussed under the following subheadings. a). Specifically identify the product; its life cycle and the initial and future scope of the market intend to serve. The product in this case entails Sonny Erriccsson phone, this product falls under electronic and communication industry. Sonny Erriccsson phone entails five phases of product life cycle development namely; development phase, introduction phase, growth phase, maturity phase and finally, decline phase. The introduction phases focuses at creating awareness to both new and existing customers about the existence of Sonny Erriccsson phones. However, this stage tends to experience numerous challenges such as low sales volumes, low profits, higher marketing and advertising expenses. On the contrary, is the growth phase, this phase involves creation of brand preference and market share. In addition, sales and profits tend to be higher in this phase as compared to the introduction stage (Grieves & Michael, 2006). In the fourth phase (maturity phase), marketers focuses at maintaining the already established market share through modification of Sonny Erriccsson phones to make its product more competitive. The final phase is declining phase whereby, the market has become saturated and the product start losing customer causing a decline in sales volume and profitability to decline significantly. Therefore, marketing managers may respond to this stage by either selling the business to a market niche or carryout phase withdraw before incurring losses (Grieves & Michael, 2006). b). Recognize and evaluate the market structure, degree of competition and the availability of substitutes initially and in the future, locally and globally for the proposed product. Sonny Erriccsson mobile is a wholly owned subsidiary of the parent company known as Sonny Corporation. Sonny mobile become part of Sonny Company through acquisition of Telefonaktiebolagate shares on 15th February 2012. The market structure for Sonny Erriccsson has been highly restructured with an aim of increasing future operational efficiency. For example, Sonny moved its operation structure from Sweden to Tokyo Japan. Additionally, the company CEO announced that sonny his company had integrated all its subsidiaries located in different regions to increase market share as well as to reduce operating cost. The CEO further issued a notification that to the Sony authorities in Sweden that the company was aiming to enhance efficiency by eliminating redundancy in the entire company (Sony Inc, 2012). The degree of competition in this market tend to be very stiff due to globalization and new scientific innovation hence, making different phone manufacturers such Samsung, LG, Nokia, Motorola among other competitors who are continuously modify their products by adding more features to make their products more attractive before the eyes of the customers. In addition, there are numerous substitutes available in the market that can serve the same purpose as Sonny Erriccsson phones. For example; I pads, I phones and Samsung galaxy phones may act as a good substitute. The above substitute may not only serve the local meets but also global needs for the current and future customers (Sony Inc, 2012). c). Identify the various barriers to entry to the market structure in which the proposed business will compete, entry strategy and the application of economies of scale for the proposed business. The various barriers in the telecommunication industry where Sonny Erricsson phone operates include: complex legal formalities that hinders new entrants, higher capital requirements as well as discouraging pricing strategies. Whereby, establish firms may sell their products at a loss so that they can discourage new entrants into the market. In addition, customer loyalty may act as a major barrier. Whereby, new entrants may not get customers easily because customers had developed loyalty with already established products. The entry strategies in this market may include: Technical innovation strategy where the superiority of Sonny Erricsson phones may be demonstrate in the new market. Penetration pricing strategy whereby, low prices may be charged on the products sold. Product adaptation may also be utilized whereby; necessary modification on products may be carried out (Pagani & Margherita, 2005). The application of economies of scale by Sonny Erricsson mobile has made the company to enjoy operation efficiency because the company has become bigger and financially sound. This has been achieved via introduction of new technological innovation that has helped the company to cut down its operation cost. This has increased organisation profitability as well as enhancing organisation ability to produce goods and services in large scales (Lymbersky & Christoph, 2008). d). Evaluate and specify the potential demand and buyers of the proposed product. The potential demand and buyers of Sonny Erricsson phones are young people who are highly fascinated by numerous features added on those phones that allow them to access internet at ease. Other buyers include business people and corporate due to the fact that this product does not only meet their needs and wants but it also exceed their satisfaction and hence, making this product to be highly preferred by numerous buyers. In addition, this product has an numerous buyers in Tokyo, Sweden, India, African continent, United Kingdom., United States among other parts across the entire globe (Pagani & Margherita, 2005). e). Identify the degree of price, income and cross elasticity of demand for the proposed product and their influence on the various pricing and production strategies of the proposed business. The prices charged on Sonny Erriccsson products tend to have a significant impact on demand. If the prices are increased, buyers shift to other substitute phones such as; Nokia, Samsung galaxy among other substitutes. In addition, the Sonny Erriccsson Company has manufactured various brands that cater for buyers with different levels of income. This is because the level of income may further influence demand. People with higher level of income tend to afford more expensive models of Erriccsson Sonny phone as compared to those with low income levels. In above connection, price elasticity of demand tends to have a significant impact on demand of Sonny Erriccsson phones. Whereby, a small change in phone price tends to have a significant change on demand. For example, an increase in prices of Sonny Erriccsson phones causes the demand to decline significantly because demand is highly sensitive to any slight change in prices(Highly elastic). On the contrary a decline in prices of Sonny Erriccsson phones leads to an increase in demand (Lymbersky & Christoph, 2008). This indicates that the demand for Sonny Erriccsson phones is highly elastic because any slight increase or a decrease in prices cause a significant change in quantity demanded. Therefore, this change tends to influence the pricing strategies to be used when entering the new markets. For example, the company may decide to utilize market penetration pricing strategy to penetrate new markets because this strategy allows charging of low prices which helps to increases sales volumes. Additionally, a company may utilize focus strategy by concentrating into a particular market or region while changing their customers’ similar prices for similar products, while at the same time ensuring that the prices that they charge are unique from those charged by their competitors (Lymbersky & Christoph, 2008). f). specifically describe the competitors and evaluate the strategies to maintain the competitive advantage of the proposed business in the market. Some of the major competitors in this market include; Motorola company that deals with production of mobile phones and other electronic products, Samsung company and Nokia company. The above mention competitors may significantly influence the competitive strategies that Sonny Erriccsson Company may adopt in order to maintain a competitive advantage. Among the competitive strategies that might be applied include: benchmarking strategies, where the company may emulate some of the production and marketing techniques of the best performing company. In addition, porter’s generic strategies might be employed. For example, market segmentation strategy may be utilized to apportion the market to be served. Secondly, differentiation strategy may be utilized to maintain competitiveness through adding new features that may attract new customers as well as retain the existing ones. Cost leadership strategy may be applied. The companies decide to become a low cost producer in the entire market by managing its production cost and selling its products at a lower price. Finally, focus strategy may be utilized whereby; the company may concentrate in one market in order understand its dynamics (Day & George, 2004). g). critically evaluate the current and future industry trend for the proposed business. The current trends regarding the application of Sonny Erriccsson phones has been grown significantly since the year 2011. This trend indicates that the global trend for mobile phone application has increased tremendously over the recent times. This may be attributed to new technological advancement, new innovation and development of smart phones, revenue restructuring among other factors. More than three hundred and seventy one million phones were shipped between the year 2011 and 2012 (Pr Log, 2012). The future trends of telecommunication are predicted to grow at a rate of 19.8 percent per annum as a result of new innovation and higher increase in the application of smart phones. In addition more advanced data enable gadgets will have developed by the year 2015. Whereby, features of Sonny Erriccsson hardware will be less relevant and emphasize will be on phone software such how well can phone operating system hold large data as well as its mega pixels. Though there has been great evolution of Sonny Erriccsson phones, more evaluation dynamics in terms of the future trends will be experienced. It has been predicted that those phones will have the highest speed that has never been experienced before (Pr Log, 2012). References Day & George S. (2004). Wharton on Dynamic Competitive Strategy. New York, NY [u.a.: Wiley. Grieves & Michael.(2006). Product Lifecycle Management: Driving the Next Generation of Lean Thinking. New York: McGraw-Hill. Internet resource. Lymbersky & Christoph. (2008). Market Entry Strategies: Text, Cases and Readings in Market Entry Management. Hamburg: Management Laboratory Press. Sony, Inc. (2012, August, 23).Sony Mobile Communication Announces New Operational Structure and Reduction in the Work Place. Retrieved: on 20th November 2013. Pagani & Margherita.(2005). Encyclopedia of Multimedia Technology and Networking. Hershey, PA: Idea Group Reference. Pr Log.(2012 June,3) Global Mobile Trends and Enablers: Current State and Future Outlook.Retrieved: on 20th November 2013. U.S.Small Business Administration. (2013 November,18) Thinking about Starting a Business. Retrieved..on 20th November 2013. Read More