Market Demand
The global demand for the carpets has risen 5 percent annually form 2012. Additionally, the marketing of the carpets forecasts to grow by 5 percent from 2014 to 15. 3 billion square meters. Tentatively, in terms of dollars, product demand projects to augment 6.5 percent per year, to $ 204 billion. Undoubtedly, the advances in the market project acceleration in world residential building construction activity, supported by an upturn in spending in industrialized countries, like the US, as well as a healthy sales environment.
On the other hand, North America registers the fastest sales in terms of gains. This largely centers on a strong rebound in residential construction expenditure in the US. Retentively, the segment experiences a double-digit annual increase in the regional output.
Developing parts in Asia will post the next fastest advances, followed by Mideast region, South America and Europe. China will account for almost 40 percent to all the additional sales through 2013, thus strengthening its position as the largest carpet market in term of areas. On the other hand, the demand for the carpeting services in the areas of lower volume, such as Turkey, Vietnam, and Thailand, the intensity of growth is expected to grow. Nevertheless, despite the increase that is not relatively strong in comparison to the developing parts of the world that includes western countries and Japan. The growth is as a result of renewed strength in new housing construction spending, as well as transportation equipment.
In Russia for instance, the carpeting market presents to augment by 3 percent per year to an estimated 330 million square meters in 2014 that decelerates from the preceding 2004-2009 period. Product demand is decreasing, due to their negative impact of the declining household units built as most of the country’s population conversely decreases. Nevertheless, the flooring market will be buoyant with retrospect to all the factors that affect the product. Additionally, the motor vehicle outpost expects to triple through 2014 as the foreign investment in the industries is constantly growing. In January, for instance, Hyundai started commercial production for vehicle plant in Saint Petersburg, and Ford announced plans of assembling vehicles in Russia through a joint venture with the locally based sellers.
As such, the carpet production of plants in Russia will augment by 2.8 percent annually through 2014 to 270 million square meters. The approximation depicts the increased demand for the carpeting products as well as services in domestic demands. Nonetheless, it is not augmented enough to prevent the nations’ trade deficit in production from widening. Additionally, the products will advantage from extensively favorable markets’ environment in Russia as well the neighboring East European countries, with the capacity gains in production assisted by local investments. For instance, in 2009, Tarkett started manufacturing operations at a new laminating flooring plant near Moscow. The industry output growth restricts by intense population competition from suppliers in other parts of Eastern Europe.
The company has the potential for growth from the increased demand for online purchasing. Enhanced by technology and security protection improvements, free shipping and more liberal return policies promote the market. This makes the demand for the Internet presenting these products to go up. In order to expand its markets, the company requires adopting the use of e-commerce. The company can, therefore, use this opportunity resulting from increased demand for online servicing to increase its profits.
Price floors
In some cases, TPP TPP involves price floors. In the case of fair trade, the company would set a price for the product that was higher than the equilibrium price. As such, the company then lowers the prices for their services.
Elasticity
The demand for TPP products closely links to the overall pace of the building as well as remodeling of ventures in new areas. As a result, the market is highly sensitive to alterations in the national income. As such, the carpet industry is highly competitive. So TPP demand is as well sensible in pricing. In the past years, TPP sold 20 million square yards of the carpeting products. Within any price alterations, the marketing director, on the other hand, anticipates current year sales augment to 40 million in the case of venturing into the online business. Consequently, carpeting services are highly sensitive to changes in the nation’s income. As such, the alterations of the key factors influencing the cleaning business, thus, question the elasticity of such business ventures. The cleaning business is highly competitive, thus TPP demand is sensitive to price.
The online business forms a connection between the corporation and the market. 10 % of consumers are online marketers. As such, the augmented sales expected will be proficient in establishing the connections with the areas that have a high demand for the services. The connection with the various markets presents the probability of attracting new markets in the regions influenced by it. Additionally, the rise of the online marketing strategy will promote the advertisement of the products.
Carpet cleaning companies know the importance of advertisement in order to attract more customers as well as increasing the coverage of their services. With retrospect to clean fax, thousands of prospective customers search online for carpet cleaners each month. In January 2007 alone, 750000 people, in the US alone, employed the term “carpet cleaning”, in adapting an online search engine. On the other hand, pay per click advertising is routinely in cooperated with the generation of traffic on the website, advertisers pay for web-based ads. Most of the cleaner’s website is in search of indicators that are business credible for the display of the products. As a search, the results depicted by clean fax present the availability of their new market for the services. As such, the services depict the availability of the market in the venturing into the new areas.
With the absence of the price change in the services, there is an expected soar of sales of up to 50 million. As such, the calculated income tax would be inconsequential. Given a rise in income, the volume unit could be maintained whilst an augment in the price of $ 1in every unit. As the demand of the service, as well as pricing, is in the elastic range, EP= -8 in price, it will result in the lower total revenues.
Costs
An inexpensive carpet parallels the performance as well as appearance retention of proffered grade. Thus, in the selection of affordable pricing that will meet the expectation of the market. Diminished quality in the services of the cleaners based on the service alone for a moderate traffic area simply will not present the most proffered value. With retrospect to the total cost of ownership in the determination of the value of better services is the best idea. So, the costing services will depend on the market. As a result, the market that has a lot of customers proffering the services will result in the high-cost estimation as there will need to satisfy the market.
Revenue forecast
Rates in the office cleaning services in the DC, for instance, range between $0.8 to $ 1.25 per square foot, relying on the building, as well as, the citing of the area. Additionally, other factors that influence the rate altered include the frequency of cleaning, the total area cleaned, differences in the floor surface, the volume of traffic of the customers, partitions and the amount of trash generated. As such, a billing rate of $ 1.05 per sq feet employed in year one and assumes daily cleaning services at one hour per site, therefore, creating a profit platform. Undoubtedly, the rates augment by five percent annually thereafter. The revenue presents a partner based scenario, thus the two five large customers contract for cleaning service assists in launching the cooperative. These factors affect the revenue of the servicing company in the new market. Tentatively, the revenue augments over the five years, where the monthly break-even the sales achieved throughout the years.
Profits
The appendix presented projects the detailed financial projections for the startup company. The first-year sales present at $262,500 as the level of sales would employ 12 full-time workers. As such, the company achieves profitability on a monthly basis in the 31st month in the years four as well as year five. The projection depicts augmented profits experienced by the company. As such, the improved projection forms the basis of the augmented service sale in the new region.
The factors that threaten profitability in the cleaning industry are the levels of existing and possible competition. The five forces model explains the risk to the potential profit of the company in a competitive market such as this one. The five forces model involves rivalry between existing firms, the threat posed by new entrants, the threat of a substitute and the bargaining powers of buyers and suppliers.
Talking about competitive rivalry, it is necessary to mention that the high-end industry has inflexible competition and firms must find means to stand out. Large companies have the biggest market share, but also face competition from small businesses. Competition canters on the sectors of fashion, price, quality, advertising, and customer service, as such, offering a better sales platform. The ideal aspect to change would be the price, but since most firms are incapable to change prices significantly, they resort to customer service. The majority of the larger firms has expanded their business to the Internet, and this has given them an advantage over the smaller firms. Internet sales have increased returns and provide a way of offering more personal customer service.
The threat of new entrants, when starting a stiff competition, a company has to invest a lot in products that will not be immediately sold or work at less capacity. Economies of scale are, therefore, significant. Large firms that can produce large economies of scale are at an advantage. It is hard to enter a new market and achieve a monopoly or instant success. The threat of new entrants is, therefore, low.
The threat of substitute products: the fact that there are numerous high-end stores offering the same products makes it easier for an individual to substitute products in one store with those from another. The threat of substitute products is extremely high.
Supplier power: the bargaining power of suppliers is low because there are scores of supplier’s selection. In fact, large service outlets operate with the principle of not depending on a single supplier. Supplier threat can be enormous if there are few companies to supply, but this is not the case in the high-end cleaning industries.
Bargaining power of customers: there are elements that determine the power of buyers. There is an extent to which they look to bargain prices (price sensitivity and the relative bargaining power). On the other hand, the relative bargaining power is how many buyers are successful in forcing the price down. Other firms offer most of the TPP’s products, and this increases the power of the customer over price. As such, price sensitivity is high and pushes the prices down in the contemporary market.
Evaluation of the financial statements of TPP showed positive results. Forecasting as far as ten years into the future shows the possibility of growth. TPP was going South in 2007, but a change in business tactics and management put it back on track. Cost-cutting and repositioning strategies put it back on the map in terms of profitability in 2009. Three models in 2007 concluded that TPP had better sales. The abnormal earnings growth, free cash flows, and the residual income models all concluded that the stock price overstated by about $20 per share.
Marketing
Considering efficiency, market systems are impossible to beat. They have the idiosyncratic merit of competence prices and that, foremost, allow a drastically improved degree of resourceful choice, thus, making cost information commonly obtainable. Working throughout mutual alteration, markets also offer physically powerful motivations towards effectiveness, for entrepreneurs especially and distributed control allows efficient and rapid solutions. Many have condemned markets for their unenthusiastic effects on culture and personality, but Lindblom discovers little of this persuasiveness. Additionally the market, during persuasion, generates market circularity — but sales operations are “not very intimidating to consumer control over market choice”. Switching to enterprise “obstacles” to equality, Lindblom pressures the danger of giving democratic “rights” to conglomerates and treating them as individuals: “In a democratic system, a conglomerate would not go into court as a person but in its role as a communal foundation.”
SWOT analysis is a strategic management tool used by the strategic managers of any organization in the evaluation of its performance in terms of strengths, weaknesses, threats, and opportunities available to them. An analysis of the electronic industry in which it operates depicts the following as its strengths: a wide geographical presence, large distribution of stores and a broad product offering.
The weaknesses that are challenging to the operations of the company include seasonality of the generated profits, fluctuations of the volume of sales and accidents while handling the electronics among others. The company also faces some threats that lead to a further decline in net profits obtained. Other sources of its threats are a global economic slowdown and increasing labor acquisition costs.
The company’s weaknesses and threats countered by its maximization on seizing the opportunities available to the organization such as the increasing demand for online communication and purchase, probability of emerging markets and the rapid growth of the global electronics industry which ensures the future growth of the company sales and market share.
