IBCStephen Lumbard & Mark Gilmore
Contents
1Introduction
1.1Executive Summary
1.2Market Definition
2Marketing
2.1The Macro Environment
2.1.1Political Factors
2.1.2Economic Factors
2.1.3Socio-cultural Factors
2.1.4Technological Factors
2.1.5Environmental Factors
2.1.6Legal Factors
2.2The Competitive Environment
2.2.1Threat of entry of new competitors
2.2.2Bargaining Power of Suppliers
2.2.3Bargaining Power of Customers
2.2.4Threat of substitute products
2.2.5Intensity of competitive rivalry
2.3Marketing Strategy
3Realisation
3.1Company name and logo
3.2Building requirements
3.3Office Requirements
3.4Staffing requirements
3.5Day to Day Operations
4Finance
4.1The spreadsheets
4.2Most Likely Scenario
4.3Optimistic Scenario
4.4Pessimistic Scenario
5Strategy
5.1Strategic Position
5.2Strategic Direction
5.3Strategic Analysis
5.3.1Strengths
5.3.2Weaknesses
5.3.3Opportunities
5.3.4Threats
5.4Three Year Plan
6Conclusion
7References
1Introduction
1.1Executive Summary
Our Mission Statement is as follows:
“Our mission is to generate a profit by providing a bike rental service to people in Sheffield, with a target market primarily consisting of students.”
Hallam Bike Hire will be a small business start-up based in central Sheffield, South Yorkshire. The business will rent out bikes to people (primarily students), and will operate as a partnership, with Stephen Lumbard and Mark Gilmore as partners. The business will be based in Sheffield city centre, and will consist of a warehouse containing all the bikes to be hired and a front end to deal with customers, which will be manned by a single employee at any one time. The management and administration of the business will be conducted by the partners working from home. The partners will manage the business in addition to their main full time jobs. It is envisaged that once the business has made it through the difficult first few months, it will require relatively little management, so management in the partners’ spare time would be viable.
The warehouse will contain bike racks to enable the bikes to be stored correctly. If the business is successful, more bikes and bike racks will be purchased. The business will only be open during semester times, due to the fact that the main target market is students. The bikes will require maintenance and checking once per month with no availability for a day. This will be done by the employee at the warehouse in addition to their duty of renting out the bikes. They will be trained on an evening course for six weeks on how to properly maintain the bikes. Should the employee run out of time and not be able to service the bikes that day, the partners will help out in the evenings as they will also be trained on how to service the bikes. Customers will be given an option to “hire purchase” bikes, meaningif they rent the bike out for 12 weeks in a 12 month period, they will be given the bike to keep. Additional extras will also be available to buy, such as helmets, reflective clothing, cable locks, etc.
1.2Market Definition
Sheffield is England’s fourth largest city with a population of over 500,000. It also has a large student population, with two universities accommodating over 45,000 students. The potential target market is very large. The business will primarily target students, and the marketing will reflect this. Thebusiness has been deliberately situated in the centre of the city, between both university campuses to be as useful and as visible as possible to students.
2Marketing
2.1The Macro Environment
To analyse the macro environment, we will conduct a PESTEL analysis:
2.1.1Political Factors
Sheffield Cycling Action Plan
In 2006, Sheffield City Council published a Cycling Action Plan. The objective of this plan is to create conditions in Sheffield in which more people choose to use a bike as their daily means of transport. Key to this will be improved cycle routes throughout the city centre.
2.1.2Economic Factors
Current Recession – The “Credit Crunch”
As a generalisation, most people are affected by the recession, and as they feel the effects of the economic climate, it is possible that they could look at cheaper methods of transport such as cycling rather than driving. People may also be more inclined to rent for a smaller weekly fee than too make a more expensive one-off purchase.
2.1.3Socio-cultural Factors
Health Consciousness
People will realise the health benefits of cycling as a means of transport above driving and public transport, and cycling is being actively promoted as a healthy choice in the NHS’ high profile active4life initiative.
2.1.4Technological Factors
The development of more affordable automated bike release technologies (similar to that of the Paris Vélib)could save the company a significant sum of money by reducing staffing costs to a minimum after an initial investment in the technology should the company grow large enough.
2.1.5Environmental Factors
Tackling Climate Change
Currently there are a number of Government initiatives as well as legislation in place to help reduce the impact of climate change, such as the UK Climate Change Program, and the Climate Change Act 2008. The Government is actively encouraging use of less-polluting means of transport.
2.1.6Legal Factors
The company will have a responsibility to ensure the health and safety of employees and customers using the bikes. Safety checks must be carried out and all necessary safety equipment must be available, at the expense of the company. The company should also promote cycling proficiency, and should ensure all employees are proficient and trained accordingly. The company should ensure that customers agree to ride safely and legally. To ensure it is legal to ride the bikes the company rents out on the road, the company should fit the relevant front and rear lights to each bike. These should be (from
One steady, fixed white light, marked BS6102/3 (or equivalent), positioned centrally or offside, up to 1500mm from the ground, aligned towards and visible from the front.
One steady, fixed red light, marked BS3648 or BS6102/3 (or equivalent), positioned centrally or offside, between 350mm and 1500mm from the ground, at or near the rear, aligned towards and visible from behind.
One reflector, coloured red, marked BS6102/2 (or equivalent), positioned centrally or offside, between 350mm and 900mm from the ground, at or near the rear, aligned towards and visible from behind.
Four reflectors, coloured amber and marked BS6102/2 (or equivalent), positioned so that one is plainly visible to the front and another to the rear of each pedal.
2.2The Competitive Environment
In order to analyse the competitive environment, we will use Porters 5 Forces model:
2.2.1Threat of entry of new competitors
While similar companies are currently starting up across the country, no bike hire companies currently exist in Sheffield. Should the business be successful and profitable, it is likely that other companies will want to enter the market, due to the sheer size of the target market meaning a competitive environment is viable. If other competitors did want to enter the market, the only barrier to their entry would be the initial investment. However, in that instance Hallam Bike Hire would already have significant advantages following our initial investments and success. Also, if Hallam Bike Hire was able to secure partnerships with both Universities and the City Council before any competitors entered the market, again we would be at a significant advantage.
2.2.2Bargaining Power of Suppliers
It is envisaged that within the current economic climate, suppliers would be more than willing to do business with a start-up company in order to generate as much turnover for themselves as possible. While we are relying on a non-profit company to supply bikes as cheaply as possible, the money we could potentially generate for that organisation as regular customers would put us in a strong position when working with them. Also, should Hallam Bike Hire be successful it would give us extra bargaining power over other suppliers.
2.2.3Bargaining Power of Customers
The customers will have relatively low bargaining power: withdrawn bus routes and unwillingness or inability to use a car for their journey mean that the only alternatives for our target market are to walk or cycle. Hallam Bike Hire must ensure that rental is cheap enough to dissuade potential customers from simply purchasing their own bike.
2.2.4Threat of substitute products
Since the company came into existence to fill a gap in the market caused by the withdrawal of popular public transport routes, there is little threat from substitute products; the routes from the main student areas to the Universities and the City Centre are notoriously car-unfriendly, parking on site is prohibitively expensive, and most student accommodation lacks car parking. While many students would simply walk as opposed to cycle, a large proportion of the student accommodation is further than a 30 minute walk from the campuses, making it likely that some students would not see walking as a viable method. Also, the main student areas fall outside of Supertram routes. It should be considered that should the withdrawn services should be reinstated, it is highly unlikely that the business will be viable.
2.2.5Intensity of competitive rivalry
As previously suggested, on entering the market Hallam Bike Hire would have no direct competitors, although should the company be profitable this scenario is likely to change. In the event other competitors do enter the market, it is likely that an already successful Hallam Bike Hire would be able to use economy of scale to reduce prices and make it difficult for any new start-ups to compete.
2.3Marketing Strategy
As Hallam Bike Hire is actively targeting the student market following the withdrawal of popular bus routes, it was important to do research into the potential number of students who could become customers. Data from the National Travel Survey ( /datatablespublications/personal/factsheets/cyclefactsheet.pdf) suggests that 3% of all commuting trips are made by bicycle. Assuming that all 45000 students travel to University every day during term time, that results in 1350 possible cycling commutes every day. Simple observation suggests that far fewer students than this currently cycle to and from the Universities. Of particular interest are the 3600 (108 possible cycling commutes per day) students living in the popular Endcliffe Village residencies, in the popular student area near Ecclesall Road, as well as other students renting private accommodation in this area. With these being approx 30-40 minutes walk from Sheffield University campuses, the withdrawal of the bus route provides an excellent opportunity to target these students. Again, observation suggests that far fewer students from this market currently cycle, so we have an opportunity to develop an underdeveloped market.
Basing our warehouse in this area removes any need for students to store bikes themselves; they could make a short walk simply pick a bike up in the morning and return it in the afternoon. Common sense suggests that this convenience would make it much more likely for students to hire a bike.
Based on these findings, our marketing will aggressively target students in the Endcliffe Village, while also targeting the wider student population. To save on costs, all marketing activities such as flyering, design etc. will be done by the company founders. We will market the company through the following avenues:
Figures quoted from
Advertising in the student newspaper, Sheffield Forge Press.
Print Run: 5000
Readership: 15000
Eighth Page Advert: £210
With a readership approaching 1/3 of the entire of Sheffield’s student population, Sheffield Forge Press is an ideal solution for getting the company known within the wider student population, and at £210 for an eight page advert represents good value in relation to the possible audience reach. However, it is likely that a significant percentage of the readership are not suitable targets for the business, due to factors such as location. This does not detract from the fact that running occasional adverts in the newspaper is still a worthwhile activity.
Hiring a stall at Freshers Fair for flyer distribution.
Attendance: 10000
Standard Stall: £500
The Freshers fair at the start of the University year provides an ideal opportunity to market to the business to new students, many of whom will be unfamiliar with Sheffield, and as such will choose to live in student accommodation such as Endcliffe Village. It will also be an opportunity to remind returning students who may be affected by the withdrawn bus routes of the existence of the company. However, hiring a stall at Freshers Fair is expensive, and as such only 1 days stall hire can realistically be afforded. In this time we would estimate that 3000 flyers would be distributed from the stall.
Hiring a stall at Refreshers Fair for flyer distribution.
Attendance: 7000
Standard Stall: £400
Refreshers fair is the 2nd Semester equivalent of Freshers Fair, and again is a good opportunity to target returning students. It is cheaper to hire a stall here than at Freshers Fair due to the lower attendance, but it is still unrealistic to market at Refreshers Fair for more than one day.
Flyering on the Piazza, Endcliffe Village
Resident: 3600 Students
Cost: £100 per day (Max 2000 flyers)
Flyering in this area previously identified as a core market is seen as necessary to the success of the business. In relation to the other flyering activities, the costs involved represent poorer value in relation to market reach, but this is seen as worthwhile to reach potential key customers.
Sheffield University Student Union Concourse Flyering
Daily Footfall: 10000
Cost: £150 per day (Max 2000 flyers)
Flyering in this area will again reach a wide audience, but as with the Sheffield Forge Press advert our services may be unsuitable for a significant proportion of the audience reached, although again the activity is still deemed worthwhile.
Banner Advert, Activities and Sport Email Newsletter
Mailing list: 2500 Students
Cost: £200 per advert per newsletter
While again a significant proportion of the audience reached may find our services unsuitable, students reading this newsletter are more likely to lead an active lifestyle, and by association more likely to be willing to cycle to University, making this a valuable target audience.
From
10000 A6 flyers £165 + £20 Carriage
From
200 10cm x 4cm Solid Matte vinyl stickers £54.05 inc delivery
3Realisation
3.1Company name and logo
The name Hallam Bike Rental was decided upon as an obvious and straightforward company name. ‘Hallam’ was used in preference to ‘Sheffield’ to align the company better with the Student market; Hallam and Hallamshire are frequently used in place of Sheffield for student-orientated services.
A company will not be hired to create the company logo, as both company founders have enough expertise to create a relevant logo. It is envisaged that the logo again will be obvious and straightforward, as well as being ‘high impact’ enough for successful marketing.
3.2Building requirements
Initially, no further premises other than the initial warehouse are required for the chosen business model. The warehouse will need to be supplied with electricity, gas, and water; estimates of the relevant utility bills will be taken into consideration. A telephone line is not required as Internet access is not necessary, and we intend to supply the employee with a company mobile phone.
A long-term goal of the business would be to have multiple rental sites, as this makes it much more convenient for the customers since they could pick the location closest to them, resulting in more custom. However, the economies of scale required to make multiple locations viable put this ambition outside of the scope of our initial 3 year forecast.
3.3Office Requirements
As the company has no major IT requirements, other than keeping a record of rentals, invoicing customers, and day-to-day administration tasks, an expensive computer is not necessary. As such, a second-hand laptop will be purchased for £99 from detail.asp?ProductID=652. To save money on software costs, the laptop will be installed with the Ubuntu operating system and the OpenOffice office suite, both of which are free and open source. The software has been checked for compatibility with the laptop and there should be no issues.
A printer is also required to produce customer invoices for deposits. Since the volumes will be relatively small, we believe that an inkjet printer will be better value than a laser printer; as such, the printer we will choose is a HP Deskjet 1560 from for £29.99.
A mobile phone is required for the employee during business hours to answer any enquiries, and make any necessary calls. The tariff chosen will cost £15 a month from The decision to use a mobile phone rather than a landline phone has been reached as it is significantly cheaper; a business landline alone would cost £14.10 a month before the addition of a call plan. As the mobile phone plan is SIM only, a spare phone will be donated from one of the company founders.
A desk and chair will be required for the office. The cheapest computer desk from Ikea ( costs £10.76 and the cheapest suitable chair from Ikea ( costs £29.26. All other office-related expenses can be classed as incidental.
Should the business be sufficiently successful, it is envisaged we would invest in unmanned rental stations with automatic unlocking technology; however, the investment required means that they business would have to be operating on a scale larger than we can envisage within the initial 3 year plan.
3.4Staffing requirements
Until further expansion, staffing requirements remain at 8 man hours per day, split into two shifts (7am-10am and 3pm-7pm). This works out at £52 per day. Staff would work on a casual basis, thus providing sufficient cover for holidays etc. To maximise profit margins against costs, the business will only operate during University term times, as it is not envisaged there will be enough demand outside of term times. If such demand did arise, staffing requirements would be adjusted accordingly, but this is not anticipated to happen within our 3 year forecast. Furthermore, in the long term the company would be willing to invest in unmanned rental stations using automated unlocking technology to keep staffing costs to a minimum should the business grow sufficiently, although this is outside of the scope of the 3 year plan.
We opted to employ staff rather than work ourselves as initially there would not be sufficient profit in the business for either founder to take a sufficient wage. However, this scenario is likely to change after sufficient expansion, although again this is not anticipated to happen within the 3 year forecast.