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1. Executive summary
1.1 General company description
Fin is a ring gadget that you wear on the thumb and make your whole palm a digital interface. It works as a
universal remote control and the best is you can operate it just by gestures and doesn’t require instructions by
voice or even looking at it. Its Head Office is located in Palo Alto in the Silicon Valley whilst the
manufacturing is outsourced to China. It can play a significant role in several market segments like education
system, office, leisure, aid for the blind/handicap and overall it is a consumer gadget that can be used in day-to-
day life. We are still a young company on a development stage and will be prepared for our first shipment in
January 2015. We believe that Germany is a major market for us as it encourages innovative products and has
availability of skilled and educated people with a large population of 82million people.
1.2 SWOT analysis
Strengths:
• Fin is a compatible wearable technology that can be paired
with three distinct Bluetooth devices.
• Fin is a light, dust proof, water proof and durable
technology which can be worn on fingers which make it so
easy to access mundane activities.
• Fin technology is offered at an affordable price and acts as
a security authenticator, which recognises each finger
print.
• This technology helps and makes life easier for the
visually challenged people and is also fashionable to wear.
• Fin provides touchless interactions and gesture interaction
on palms (Wearfin, 2014).
Weakness
• As Germany being a new market, Fin may face
problems with lack of knowledge about the local
market, distribution channels and resource and
development.
• The lack of funds as Fin is a start-up company, which
in turn may affect the scenario of dealing with
unexpected high demand.
• As the assembly unit is based in China, there’s always
a threat of replication of the procedure which ia a major
problem (EuroMonitor,)
Opportunities:
• Fin being a wearable ring which has numerous
applications with different electronic devices.
• Fin has a huge market potential and can grab a larger
market share majorly associated with automobile industry
and consumer electronics industry.
• Fin has a huge opportunity to expand to the whole of EU,
as Germany is major economy to start with.
• Fin’s use can be helpful to revolutionize the way visually
challenged people deal with the world.
Threats:
• The major threat will be faced by the competitors like
Logbar’s ring, Myo armband and Nod ring who will
arise due to first mover situation.
• The growing consumer production in Germany which
in turn attracts so many consumer technologies, will
put Fin in a very competitive position.
• There may be a low level of demand for the product
due to first entrants in the market than estimated level.
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2. Product Sourcing
Fin ring is made of five components: a led indicator, a battery, water and dust proof material, Bluetooth and a
touch-less interactive electronic sensor patented pending protected designed by the firm. The manufacturing of
the components, assembling and packaging is outsourced to a foreign company called Foxconn1. The total cost
of the manufacturing of one device goes up to 38$ and the device itself is selling for 120$. This means that the
profit is roughly 70%. Before explaining how we arrived to these numbers, first we need to estimate the cost of
each component (Foxconn, 2014) (HIS Technology, 2014).
The LED indicator is a simple, tiny semiconductor device that emits visible light when an electric current
passes through it. This light is used to indicate events like connection or battery status to its owner. The cost is
estimated in 2$.
The battery, is a Li Po custom battery with micro-USB charging dock. One charge can last one week with
heavy use and up to a month in standby. This battery is estimated to have a cost of 8$.
The flexible material used in the device has an IP2 code of 67, which means that the device is dust tight, with no
ingress of dust and complete protection against contact. It also has a water immersion limit of up to one meter.
Tested in a period of thirty minutes. The value of this component is priced at 5$.
The Bluetooth sensor is a 2.1 + EDR3 and 4.0. Since this is a highly demanded and standard component its
price is as low as 4$.
The most important part of the device is the touch-less interactive sensor. This sensor is design by the firm and
is a major innovative sensor which is their core competence and gives them a competitive advantage. This
sensor, since it is exclusively produced for this company, its price is at this point at 8$.
The last part of the cost of the manufacturing is the labour. Since the manufacturing is located in China, the
labour costs are as low as 11$ per device.
So, if we combined the costs of the production of its part is goes up to 38$. And subtracting this cost to the
selling price of 120$ gives the firm a profit of 70%.
3. Favorable Attributes of the Country PEST ANALYSIS analyzes the external favourable attributes of Fin.
POLITICAL:
• As per (The basic law, 2014) the political system in Germany is based on the principles of social and
democratic federal state. 1 Taiwanese multinational electronics contract manufacturing company 2 International Protection Making 3 Enhance Data Rate
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• The capital of Germany being Berlin and the country consists of sixteen federal states
• The government policy law which is established in Germany does not distinguish between the Germans
and foreign nationals in regards to investments or establishing of companies
• The constitution or Basic Law (Grundgesetz) which acts as the ultimate source of law in the nation
ECONOMIC:
• Germany being a founder member of the European Union (EU) is the Europe’s leading economy and
the fourth largest in the world (pwc.de, 2011).
• The federal republic of Germany is called the social and free market economy with 82 million
inhabitants (Australian Government, 2014)
• This country has a broad – based economy in which has most forms industries are situated.
• The GDP was approx. $3.4 trillion in 2012 and is the world’s third largest exporter with about $1.46
trillion and exporting of goods and services making 52 percent of the entire GDP (export.gov, 2014)
• The export sector is dominated mainly by the automobiles and machinery industry but sectors like IT,
biotechnology and renewable energy are growing rapidly.
• The average unemployment rate was 5.5% and Annual inflation rate 2.1% in 2012 (Export.gov, 2014)
• According to (Miles, 2011) the German economy which is oriented towards manufacturing which in
turn helps to extend the service sector, in which there are many companies developing and applying
leading-edge technologies for industrial use.
• The main aspects of Germany’s economy are it has a strong free trade zone and strong robust economy
and the society has well educated and trained labour force.
• The labour law protects the labour force and the unions which are a major thing in the country.
SOCIAL:
• According to (Export.gov, 2014) Germany has an estimated population of 82 million, has a ethno –
cultural diversity.
• Germany is densely populated when compared to both neighbours France and Poland.
• The social changes don’t the family values, as the family is still the most important reference unit and
the young people are closely knit with their parents.
• The religions found in Germany are mostly Protestant (33%), Roman Catholic (33%), Muslim (4%),
108,000 members of Jewish communities, and others
• The language spoken in Germany is German and the minority languages are Frisian, Sorbian, Danish
and Romany, although English is widely spoken throughout the population
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• The German class system is classified into upper middle class, middle class and lower class, the upper
class offsets the poverty experienced by the lower class people. The social indicators like education,
average income and property ownership decide the social status (German social structure, 2014)
• The largest group of people in Germany are Turkey (1.95%) and Others (Serbia, Croatia, Italy, Russia,
etc.) (6.45%).
• According to (Euromonitor, 2014) people are steadily increasing their spending on private consumption
of consumer electronics.
• The main pillar in the social system is the dual system of vocational education, which is a combination
of education and workplace training.
TECHNOLOGICAL:
• Germany has contributed a lot in terms of science and technology, the range goes from physics and
chemistry to cars and consumers.
• (Thomas vasek, 2005) says Germany stands out as a world leader in innovation, has 277 international
patents per one million inhabitants.
• The advancements in the development of technology even though a few years away from use, but are
under developing stage process, which proves that technology is widely encouraged by the people (MIT
technology review, 2014)
• Germany’s major strength being the automobile industry, many technologies are emerging which go in
sync with this industry (optical communication links to nano technology).
• German automobile industry is betting on consumer electronics like computer-based assistance systems
that could make driving safer and more comfortable (German mission in the United States, 2014)
• According to (Australian government, 2014) Germany's environmental technologies industry
is expected to reach a higher sales volume than automotive or mechanical engineering by 2020.
• The world famous institutes like Max Planck and Fraunhofer have cooperation with the industries for
transformation of ideas into products.
3. Competition
Belonging to an oligopolistic market, it has three direct competitors who too are yet in the development stage-
Nod ring and Myo armband. Nod is a gesture control ring just like Fin and is compatible to smart phones, home
appliances, television etc. however, this ring is bigger in size and does not look like a fashionable gadget to
wear around. It is available in several sizes and follows a policy to replace the ring if it’s not of the right size.
This kind of practice will increase its costs of transportation and packaging as well as increases complications
of operations. Moreover, Fin has one universal size and the ring is flexible to fit different sized fingers. On the
other hand, Myo is an armband that understands the electrical movement of your muscles to automatically get
connected to your computers, television or other electronic devices. The shipment begins in September 2014
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that can be a threat to the market potential and growth of Fin as its still in the development stage. As Myo
armband would be ready to use by consumers before Fin and Nod, it will have its first-movers advantage of
building a customer base, brand loyalty, establishing its market share, and surveying consumer tastes and
demand patterns would probably give Myo armband an upper-hand over its competitors. To add on, it is also
skeptical how Myo armband and Nod ring are priced the same at $149(Nod, 2014), (Thalmic Labs, 2014). This
is a psychological pricing strategy where the buyer psychologically feels that they paying somewhere in the
range of 140s but they almost paying $150. This pricing strategy makes buyers underestimate the price due to
smart arrangement of number pricing. Nod is also aiming at competitive pricing by cutting competition with
Myo armbands by pricing its ring at the same rate as Myo. However as we see, Fin has priced its product at
$120 persistently despite the few competitors having a higher price. Fin can have a competitive edge over Nod
and Myo as it is priced much lesser than the two hence they may lose their cliental base to Fin. However, logbar
rings are already in the US market as they started shipment in July, 2014. Just like the nod ring it is available in
several sizes but it priced the highest at $185. Just like Fin, it is also featured by Mashable, and Techcrunch
(Kickstarter, 2014). Being run by Japanese owners, we assume that they may begin exporting to Japan.
Considering competition in Germany, there have not been any direct competitors to Fin in Germany’s local
market. If Fin enters the market, it can remain the only market player in Germany. However if we use the
Multi-point argument similar to game theory of oligopolies, if Fin is acquiring the German market, Nod,
Logbar and Myo will see the market potential and penetrate the German market as well in order to increase
their sales and profits and carrying on the cut-throat competition with Fin.
4. Barriers to Entry
Germany, as state member of the European Union, has passed its sovereignty on export and import policies to
it. The international institution has a common policy on tariffs and barriers of imports for all the member
countries. As a consequence of it, for the import of fin to Germany, we should consider the European rules.
The European Union has a very specific list where it mentions and details all the products in relation with the
tariffs they have. If we consider fin to fit in the box of “other telephonic apparatus” it will have a rate of duty
tariff of 7 5% (European Union Council Regulations, 1987). We should consider also that, in case of future
expansion to other countries members of the European Union the tariff will remain the same.
Apart from this tariff there is no other restriction in order to distribute our product in Germany.
(European Commission, 2014) Finally, we should shortly mention that in several media is mentioned that the
European Union and the United States government are negotiating a free trade area. That would imply that, if
the day comes, there will be no barriers or taxis within the two economies and therefore fin would have no need
to pay the tariffs we just discussed (Wall street journal 2014).
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Finally, we should shortly mention that in several media is mentioned that the European Union and the United
States government are negotiating a free trade area. That would imply that, if the day comes, there will be no
barriers or taxis within the two economies and therefore fin would have no need to pay the tariffs we just
discussed (Wall street journal, 2014).
5. Problems Anticipated After Entry
Exporting therefore Greenfield acquisition: As fin is a technology which really does not need a Greenfield
acquisition (Hill, 2014) as this is a small product which can be shipped in bulk quantities according to the
demand for the product. This may be a problem that the company faces as the manufacturing and assembling
units will not be established in Germany. Fin will be providing its products and services by exporting it to the
German market and collaborating with retailors like Media Markt.
First movers disadvantage: Fin being a new technology and a new product which may take a while for the
product to sync in the market, as this would give rise to first mover disadvantages as said by (Hill, 2014) which
includes the pioneering costs as this is a new product marketing, advertising and promotion will be a huge thing
for fin to establish its mark in the field and to make its presence as felt the market will be new and there is
always a chance for less demand than anticipated. There’s a certain liability for a foreigner to enter a national
market.
Competition and intensity of rivalry: As fin is a very new idea it may face problems with competitors, the major
one being Logbar’s Ring and Nod ring which will eventually compete with fin in the foreign market . There is
always a threat related to duplication of the formula of the product or the services that fin has to offer over the
times, so problems with trademarks, patents and copyrights may arise. Fin being a small device and at a very
affordable price offered to the public, the market may get saturated easily after a point of time.
6. Political Risk
We should start defining political risk “as the likelihood that political forces will cause drastic changes in a
country’s business environment that adversely affect the profit and other goals of a business enterprise”
(International Business, 2014).
In order to minimize this risk, what we need to look for is political stability. As more politically stable the
country is, the less we need to worried about for unexpected changes in that country policies that affect our
business.
When analyzing political system in Germany, we should take in consideration four different aspects. Firstly we
need to understand how does the political system works in Germany. Then, we are going to talk about the
impact that the European Union has in the state. Also we are going to analyze the corruption perceptio index of
International Transparency. Finally, we are going to see the economic situation in this country, to see if there is
any economic risk than can affect the political stability.
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The political system operating in Germany is a democracy. We can see evidence of this in the Deutscher
Bundestag (the country constitution), where it says that Germany is a democratic and social federal state . It has
a representative system with an universal system vote and their parliament is elected every four years (anyone
with more than 18 years old can vote). It has all the key features to be a stable democracy (Deutscher
Bundestag, 2010).
Moreover, Germany as a State belongs to the European Union since 1952, and it was one of the founder
countries. This implies that some decisions normally made by a State in the exercise of its sovereignty have
been transmitted to the EU. What in concerns to our goal, the EU has a common trade policy, which implies
that such policies can and are only change by the UE and not by Germany. This situation make that policies
even more stable, because is harder for such an international institutions change them than for Germany would
be in its own. We should consider the well known corruption perception index of the international organization
Transparency International. This index appoints Germany as the 12th “cleaner” country (cleaner in opposition
to corrupted) in the 177 list of countries. This is a good qualification where Germany stands above other
“clean” countries such as United States, Japan Belgium, United Kingdom or Hong Kong. Such a good rate
means that we have to worry very little –if not nothing- about corruption in Germany. This fact is probably due
to the political system stability. (International transparency, 2013)
Finally, Germany has a good economic situation what helps to maintain the political stability. Its Gross
Domestic Product (GDP), has a positive evolution during the past four years. Being only negative in 2009 due
to the global economic recession. That’s very good in comparison with the average of the whole UE, in which
the GDP has decrease not only in 2009, but also in 2012 and 2013.
Overall, we can conclude that German political system is not only stable but also trustful, and that is due to its
democratic system, its membership to the UE, its good rate at corruption indexes and to its economic wealth.
Those are the reasons which led us to understand that political risk in Germany is mostly inexistent.
7. Market and its Potential
Germany is a country with one of Europe’s strongest economies. With constantly decreasing unemployment
rates, and with a stable real purchasing power and development, the private consumption in Germany is
forecasted to keep increasing by 0.4% each year. (Euromonitor, 2014) Income and Expenditure reports in 2014
(Euromonitor, 2014) show that private consumption since 2009 has greatly changed in Germany. With a higher
importance being placed on sophisticated and technologically advanced devices, Germans are willing to
sacrifice larger percentages of their disposable incomes on newest electronic devices, which are helpful with
everyday tasks and are tailored to the lifestyle changes. Fin being a relatively expensive device, requires a
market where the consumers are willing to spend higher sums of money on gadgets. Communications sector is
predicted to be one of the three categories of expenditures in Germany with the highest Growth Index by 2030
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(Appendix 1). Therefore, with the high GDP and technologically savvy citizens, Germany is a market with a
very high potential for Fin.
Ranked as 4th highest GDP in the entire world (Central Intelligence Agency , 2014), Germany has two markets,
which are perfect target customers for Fin’s
products. Primarily, with the changing
demographics and increasing numbers of young
working individuals, a high number of
individuals, represented by the smaller hot spot in
Figure 1 are aged 23-27 and have an income per
capita of US $45,000 – US$55,000. This group of
consumers “are willing to save money in other
areas in their life such as food or travel in order to
obtain the newest technologies that are helpful
and fun at the same time” (Euromonitor, 2014).
As a result they are the ideal target customers for
Fin.
Seeing as the mean annual income in Germany is US$58,086, Fin should also be targeting the upper classes,
which have a higher than mean income. This group represents 39.8% of the total population in Germany, and
represent about 65% of the total national expenditure on communications and technology (Euromonitor, 2014).
Seeing as Fin costs 120$, they are the most likely group of people to invest into a gadget which is intended for
recreational use.
In conclusion Fin upon entering Germany, should target the citizens in top 5 deciles (have a higher disposable
income than national mean), and young citizens ages 23-27 with an income per capita of US $45,000 –
US$55,000.
8. Marketing & Sales Strategies
In order to enter the German market, it will make use of International strategy as it will experience low
pressures for cost reduction as well as local responsiveness. Being a new product idea, people in Germany
would be willing to pay this price for fin. It also serves for universal needs of consumers and doesn’t require
any changes for making it localized. Least local customization like writing the instructions in German in the
toolkit and on the packaging box would be required. Having only three direct competitors, there is lack of
competition. We will be exporting to Germany and not licensing as it’s a new product idea and we wouldn’t
want our core competencies to be known by other local German businesses. Fin would not even consider
Greenfield investment due to insufficient finance as it’s a young company.
Figure 1
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In order to enter the German market, lets review the marketing mix of Fin, which might need to be altered to
attain high demands in the country. 4 P’s allows for the further breakdown of the marketing mix:
• Product- the product remains the same, however the guidelines and product information will be written
in German as well as English as in several European countries English is a second language and the
consumers would feel more comfortable to read the complicated instructions of different palm
movements and gestures in their own native language.
• Price- as mentioned, each unit would cost $130 for whoever orders it in whichever part of the world.
Moreover, Fin is priced much lower than its competitors Nod ring, logbar ring and Myo armband. Myo
and Nod are priced at $149, logbar is $185 whilst Fin is $120 excluding the transportation cost (Nod,
2014), (Thalmic Labs, 2014).
• Promotion- the two kinds of marketing strategies are the Push strategy and the Pull strategy. A push
strategy involves personal selling of the product whilst a pull strategy is all about using sources of
media and advertisements used to grab attention and educate the people about the product. Currently,
Fin is entirely using the pull strategy. It is one of the world’s top 15 startups in TechCrunch Hardware
Battlefield 2014. It is also featured by several other worldwide media like Discovery Channel,
Mashable, Gizmag, Yahoo, techstage, Lifehack and many more (Wearfin, 2014). Moreover, in order to
successfully enter the German market, it will need to consider advertising in local media.
- It can advertise in German business and financial magazines like Capital as well as the monthly
Science newspaper called Bild derWissenschaft.
- Trade shows- being part of IFA trade show which happens every year in Berlin catering to
Electronics and Home Appliances. In 2013, “Berlin was home of the digital world” with 240,000
visitors and 1,500 exhibitors (IFA, 2014). This will give Fin a platform to make Germans aware of
the product as well as demonstrate it and enhance personal selling by a push strategy. The 2014 IFA
will be held from September 5th to 10th.
• Place- The R&D should remain in Palo Alto, USA in order to achieve the knowledge spillover benefits
as described by the Dunning’s theory of Electic Paradigm. To penetrate the market of Germany, Fin
does wouldn’t require any Greenfield investments but just local electronic retail distributors. It can
export its products to Media Markt that is Europe’s best electronics retailer. Usage of Fin can be
demonstrated by the staff to the consumers. The consumers also have the privilege to touch and see the
product before making any purchasing decision. Media Markt also provides high quality after-sales
service where they provide technical assistance to consumers if they are confused about the usage. Fin is
not a complicated device, however it would take time to remember which movement is for what
command being a brand new idea. Another major benefit is that Media Markt encourages innovative
products to flow into its shelf to provide a wider choice of advanced technological products to its
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customers. it has more than 750 stores in 14 countries concluding to be a highly reputed retail business.
Due to its high reputation, people will also trust Fin and not hesitate purchasing a new brand. Moreover,
despite being a multinational with a Greenfield investment into so many countries, the decision-making
is decentralized and the range of product offering is locally decided by the manager who owns 10% of
the Media Markt store allocated to him4. Due to this advantage, Media Markt (Media Markt, 2014)
would agree to sell Fin only in Germany as we are initially focusing on increasing sales in Germany.
Later over the years, Media Markt can be a medium for Fin to grow even into other countries.
9. Cost of operations
Appendix 2 shows a global view of where the different activities of the firms are located.
As we can see in the figure 1 shown above, Fin Robotics Inc. headquarters are located in sunny California,
USA and manufacturing and assembly of the product is outsourced to Foxconn5 where they have their factories
in Longhua, Shenzhen, China. And the logistics of the company is also outsourced to EMS6, a delivery company
which offers logistic services.
The value chain of the firm is divided into primary and support activities following the Porter’s generic value
chain shown in Appendix 2. The primary activities are operations (R&D, Production and Management),
logistics, marketing & sales, and customer service. The support activities include information systems,
infrastructure and human resources.
As the firm is a start-up, the company lacks of an organizational architecture but the closest organizational
structure could be a Functional structure where only the logistics and the production are outsourced and every
other activity is done in the headquarters. (See Appendix 2 for Porter’s Generic Value Chain Activities)
The headquarters is where the activities of R&D, management, customer service and human resources are
located. Foxconn is responsible for the manufacturing, assembling and packaging of the product. EMS is
responsible for the logistics and Mediamarkt7is responsible for the sales and marketing.
The headquarters are run by four managers (CPO, CCO, CFO and COO) and the CEO of the company Rohildev
N. All of these managers are paid in shares of the company. Apart from this managers the firm has eight more
employees responsible for the support activities.
The reason for the organizational architecture are a result of an intensive analysis. Since we are using an
international strategy, the supply chain is centralized in one place. The reason why production is outsourced is
to take advantage of the low cost labour, minimise the risk, time and investment needed in the production of the
5 Taiwanese multinational electronics contract manufacturing company 6 China Postal Express & Logistics -‐ http://www.ems.com.cn/english.html 7 Media Markt is a German chain of stores selling consumer electronics http://www.mediamarkt.de/
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product (since we don’t have capital to build a manufacturing plant). Another reason for outsourcing is to keep
focus on the core competences of the company which for the company is R&D.
A big concern with the outsourcing of the production is that the company could eventually learn how the
sensors work and copy the design and use it or sell it to another firm who will become a potential competitor.
Since the technology of the key touch-less sensors are in the process of being approved as a patent the risk is of
this happening is reduced and since fin Robotics Inc. is a start-up with no major capital to acquire a
manufacturing firm or build our own plant this is the best option.
The reason for outsourcing the logistics is because the firm doesn’t have any experience or infrastructure in the
distribution between China and the USA.
The way the process works is the following. First the product is manufactured, assembled and packaged by
Foxconn, then the finish product is delivered to a USA warehouse where the products can be proofread to check
the quality of the final product. After an order is placed from everywhere in the world, the product is send to the
consumer via a delivery service like UPS or DHL depending of where the product destination for a fixed cost of
10$.
Putting it all together, the cost of the overheads, starting with the headquarters, the cost of the office we
estimated to be 2000$ based on California’s financial square real state, 4000$ for the warehouse, 4000$ for the
lab, where they design and test and analyse the products and the eight employees with a base salary of 1.200$
(minimum wage of California), and 400$ for extras. The total amount spent per moth goes up to 20.000$.
Now, for the estimation of the cost of operations we look at the three outsourced companies independently.
First we start with the cost of manufacturing, assembling and packaging of the products. Base on the initial
demand of pre-orders and the estimated sales in the market, we can estimate that Fin will sell 400 devices per
month (initially). If the cost of one device is 38$, then the cost of the manufacturing hikes to 15.200$.
To calculate the cost of the distribution, based on the assumption that Fin will be selling 400 devices a month,
the devices with packaging can fit in a 10x10 container which has a cost of transportation between China and
the USA of 2.500$.
To pay the services Mediamarkt, Fin is planning to do a contract, where Mediamarkt gets a 5% of the profit for
every device sold.
Sales Forecast
Assuming that the costs for Fin are:
Overheads per month: US$20,000 Price per device: US$120 Cost per device: US$52
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Using the Value Sales Forecast formula:
𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ = 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠 (𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ)
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒
$46,157.40 = $20,00043.33%
It was established that Fin needs to generate revenue of US$46,157.40 (385 devices) per month in order to
break-even. Furthermore, with the implication of the Start-up Curve (10% per month) and a Multiplier Effect
when the company becomes known on the market (3% per year), it was calculated that Fin will begin to break-
even in September 2015. Figure 2 and 3 show the forecasted sales for year 2015-2019 and the Forecast of
devices sold can be found in Appendix 3.
Figure 2: Sales Revenue Forecast for years 2015-2019
Figure 3: Sales Revenue Forecast for Years 2015-2010
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11. Source of Finance
Every business requires capital in order to fund its startup costs and operations. Sources of finance can be
internal like owners savings or ploughed back profits whilst it can also be external by issuing a bank loan, aid
from financial institutions etc. in the same fashion, Fin being a new technological idea required most of the time
and financing in Research and Development of this universal remote control-like gadget. Moreover, being a
new brand in the market it required impulsive promotional strategies to make the potential consumers aware of
the existence of the brand and the unique product it offers. This marketing campaign also requires a higher
budget to bring successful results. The sources of finance used by Fin are:
! Business- Fin would have approached an angel investor, as an angel investor is the one who provides
pioneering financing for starting up a brand new business. These investors are risk takers as they putting
money into a completely new firm with no prior records or history of assuring credit worthiness and
success. They use their own money to fund the start-up because the offer looks profitable at this stage.
These are silent investors and wouldn’t demand a seat among the board of directors. They are gentle-
like and often provide guidance and mentoring to the owner of business. Fin will benefit guidance from
a highly experienced person and also basic start-up capital. A higher rate of return on investment is
desirable by the angel investor.
! Venture Capitalist- Fin has attracted venture capitalists to invest into the business displaying its
potential growth model and techno savvy ideas to bring about a technological revolution. Unlike the
business angels, venture capitalists get involved little later in the process of making the product but they
do not contribute to seed financing. They would also demand a position in the board of directors and
also have the veto rights to influence Fin’s decision-making process (Peavler, 2014).
In both the cases, Fin is giving away a part of its equity to the angel investor as well as venture
capitalist.
! Crowded funding- Fin did not rely on bank loans for its new innovation and operations. It held up
crowded funding as a kickstarter for its wearable gadget. This was held by indiegogo.com and raised
$202,547 which was double than the amount expected (Wearfin, 2014). The potential buyers pay for
their fin in advance for the development of the product. They benefit by paying lesser than the regular
cost of a fin device as well as they will be the first ones to receive their fin gadgets once its launched in
the market. Whilst the original price of fin after its launch in the market would be $120 (Wearfin, 2014),
the crowded funding groups paid only $100.
! Bank Loans/ financial institutions- If fin has taken a loan from the bank or from a financial institution,
it will have to make sure to go with an offer in which it has to payback at a lower rate of interest. In our
opinion, fin wouldn’t have approached any financial institution for capital as they raised double the
money forecasted by the crowded funding activity.
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12. Foreign Exchange Issues
At today’s market, the euro dollar exchange it is about at 1 euro = 1,34 dollars. But, as we know both of these
currencies have a floating exchange rate and this is a volatile market which is difficult to predict. On the other
hand, one major advantage of working in Germany is that the euro is one of the reference currencies in the
world. That fact in addition with the being a currency of a large group which economies that are in
interconnected, make the euro a stable currency. We should also mention that working with euro, and not only
with dollars, is a good way to diversify currency risks to fin. (European Central Bank, 2014)
We should consider that the gross national income per capita in Germany based purchasing power parity, the 8th
largest in the world, it was set at 44,540$ (international dollars). Not only that, but also is one of the economies
that has grown more for the last 5 years despite the world crises. The World Bank data estimated that in 2009
the gross national income per capita in Germany was 36,860$ (international dollars). That means that during the
period 2009-20014 the gross national income per capita has an increase by 20.8%. All data appoints that
Germany will continue growing. If this is the case, once we establish the product in Germany and if its
economy still growing, fin will be able to increase the price of the product in the next years (World Bank,
2014).
13.Exit Strategy
As Fin is exporting to Germany, an exit strategy will not be very complicated. Fin can have an export contract with Media
Markt for first six months to test the waters in the German market. If the demands in the market are high, then Fin can
renew the contract and extend it for further two years and continue renewals in this process following the local demands.
One of the agreements with Media Markt could also be to pay them 5% of every sale made through them in Germany.
This will motivate Media Markt to demonstrate and put extra efforts for sales of Fin.
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14. Bibliography and References
10 Reasons To Invest in Germany. (n.d.).German Missions in the United States. Retrieved July 30, 2014, from http://m.germany.info/Vertretung/usa/en/07-Econ-Energy-Innovation/02__Bus__w__Germany/Feature__01/__Feature__01.html?r Central Intelligence Agency . (2014, June 22). Fact Book. Retrieved July 15, 2014, from Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html Council Regulation of the European Union (ECC) Nº 2658/87 of 23 July 1987. Pg. 577 (http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31987R2658&from=ES). Deutscher Bundestag, article 20.1. (https://www.btg-bestellservice.de/pdf/80206000.pdf) Differences Between Venture Capital and Angel Investing. (n.d.). About.com Business Finance. Retrieved July 31, 2014, from http://bizfinance.about.com/od/equityfinancing/qt/The-Differences-Between-Venture-Capital-And-Angel-Investing.htm Doing Business in Germany - World Bank Group. (n.d.). Doing Business in Germany - World Bank Group. Retrieved July 26, 2014, from http://www.doingbusiness.org/data/exploreeconomies/germnay/ EASE YOUR RIDE LIKE NEVER BEFORE. (n.d.). Fin : Wearable Ring Make your Palm as Numeric Keypad and Gesture Interface. Retrieved July 31, 2014, from http://wearfin.com Environmental Technology. (n.d.).Research in Germany -. Retrieved July 30, 2014, from http://www.research-in-germany.de/dachportal/en/Research-Areas-A-Z/Environmental-Technology.html Euromonitor. (2014, July 15). Euromonitor. Retrieved July 31, 2014, from Euromonitor: http://www.portal.euromonitor.com/Portal/Default.aspx Fin : Wearable Ring Make your Palm as Numeric Keypad and Gesture Interface. (n.d.). Indiegogo. Retrieved July 30, 2014, from https://www.indiegogo.com/projects/fin-wearable-ring-make-your-palm-as-numeric-keypad-and-gesture-interface Germany | MIT Technology Review. (n.d.). MIT Technology Review. Retrieved July 29, 2014, from http://www.technologyreview.com/news/403891/germany/ Germany country brief – Australian Government Department of Foreign Affairs and Trade. (n.d.). Germany country brief – Australian Government Department of Foreign Affairs and Trade. Retrieved July 29, 2014, from http://www.dfat.gov.au/geo/germany/germany_brief.html Germany Social Structure - Flags, Maps, Economy, History, Climate, Natural Resources, Current Issues, International Agreements, Population, Social Statistics, Political System. (n.d.). Germany Social Structure - Flags, Maps, Economy, History, Climate, Natural Resources, Current Issues, International Agreements, Population, Social Statistics, Political System. Retrieved July 30, 2014, from http://www.photius.com/countries/germa Germany, a world leader in technology, engineering and innovation. (n.d.). Digital agenda for europe. Retrieved July 28, 2014, from http://ec.europa.eu/information_society/newsroom/cf/itemdetail.cfm?item_id=8572 GNI per capita, PPP (current international $)." Data. N.p., n.d. Web. 31 July 2014 <http://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD>.
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How corrupt is your country?."Corruption Perceptions Index 2013. N.p., n.d. Web. 29 July 2014. http://www.transparency.org/cpi2013/results. International Business: competing in the global marketplace, 9E, Charles W.L. Hill. Pg. 92. Media Markt. (n.d.). : Europe's Number one consumer electronics retailer. Retrieved July 31, 2014, from http://www.mediamarkt.com Picture gallery. (n.d.). Facts about Germany: The Basic Law. Retrieved July 30, 2014, from http://www.tatsachen-ueber-deutschland.de/en/political-system/main-content-04/the-basic-law.html Profile of germany. (n.d.). export.gov. Retrieved July 25, 2014, from http://export.gov/germany/doing_busines Thalmic Labs. (n.d.). Thalmic Labs. Retrieved July 30, 2014, from https://www.thalmic.com/en/myo/ The European Commission (http://ec.europa.eu/trade/policy/countries-and-regions/agreements/); online wall Street journal (http://online.wsj.com/news/articles/SB10001424052702303973704579350783279285204). Trade Events. (n.d.). IFA Berlin. Retrieved July 25, 2014, from http://export.gov/germany/TradeShowsEv US dollar (USD)." ECB: Euro exchange rates USD. N.p., n.d. Web. 31 July 2014. <https://www.ecb.europa.eu/stats/exchange/eurofxref/html/eurofxref-graph-usd.en.html>. Wave hello to Nod.. (n.d.). Nod. Retrieved July 31, 2014, from https://www.hellonod.com
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APPENDIX 1:
Real Growth Indices of Fastest Growing Consumer Spending Categories: 2014-2030
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APPENDIX 2:
Figure 1: Activities location in the world
Figure 2: Porter’s Generic Value Chains Activities
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APPENDIX 3:
Forecast of devices sold for years 2015-2019
2015 2016 2017 2018 2019
January 77 500 615 731 846
February 115 500 615 731 846
March 154 500 615 731 846
April 192 500 615 731 846
May 231 500 615 731 846
June 269 500 615 731 846
July 308 500 615 731 846
August 346 500 615 731 846
September 385 500 615 731 846
October 385 500 615 731 846
November 385 500 615 731 846
December 385 500 615 731 846
Total 3231 6000 7385 8770 10155
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