Project Opportunity
Introduction
Airdri is a UK based small sized
organisation. It operates it function in UK and plans to expand the business (Airdri,
2022). So, the organisation will want to enter the Asian region. The
organisation selected India as the targeted nation. Airdri finds out some
non-financial factors such as highest GDP of India in 2023, lower inflation
rate, huge market opportunity. The financial management team also conducted
some financial analysis and find out that the following opportunity. This
report is going to be presented through demonstrating investment opportunities
in India. Industry attractiveness will be evaluated in this report as well. The
report will be presented through determining feasibility test for making the
right decisions for the investment project.
Investment opportunity in India
Airdri is going to enter into the Asian
region for expanding its operations and for that reason, the company has
selected India. There are certain factors which have to be evaluated before
determining the investment decision making process in India. Political scenario
of India is not stable as there prevails political turbulence and violence.
Political scenario is not stable for which it can be challenging for the
company to obtain success from the investment. However, the Indian government
is supportive for providing the opportunity to enter the market foreign direct
investment which will be a significant opportunity for Airdri to acquire success
from the investment. Economic scenario of India is effective enough for the
purpose of making the market entry by Airdri. The World Bank (2023) states that
India is one of the most successful countries in the world to determine
effective GDP growth which is 6.1%. The company can obtain this opportunity
according to the prospect of performing business and acquiring success from the
investment project. The Indian Express (2023) states that inflation rate of
India is 4.25% and the country has been successful in lowering the rate of
inflation. There are higher opportunities to make expected profitability by
Airdri from this orientation through which success of business can be obtained
significantly. One of the major benefits which can be sought by Airdri is the
opportunity to serve a mass number of customers as India has a huge population
of 1.42 billion (Kundu, 2023). Airdri can determine the context of business
effectively by grabbing a mass number of customers in India. The company can
attract the attention of the Indian customers as there are different races for
which company can be able to determine the marketing activities for dealing
with effective segmentation. India is technology developed significantly in the
most recent times for which it can be a great opportunity for making investment
by Airdri. The IT sector of India is very developed because of the sector has
higher expertise. Several multinational companies are focusing to established
they are manufacturing plants in India for having greater opportunities.
Recently, Apple has established its manufacturing plant in India for having
greater opportunity to deal with technological orientation. Tesla has decided
to enter into India with its manufacturing project of electric vehicles and the
company has been attracted with the orientation of dealing with technological
aspect. So, it can be acknowledged that Airdri can undertaker the opportunity
by making investment in India according to the prospect of expanding its
business there.
Porters five forces of home equipment industry in
India
It is significant for Airdri to evaluate
the home equipment industry in India properly for the purpose of understanding
the market so that effective strategies can be applied to obtain success from
the market expansion purpose in India. This part of the report is going to be
presented through performing an analysis of the industry attractiveness.
Porter’s Five Forces model is going to be applied here in that context.
|
Factors |
Intensity |
Particulars |
|
Threats of new
entrants |
High |
There is higher
intensity of threats of new entries in the home equipment industry of India. Energyworld
(2023) claims India is a significant market for making entrance by both local
and international companies because of they are significant opportunities
which can be undertaken by the organisations by making expansion of market
there. Trade regulations for making an entry in India by a foreign country
are supportive from the government because of organisations can enter to
India by determining for interior investment or joint venture. market
opportunities can be obtained significantly because of there are several numbers
of customers in India who can be cracked by determining extensive promotional
activities. A new comer can easily enter into the industry of home equipment
and perform business accordingly.
|
|
Bargaining
power of buyers |
High |
Bargaining
power of the customers in India in home equipment industry is high because of
there are several alternatives towards the customers in the markets. Organisations
are mostly focusing on aggressive pricing strategy for which there is higher
competition in the market (Porter and Kramer, 2018). Switching cost for the
customers is not so high for which customers have the power to determine the decision-making
process in terms of purchasing product from the brand. So, purchasing power
of buyers in the home equipment industry of India is high. |
|
Bargaining
power of suppliers |
Low |
Bargaining
power of suppliers in the home equipment industry of India is low (Talerico,
2022). Because of the suppliers are not united and they have lower influence
in the market to make negotiation and determine the decision-making process
over the logistics support to the organisations. So, bargaining power of
suppliers in the home equipment industry is low. |
|
Competitive
rivalry |
High |
Rivalry among
competitors in the home equipment industry of India is very high. LG Electronics,
Whirlpool, Philips and so on are the main competitors in the home equipment
industry of India performing business significantly (K. E. D. Global, 2023). Home
equipment industry offers significant market opportunities for which
competitors are performing business according to their organisational
principles. |
|
Threats of
substitutes |
Moderate |
Threats of
substitutes in the home equipment industry of India are in moderate
orientation. Because of people need to purchase home equipments the context
of determining their activities. On the other hand, the existing products can
be altered by introducing new products as well. |
VRIO analysis of Airdri
VRIO analysis stands for value, rareness,
inimitability and organisation determining for organisational resources which
can derive sustainable competitive advantage. There are certain resources of
Airdri which are significant to ensure sustainable competitive advantage which
are going to be demonstrated here.
|
Resources |
Valuable |
Rare |
Imitable |
Organised |
Impact on
competitive advantage |
|
Variation of
product |
Yes |
Yes |
Yes |
Yes |
Sustainable
competitive advantage |
|
Brand
reputation |
Yes |
No |
Yes |
Yes |
Sustainable
competitive advantage |
|
Distribution
network |
Yes |
No |
Yes |
Yes |
Sustainable competitive
advantage |
|
Innovation |
Yes |
No |
No |
Yes |
Sustainable
competitive advantage |
|
Quality of
products |
Yes |
No |
Yes |
Yes |
Sustainable
competitive advantage |
|
Human capital |
Yes |
Yes |
No |
Yes |
Sustainable
competitive advantage |
Airdri has effective variations of product
in the market which are available and rare in the market. Variations of product
can be imitable but those are organised at the same time. Such orientation adds
competitive advantage to the organisation in a very significant manner.
Brand reputation of the company adds value
organisation but it is not rare because of other organisations can determine
the resource also. It is also imitable and the organised which provides
sustainable competitive advantage for the organisation.
Airdri has effective distribution network through
which products are delivered to the customers efficiently where the
distribution network adds values to the organisation. But this resource is not
rare because of other organisations can also imitate it. However, Airdri
determines the distribution network in an organised manner for which
sustainable advantage is obtained from this resource.
Airdri innovates new products and
technology in the market regularly for which this resource determines values to
the organisation. innovative orientation of the company is not rare because of
other companies can imitate it. However, innovation of the company is
determined in an organised manner for which the resource derives competitive
advantage to the organisation.
Airdri believes in maintaining quality of
products effectively for the prospect of satisfying the customers. Quality of
products is valuable but not rear because of it can be imitated by other
organisations. However, quality of products of the company is determined in an
organised manner for which the resource derives competitive advantage to the
organisation.
Human capital of the organisation provides
competitive advantage to Airdri because of the employees of the organisation
are skilled enough. The firm provides training facilities to enhance skills of
the employees are rare also and not imitable. Airdri determines the human
capital in an organised way for the prospect of having sustainable competitive
advantage.
Feasibility test
|
1 |
2 |
3 |
4 |
5 |
|
|
Price per
product |
300 |
300 |
300 |
300 |
300 |
|
Product sold
unit |
1000 |
2000 |
3000 |
3500 |
4000 |
|
Cost of per
product |
150 |
150 |
150 |
150 |
150 |
|
Fixed cost |
5000 |
5000 |
5000 |
5000 |
5000 |
|
Year |
1 |
2 |
3 |
4 |
5 |
|
Sales |
300000 |
600000 |
900000 |
1050000 |
1200000 |
|
Cost of
product |
150000 |
300000 |
450000 |
525000 |
600000 |
|
Gross profit
|
150000 |
300000 |
450000 |
525000 |
600000 |
|
Fixed cost |
5000 |
5000 |
5000 |
5000 |
5000 |
|
Net profit /
Cash flow |
145000 |
295000 |
445000 |
520000 |
595000 |
|
Year |
Initial cash
outflow |
Cash in flow
|
|
0 |
-500,000 |
-500,000 |
|
1 |
145000 |
(355,000) |
|
2 |
295000 |
(60,000) |
|
3 |
445000 |
385,000 |
|
4 |
520000 |
905,000 |
|
5 |
595000 |
1,500,000 |
|
PBP |
2.26 |
|
The project shows that there is financial
opportunity available here. The organisation can achieve the success of the
project.
PBP has been measured for the company for
the prospect of identifying the time after which the invested money can be got
back from the investment project. It has been found from the evaluation of PBP
that Airdri can cover the investment after 2.26 years. It can be stated it that
the investment project will be profitable for the organisation because of the
invested money can be covered within the effective time. So, the investment
project will be profitable and effective for the company.
|
Year |
Initial cash
outflow |
Discount
factor @6% |
Discounted
cash flow |
|
0 |
-500,000 |
1 |
-500000 |
|
1 |
145000 |
0.943396226 |
136792 |
|
2 |
295000 |
0.88999644 |
262549 |
|
3 |
445000 |
0.839619283 |
373631 |
|
4 |
520000 |
0.792093663 |
411889 |
|
5 |
595000 |
0.747258173 |
444619 |
|
NPV |
1129479 |
||
|
IRR |
54% |
||
NPV has been measured for the company and
it has been found from the evaluation that the NPV is also effective. As NPV is
positive, it is recommended to make the investment project.
IRR has been calculated for the company and
it has been found that the rate is 54%. IRR is higher than the cost of capital
in this case for which it is recommended that the investment project should be
accepted.
Non-financial factors have to be considered
in this context by Airdri to determine the investment project. Inflation rate
of India is lower which can be a great opportunity for the company to determine
the investment project. Because of the company can be able to keep the cost of
operations and sourcing of materials lower for which effective gains can be
obtained. The growth of GDP is another factor which can be grabbed by the
company for the prospect of determining the investment orientation. Perception
of consumers towards the innovative products of the brands in the market is
another factor of considering the option of determining investment project.
Overall, the investment opportunity will be effective for which it is
recommended to Airdri to go for the investment project.
Sensitivity analysis
|
Price per
product |
$300.00 |
|
Product sold
unit |
1000 |
|
Cost of per
product |
$150.00 |
|
Fixed cost |
$5,000.00 |
|
Net profit |
$145,000.00 |
|
Sales
revenue |
$300,000.00 |
|
Cost of
product |
$150,000.00 |
|
Fixed cost |
$5,000.00 |
|
Net profit |
$145,000.00 |
|
Effects of
varying price |
$145,000.00 |
|
$100.00 |
-55000 |
|
$200.00 |
45000 |
|
$300.00 |
145000 |
|
$400.00 |
245000 |
|
$500.00 |
345000 |
|
$600.00 |
445000 |
|
$700.00 |
545000 |
|
$800.00 |
645000 |
|
$900.00 |
745000 |
|
$1,000.00 |
845000 |
Conclusion
Airdri has decided to inter into a new
market for the prospect of expanding the business. the company has selected
India as the new market according to the purpose of expanding the operation. This
report has been presented through evaluating the investment opportunity by
analysing certain factors. This report has been presented through demonstrating
investment opportunities in India. Industry attractiveness has been evaluated
in this report as well. VRIO analysis performed in this report for determining
the investment project. The report has been presented through determining
feasibility test for making the right decisions for the investment project.
Reference list
Airdri, 2022. Commercial
Hand Dryer Suppliers | Airdri Group [WWW Document]. AirDri. URL
https://www.airdri.com/ (accessed 6.24.23).
Energyworld, 2023.
Driving Factors for The Growth of India Electrical Materials Market - ET
EnergyWorld [WWW Document]. ETEnergyworld.com. URL
https://energy.economictimes.indiatimes.com/news/power/driving-factors-for-the-growth-of-india-electrical-materials-market/97076225
(accessed 6.23.23).
K. E. D. Global, 2023.
LG Electronics widens lead over Whirlpool as top home appliance maker [WWW
Document]. KED Global. URL
https://www.kedglobal.com/electronics/newsView/ked202204190018 (accessed
6.24.23).
Kundu, A., 2023. All
Eyes On India—1.42 Billion Rising [WWW Document]. Outlook. URL
https://www.outlookindia.com/national/all-eyes-on-india-magazine-285010
(accessed 6.24.23).
Porter, M.E., Kramer,
M.R., 2018. Creating Shared Value. Managing Sustainable Business 1, 323–346.
Talerico, A., 2022.
Bargaining Power of Suppliers [WWW Document]. Corporate Finance Institute. URL
https://corporatefinanceinstitute.com/resources/management/bargaining-power-of-suppliers/
(accessed 6.24.23).
The Indian Express,
2023. Factory output uptick 4.2% in April, inflation cools to 4.25% in May [WWW
Document]. The Indian Express. URL https://indianexpress.com/article/business/economy/india-may-retail-inflation-cpi-iip-data-8658866/
(accessed 6.23.23).
The World Bank, 2023.
GDP growth (annual %) | Data [WWW Document]. Worldbank.org. URL
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=IN (accessed
6.24.23).
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