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Introduction: Schuster Aircraft Engines Manufacturer (SAEM) is a newly formed manufacturing company which is located at Stausberg, Berlin, Germany. As it's a start up company so it has a significant level of its own capital and it hopes to start off their venture in a positive way.
SAEM has set up a successful financing to begin its operations and is looking to conduct an operation at its location to meet an ever growing demand of aircraft engines. The initial product offering of the company would be the light weight Piston, Wankel and Jet engines. These products will be of high demand and popular as most of the airline companies would like it because of its versatility (nowadays an ideal engine should be reliable, lightweight, powerful, repairable, fuel efficient, small and easily streamlined).
Objectives and Mission: The main motto of SAEM is to offer engines of high performance and low in weight as well as size for the commercial aircrafts at a very competitive price in comparison to the other premium quality commercial manufacturers in the market. The SAEM management believes that SAEM can emulate the existing engine manufacturers because existing providers of the aircraft engines are too diversified to serve the increasingly significant needs of the commercial industries.
In order to succeed a company should have a vision as well as mission. I think vision is more important than mission as vision focuses on the future and serve as a concrete foundation for the organization. SAEM's keys to success will include -
- Sublime quality in terms of product.
- Research & Developments is the lifeline of the product and company should invest a significant amount in order to grow and with an aim to compete with the giants of the market.
- Upgrading and maintaining its referral networks in order to beget sales.
- Improving efficiencies of operations.
- Put a greater emphasis on production to meet the demands of the rapidly growing industries.
There are five parts of the newly formed company and it will be managed by 5 executives representing Research & Development, Marketing, Production, Administration and Finance. These executives act as catalyst as they have a supreme degree of experience and help the company to acquire a significant amount of market share by focusing on the particular needs of the aviation industry and providing sublime quality of high tech engines than the rest in the market. The company will be well organized corporation as majority of the shares are held by five main executives.
For start up purposes the company will be seeking to raise approximately $4.6 million in terms of loan and $500,000 from private investors. Stausberg, Berlin would be the only manufacturing facility for the company as of now.
Ownership Of The Company
This is a closely held corporation with seven main shareholders who will form the board of directors. To enlarge financing the company will be instituting public offerings in the coming five years though most of the shares will be retained by the principle owners for the foreseeable days in the future.
Aviation industry has turned into one of the booming industry lately so in order to meet the requirements of the modern aircrafts SAEM will manufacture compatible engines for these aircrafts. The primary focus should remain on the research, engineering and manufacturing processes because the rapidly changing industry needs to revise their products as well as design in order to survive or to gain competitive advantage in the market. In order to gain competitive advantage SAEM will produce the highest quality of engines which are very efficient in the epoch.
SAEM will produce Piston, Wankel Rotary and Jet engines. The Wankel engines are a kind of internal combustion engines which uses rotary device to convert pressure into a rotating motion. Wankel engines simpler and lighter moreover, it is about one half of the weight and size of a traditional four stroke piston engine of equal power output. Usually the power and weight ratio is very important in an aircraft operation so the company believes Wankel engines would be a good choice.
Apart from Turbojet and Turboprop engines SAEM will also produce Precooled Jet Engines. For very high supersonic/low hypersonic flight speeds inserting a cooling system into the air duct of a hydrogen jet engine permits greater fuel injection at high speed and obviates the need for the duct to be made of refractory or actively cooled materials. This greatly improves the thrust/weight ratio of the engine at high speed.
The market is dominated by a few leading companies in the era in which Bayerische Motoren Werke (BMW) AG top the list with 40% of market share last year followed by Mercedes., Junkers., Daimler AG and Siemens and Halske respectively. These market giants have multisegment marketing strategies so their sales reached the soaring heights last year according to reports. BMW reported sales approximately around $20 billion whereas Mercedes was likely $10 billion and the likes of Junkers, Daimler and Siemens and Halske were reported around $8 - 7 billion.
Marketing of the products are usually done by established and renowned local distributors as they are franchises of the parent manufacturer and there is a limited direct sales to big customers. Usually these distributors have a close bond with customers and service providers which eventually allow the company to maximize its products usage. The distributors have the ability to provide financing, rapid servicing and replacement to some extent etcetera.
Customers choose to buy products which are reliable, easy to repair, fuel efficient and versatile for a variety of relevant things. The company goodwill acts as a huge influence and most importantly the cost of the product which attracts the customer to buy their long term assets.
Market Analysis Summary:
Last year the engine manufacturing industry had reported sales approximately $15.4 billion. As the aircraft engine industry has a huge and matured market so it is already noticed that it has a five percent (5%) growth annually.
Commercial aircraft companies, general aviation schools and relevant companies are the main customers of the product. SAEM management believes the commercial aircraft companies would be the subjugate consumers of SAEM product as they have a bulky and thick pockets, the greatest need for large orders or aircraft engines and more significantly the greatest need for precision controlled equipments.
The small segment companies are the most rapidly growing sub segment of the commercial engines manufacturing segment. Usually this small segment companies have relatively a low entry / exit barriers in the competitive market. Since these companies don't have a deep pocket so they are not seen as potentially large market for SAEM.
The current trends in the economy have a huge influence in the market segment. Companies like BMW, Mercedes have experienced recent downfalls in sales due to a weak global economy and retrograding consumer's confidence level. If this trend continues then it would be very hard to stomach for SAEM as their task will be difficult to acquire sales contracts and financing.
The recent trends show that to gain the market a company should be innovative and should work on the research and development in order to produce more and more specialized engines and should spend more on the promo budget in order to gain the customer awareness. SAEM's aim is to reach the zenith in focusing on these trends and being the first one in the market to introduce innovative ideas and proper implementation of those ideas can bring in a change.
As high revenues can only come from large commercial airline companies so SAEM's main focus will be on the companies over $2 billion in annual revenue. Usually these companies look for reliable, lightweight, powerful, repairable, fuel efficient, small, easy to operate and offer a variety number of features including safety types of feature to minimize the potential risk. Basically these companies tend to buy products like Wankel, Turbojet and Pre Cooled Jet Engines.
Mid sized airlines companies would more likely bend to products like Piston and Turboprop engines. Unlikely large commercial companies the annual revenue or the mid sized companies range from $500 million to $2 billion. As these mid sized companies are still in the process of growing so cost saving is a significant factor to them.
Target Market Segment Strategy:
The large commercial aircraft companies are the target market for SAEM. It is of SAEM's primary focus through direct selling via its various relationships and referral networks. Promotion creates awareness, so the company invests a significant amount to promote product awareness which may result in a good elevation in sales. Moreover, direct selling has always been effective in closing sales in terms of sales as well as marketing cost.
Product demonstration is an important tool, used by SAEM at its site to close sales. Why this is an important tool because demonstration of product is a critical step in sales process. Clients are brought to the site to prove the capabilities and effectiveness of the product, to educate and enhance their knowledge about the product and last but no the least is to establish a good relationship.
Demands of an ideal engine has increased in recent years as most of the commercial aircraft companies want high performing and versatile engines which should be reliable, lightweight, powerful, repairable, fuel efficient, small and easily streamlined. New entrants as well as existing engine makers are innovating new stuff to fulfill the needs.
Competition and Patterns of Buying:
In the national level there are plenty of SAEM's competitor even a few of them are giants in the international market. BMW is a famous name worldwide and in the market for likely 90 years so their products are well known as well as trusted. The brand name is enough to sale their product.
Generally large commercial aircraft companies look for established names that have a good reputation in the market so they usually consider the top notch companies as their products are sublime and reliable. SAEM is a start up company and not well known so demonstrating their products to the buyer is a critical part of the buying process.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. A useful tool implied by SAEM in order to know their market position. A company capitalizes depending on their strength, weakness is what a company shore up, opportunities are what a company invest in and company identifies its potential threats.
- SAEM produces the highest quality of engines which are very efficient in the era and are reliable.
- SAEM has got good relationships and referral networks with the large commercial aircraft companies.
- SAEM management is very experienced and has vast knowledge in marketing and sales as well as production.
- SAEM invests a significant amount in R & D so that the company keeps on innovating new products at times.
- The product price is very competitive in the market as the engines are of sublime quality
- SAEM is located in the capital city of Germany (i.e. Berlin). So it has loads of benefits as most of the trading is done in the densely populated areas.
- Management and the workers will try to put their cent percent as it's a newly formed company in order to succeed and gain a higher position.
- SAEM is a start up company so it doesn't have a good reputation unlike the established companies in the market.
- SAEM will not be issuing any shares in its first year for public interest so the profitability will be relatively low. But in the coming years it would fill up its loopholes.
- The new management will be working together for the first time so it may cause a few problems understanding each other.
- For SAEM it would be a colossal task to produce aircraft engines with less labors and machineries.
- Most of the established engine manufacturing companies are too diversified to serve the increasingly significant needs of the commercial industries.
- SAEM is stepping up into a new market so in a few occasions a new entrant has some chance to be a big hit if SAEM can keep up with customer's expectations.
- SAEM has good connection with a few major airline companies nationwide so in future they can establish its name worldwide by mouth to mouth publicity.
- Demonstration of a product is always very effective as it educates the customer. This market strategy will attract a few potential customers who try to keep up with the modern trend of engines.
- SAEM isn't an established name so it maybe a big flop in market as it's a start up company. Brand name is what a customer wants.
- SAEM doesn't have enough financial strength as it's a private start up company so it may not compete with its competitors in terms of money. Such as SAEM can't put havoc amount in promotional budget of the product to create the customer awareness unlike the established names in the market.
Strategy and Implementation Summary
SAEM will succeed or dominate the narrow segment of the market by manufacturing high quality robust design and thermal shock resistance engines which are ideal for an aircraft and extremely exact in terms of controlling. The attempt is to accomplish the reputation in order to grow.
SAEM's upper hand would be its relationship with the various commercial aircraft companies nationwide and level of quality as well as product features.
SAEM's strategy is to reach the acme but steadily and slowly. The company predicts to deliver sales approximately $61 million in first year, $76 million in the second year and $97 million in the following year according to the plan,.
Many high profile aircraft commercial companies have expressed their interests to buy SAEM's product as SAEM has an extensive relationship with them and by utilizing it SAEM can leverage contracts through direct sales and online demonstrations method.
To create customer awareness SAEM will start off their advertising campaign through trade journals and magazine, direct mail advertising and all other possible means. Customer awareness will have a havoc impact on company sales. In the coming days once SAEM establishes its name and reputation the company will seek to entice its primary or main distributors to carry out SAEM's product. To provide additional sales and opportunities for marketing brand new products SAEM has established post sales service and parts division.
Fabian Kurtz, Chief Executive Officer (CEO) - Mr. Kurtz has a vast knowledge as well as experience in the engine manufacturing industry with sales and marketing capacities. He received numerous awards while he was the sales executive in Curtiss - Wright, an US based engine manufacturing company.
Tim Schneider, Chief Financial Officer (CFO) - Mr. Schneider is a Certified Public Accountant (CPA) has been a Vice President with Deutsche Bank Investment and FinanzCenter. He has a lot of experience which brings heavy focus on finance. He was a former CFO in "Wesco Aircraft Germany GMBH "
Stephanie Becker, Vice President of Sales - Has a solid understanding of a diverse range of business management application. Miss Becker has a strong background in sales and marketing, team building, quality assurance and strategic partnership developments. She was the vice president of sales in "Glasflügel".
Lukas Weissmann, Service and Production Manager - He was the service team manager in "Diamond Aircraft Industries - Austria". He has a vast experience in order processing, scheduling of outsourced orders. He has a complete knowledge of the engine manufacturing procedure and related stuff.
Hans Friedrich, Vice President of Marketing - He holds a strong background in all aspects of marketing and sales methodology. Has extensive knowledge in technical market, pricing models, consumer packaging, channels of distribution, technological trends, budgeting, growth, profits etc. He has experience of over more than 30 years and use to be a reputed personnel for GE Company, US.
Research & Development is the lifeline of any manufacturing company so it's of no wonder that SAEM is going to put greater emphasis on R&D by investing a significant amount.
For start up costs for the first three years SAEM expects to raise $4.5 million in loans and half of million dollars in private investments. In the next three to five years there will be an up rise of an additional $50 million in financing as there will be initial public offering which is already scheduled. For a start up company the huge finance will provide an opportunity to grow operation in a planned way.
Break Even Analysis:
Break Even Analysis for a product is calculated where total revenue received is equivalent to the total costs associated with the sale of the product. SAEM's break even analysis is usually based on the average of the first year figures. These are expressed as per unit revenue, per unit cost and fixed costs. Basically these are conservative assumptions which increase the potential risks when it comes to accurate estimation.
Projected Profit and Loss
SAEM expects a steady inclination in terms of profit over the coming three years of operation. The profit and loss table projects its steady rise.