Introduction to Management

Professor Marcus Menz

Autumn 2015

http://www.standard.co.uk/lifestyle/london-life/lets-power-walk-how-start-ups-like-pavegen-
are-producing-smart-tiles-that-generate-energy-when-10328555.html

http://www.swissinfo.ch/eng/walking-the-talk-on-renewable-energy/31887656

GREEN STEPS LLC.

By
Guignard, Pierre Antoine
Ho Kin, Louis Robin
Mendoza Zapata, Adrian Gabriel
Ngo, Quang Vinh Jeremy
Oliveira, Paulo

INDUSTRY ANALYSIS
PESTEL Analysis

Political:
● Government as a client and investor
● “Green” parties
Economic:
● Decreasing energy expenses in the long term
Social:
● Ethics of sustainable energy
● Improved brand image
Technological:
● Application of existing but not readily available technology
● Consistent improvements
Ecological:
● Lowering of carbon footprint
Legal:
● Renewable electricity tax exemptions and trade remedies under international law

Porter's 5 Forces Framework

We are a young company in a well-established market of clean energy. However,

we're trying to implement the concept of green energy in a different way. As such, we don't
have many competitors. Our main competitor in the market at this time is Pavegen, a
company focused on creating renewable energy using similar concepts as ourselves.
Nevertheless, we are trying to implement our product in a different way to remain
competitive in the market.
Finding new ideas to have clean energy is becoming harder and harder. Since this product is a
new idea to be implemented in Switzerland, and requires technical knowledge, the threat of
new entrants is low.
Solar panels aren't always the most efficient. The amount of energy created through
solar panels not only depends on the amount of daytime but also on the angle at which the
light hits them. “Green Steps” tiles however, do not. Since our goal is to equip places with
high foot traffic, like public places (universities, train stations, airports, etc.), the amount of
energy produced should remain approximately the same throughout the year. As such, our
price/performance ratio is more attractive than the price/performance ratio of solar panels.
This means that the buyer would have a low bargaining power which in turn means that the
price of our product should remain constant.
This isn't the case with suppliers. Raw materials can be cheap, but we need factories
with the knowledge to assemble such product. If we build the product in Switzerland, labour
might be expensive but we'd spare on transportation. If we decide to relocate, labour might be
cheaper but the costs of transportation would go up. Therefore, suppliers have the biggest
bargaining power.
To conclude, we can say that this market has potential for us if we can overcome the
bargaining power of suppliers.

THE BUSINESS

The SWOT Analysis

Opportunities:
● Increase in demand of clean energy
(​http://www.swissinfo.ch/eng/walking-the-talk-on-renewable-energy/31887656)
● Low levels of competition
● High foot traffic in large dense cities

Strengths
● Image of renewable energy
● Low maintenance costs
● Brand image
● Reduce energy cost in the long run

Threats
 ● Unknown concept for many which could turn into slow acceptance rates

Weaknesses
● Cost
● Lack of available manufacturers
● Profits not immediate

SO-Strategies
● We can use the fact that installing our product reduces energy costs and that we use
green energy to answer to the increase in demand of clean energy
● Since it shows a good image to the citizens, we can use “Green Steps” to take profit
from the high levels of displacement in cities
ST-Strategies
● Since acceptance rate might be slow, we're going to apply marketing strategies, such
as publicity, to show that our product can benefit cities and the environment. Publicity
for our product would be made through demonstrations and showcases as well as
industry journals.

WO-Strategies
● Since the cost would be high, so would the time to achieve profit from our product
(for the company that uses our product), some opportunities could go by without us
being able to take advantage of them.

WT-Strategies
● Money would once again play a role here. Since costs are high, governments and
companies would maybe accept the product at a slow pace, or until it becomes more
profitable all together.

(Analysis)
Switzerland is a country very interested in the clean and renewable energies. Hydroelectricity
is a big source of this type of energy, occupying a big share of the market, equal to around
97%, and the government has said that by 2050, no more nuclear is going to be used.
This means the market might seem hard to get into, but it can play to our advantage.
Switzerland is a country worried with it's image, and we can respond to demand.
Switzerland lacks infrastructures in geothermal energy, solar energy and (wind energy),
which might be due to the country's terrain, or other reasons. However, it's been established
that “Green Steps” aims to solve that problem.
As a product easily installed, and production should remain stable even if the weather
changes. This is possible by offering two different versions. To maximize energy production,
the product is to be placed in high movement cities, on public places, train stations and
airports and certain businesses.
We also aim to offer a product of low maintenance. What this means to our clients is that
secondary costs, such as reparation, remain affordable.

However, there are a few problems that need to be tackled, and the most important one being
the price. This is a big problem for us, specially because it greatly reduces the potential
market, and more importantly the penetrated market. This forces us to direct our product only
to bigger businesses and governments. We do expect price to go down as as the
manufacturing process becomes more standardized and as the entire process . This will allow
us to offer the product at a lower price point, to be more profitable and to open the the
potential market. Unfortunately, this can't be done immediately.

Secondly, is the acceptance rate. Hydroelectricity is already well-developed and occupies the
biggest share of the market. To introduce a brand new product might play against our favor in
the first few years.
That's why we can't compare both products. One aims to produce electricity in substantial
quantities, while “Green Steps” wishes to provide a small, but hopefully continuous source of
power capable of reducing costs in the long run. For a fair competition, we are comparing
ourselves to solar panels. However, even then it's hard to penetrate the market with a new
product that few people have heard off. For that, we will have to apply some marketing
strategies, such as publicity, demonstrations and eventually an interactive website.
However, such tools like the website can't be implemented at first because we're trying to be
as cost efficient as possible. To tackle this problem, we're going to be talking directly to the
businesses we're targeting. This works on our favor because it develops a personal
relationship between us and the consumer.

The 4 P's

The main focus of our product would not be variety but that is not to say there won't
be some. We are planning on having two major versions: one for the inside, less rugged and
therefore less expensive, and another one for the outside that would be able to withstand
weather changes but with a price increase. Other than that, we'd have different colours to
match the surroundings and to be as unobtrusive as possible. Not only that, but we'd build
every tile to be independent from one another in case we need to replace a faulty one.
We are going to invest in high quality materials and of low maintenance to hopefully
decrease the extra costs of maintenance.
The main feature of Green Steps tiles would be transformation of kinetic energy to
produce clean energy, and power lamp posts for example. We could then expand it to power
many more things.
Not only that, we'd also build in a counter that would show how much energy was
produced in any given day, to help the owner have a better idea of its savings.

As we've said above, price would be quite high. Each tile would cost 370.- (compared
to Pavegen's 385.- per tile
http://www.standard.co.uk/lifestyle/london-life/lets-power-walk-how-start-ups-like-pave
gen-are-producing-smart-tiles-that-generate-energy-when-10328555.html​) for the
outside one and 350.- for the inside one. Contrary to Pavegen, we give our buyers the choice
of the product and also the colour.
However, since we're targeting governments and businesses (due to the sheer amount of
people that pass through public places or shops) the payment would be immediate. Some
discounts can be offered if the buyer buys in big quantities.

Given the nature of the project and complexity, the product wouldn't have publicity designed
to sell. The distinction has to be made. We'd use publicity to encourage people to step on the
tiles but not to encourage them to buy for their places (the price/performance ratio wouldn't
be low). As such, we'd use direct marketing. There would no retailers in between and we'd go
talk directly with the governments and companies.

At first, we want to cover two main cover two main cities of Switzerland: Geneva and Zürich.
This would allow us to better assert profits and demand. If both those criteria are met, we are
thinking of expanding.

The materials needed and assembly would be done in China, and from there it would go to
our warehouse. Our offices and warehouse would coexist in the same building. Since we'd
begin installing the product in Switzerland only, transportation inside the country would be
fast. Most likely as fast as 2 days for the product to get anywhere inside the country.
Therefore transportation would be cheap and done effortlessly.

(Analysis)
Compared to our main competitors, Pavegen, we allow user choice on the colours and type of
unit. Other than that, we’re using the same principle to achieve energy. The fact we have
multiple choices gives us a competitive edge.
However, we haven’t been able to greatly reduce costs due to the complexity, assembly and
transportation. This is obviously negative for us as it decreases our chances of pleasing
customers and it might lead to a decrease in sales. Because of this, we expect sales to be
lower at first. This is normal for new business firms because we have to build our brand and
train our employees.
We do expect price to go down as the assembly factory gets more familiar with the
manufacturing process (and when our brand is built -> Don’t know how to say it better)). Not
only that, but we anticipate investing some of our capital in some form of publicity to help us
build our brand, and achieve a broader public, while still sticking to companies and
governments, as we don’t expect the product to be profitable to households in the foreseeable
future.
Furthermore, if we analyse the market, it’s clear it’s a good one for business. Demand for
clean and renewable energies has been steadily increasing. This is favourable for us because
our product offers many things that others in the same market do not. For example,
 weather/seasons doesn’t have a major impact on the production of energy, contrary to wind
turbines or solar panels.
Secondly, in Switzerland, companies who are perceived as ecological are tax exempted
according to the law.
Therefore, we foresee the growth of our company in the years to come as we offer better
choices than our competitors, and because the market is progressing to become more
attractive to companies who use our product (because they’d be tax exempted ->don’t know
how to say it better))

(​https://www.iea.org/newsroomandevents/pressreleases/2015/october/renewables-to-lead-wor
ld-power-market-growth-to-2020.html
“​The report sees the share of renewable energy in global power generation rising to over 26%
by 2020 from 22% in 2013 – a remarkable shift in a very limited period of time. By 2020, the
amount of global electricity generation coming from renewable energy will be higher than
today’s combined electricity demand of China, India and Brazil.​”)

The Value Chain Analysis

Primary Activities
· Inbound Logistics
· Incoming material storage: Material from “China” arriving to the Factory in Switzerland to
be assembled
· Data Collection: Accountant information and sources from research department
· Service : Customer Care
Operations
· Assembly: In the Factory
Outbound logistics
· Warehousing: In every branch
· Report Preparation: From branches to the central house
Marketing and Sales
· Web Site: To invest in the company, buy products, etc.
· Promotion: Leaded to governments and big institutions
· Advertising: Only for the B2C product
After – Sales Service
· Customer support, Customer care
· Feedback

Support Activities

C.E.O:​ Makes the administrative decisions, image of the company.

Secretary:​ Helps the C.E.O.
Corporate Lawyer: ​ensure the legality of commercial transactions, advising corporations on
their legal rights and duties, including the duties and responsibilities of ​corporate officers.
Financial Manager: ​responsible for providing financial advice and support to clients and
colleagues to enable them to make sound business decisions.
Accountant:​ In charge of the accountings of the enterprise.
Technology Manager:​ ​Responsible for implementing and maintaining technology in the
enterprise and the products.
Engineering Department:​ ​Responsible for creating and developing technology.
Marketing Manager:​ ​A manager whose​ ​primary​ ​task​ ​is​ ​to manage​ ​the​ ​marketing​ ​resources​ ​of
a product or business.
Planning department:​ ​ensure that people are aware of your product or service and that you
have an opportunity to convert that awareness into paying customers​.
Research Department:​ Gather Information in order to create marketing to specific market
segments.
Administrative Manager​:​ ​ ​oversee the support operations of an organization. They ensure that
there is effective information flow and that resources are employed efficiently throughout a
business.
Logistics Department:​ ​A group in charge of organizing and controlling the training group,
and the salary group.
Human Resources Manager:​ responsible for maximize employee performance in service of an
employer's strategic objectives.
Salary Group:​ Conformed by base workers (sellers, etc.)
Outsources:​ Cleaning services, security services

M​arket and Customers

Green Steps energy is offering its products to the public sector. Main customers targeted are
big cities, for example Geneva and Zurich; in the first and second year the market will be
mostly national; the Swiss market only will be offered our products. If the demand for this
product is high, this form of energy production will be offered on an international level.
Places with a high density of people in motion will be targeted first; these places are
essentially public; airports, train stations, museums, schools and so on are the places where
this service will be launched. Cities with a wish to increase green energy will be primary
customers. This product will lower energy costs and pollution drastically.

Competition
In this type of market competition is relatively low. It is very likely that two or three
companies will be dominating it. There eventually will be a form of cooperation developing
between these enterprises in order to be more efficient with creating cheap green energy.

Marketing
The ​product​ developed by Green Steps Energy Ltd is a service aimed at reducing the use of
polluting energies like nuclear, fossil fuels, and also coal. It is an energy that is non-polluting,
that stands alongside with solar- and wind-created energies.
The energy offered here needs considerable investment in its instalment. The kinetic sensors
and the energy-storing batteries that are needed to create this power source are high
technology and need a considerable amount of workforce. The initial ​price​ is important but
the benefits should cover the costs in a time lapse of about five years. ​This product will first
be offered to public institutions and will therefore be financed by governments.
Green Steps will be installing its energy-producing devices with workforce managed by its
own. The Research and Development will be designing the power devices; those will be
manufactured by outside companies in order to reduce costs maximally. The ​place ​where our
products are manufactured is external, but the instalment will be through Green Steps Ltd; it
will be a direct channel. Our strategy for placing our product is selective at first, because they
will be offered only to main cities and built only on selected public sites.
Promotion​ will be organized for major business or technology forums, like the summit in
Davos for example, and evidently events for the promotion of the environment.

Operations:

4V's

(Volume)
The demand of clean energies is increasing worldwide. “Green Steps Ltd” aims to tackle this
problem with its unit.
Nonetheless, due to the nature and complexity of the product, the volume of production is
low. Such situation increases the price of each unit which goes against the objective.
However, the company foresees having two advantages to overtake this problem. The first is
easy and fast installation. It also allows us to cover a bigger surface when putting the product
in place and in a shorter amount of time. Secondly, since the company aims to have two
variations (excluding the colour choices) the manufacturing process is repeatable and
standardized.
Having a low volume implies a higher unit cost. However, processing everything is easier
and that makes for a lower processing cost. The task involved for assembly may be less
rewarding for the staff since it's standardized.
Nonetheless, the process of building two diverse products isn't capital intensive because the
product remains the same save for a few differences.

(Variety)
Not only there’s an increase in demand for better ways to achieve energy, but also on ways to
create a product that doesn’t ruin the landscape, such as windmills for example.
Because of that, “Green Steps Ltd” offers two different units. One better prepared for the
inside, and another for the outside. The differences aren’t major allowing it to achieve
standardization.
The outside unit is better fitted to sustain weather changes while the inside one has an
easy-to-clean layer as a way to keep the building as presentable as possible.
A second way to match our customer’s need is the possibility of changing the colours of each
tile. This small change does not affect the standardization of the process which grants an
economic advantage.

The product itself has low variety. Aside from an indoor/outdoor version and different set of
colours, the unit remains the same. This allows the company to reduce the required number of
assets needed to put everything together, effectively achieving a lower price, while retaining
the customer’s needs as a choice and target.

(Variation in demand)
Many markets, like the clothing ones, have to deal with demand differences when a new
season begins, and therefore they have to change their production process. Our product
however, is not seasonal and doesn't need to be replaced frequently.

We can estimate that the demand should remain fairly stable, because price also plays a role.
This means that the manufacturing time to assemble a product, and the time it takes to arrive
until the client, doesn't change either nor there is a need to alter the production process. Thus
we are allowed to achieve a stable routine, because the demand is predictable, and to offer a
high-quality product at a lower price point.

(Visibility)
Given the nature of our company and business, clients may not have a large insight into the
company’s internal processes.
However, staff might available to explain the functioning of the product and to retain contact
with the client.
By doing so, the company is able to achieve another degree of standardization at the expense
of lower connection with the client. This however. might influence the time between
production and consumption of the product.

(Analysis)

One of the activities of “Green Steps” is the allocation of materials needed for manufacturing
and the movement of the product from the assembly line to the customer.
In terms of volume/variety/variation, the transformation process from raw materials to the
finished product remains equal, and so does the demand. The unit cost is therefore kept low.

The assets, like machines, needed to put everything together are part of the cost, and so is the
maintenance of “Green Steps”.
However, due to the low volume of production, the assembly machines do not have to run at
100% all the time, effectively reducing costs.
The high-quality materials used in each unit and the fact that every tile is independent from
the others, lowers the need for maintenance.

In terms of improvement, the company looks to achieve a low cost in transportation by

contracting a logistics enterprise such as FedEx (example of the slide). The reason being for a
reduced cost and the risk of transporting the units from the factory to the warehouse.

The company also aims to have a specialized maintenance unit. This allows the company and
our product to keep functioning with minimum disruption and low downtime.
 In an effort to attract more customers and reduce the time between production and
consumption, the company aims to elaborate via graphics and other sources, the various
economic and social advantages of using “Green Steps”.

Operations Process

1) Panel Production (Suppliers)

The panels are conformed by:

· Piezo- Electric of Barium titanate (Supplied by Cosson.cn

(​http://cosson.en.alibaba.com/contactinfo.html?spm=a2700.7724858.35.9.CFo
N29​)
· Battery, Diaphgram and plastic materials (Supplied by hktd.com)
Both companies stablished in ​Dongguan​ – China
 Material reference (http://www.azosensors.com/Article.aspx?ArticleID=36)
2) Assambling
The assembling process takes place in ​Dongguan​ (Where the factory rental goes around
7500$ per month per 5000 m2
(​http://www.china-briefing.com/news/2010/09/03/relocation-costs-from-china-to-india-and-v
ietnam.html​)
3) Transport
LuckyLucky Ltd realizes the transportation from Dongguan to Geneva, where “selling
process” takes place

Organizational Design
Green Steps applies the mechanistic model as showed in the value chain analysis.
Our firm has decided to apply this organizational design based on the next aspects:
1.​ ​Organization’s strategy: Being the process of assembling and selling the product

chronological, the mechanistic model gives us the opportunity to organize tasks correctly and
efficiently.
2.​ ​Environmental Uncertainty factors: Applying this model would be ideal thanks to low rates

of uncertainty.
3.​ ​Organizations’ technology: Since technology tends to change dramatically, our firm will

apply an organic model ONLY in the engineering department, where technology

development is crucial.
4.​ ​Organizations’ size: Due to our presence in two different countries, our enterprise would be

easier to control applying the organizational design.

In this way, taking into account the lack of communication that mechanistic model could
bring, the firm has decided to establish a weekly meeting between the CEO and managers to
coordinate the week’s goals and objectives. Therefore, every manager works with their
respective teams letting know the week’s plan to every lower level based on a span of 4 in the
administrative levels and 7 in the lower levels.
Equally, knowing the difficulties that managing an international enterprise could bring, we
have decided to apply a centralized decision-making.

Information systems: ​As a technological area, the Technology Manager is in charge of the
information systems. Green Steps S.A. applies IBM “supply chain management systems”.

Finance
First of all, we decided to offer two units at two different prices. The indoor one at 350.-
while the outside one costs 370. As has been said, we are comparing ourselves to the solar
panels market. They’re easy to install and affordable and produce a reasonable amount of
electricity.
What does this mean to us? We can expect lower sales in the first couple of years to build
brand, to build trust with our customers. After this first period, we’re hoping for an increase
in sales. This is a common situation in management for a new company.
By taking this in account, we estimated our sales. However, these numbers are assumptions
because as a relatively new product, we can’t compare it to anything else.
For our first year, we presume we’ll sell about 460 units which means we cover around 124
square meters, and about 165400.- in a year. Assuming 15 businesses buy our product, which
is a reasonable number for the first year, we should retain a 0.70% of market share. This is
comparing to the approximatively 48’000 sales of solar panels in 2014. In fact, all
comparisons are done with that same value because it is the most recent one.
After that, we analysed our market share to that of the biggest solar panel vendor, Alpiq. We
weren’t able to find numbers but considering they’re the biggest, we assume they have 40%
of the market. With such assumptions, we come up with a relative market share of 1.74%,
which can be considered attractive for such a young company.
Second year isn’t very different. We expect sales to increase but not by a big amount. This is
because we haven’t had the time to build our brand.
However, in third year, we’re aiming for a jump in sales, and to have more demand from
more businesses. This would allow us to have a bigger relative market share (around 3%).
The same continues in year four, where we once again expect an increase in sales.
However, we expect that demand eventually becomes too high. This means we might have to
buy more machines and employ more personnel, so we’re able to retain the same quality and
respond to demand.
What can we conclude from this, is the expectation of growth. By offering a new product,
sales might be low at first but increase steadily, and with it, our market share.
However, these are only assumptions. We only take into account the solar panel sales of
2014. This is not necessarily bad because it’s a high number so we take it as an average
number.
Overall, this is an exciting new product in an already established market. We don’t expect to
overtake the solar panels sales in the next few years, but Switzerland is a country worried
with how electricity is produced and a country willing to invest in clean and renewable
energies, which gives our product a good opportunity to grow, and eventually be more
competitive.