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LUOU LUOU Smart pod

 TABLE OF CONTENTS

1. INTRODUCTION
1.1. Paper’s Objective
1.2. Problem Definition and Solution
2. FEATURES. BENEFITS AND MARKET OPPORTUNITY
2.1. Gap Analysis
2.2. Features and Benefits
2.3. Market Opportunity
3. MARKET STRATEGY
3.1. Porter’s 5 Forces Industry Analysis
3.2. Competitive positioning
3.3. Market Strategy
3.4. Generic Go-to-Market Strategy
3.5. Fictional Persona
3.6. Elevator Pitch
4. FINANCIAL MODEL
5. CONCLUSION
6. BIBLIOGRAPHY

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1. INTRODUCTION
2.

1.1. Paper’s Objective

Paper's Objective is to attract investment resources to create the company LUOU

LUOU. The purpose of the project is to make a profit through innovative product promotion.
LUOU LUOU Smart pod is a small company with a long-term focus. To achieve its goals,
the company must focus on the mission behind the vision. The company's vision is realized in
three ways:
 Simplify the daily work of medical personnel through the introduction of high
technologies.
 Ensure job creation with competitive wages.
 Work effectively to achieve the best innovative result.
LUOU LUOU Smart pod mission
The company is focused on empowering everyone to use technology to facilitate
everyday functions. We use the best human and technological resources to create excellent
quality products, thereby contributing to sustainable development.

1.2. Problem Definition and Solution

Project goal: To design a company with an innovative product based on SMART technology
for implementation in the healthcare industry.
Planned annual sales: up to 100 units.
Upon successful implementation of the project, the company plans to increase its production
capacity.
Market: This product is designed to meet the needs of healthcare professionals. The start-up is
planned in the territory of Riga, with subsequent expansion to the entire Baltic region
Outlook: The Covid-19 pandemic has given serious thought to the importance of the medical
sector in the economy. The company is a good solution for redirecting the forces of medical
personnel, which will allow for private partnerships with public and private medical companies.

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 2. FEATURES. BENEFITS AND MARKET OPPORTUNITY

2.1. Gap Analysis

Gap analysis can identify gaps in the market. A gap analysis method permits companies to
discover how to best accomplish their business purposes (Watkins, Meiers and Visser, 2012).

Table 2.1. Gap Analysis

No Current Gap Desired Goal Weighting Audience

.
1 Some professions An innovative device that 4 Healthcare workers,
require complete responds to both voice engineers and anyone
freedom of and gesture or touch looking for mobility
movement
(hands) combined
with fast
execution of tasks
2 Sometimes it is Portable device that does 3 Police, emergency
necessary to have not need special services, healthcare
a handheld device conditions for workers
on hand that transportation, power
releases control supply or installation
3 Modern society is A device that allows 4 Everyone
focused on instant access to
improving the numerous control
efficiency of functions
medical
institutions
4 The introduction A device that allows 2 Any SMART-house’s
of a system of keeping abreast of the owner
protection against current security status of
fire, theft or other the premises with instant
negative cases notification at any
requires a distance
centralized
solution

2.2. Features and Benefits

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 A feature is the characteristics of the product, which defines its usability. A Benefit is the
outcomes or results that users will (hopefully) experience by using your product or service (Majhi,
2021). Feature-benefit matrices help marketers ensure their messaging is consistent, relevant, and
accessible to end-users (Shewan, 2020).

Table 2.2. Feature-Benefit Matrix

No. Feature Benefit a Benefit b

1 Voice, gesture and touch
control
2 Device portability and
mobility
Allows full control of the device in Such functions as recording,
three different ways streeming, photoes, routing etc. can
be fully
controlled by voice
Allows easily carrying the device Does not need a constant power
and even use it on the way source, requires charging once a
day or less

3 Fire and thief alarm In case of nearby emergency or  

dangerous situation,
glasses will inform owner about it

2.3. Market Opportunity

Today, more than 28,000 specialists work in software development companies in the IT sector
of Latvia. In addition, about 700 computer science students graduate annually from the country's
universities, which also stimulates the industry's growth (IT Outsourcing Destinations Overview:
Estonia, Latvia, Lithuania - N-iX, 2019). The information and communication technology sector has
become the third-largest exporter in Latvia after the woodworking and food processing sector
(Information and Communications Technology Industry, 2021). The development of the Latvian IT
market has led to the emergence of such large service providers in the country as Tieto, Evolution,
Accenture Latvia, and Lattelecom Technology. Thus, the high-tech market is successfully developing
in Latvia, which creates favorable conditions for the implementation of an innovative company.

In addition, despite the recession associated with the Covid-19 pandemic, Latvia is showing
good results in overcoming it. So, in 2020 in the European Union as a whole, a decline of 7.4% was
predicted, in Latvia - by 5.6%, in 2021 the forecast for economic growth as a whole for the European
Union - 4.1%, in Latvia - 4.9% (LSM, 2021).

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3. MARKET STRATEGY
.

3.1. Porter’s Five Forces Industry Analysis

The competitor’s analysis can be done as per the guidelines in Porter's 5 Forces Analysis. This
include (Aithal, 2017):

 Threat of new entrants to the given industry.

 Threat of substituent products, services, or technology in that industry.
 Bargaining power of customers on pricing, quality, and after-sales support.
 Bargaining power of suppliers while supplying various resources in a given
industry and the ability of companies to sustain and negotiate. The strength of bargaining
power of supplier depends on their switching cost.
 The competition among the revelry in the given industry and its consequence on
their profit and sustainability.
Table 3.1. Porter’s Five Forces Industry Analysis (Aithal, 2017; Kharub and Sharma, 2017)
The first step: assessing the competitiveness of the company's product and the level of competition in
the market 
1.1 Substituent products

Parameter Comments Parameter estimation

3 2 1
Substituent Is able to provide Do exist and have a Do exist, but have Does not exist
products "price- the same quality at high market share just entered the
quality" lower prices market and their
share is small
    1
TOTAL 1 – low risk
1.2 Assessment of the level of intra-industry competition

Parameter Comments Parameter estimation

3 2 1
Number of firms The more players on High level of Average market Small number of
the market, the market saturation saturation sellers
higher the level of
competition and the
risk of losing market     1
share
Market growth The lower the Market stagnation Slowing down but Market increase
rate market growth rate, or decrease growing
the higher the risk of
permanent
redistribution of the     1
market

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Level of product The lower the Companies sell The product has Products differ
differentiation product standardized goods standardized key significantly from
differentiation, the properties, but each other
higher the risk of differs in additional
consumer switching benefits
between different
companies   2  

Restriction on The less Fierce price There is a There is a

price increases opportunities to competition possibility of price possibility for
raise prices, the increases only to price increases
higher the risk of cover cost increases
losing profits with a
constant increase in   2  
costs
TOTAL 6 – average risk
1.3 Assessment of the new firms threat
Parameter Comments Parameter estimation
3 2 1
Economies of The larger the No Exists only for a Significant
scale volume of few market players
production, the
lower the cost of
purchasing 1    
materials, the less
the fixed costs
impact
Strong brands The stronger the There is no key 2-3 large players 2-3 large players
with a high level existing brands in firms have about 50% of hold more than
of knowledge and the industry, the the market 80% of the
loyalty more difficult it is market
for new players to 3    
join.
Product The higher the Low level of There are micro- All possible
differentiation variety of goods and product variety niches niches are
services, the more occupied
difficult it is for new
firms to enter the   2  
market
Level of The higher the Low Average High
investment and initial investment
costs to enter the level to enter the
industry industry, the more
difficult entering the     1
industry
Access to The more difficult it Access to Access to Access to
distribution is to reach the target distribution distribution distribution
channels audience in the channels is channels requires channels is
market, the lower completely open moderate limited
the attractiveness of investment
the industry   2  

Government The government can There is no The state interferes The state fully
policy limit and close the restrictive acts by in the industry, but regulates the
industry through the state at a low level industry and sets
licensing, restricting restrictions
access to raw 3    
materials and other

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 important resources,
regulating the price
level
Willingness of If companies can No price reductions Large firms will not At any attempt to
existing players to lower prices to agree to reduce enter a cheaper
reduce prices maintain market prices offer, existing
share, this is a players reduce
significant barrier to prices
entry for new   2  
players.
Industry growth The higher the High and growing Decelerating Stagnation or
rate growth rate of the decline
industry, the more
new firms
3    

TOTAL 17 – high risk

Step Two: Assess the consumer’s threats
2.1 Consumer’s Bargaining Power
Parameter Comments Parameter estimation
3 2 1
Share of buyers If buyers are More than 80% of A small part of Sales volume is
with high sales concentrated and sales come from customers holds evenly distributed
make purchases on a several clients about 50% of sales among all
large scale, the customers
company will be     1
forced to constantly
make concessions to
them.
Склонность к The lower the The company's The company's The company's
переключению uniqueness of the product is not product is partially product is
на товары product, the higher unique, there are unique, there are completely
субституты the possibility that full analogues distinctive unique, there are
the buyer will be characteristics that no analogues
able to find an are important for
alternative product customers
   2
Price sensitivity The higher the price The buyer will The buyer will The buyer is
sensitivity, the always switch to a switch only if there absolutely
higher the product with a is a significant insensitive to
possibility that the lower price difference in price price
buyer will buy the 3    
item at a lower price
from competitors
Satisfaction with Dissatisfaction with Dissatisfaction with Dissatisfaction with Complete
quality quality creates latent the key secondary satisfaction with
demand that can be characteristics of characteristics of quality
met by a new the product the product
competitor   2  

TOTAL 8 – average risk

Step Three: Assess Suppliers Threats 
Parameter Comments Parameter estimation
 
2 1
Number of The fewer suppliers, Few suppliers or Wide range of
suppliers the higher the monopoly suppliers

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 possibility of   1
unjustified price
increases
Limited supplier The higher the Limited volumes Unlimited volumes
resources limited resources of
suppliers, the higher
the likelihood of
price increases   1
Switching costs The higher the High costs of Low costs of
switching costs, the switching to other switching to other
higher the threat to suppliers suppliers
price increases
  1
Priority direction The lower the Low priority High priority
for the supplier priority of the
industry for the
supplier, the less
attention and effort   1
he invests in it, the
higher the risk of
poor quality work
TOTAL 4 – low risk

3.2. Competitive positioning

The “five forces” Porter’s diamond model has been regarded as the major analytical
framework of the competitive positioning paradigm (Kharub and Sharma, 2017).

The analysis showed the following position of the company (table 3.2).

Table 3.2. Competitive positioning analysis

Porter’s Force Description

Low The company has a unique offer on the Latvian market, which has no analogues

Average The company's market is highly competitive and promising. There is no possibility of a
complete comparison of products from different firms. There are restrictions on price
increases.

High The risk of new companies entering is high due to the ongoing scientific and
technological progress and digitalization. New companies can emerge all the time due
to low barriers to entry and relatively low initial investment.

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 Average The client portfolio does not have high risks (there are no key buyers). The existence of
less cost-effective proposals that have similar potential. Dissatisfaction with the current
level of work in certain areas.

Low Stability from suppliers

3.3. Market Strategy

According to Porter, strategies allow organizations to gain competitive advantage from three
different bases: cost leadership, differentiation, and focus [18, 30]. Porter calls these bases generic
strategies (Islami, Mustafa and Latkovikj, 2020).

На основании матрицы Майкл Портер выделяет 3 основных стратегий конкурентного

поведения компании в отрасли: лидерство в издержках, дифференциация и специализация
(рис. 3.1).

Figure 3.1. Porter's Generic Competitive Strategies

Based on the matrix, Michael Porter identifies 3 main strategies for the company's
competitive behavior in the industry: cost leadership, differentiation, and specialization (Figure 3.1).

A competitive product leadership strategy or differentiation means creating a unique product

in the industry. A competitive cost leadership strategy or price leadership means the ability of the
company to achieve the lowest cost level. A competitive focusing strategy or niche leadership means
focusing all the company's efforts on a specific narrow group of consumers (Islami, Mustafa and
Latkovikj, 2020).

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 This classification of Porter's competition strategies is very general and suggests that a
business should choose the type of competition that will become the basis for making decisions in the
field of assortment, prices, packaging, promotion and distribution of goods. After choosing the key
direction of the competitive strategy, it is necessary to develop the main principles as follows:

1. It is recommended to adhere to reinforcing the uniqueness of the product strategy and to

focus on such a target market for which unique characteristics are significant. In other words, the
company should strive for leadership in a specific market niche.

2. The main efforts of the company should be focused on building a high level of knowledge
of the product. It should build awareness of the unique characteristics of the product.

3. It is necessary to constantly monitor the proposals of competitors and the appearance of

new players.

4. Firm should concentrate promotional activities on building long-term relationships with

customers.

5. It is recommended to diversify your client portfolio.

6. Special loyalty programs are required for VIP-clients (it is possible to attract government
grants. Among the main customers there may be medical workers) and economy programs for price-
sensitive buyers.

3.4. Generic Go-to-Market Strategy

A company’s go-to-market (GTM) strategy is one of the most important method to improve
key business outcomes through market situation and business entity capability. At its core, a GTM
strategy is the way a company aligns to the evolving needs of its customers – it is the interface at
which the company sells to and serves its customer base and interacts with new prospects. It involves
the most strategic questions a company can ask, such as (Himawan Kunto and Retno Kusumastuti,
2018):

1. What type of market sector do we aim for?

2. Which customer do we target?

3. Which channel suits the customer's behaviour to buy?

4. How can our offer meet our market and channel needs?

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 5. What is our unique benefit for each target customer?

According to the above analysis, such features of the GTM strategy can be distinguished.
First, it should be understood that a high-tech product cannot be cheap. At the same time, today, there
is a simple solution to vision problems. Therefore, the strategy should be focused on demonstrating
and explaining the benefits of choosing smart glasses.

Hence, among the tactical steps should be highlighted:

Creation of illustrative material to demonstrate the benefits of smart glasses. The target
audience will be:

 workers who need high accuracy in their work, namely: medical personnel,
workers of precision industries.
 consumers who focus on internet connectivity, recording, and device mobility
(extreme sports athletes, vehicle drivers).
Thus, two lines of smart glasses should be distinguished: ACTION ZG-Glasses and SMART
ZG-Glasses. Digital and content marketing should be used to promote the ACTION line. For the
SMART line - the use of more traditional methods focused on the business-to-business segment
(building long-term loyal relationships).

The main channel for promoting the ACTION series is social networks that use visual images
(YouTube and Instagram). Professional channels should be used: conferences, educational institutions
(focused on post-university education), and focus groups to promote the SMART series.

3.5. Fictional Persona

The persona method has as its objective the creation and design of all the user types or
profiles that make up a product’s target audience. It helps to make decisions concerning the user
experience and identify the main features to include in the product strategy (Benyon, 2019).

Two persons should be distinguished:

SMART series:

Persona: Certified plastic surgeon, microsurgeon, hand surgeon 

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Photo:

   
Fictional name: Eduards Jurševis  
Workplace Latvijas Mikroķirurģijas centrs  

Job responsibilities Conducts microsurgical hand and reconstructive microsurgical operations

Demographics: 46 years old

Married
 
Father of two children
 
Has a Ph.D. in Medicine
 
Goals and tasks: He is focused, goal-oriented within a strong leadership role.

Scientific activity Promotion paper “Micro-blood vessel grafts – source of neoangiogenesis and
revascularisation.”

ACTION series:

Persona: Professional motocross racer

Photo:

  
Fictional name: Pauls Jonass
Workplace Standing Construct GASGAS Factory Racing Team

Job responsibilities Professional MX racer for

Demographics: 24 years old

Not married

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 Goals and tasks: He is focused, goal-oriented within a strong leadership role.

Special activity 2017 MX2 World Champion

Latvian Annual Sports Award for Athlete of the Year nominee

3.6. Elevator Pitch

My name is Aisara Suleimenova and I am researching innovative high-tech products that can
improve human performance.

Over the past years, I have been studying the need to create universal devices that will enable
the use of computer technology, but at the same time leave your hands completely free. Recently I
have summarized the received materials and created a project that will allow introducing Smart
Glasses technologies to the Latvian market.

My project builds on the experience I have gained while working with several software
startups as a sales and marketing specialist.

I am ready to discuss my work with everyone interested in how we achieved success.

4. FINANCIAL MODEL

For the implementation of the project, it is planned to attract credit funds for 24,000 euros
(about 80% of the total cost). The annual interest rate on the loan is 10%, the interest is calculated
from the remaining amount. The loan repayment period is 120 months (10 years). Assumed loan
terms: May 2021. If additional sources of income are available, early repayment of the loan is
expected.

Overpayment of the loan 13690 euros. Payments for the entire loan term (debt + interest)
amount to 37,690 euros.

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 The monthly payroll cost for two employees is € 2,978.16 (including VSAOI for the
employer).

Planned sales at the level of 1-2 pairs of glasses per month at a cost of 200 euros (to assess the
pessimistic forecast).

Cash flow

Description Годы
1 2 3 4 5 6 7 8 9 10
Net profit -26140 1584 5866 8845 13793 18990 5713 10507 15543 20929

Investments 30140
(loan + equity)
Depreciation 0 2700 2700 2700 2700 2700 2700 2700 2700 2700

Cash flow -30140 4284 8566 11545 16493 21690 8413 13207 18243 23629

Let us make calculations of the main financial indicators based on discounted indicators.
First, calculate the IRR using the excel program:
IRR = 33%
Let us make calculations to assess the efficiency using the NPV function:
The value is 4,671.36 euros.
The payback period exceeds four years, but less than five years. Let's make a calculation:
Accumulated profit for four years will amount to -9845 euros.
This balance needs to be covered by income in the fifth year: € 13,793.
Let us calculate the number of months: 9845/13793 = 0.71 years (nine months).
Total payback period is 4 years and 9 months

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5. CONCLUSION

1. Drafting an investment proposal is a complex multidimensional task. It includes both

market and industry research and the development of action strategies.
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 2. The current investment proposal has been drawn up for the design purposes of ZG-Glasess
by Aisara Suleimenova.

3. The advantage of this company is an innovative product that may be of interest to a wide
audience of consumers. The main key factor for the company's success will be the focus on building a
strong loyal customer base.

4. The cost of setting up a company is 30,140 euros. The total payback period is four years
and nine months.

5. Pricing is based on a market method, and revenue targets include averages of price and
sales.

6. The calculated performance indicators show positive values even for the pessimistic
scenario.

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6. BIBLIOGRAPHY
Watkins, R., Meiers, M.W. and Visser, Y., 2012. A guide to assessing needs: Essential tools
for collecting information, making decisions, and achieving development results. World Bank
Publications.
Majhi, D., 2021. Learning to Build a Feature-Benefit Matrix. [online] Linkedin.com.
Available at: <https://www.linkedin.com/pulse/feature-benefit-matrix-dipak-majhi>
[Accessed 9 April 2021].
Shewan, D., 2020. Features vs. Benefits: Here's the Difference & Why It Matters. [online]
Wordstream.com. Available at: <https://www.wordstream.com/blog/ws/2017/02/21/features-
vs-benefits> [Accessed 9 April 2021].
Liaa.gov.lv. 2021. Information and Communications Technology Industry. [online] Available
at: <https://www.liaa.gov.lv/en/trade/industries/ict> [Accessed 9 April 2021].
N-ix.com. 2019. IT Outsourcing Destinations Overview: Estonia, Latvia, Lithuania - N-iX.
[online] Available at: <https://www.n-ix.com/it-outsourcing-destinations-estonia-latvia-
lithuania/> [Accessed 9 April 2021].

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