Practise IB Business Management SL 1.1.4 by analysing the challenges and planning steps faced by new businesses.
KapTan
KapTan (K T), which manufactures rechargeable batteries for cordless consumer products like vacuum cleaners, began five years ago as a business with a product orientation. It sells business to business (B2B). Multinational companies dominate the rechargeable battery industry, and K T suffered from cash-flow problems in its first year of trading. Its profits are small and, in the last two years, have fallen.
K T has now developed an innovative battery that is small and lightweight. This battery is an emergency power source allowing electric cars to reach a charging station. However, the battery can only be used ten times before it runs out. K T has insufficient finance to create a battery that can be recharged an unlimited number of times.
Through market research, K T has discovered that:
- no other emergency batteries for electric cars exist
- owners of electric cars fear running out of power
- KT's new battery could be obsolete in five years.
K T has the capacity to produce 90000 of these new batteries each year. The average cost is per unit. KT has insufficient funds to invest in additional capacity.
K T is considering two options:
Option 1: Market and sell directly to existing car owners through business to consumer (B2C) at a retail price of . K T will need to borrow significant capital to finance this option.
Option 2: Accept an offer of a five-year strategic alliance with a manufacturer of electric cars. K T would provide its product exclusively at per unit. Sales are guaranteed.
Table 2: \(\boldsymbol{K
With reference to K T, explain two problems that a new business may face.