American InterContinental University

Executive Summary

The many problems facing many businesses around the world is the pace at which technology is changing to make businesses better for the future. Many businesses are using technology to build competitive advantage over their rivals, but in order to achieve this, they need to identify problems within the industry and find a solution to such problem to achieve the required competitive advantage. ATM machines have made it easier for customers to obtain counter services without having to go to a bank, however there are still several difficulties with the use of ATM machines. This business plan identified the use of bankcards as a problem to customer since they can either lose it or even forget their pin number for the elderly and those suffering from memory lapses. The solution to this would be the use of biometric ATM technology, which eliminates the use of bankcards. This business plan will describe the business for the introduction of biometric ATM technology by Hitachi, it will analyse the environment in which this business operates using various models like; Porter’s five model, PESTEL framework, competitive analysis and target markets and the marketing strategy that will be used by this company using the marketing mix tool. The aim of the business plan is to raise funds for this venture, so therefore, it will discuss the financial requirements and ownership of investors, it will further discuss the format of the biometric ATM venture, the structure of the operational management of this venture by looking at the distribution and returns of the business before coming to a comprehensive conclusion.

Business Description

The nature of our business lies within the banking industry and more particularly, giving business and customers an easier way to use ATMs. We aim to create ATMs machines with biometric technology, which means customers, will no longer require to use their cards for transactions. It will enable customers to place their finger on a reader at the ATM. The system works through the transmission of intra red light into the customer’s finger, which then enables customers to make transactions. The scanning technology used for these ATMs will be developed by Hitachi, a leading Japanese company that will create unique identifier system by recording veins that runs through our fingertips.

Fin Payment plans to provide banks, businesses and customers with an efficient, user-friendly system that will enable more privacy, practicality/ ease of use, transaction speed and most importantly security. A person using a cash machine or making a payment at the store can just place his / her finger on the scanner and the transaction is completed. Introducing this new system will have a great impact on customer satisfaction. 

Critical Success Factors

• Educating businesses and customers on a new, safer, efficient and easier way to make transaction by using biometric technology
• Reducing rising level of credit / debit card crimes
• Increasing customer satisfaction – Highest level of security and higher withdrawals and transactions limits
• Introducing a faster way of transacting -  “Touch and Go”

Mission Statement

At Fing-Payment, we provide a unique range of biometric services based on the principal of high value, cost-effectiveness and tailored solutions. Our aim and passion is to counter plastic money crimes, making England a crime-free zone by improving our client’s strategy and commercial intelligence to ensure a competitive edge in our market sector. To achieve our mission, we are determined to provide excellent customer satisfaction, quality and performance and security.

The Business Model

Marketing

The target market mainly comprises of three distinct groups: Banks, businesses and customers. According to our market research, our target market compromises of around 20,000 businesses, 5 major banks and 10 million consumers. Banks and businesses purchase ATMs machine or chip and pin device on a monthly basis. Special emphasis will be placed on Banks that want to control rising plastic money crime and who are looking for better customer satisfaction. To engage this primary target, we will send our products and services to these banks for free; in this case we will have a greater amount of cooperation between our primary target and us.

Our secondary market comprises customers that use ATMs on a regular basis. This group will include elderly people, students, parents and bankers. The method to target these customers is to install our machines in universities, shops, bars and restaurants. We plan to advertise our products and services on Billboards, radios and television. We intend to create our brand name by elaborating our marketing campaign, which will be used to introduce the company, and the services it offers.

Environmental Analysis

The aim of this analysis is to understand the main factors, both internal and external that will affect the operation of the business, hence affecting the profitability of the business. These analyses will be used to develop strategies that will help in overturning the negative impacts of the forces affecting the business. There are several tools that can be used to carry out this analysis and these include, Porter’s five force (1985), Political, economic, social and technological (PEST) framework (Pearce and Robinson, 2005), SWOT analysis, value chain etc. 

Porter’s five forces

In theory, the main elements of the Porter’s five forces include; industry rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of consumers and the threat of substitute goods (Porter, 1985 et al) as shown below

Threat of new entrant - Low

The biometric ATM machine is highly technical venture, which requires large amount of capital investment, so therefore this lowers the threat of new entrants into the new entrants. This also means that, there are higher barriers of entry into the market.

Industry rivalry - Higher

There are high concentrations within the industry since there are several ATM machine suppliers that include; NCR Corporation, Diebold, Wincor-Nixdorf, Fujitsu, Nautilus Hyosung, GRG, Itautec, etc. constitute the leading competitors within the industry. Almost every major country has its own ATM manufacturers and distributors, so therefore this means that, there is currently high level of industry rivalry and besides this, the services provided by all the companies are similar with little difference, hence increasing the level of rivalry more.

Bargaining power of suppliers - Low

The main suppliers of ATM machine are several ATM machine software suppliers that include; RMX or OS/2, Microsoft OS, Windows XP professional, Windows NT and Windows CE in particular,  Linux, IFX, XFS, etc. Recently XFS has been gaining more popularity over the rest of the software suppliers, however all software companies almost share the same technology and security levels. So therefore this is part of the justification that, the bargaining power of the suppliers is low since many ATM manufacturers have options to choose from, hence the low bargaining powers.

Bargaining power of buyers - Low

The main buyers of ATM machines are banks and as we all know there are several banks around the world using ATM machines since, it makes their work easier. This also means that they have low bargaining power. Further still, since ATM machines are very technical, the switching costs are very high for the buyers so, this also means that, their bargaining powers are lowered further.

Threat of substitute products - Low

ATM machines now offer most services that were traditionally offered over the counter; so therefore apart from these counter services, there are no substitute services to the ATM machines, thus lower threats of substitute goods. Further still, due to the convenience of ATM services, the switching costs to a substitute for ATM machines will be to higher, hence lowering the threat of substitute services further.

PESTLE Analysis

The PESTLE analysis is another important frameworks that are commonly been used by companies to assess the extent to which macroeconomic factors affect the operation of any business (Thompson, 2002). The main elements include; political, economic, social and technological factors (Johnson and Scholes, 1993) and this can apply to the biometric ATM machine as seen below

Political factors

According to Thompson (2002, et al), the main elements of the political factors include; regulatory and legal policies, consumer protections, wars, taxations policies etc. In this perspective, number political factors have affected the use of ATM machines in UK and elsewhere. The main factors affecting the ATM machine use and banking services are subjected to political policies. In the UK one of the political factors that affected the supply of ATM machines has been the ATM machines usage fee. According to CNNMoney (1999), in the 1980s several banks and building societies charged issuer fees and in 1990 Barclays bank proposed the use of acquire fee for non-Barclays card holder, which meant that customers were charged twice since the card issuers and ATM operator imposed charges. However, these proposals and the issuer charges were removed by the government interception under tabloid pressure and nationwide building society campaign. 

The supply of ATM machines has being heavily boosted by UK government attitude towards increasing technological developments in the UK banking systems.

According to Latter, Mott and Pinniger (2006), in 2005, the UK government introduced new rules under the consumer protection act that fixed ATM usage fees, between £1 and £1.50 so as to protect consumers who still used the 27,000 pay-to-use ATM machines around UK. This helped to reduce the number of these pay-to-use ATM machines down to 12,000, in 2010.

Economic

The main elements of the economic factors include the level of economic growth, economic growth trends, disposable income, taxation, employment/unemployment, tariffs etc. According to the trading economics report for the second quarter of 2011, the GDP of the UK grew by 0.2% in the 2^nd quarter of 2011 as illustrated in the graph below. History shows that, UK’s GDP growth averaged at 0.58% since 1955, with a highest of 5.30% in 1973 and -2.50% being the lowest reported in 1974.

These kinds of GDP growth trends shows that, the strong and increasing demand for ATM machines in the UK. Any economic growth of this strength certainly requires high technological development to support the economic. This is why this business plan will be profitable venture for the biometric ATM machine.

Social

The main social elements that will affect the biometric ATM business venture would include; demographics (Age, sex, family size, race, etc.), education, living standard, diversity, lifestyle changes, population shifts, etc. The main problem that initiated this business venture is the increasing problems associated with carrying cash cards and use of pin numbers, which may not be suitable for the elderly and others with memory problems. According to the office of national statistics (2010), over 39.64% of the UK population is aged over 59 years, which is the age associated with memory loss and lapses. This is population that would benefit most from the biometric ATM technology.

More so, the standards of living and education, which are one of the key success factors for this venture, are also on increase. The increasing levels of education amongst British nationals, that has raised the level of living standards of the UK population, means that UK is ready for biometric ATM technology, since they will not have any problems with this system.

Technology

In theory the main technological elements that affect any business would include; research and development, inventions, rate of obsolescence, biotech, transportation, Internet technology, information technology and so on. According to Pearce and Robinson (2005, et al), several companies use these elements of technology to determine the changes needed to exploit the opportunities presented by the macroeconomic situation. This business venture by Hitachi is not different in any sense from Pearce and Robinson (2005, et al), it has seen that the use of bank cards is becoming obsolete with time, so this is why Hitachi plans to replace bank cards with biometric technology that reads figure prints to facilitate a transaction. Information technology will be used to implement this venture, as well as the use of Internet technology to enable the use information transfer from database to the point of service. 

This technology would also help in reducing credit and debit card crime rates, since most the credit or debit cards will not be used if the biometric ATM machines are introduced in UK.

Legislation

Legal factors: these are related to the legal environment in which firms operate. Over the recent years in the United kingdom  there have been acouple of significant legal adjustments that have impacted banks operations and the use of ATMs. The establishment of an increase in the minimum wage and greater requirements for firms to recycle and age discrimination and disability discrimination legislation are examples of recent legislation that impact an organisation's actions  (McKeever, 2010). Legal changes impact on a firm's costs if new procedures and systems have to be adopted and demand  if the legislation affects the possibilty of clients purchasing the product or using the service  (DeThomas, 2008).

Environmental

Environmental issues are becoming signficant each and every other day. Every organisation is tasked with the responsibility to conservr the environment and produce environmental friendly products or offer environmetal friendly services  (Dickson, 2006). The use of biometric ATMs will boost environmental conservation by a great deal since banks will no longer be issuing chip in plastic cards that are non-biodegradeable. The introduction of the touch and go will get an overwhelming suport both by the environmental agencies and the ordinary cititzens who mind about the environment hence competitive advantage  (Joseph, 2006).

So far, this model as advanced and it does categorise the market area targeted or covered.

For instance, a firm undertaking PESTEL analysis may consider:

• Local factors and these may include local economic growth rates and planning permission
• National factors these may include trade descriptions legislation, UK laws on ATM opening hours and UK interest rates
• Global factors such as the launch of new markets.The entry of Rumania and Bulgaria into the European Union  may result to easier market entry requremnet and offer expansion opportunities. This type of PESTEL analysis is refered to as LoNGPESTEL. This is illustrated below:

Competitive Analysis

The traditional chip and pin bankcards are still the most popular methods of carrying transactions in UK. The key attributes customers will associate with the biometric ATM technology in the UK would be key success factors identified before and these will be used in the positioning matrix illustrated below. The key success factors of the biometric ATM technology venture includes; tendency to reduce credit/debit card crimes, higher customer satisfaction through high levels security and high withdrawal and transaction limits and fast way of transaction using the “Touch and Go” technology.

Biometric ATM technology Positioning Matrix

This above mapping means that, the traditional pin and chip ATM technology has relatively higher levels of credit and debit card crime levels hence low security levels, and it also means that, there is relatively slower transaction speed since the ATM machines will have to read the pins and chip cards, to facilitate a transaction. On the other hand, the introduction of biometric ATM machines will significantly reduce the credit and debit crime rates and would also increase the speed of transactions since, it will use “Touch and Go” technology. These are the key perception of biometric ATM technology by the customers.

Target Markets

The banking service has a diverse customer base, ranging from people of all ages, gender, race ethnicity etc, so therefore the main targets will be all banks and other companies that issuer ATM cards like credit card companies etc. to partner with Hitachi in introducing this new technology. Even though the product is designed with the expectations of customers in mind, banks and other card issuers are the target markets. The biometric ATM technology is aimed at improving the services they provide to customers.

Marketing Strategy

There are several ways in which marketing strategies can be defined and according to Kotler and Armstrong (2010), it refers to processes organisations use to allocate their resources to build opportunities that can increase their sales to gain competitive advantage over their rivals. Some of the best ways to achieve this is by using the elements of the marketing mix that includes; Product, Place, Promotion and Price, and the use of social marketing strategy like the twitter marketing model to create these opportunities that can be used to achieve the required competitive advantage as explained below for the biometric ATM business venture.

Marketing mix tools

Product

The product of this venture is ATMs machines with biometric technology, which means that customers don’t have to bankcards for transactions. The technology enables customers to place their finger on an ATM reader, to carry out any transactions. This technology works through the transmission of intra red light into the customer’s finger, which then enables customers to make transactions. The scanning technology used for these ATMs will be developed by Hitachi, Japanese company that will create unique identifier system by recording veins that runs through our fingertips. The competitive advantage of this creates for the customers include; faster speed, reduction of credit/debit card crimes, efficiency and security.  This will be the marketing slogan that will be used to position the product to the customers.

Place

This mainly refers to the distribution channels that will be used by the company, therefore since banks and other financial institutions are the ones that offer ATM services to customer, the distribution will be through these companies. These will be the distribution channels used for this company, and since there are other private companies that distribute ATM machines as we have seen before, these will also be used as well.

Price

Pricing is one of the common marketing strategies used by companies and some of these strategies include; competitive pricing, cost-plus pricing, skimming pricing, market oriented pricing, premium pricing, cost leadership pricing, etc. Since this is highly technical product, its will best to use premium pricing strategy which will also serve as a reflection of highly engineered technology. The reason for using this strategy even though its new product is because of the quality of the product, the idea is to use the price to reflect the quality which is always the case with technical products, besides banks and financial institutions are advance industry that can’t be put off by premium prices easily.

Promotion

The fourth element of the marketing mix that can be used to build competitive advantage is using promotion strategy and the main elements may include; advertising, personal selling, direct marketing, public relations, sales promotion and exhibitions according to Kotler and Armstrong (2010 et, al). Therefore in order to build strong competitive advantage, it will be best to use the most effective promotional mix, however it would be best to use a mix of all the elements of the promotional mix to reach all targeted customers. One of the most effective promotional mix for this product is public relations, this will help in selling the service to media representatives. The second and important promotional strategy is personal selling since this is highly technical product. Personal selling will be used to; educating businesses and customers on the benefits and usage, safety, efficient, easy of transacting using biometric technology, reduced crime risks, high security levels and withdrawals speeds through the  “Touch and Go” technology. This will be help in creating competitive advantage.

Social media marketing model

This is a marketing model that does use social sites to market a product or an idea. It has the ability to increase awareness within short period of time and therefore bring competitive advantage. Apparently, social media has very many subscribers who range from old to young, white to black and the literate to the illiterate.

Over View of the Model

The prime objective is to increase awereness amongest all the concern stakeholders and also increase competitive advantage for the  company. Socail media will not only increase online client interaction but also it will change the attitude and mentality of the market from the chip and card to the tough and go (biometric use)  (Rhonda, 2005).

Since the large portion of the company will be owned by the shareholders of Hitachi, these shareholders are our first target. Afterward, the concern will be segmenting and targeting the market through geographic and social demographic data to be obtained from the registerer of persons in the UK. Possible targets could be based on: location, age, current brand awareness and product usage.

Finance

The purpose of this business plan is to raise funds to develop this technology, so therefore as Hitachi is well known around the world, its success in the industry is speaks for itself. According to Hitachi’s corporate profile, its $112.40bn company by market capitalization by the second quarter of 2011, therefore this therefore means that, investors don’t need to worry about their investment in this project, if anything this is a great investment opportunity for any investor. This is an estimated $1.2bn investment project and Hitachi is investing 80% into this project so therefore, it’s only looking for 20% from various investors. Since Hitachi is public limited company, the investors will get the changes to be shareowners of this company with great success history.

Organisation

This mainly refers to the ownership formats for prospective investors, which in theory include, sole proprietorship, corporation, partnership, limited partnership, limited and unlimited company ownerships, limited liability partnership and non-profit corporations. Since Hitachi is a corporation, this will simply be the format of ownership with this company

Operational Management

In theory, operational management refers to the planning, coordination, control and organisation of the distribution of products and allocation of returns. So therefore bearing this in mind, the biometric ATM technology company will, use banks and other financial service providers to distribute these ATMs and the returns to shareholders will be allocated according to the ways in which returns are distributed amongst shareholders by most corporations, particularly the Hitachi Parent company way which is through dividend distribution to shareholders. This is how the operational management of this venture will be carried out.

Conclusion

This business plan was initiated by the discovery of the market opportunity that exists within the banking industry, and it was further strengthened by the past success of Hitachi Parent Company within this industry. This is a very rare, “win-win” opportunity for a prospective investor to acquire shares in a company with long history of success within this industry. Added to the success history of Hitachi is the attractive package accompanied with this project, so therefore its low risk investment venture any investor.