Case Study of EcoFone: Market Analysis and Expansion Decision

This report analyzes the market for smartphones in the UK, with a focus on the usage patterns of different age groups. It also discusses the potential for expansion in Kingston and provides financial analysis. The report concludes with recommendations for EcoFone.

B09891
ECO FONE

EXECUTIVE SUMMARY
This report consists of case study of EcoFone who has major business of selling
smartphones in UK. This report consists of overview of company and its market
analyses based on percentage of usage by all age group workers. Budgeted usage
rate for 2018 and 2019 also calculated through moving average method for
smartphone; base year taken for this analysis were 2012 to 2017. Summary of
features of smartphones which increase sales by older customers has also been
discussed. Pros and Cons analysis method will reflect whether company should
expand or not.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
Overview..........................................................................................................................................4
Product Analysis:.............................................................................................................................5
Customer analysis:...........................................................................................................................7
Decision related to expansion:.........................................................................................................8
Financial Analysis:..........................................................................................................................9
Relationship between two retail shops:.........................................................................................10
Customer Satisfaction:...............................................................................................................11
Quality assessment:.......................................................................................................................11
Conclusion:....................................................................................................................................12
REFERENCES..............................................................................................................................13
APPENDIX....................................................................................................................................14

Overview
Research report shows that over 50% UK workforce population uses smartphones
for business related activities. Some of the common applications used by UK
workers are email, voice call and calendar management. Report reveals that 44%
populations mostly utilized email app, while other 34% and 73% engage
themselves utilizing voice calls and calendar management. Some of the
applications such as legacy information and reporting systems that requires
special knowledge and skill are recorded lower usage by these workers. Besides
these unofficial apps like instant messaging, smarphone browsers, map navigation
and photo editors are quite popular among employees and widely used by them
(Flowerdew and Aitkin, 1982). The outcome from survey done on some biggest
company workers shows that 40% employee use whatsapp on regular basis.
Additional to this some of modest smartphone usage includes timesheet
submission; as only 4% submits expenses report; while 6% use intranet for
submission. From the survey done on workers having field job; it was found that
there is no use of PC and tablets for them, because smartphones is enough to
update information’s like location tracing, sending confirmation mail, checking
daily tasks, etc. A smartphone is not smart due its look or features but various
utility apps and software’s make it smart.

Figure 1: Usage of smartphones in 2016-17
Email
Making Standard Calls
Viewing Documents
Managing my
time/workload
None of these
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
37%
32%
0%
60%
50%
41%
33%
17%
80%
44%
2016
2017
Interpretation: Figure shows that in 2017 every usage like Managing time and
workload, viewing documents, making standard calls and email has reduced as
compare to 2016. But 50% people respond that they don’t use smarphones for
these four usages. This figure is increased from 2016; which indicates these four
applications usage has been decreased and will be eliminate in future (Karlis,
2003).
Product Analysis:
Smartphone has shown constant growth trend from 2012 to 2017; Market is boom
with several other products available in the market such as laptops and tablets
which records similar usage as smartphone does. From figure 2; it can be analyzed
that 2012 maximum usage of laptop than smartphone and tablet by customers. But
certain upside down can be seen in laptop usage since 2012 but smartphone and

tablet are steadily growing without any downward slope. Tablet usage data shows
maximum growth in 2012-13 which is by 20%. But in 2017; smartphone is the
only product which cross 80% usage by workers. After analyses of this line chart
it can be stated that smartphone is the future electronic device which has most
usage than laptop and tablet. It’s clear from above statement that smartphone is
out of competition from laptop and tablet competitors (Adelson, 1966).
Figure 2: UK adult smartphone use in the period 2012-2017
2012 2013 2014 2015 2016 2017
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Figure 2
Laptop Smartphone Tablet
YEAR
U
S
A
G
E
Expected usage of smarphone in 2018 and 2019:
According to steady growth in usage of smartphones from 2012 to 2017; it is
estimated that in 2018 it will cross 90% usage in 2018 and 95% in 2019. The
method used here for forecasting future usage of smartphones by worker in 2018
and 2019 is moving average module (Grainger and Garcia, 1996).
Why linear forecast would not work in this case?

The reason is; usage of smartphones from 2012 to 2017 shows constant growth
but not at the same rate. Linear forecasting is useful only when there is constant
growth rate over period but in this case pace of growth rate is not same it varies
year by year (Lintner, 1948).
Therefore moving average method is used to get estimated usage of smartphone in
2018 and 2019. This method is useful when there is unsteady growth rate over the
period; in that case average of all growth is taken to calculate future growth
(Acharya Richardson, Van Nieuwerburgh and White, 2011). Here the average
growth rate calculated for smartphones is 7%.
Figure 3: Expected usage of smartphones in 2018 and 2019:
2012 2013 2014 2015 2016 2017 2018 2019
0%
20%
40%
60%
80%
100%
120%
Laptop
Smartphone
Tablet
Customer analysis:
After doing market analysis it was found that unexpectedly smarphone sales are
mostly purchased by old consumers in UK as compared to young users. It
indicates that 71% users are age between 55 to 75 years while 20% are belonging
to age group of 21 to 54 and rest 9% are teenagers. The research report on the
basis of survey on population reveals that this age group shows faster adoption
rate compared to other market segmentation (Kelly, 2011). On the basis of

analyses; several features were found which attract consumer more than 55s
towards use of smartphones, these are discussed below:
 Parking payment via online: All parking meters receives payment via
online; so it become compulsory for older citizens to keep smartphones for
such payment.
 Facebook chatting: It was found 30% older customers engage themselves on
facebook while 70% are younger’s.
 Booking taxi: Smartphones are very helpful for old people in booking taxi’s
when they are alone and want to visit some place urgently.
 Convenient to see on bigger screen: Older people have week eyes and can’t
read comfortably on small screens; but bigger screen options solve such
issue.
 Loudspeakers help old man in making other person audible: At this age
listening power become weak but loudspeaker facility make it easier for
people age between 55 to 70 talk on phone.
 Latest software added value to smartphones and make it convenient to use:
Some of the latest software’s like BBC, navigation, google talk, etc. make it
convenient for older persons to utilize it without difficulty (Smartphone sales
boom with over-55s, 2017).
 Face recognition for authentication: The new face recognition features make
it easy for older people to get ride off from putting passwards in phone.
 Photo filters technology: It was found that older customer having account on
instagram and facebook uses photo filters to make their look effective and
beautiful.
Decision related to expansion:
Figure T4
Should we expand our business to Kingston?
Pros Score/10 Cons Score/10
More diverse customers 7 Shortage of cash 9
Raise in Income 8 Compromised quality 7

More opportunities for business 6 Loss of control 5
Boost in brand awareness 6 More working capital
requirement 5
Less Competition 5 Risk of failure 7
More market penetration 7 Increase work load 6
Visibility in the market 7 Failure in meeting
unexpected demand
5
Total Pros 46 Total Cons 44
Average Pros 6.57 Average Cons 6.28
On the basis of analysis of figure T4; it can be interpreted that Average pros are
6.57; while Average cons shows 6.28. Hence it is recommended that company
should expand its business in Kingston. Because latest research survey shows that
smartphones market is expanding every year due to increase in demand. It gives
risk free opportunity to EcoFone to expand its business in Kingstone. Additional
to this EcoFone has another benefit of increase in sales revenue by fulfilling
customer increasing demand for smartphones. But company required some
precautions against limited staff available with them and has to arrange more
funds to meet working capital requirement. A planned and forecasted expansion
will help EcoFone in minimizing risk of failure and any forecasting errors. The
probability of success after expansion is estimated more than 65% if all activities
and plan implement accordingly. The expected return on investment for expansion
could be 35% and it will increase with average growth rate of 7% each year
(Immergluck, 2011).
Financial Analysis:
It was found better for EcoFone to expand its business in Kingstone; but the major
issue faced by company is whether to acquire new premises or on lease. After in-
depth analysis it was found; if company buy new building through mortgage with
monthly fixed payment then it cost equally same to lease payment. Hence,
EcoFone decided better to acquire new premises than lease whole building. The
monthly payment paid by EcoFone as a mortgage for acquiring building is

estimated £3145.90 per month which has to be paid for the terms of 15 year @
7% annually (Ford, Burrows and Nettleton, 2001).
Popular mortgage brands of UK
(Small business prices, 2020)
Relationship between two retail shops:
The retail shops of EcoFone which offers mobile phone and accessories show
positive relationship between two; means net takings of both the shops are same
and identical. The sample size taken was 40 for both the shops; coefficient of

variance method is used for identifying relationship between both shops at 5%
significance level. From the result it was found that besides situated at different
locations; net profit of both the branches shows similarity and has positive
relation between them (Correlation in excel, 2013).
Customer Satisfaction:
The normal of 103 reactions shows that shoppers visit EcoFone's stores between 3
to 6months. That implies fulfillment level and commitment of customer rate is
normal. Result shows that on a normal people use cell phones greatest for a long
time. Individuals rate item as great and reasonable for administration; which
implies they are very little fulfilled; deals staff administration additionally
discovered great and Price of item likewise discovered normal by respondents.
Normal respondents discovered by and large fulfillment from item unbiased.
Likewise customers are uncertain about whether they will keep working with
EcoFone as they rate nonpartisan. Be that as it may, most extreme respondents
were picked likely prescribing cell phones items and administrations to other
people.
Quality assessment:
The accounts department found an average of two returned invoices out of 10,000
invoices; quality team has set the target of having such error not more than 15% in
a given month (Poison Distribution, 2020). Here method of Poisson distribution is
applied due to following reasons:
 The data has huge size which is 10,000
 Variability in error is less than 1%.
 No other method could use for such a large sample
 Normal distribution is only viable for sample size between 30 to 100
 Z test is helpful for only 30 proportions.
Therefore for above mentioned reasons Poisson distribution method found best
fitted with above case. Calculation of probability having more than 3 errors in
invoices has done below:

P(x ≤ 2, 2) = P(0;2) + P(1;2) + P(2;2)
= [(e-2)(20)/0!] + [(e-2)(21)/1!] + [(e-2)(22)/2!]
= 68%
There's 68% chance of error less than 2 in one month
Hence, probability of error more than 3 in one month will be:
= 100 -68 = 32%
The minimum percentage to meet quality was set not more
than 15% but actual data shows that probability of error
occurring more than 3 in one month is 32%; therefore it can
be declared that quality has not met
Hence, on the basis of above result it can be concluded that quality procedures
have not been met which was 15% and actual variations is 32%. EcoFone requires
more steps to improve its quality and reduce 30% chance to below 15%.
Conclusion:
On the basis of above report; it can be concluded that EcoFone has new
opportunity to expand business in Kingston to get more revenue and exposure
over market. Market analysis report shows that older customers showing more
positive response over smartphone purchasing due to several attractive features
which they didn’t found in old fashioned keypad phones. Additional to this
EcoFone requires more assessment strategies to reduce error in quality of
invoices.

REFERENCES
Acharya, V.V., Richardson, M., Van Nieuwerburgh, S. and White, L.J.,
2011. Guaranteed to fail: Fannie Mae, Freddie Mac, and the debacle of
mortgage finance. Princeton University Press.
Adelson, R.M., 1966. Compound poisson distributions. Journal of the Operational
Research Society, 17(1), pp.73-75.
Correlation in excel, 2013, Online Available through: <https://www.youtube.com/watch?
v=AjQA78tI39Q>
Flowerdew, R. and Aitkin, M., 1982. A method of fitting the gravity model based on the
Poisson distribution. Journal of regional science, 22(2), pp.191-202.
Ford, J., Burrows, R. and Nettleton, S., 2001. Home ownership in a risk society: a social
analysis of mortgage arrears and possessions. Policy Press.
Grainger, R.J.R. and Garcia, S.M., 1996. Chronicles of marine fishery landings (1950-
1994): trend analysis and fisheries potential (p. 51). Rome: FAO.
Immergluck, D., 2011. Foreclosed: High-risk lending, deregulation, and the undermining
of America's mortgage market. Cornell University Press.
Karlis, D., 2003. An EM algorithm for multivariate Poisson distribution and related
models. Journal of Applied Statistics, 30(1), pp.63-77.
Kelly, R., 2011. The good, the bad and the impaired: A credit risk model of the Irish
mortgage market. Central Bank and Financial Services Authority of Ireland.
Lintner, J., 1948. Mutual savings banks in the savings and mortgage markets. Division of
Research, Graduate School of Business Administration, Harvard University.
Small business prices, 2020, Online Available through: <
https://smallbusinessprices.co.uk/commercial-mortgages/>
Smartphone sales boom with over-55s, 2017, Online Available through: <
https://www.bbc.com/news/technology-41319684>
Poison Distribution, 2020, Online Available through: < https://stattrek.com/probability-
distributions/poisson.aspx>

APPENDIX
Figure 1
Activities 2016 2017
Email 41% 37%
Making Standard Calls 33% 32%
Viewing Documents 17% 0%
Managing my time/workload 80% 60%
None of these 44% 50%
Figure 2
Products 2012 2013 2014 2015 2016 2017
Laptop 73% 76% 75% 79% 76% 78%
Smartphone 52% 62% 70% 76% 81% 85%
Tablet 16% 36% 50% 60% 63% 68%
Figure 3: Forecasted usage for 2018-2019
Products
201
2 2013
201
4 2015 2016 2017 2018 2019
Laptop 73% 76% 75% 79% 76% 78% 79.5%
80.5
%
Smartphon
e 52% 62% 70% 76% 81% 85% 91%
97.3
%
Tablet 16% 36% 50% 60% 63% 68% 74.8%
82.3
%
Forecasted usage of Laptop
Yea
r (X) Usage % (Y)
Y1 = (Ȳ̅ -
Y)
X1 = ( -X̄̅
X) Y1X1 (X1)2
1 73% -3% -2.5 8% 6.25
2 76% 0% -1.5 0% 2.25
3 75% -1% -0.5 1% 0.25
4 79% 3% 0.5 2% 0.25
5 76% 0% 1.5 0% 2.25
6 78% 2% 2.5 5% 6.25
21 457% 15% 17.50
Mean of X
( )X̄̅ 3.5
Mean of Y 76%

(Ȳ̅)
b1 = Y1X1/(X1)2 = 15%/17.5 = 1
= 76% - 1(3.5) = 72.5%X̄̅
Fitted Equation: Y = 72.5% + 1(X)
Note: For Smartphone and Tablet moving average @ 7%
growth rate for Smartphone and @10% for Tablet
Mortgage
calculation
Loan amount £350,000
Term in years 15
Interest rate 7%
Formula (monthly installment) = PMT(rate/12, term*12, -C4)
Monthly
Payment
£3,145.9
0
Task 7
ID Q1 Q2 Q3a Q3b Q3c Q3d Q4 Q5 Q6
001 1 3 2 3 4 3 2 3 5

002 4 2 4 3 2 1 4 3 2
003 1 4 2 3 2 4 2 3 5
004 3 4 1 2 4 2 1 2 5
005 2 4 2 3 4 1 2 3 4
006 2 3 2 3 4 4 2 3 4
007 1 3 1 4 4 4 4 5 4
008 4 2 2 3 4 1 2 3 4
009 1 1 3 2 4 1 3 2 4
010 3 4 2 2 1 2 2 2 1
011 2 4 2 2 4 2 2 2 4
012 2 3 1 1 1 1 4 1 5
013 5 3 3 4 4 3 3 5 4
014 4 2 2 2 4 3 2 2 4
015 1 4 2 1 1 3 2 1 5
016 3 4 1 2 4 4 4 2 4
017 2 4 2 2 1 2 2 2 5
018 2 3 1 2 4 3 5 2 4
019 1 3 3 4 4 3 3 4 4
020 4 2 1 2 2 3 5 2 2
021 1 1 2 3 4 3 2 3 4
022 3 4 1 3 2 1 5 3 2
023 2 4 2 3 2 4 2 3 2
024 2 3 1 2 4 2 5 2 4
025 1 3 2 3 4 1 2 3 5
026 4 2 2 3 4 4 2 3 5
027 5 1 4 4 4 4 4 4 5
028 3 4 2 3 4 1 2 3 4
029 2 4 3 2 4 1 3 2 4
030 2 3 2 2 1 2 2 2 5
031 1 3 2 2 4 2 2 2 4
032 4 2 1 1 1 1 5 1 1
033 1 4 1 4 4 3 3 4 4
034 3 4 2 2 4 3 2 2 4
035 5 3 2 1 1 3 2 1 5
036 4 2 1 2 4 4 5 2 4
037 5 3 2 2 1 2 2 2 5
038 4 2 1 2 4 3 1 2 4
039 2 4 3 4 4 3 3 4 4
040 2 3 1 2 2 3 1 2 2
041 5 3 2 3 4 3 2 3 4
042 4 2 4 3 2 1 5 3 2
043 1 4 2 3 2 4 2 3 2
044 3 4 1 2 4 2 1 2 4
045 5 3 2 3 4 1 2 3 5

046 4 2 2 3 4 4 2 3 5
047 5 3 4 4 4 4 4 4 4
048 4 2 2 3 4 1 2 3 4
049 2 4 3 2 4 1 3 2 4
050 2 3 2 2 1 2 2 2 1
051 5 3 2 2 4 2 2 2 4
052 4 2 1 1 1 1 1 1 5
053 1 4 3 4 4 3 3 4 4
054 3 4 2 2 4 3 2 2 4
055 5 3 2 1 1 3 2 1 1
056 4 2 1 2 4 4 1 2 4
057 5 3 2 2 1 2 2 2 1
058 4 2 1 2 4 3 1 2 4
059 1 1 3 4 4 3 3 4 4
060 2 3 1 2 2 3 1 2 2
061 5 3 2 3 4 3 2 3 4
062 4 2 4 3 2 1 4 3 2
063 1 4 2 3 2 4 2 3 2
064 3 4 1 2 4 2 1 2 4
065 5 3 2 3 4 1 2 3 4
066 4 2 2 3 4 4 2 3 4
067 5 3 4 4 4 4 4 4 4
068 4 2 2 3 4 1 2 3 4
069 1 1 3 2 4 1 3 2 4
070 2 3 2 2 5 2 2 2 5
071 5 3 2 2 4 2 2 2 4
072 4 2 1 1 1 1 5 1 5
073 1 4 3 4 4 3 3 4 4
074 3 4 2 2 4 3 2 2 4
075 1 3 2 1 1 3 2 1 5
076 4 2 1 2 4 4 5 2 4
077 1 3 2 2 5 2 2 2 5
078 4 2 1 2 4 3 1 2 4
079 1 1 2 4 4 3 3 4 4
080 2 3 1 2 2 3 1 2 2
081 5 3 2 3 4 3 2 3 4
082 4 2 4 3 2 1 4 3 2
083 1 4 2 3 2 4 2 3 2
084 3 4 1 2 4 2 5 2 4
085 1 3 2 3 4 1 2 3 4
086 4 2 2 3 4 4 2 3 4
087 5 3 2 4 4 4 4 4 4
088 4 2 2 3 4 1 2 3 4
089 1 1 3 2 4 1 3 2 4

090 2 3 2 2 1 2 2 2 1
091 1 3 2 2 4 2 2 2 4
092 4 2 1 1 5 1 1 1 5
093 1 4 3 4 4 3 3 4 4
094 3 4 2 2 4 3 2 2 4
095 5 3 2 1 1 3 2 1 1
096 4 2 1 2 4 4 1 2 4
097 5 3 2 2 1 2 2 2 5
098 4 2 1 2 4 3 5 2 4
099 1 1 3 4 4 3 3 4 4
100 5 5 1 2 5 3 1 2 2
101 4 4 1 2 4 3 1 2 4
102 2 2 3 4 4 3 3 4 4
103 2 4 1 2 2 3 1 2 2
Averag
e
3 3 2 3 3 3 3 3 4