Business Case Study: Smart Watch Market Analysis in Australia

This case study presents an analysis of the feasibility of launching a smart watch business in Australia. The project assesses the economic scenario and market conditions, conducting a thorough economic and financial analysis. It involves a literature review, methodology development, capital budgeting, sensitivity analysis, and break-even analysis. The scope includes developing a business plan for selling smart watches, with objectives centered on setting up a profitable venture. The methodology incorporates break-even analysis, cash flow forecasting, and sensitivity analysis, using parameters such as expenditures, capital costs, and growth rates. Financial models are developed, considering depreciation, inflation, and interest rates. The analysis identifies constraints, risks, and determines cash inflows and outflows. Financial metrics such as net profit margin, return on equity, and closing cash balance are evaluated. Non-financial factors like employee behavior, adherence to regulations, organizational structure, and environmental considerations are also assessed. Sensitivity analysis reveals the impact of inflation, growth rate, and WACC. Recommendations include price strategy, cost minimization, online platform utilization, and resource enhancement. The conclusion deems the project feasible, highlighting the importance of a positive net present value and the challenges posed by changing technology.

CASE PROJECT
REPORT

OVERVIEW OF THE
PROJECT
 Conducting an assessment of economic scenario and
market conditions of Australia.
 Performing the economic analysis of the project.
 Conducting literature review
 Methodology development
 Performing capital budgeting, sensitivity analysis and
break even analysis.

SCOPE AND OBJECTIVE OF
THE PROJECT
The case project intends to develop the business
for launching smart watch in the country.
Conducting and spending time on researching
the market and analyzing the literature review.
The case project has the objective of setting up a
profitable business of selling the smart watches
(Manalo et al. 2015).

CONDUCTING REVIEW OF
LITERATURE
Australia an attractive and vibrant destination
for investment.
Business development driven by overall
productivity and innovation growth.
Economic condition of Australia supporting the
development of business.
Availability of several sources of funding.

Smart watches growth driven by number of
factors.
Highly competitive, dynamic electronic
market (Antonius et al. 2015).
Products pricing influenced by regulations
and standard
Productivity improvement due to newer
technologies

DEVELOPED METHODOLOGY
OF THE PROJECT
Project evaluation using break even analysis,
forecasting of statement of cash flow and
sensitivity analysis
Incorporating accounting methodologies such as
break even analysis and capital budgeting
techniques (Li et al. 2018).
Employing selected parameters such as
expenditures, capital cost, fundamental growth and
earning.

DEVELOPING FINANCIAL MODEL
Assumptions made in developing such
model are listed below:
Adopting fixed and diminishing method of
depreciation (Antonius et al. 2015)
Inflation rate and interest rate
Amounts assumed based on the estimates
of management

CONSTRAINTS
• Existing of immense competition
• Lack of technical expertise
• Resource constraints
• Budget constraints

RISK FACED BY THE PROJECT
• Economic risk
• Financial risk
• Management risk
• Security risk

DETERMINING THE CASH
INFLOW AND OUTFLOW
Fall in the closing balance of cash with the
passing year
Subsequent increase in cash flow generated
from operating activities
The fifth year of operation generated cash form
investing activities.

FINANCIAL ANALYSIS OF THE
PROJECT
Increase in net profit margin year on year
Increase in return on equity
Gross profit remained at the same level
Increase in closing cash balance

NON FINANCIAL DECISION
MAKING FACTORS
 Business performance influenced by behaviour of
employees.
 Business adhering to the regulations, standard and
other applicable laws.
 Role of organizational structure in conducting the
business operations (Bekaert and Hodrick 2017).
 Dealing with employees in a environmental friendly
manner.

SENSITIVITY ANALYSIS OF THE
PROJECT
The net profit margin, net present value of
project, IRR, Profitability index, ARR and
return on equity is sensitive to the change in rate
of inflation, growth rate and weighted average
cost of capital.
Inflation rate and growth rate are the most
sensitive factors

RECOMMENDATION
Adopting appropriate price strategy such as
keeping the price low to penetrate the market.
Minimizing the cost by developing appropriate
strategy
Using online platform for business development
Enhancing their resource capabilities

CONCLUSION
Project is feasible and should be undertaken
Project viability is determined by generation of
positive net present value
Changing technological trend poses a challenge
to the business.

REFERENCES LIST:
 Antonius, N., Xu, J. and Gao, X., 2015. Factors influencing the
adoption of enterprise social software in Australia. Knowledge-
Based Systems, 73, pp.32-43.
 Bekaert, G. and Hodrick, R., 2017. International financial
management. Cambridge University Press.
 Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic
management: Concepts and cases: Competitiveness and
globalization. Cengage Learning.
 Li, C.A., Lin, T.M. and Huang, Y.W., 2018. Managerial Overconfidence,
Compensation Induced Risk Taking, and Earnings Management. The
International Journal of Business and Finance Research, 12(2), pp.1-26.
 Manalo, J., Perera, D. and Rees, D.M., 2015. Exchange rate movements
and the Australian economy. Economic Modelling, 47, pp.53-62.