Smart Watch Business Venture Planning and Economic Analysis Australia

This report provides a comprehensive business venture plan focused on establishing a smart watch business in Australia. It includes a detailed literature review on project economic analysis, covering innovation, business viability, and risk assessment. The analysis considers Australia's economic scenario, funding issues for new businesses, and the growing demand for smart watches. The report explores factors affecting product pricing, potential market competition, and the overall feasibility of the venture, utilizing sensitivity analysis and other management accounting tools to evaluate the project's financial viability and potential for profitability. The goal is to provide a strategic roadmap for launching a successful smart watch business in the Australian market.

Running head: BUSINESS VENTURE PLANNING
Business Venture Planning
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
1. Overview..................................................................................................................................3
1.1 Project Title..........................................................................................................................3
1.2 Project Background..............................................................................................................3
2. Objectives and Scope...............................................................................................................3
2.1 Objective of the Assignment.....................................................................................................4
2.2 Expected Outcome.....................................................................................................................4
3. Literature Review.....................................................................................................................4
3.1 Literature review on project economic analysis........................................................................4
3.2 Special topic assigned to each team by the lecturer................................................................11
3.3 Developed methodology for the case project..........................................................................13
4. Financial model of the case project...........................................................................................13
4.1 Assumptions Made for this Project......................................................................................13
4.2 Constraints...............................................................................................................................15
4.3 Risks associated with the Business......................................................................................15
4.4. Cash inflows and outflows..................................................................................................16
5. Financial and sensitivity analyses of the case project............................................................18
5.1 Financial analysis of the case project.................................................................................18
5.2 Sensitivity analysis of the case project...........................................................................21
5.3 Non-financial decision-making factors...........................................................................21

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5.4 Selection of best alternative............................................................................................22
6. Conclusion..............................................................................................................................25
Reference.......................................................................................................................................26

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1. Overview
The main purpose of this assessment is to analyze the market conditions in Australia so that
the team members can choose a business and make plans for establishing the same. The case
needs to be analyzed effectively by conducting an economic analysis and therefore would be
including review of literature for the purpose of conducting an economic analysis (McGrath,
2013). The evaluation and viability test of the project is conducted considering the tools of
applying sensitivity analysis and other management accounting tool.
1.1 Project Title
The title of the project is Business Venture planning which is focus on a business of starting
up a new business which would be supplying smart watches in Australia.
1.2 Project Background
The project will be developed considering the market situation in Australian market and
analysis of literature review for the same. The project would also be including a methodology on
the basis of which information will be collected.
2. Objectives and Scope
The objective of the project is to set up a profitable business which would be selling smart
watches to the consumers and the same would be adopting the most modern techniques for
developing an appropriate product which can meet the needs and requirements of modern
consumer (Rubin, Aas & Stead, 2015). The demand for smart watches in Australia has
increased significantly such that the same are preferred more than cell phones.

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2.1 Objective of the Assignment
The main objective of the project work is to effectively make the members of the team
aware of the technological advancements which has taken place and how the same has affected
the markets and customer’s preferences in Australia.
2.2 Expected Outcome
The Australia economy is considered to be one of the developed economies and the same
has efficient technological advancements. The market is quite favorable for mobile phones and
also smart watches which are still at its unpopular stage. However, there is a fascination
regarding smart watches in the market which is the main reason why the management has
decided to set up a business which produces smart watches. The analysis also shows breakeven
for the business and the term period which the business needs to consider before earning
consistent profits for the business.
3. Literature Review
3.1 Literature review on project economic analysis
The project which is considered literature review and the same is relating to innovation
and business viability analysis. The literature review considers the various risks and different
framework for establishing a business of smart watches in Australian (Sztar, 2015). The analysis
of viability of the project is done on the basis of sensitivity analysis which can be used as
statistical, mathematical and graphical method for presenting the viability of the planned project
of the business. The analysis effectively directs the management regarding the sensitivity of

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profit element due to slight change in any one factor. The method measures the degree of change
and the method is also ready to measure two or more methods.
Background of Economic Scenario in Australia
Australia is considered to be one of the developed countries in the world and has an
effective market situation. The economy in Australia is considered to be a free and democratic
economic whose technological advancement level is also superior to some other countries. The
country has enjoyed a period of continuous market growth in most of the business sectors and
has not faced any recession in past couple of years (Spelman et al., 2013). The governmental
policies and an economy which is heavily dependent on industrial performance is doing
extremely well in terms of entrepreneurial development. The involvement of the government is
rare in the economy which has flourished new business set ups in the economy. The financing of
such new businesses have not been a problem for the countries as a lot of foreign investors are
interested in companies set up in Australia. The income tax provisions which are set out by
Australian Tax Office (ATO) is followed which charges income tax at the rate of 45% while the
corporate tax in the country is set out to be flat 30% on the income.
The economy is technologically advanced and therefore a lot of businesses are coming up
which are closely related to technology. An analysis of the past information and current market
situation in Australia suggest that the start-up costs are particularly high in the economy. This
effectively contributes to employment requirements of the country and also growth in the
business in Australia. An example can be given of a technological knowledge business which is
“Technocrat limited and the business is performing significantly well which attracts new
entrepreneur in the economy. The new business after its one year of operations is likely to

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improve goods provided and leads to increase in innovation. The owner of the business should
study the market and a better option is to study the performance of a newly established business.
The innovation activities in a business has a constant demand for smart watches for fulfilling the
needs of the customers.
Funding issues for new businesses in Australia
The funding sources for a new business is very important as the same can be effectively
used for financing different activities of the business. As per the analysis of the market, new
businesses which are being established in Australia mostly rely on the funds which are taken on
credits and not much on raising capital from equity sources. This is because success rate in case
equity financing is low as debt capital allows the business to effectively take advantage of
leverage effect in a business and also there is an advantage of the tax as deductions. The
economy of Australia has been ranked as tenth in terms of business management and new
enterprise coming up.
Economic Scenario in Australia
In recent years the economy has experienced certain shocks and the country is also trying
to make improvements from the same. There seems to be significant recovery for the business
after considering the 2017 and this would give entrepreneurs necessary confirmation about the
viability of the economic. The economy can be considered to be a strong one irrespective of the
fact that the economy has faced several financial crises in 2016-2017.
The economy of Australia is technological wise far more developed and one of the
reasons for the superb growth to which different businesses can be attributed to. The demand in
Australia is more for smart watches than smart phones which is the main reason why the

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economy is considered to be favorable for the business. A recent study shows that the digital
products are more in demand in Australia which shows the customer zeal for the products. The
fluctuation in currency and fall in the deposable income of the consumers have impacted the
business slightly. The growth in the technology-based business has drawn attention of the
government who have slightly reduced the tax rate of the business and thereby further promoting
the technical products of the business.
The rate of inflation in the economy of Australia has also impacted economy which has
slightly weakened the condition of the economy and the same has also allowed the head bank to
cut interest rates of the country. As per the results which was presented in 2016, the inflation rate
in the country was around 1.5% while on the same time, the customer price index was showing
0.5. The country is able to achieve economic growth and the same is shown to be 3.1%. The
government has decided to formulate policies which can effectively control the inflation rate in
the economy and also at the same time engage in research and development for the benefit of the
entire nation (Khan, Ahmad & Abdollahian, 2013). The year 2007 also shows there are new
trends in electronics market and the same is expected to create more demand in the market.
Scope of Smart Watch Business in Australia
As per the analysis of the market, technological development and electronic goods are
emerging in the market. The demand for smart watches has significantly increased and the same
are nowadays preferred more than a smart phone (Bruno, 2015). The smart watches are the
future and in some time it has the capability of replacing smart phones (Chaparro et al., 2015).
Some of the gadgets of smart watches has already caught the imagination of the consumers by
providing good graphics game, portability, calling features. In addition to this, the demand for

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smart watches is also increasing mainly because fashion trends in the country (Jin et al., 2014).
The numerous reasons due to which the demand for smart watches in the market has grown are
listed below in details:
 The demand for smart watches has increased significantly due to increase in demands for
the same and cheap availability of the product. The carrier costs are low and there is also
a replacement plan. This makes the replacement plans more affordable and easier.
 Smart Watches has motion sensors and can tell exactly how much calories are either gain
or reduced. Therefore, this can effectively be used as a fitness tool and examples can be
given of Garmin and Fitbit which has its focus on health and fitness (Lu et al., 2016).
 Smart Watches have GPS trackers and it is regarded to be excellent for navigation and
moreover the watches also appeal to the styles senses of the generation.
 There is a provision for internet services in a smart watches and therefore contactless
payments can be make cashless payments much easier (Shen et al., 2014).
There are many electronic businesses which are coming up which are developing their own
smart watches and also trying to make the same unique. The high level of investments in the
country has facilitated the development of more capital goods in the economy. The economy is
also importing certain electronic technologies for the purpose of making more development in
electronic fields. There are large established brands in the consumer electronics market and it has
remained highly competitive. The local consumers in Australia prefer international brands in
case of electronic products.
The plan of the management is to open a business which can effectively produce smart
watches which can meet effectively all the expectations of the customers. The management

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wants to take advantage of the lucrative market which is available for electronic goods. The
overall level of competition in the market is also high due to the presence of international
dealers. The market for smart watches is one which is developing and the same can a great
prospect for future.
Factors Affecting the Price of the Product
Pricing strategies of the business in Australia are affected by different factors. The factors
which affect the standard and local regulations, wage and labor costs, wholesale and distribution
costs, government tax, insurance cost, occupancy and rent costs. There are certain costs which
are related to different areas of Australia. The prices of the smart watches affect the nature of the
markets in Australia. The product of smart watches has not started in mass production in
Australia. The prices of the products of the business is depended on a variety of factors and the
same needs to be considered.
The compliance and regulation costs of the business can affect the prices of the business.
The compliance cost in Australia in the past three years has risen and 75% of compliance
expenditure expected to rise in the next three years. The product which is being developed by the
business is considered to be safe and also environmental friendly. The prices of smart watches is
affected by regulations and standards which are set by the government. There will be regulations
as the smart watches are a product of IT and therefore requires various regulations from
authorities.
In order to bring about a uniqueness in the product which is to be developed by the
business, the management plans to add certain new features such as remote for any electronic
device and some other new features. The management plans to make the product more stylish

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and also incorporate the existing technologies which are present in such smart watches. A recent
estimate suggests that there has been significant increase in the productivity of the business and
the same contributes around 16%. The investment decisions of the business are depended on the
technological level which is to be incorporated in the smart watches. Australian government can
relieve the pricing pressure by minimising the costs of the business and also thereby reduce the
overall costs of production of the business. The start up costs of the business would be consisting
of the liquid funds which are required by business and also non-current assets of the business is
also contributed from such sources. The below table shows economic significance of the project
and also start up costs of the business.
Particulars Amount Residual Value
Non-Current Assets:
Trademark 400000 0
Patent 500000 0
Property,Plant & Equipment 2000000 600000
Furniture & Fittings 800000 120000
Motor Vehicle 1000000 400000
Computer Equipment 1200000 0
Preliminary Expenses:
Business Registration 120000
License Fees 100000
Deposit for Electricity 70000 70000
Deposit for Telephone &
Internet 50000 50000
Recruitment Cost 30000
Share Issuance Cost 35000
Bond Issuance Cost 20000
Other Miscellaneous Expenses 75000
Working Capital:
Purchase of Raw Material 37500000
Wages & Salaries 25000000

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Manufacturing Overhead 16250000
Selling & Marketing Expenses 791250
General Administrative
Expenses 263250 79804500
TOTAL START UP COST 86204500
Capital Funding:
Equity Capital 38792025
5 yrs. Bond 28447485
Loan From Bank 18964990
TOTAL CAPITAL
EMPLOYED 86204500
Figure 1: (Table showing start up costs of the business)
Sources: (Created by the Author)
3.2 Special topic assigned to each team by the lecturer
Assignment Start date Submission Duration
Start up 10/12/2018 17/12/2018 1 week
Activity 1-
Researching the
Australian markets
and its economic
scenario
12/12/2018 17/12/2018 5 days
Activity 2- Financial
evaluation of project
15/12/2018 04/01/2019 3 weeks
Activity 3- 25/12/2018 12/01/2019 2.5weeks