Q1. What are the key factors in determining if this is a viable business opportunity for Josh, Hannah, and Mathew?
The Capabilities of the partners, availability of resources, and commitment towards the project are the key factors that will make the business viable. All the involved individuals must be capable of executing actions that surrounds the project. Josh has a business background that will enable him to understand the petroleum market. Hannah has an agricultural economics background that will allow her to identify the best and most cost-effective plant and animal resources for the project. Mathew has knowledge in mechanical engineering which will enable him to select and install the best energy conversion systems. There must be sustainable sources of ingredients of biodiesel (Biodiesel Incorporated, pg. 565). The vegetable and animal-based products are substitutes to the traditional diesel fuel. Biodiesel is made from various plants and fats from grease mainly the ones recycled from restaurants. There must be enough financial resources to start and maintain the opportunity. They must be passionate enough and be committed to the business to realize success.
Josh, Mathew, and Hannah must also consider the ability of their product to sell in the energy market. Their choice must be economically comparable to the environmentally non-friendly fossil fuels. Unquestionably, biodiesel is less expensive to manufacture and process compared to petroleum. The ability of the potential customers of the biodiesel to quickly access the products is also a critical factor (Biodiesel Incorporated, pg. 565). They must be able to set up an infrastructure to reach their clients. With the demand for fuel increasing on a daily basis due to industrialization and urbanization, an expanding market for fuel is inevitable. For their continual success, the project partners must strategize ways of attracting the customers and winning the competition from other sources of energy.
Q2. What market drivers should they research and be aware of?
Without a doubt, the primary drivers for biodiesel entrepreneurs are their suppliers and customers. Agricultural waste materials and used cooking grease are the primary sources of the bioenergy (Biodiesel Incorporated, pg. 565). The partners must carry out both qualitative and quantitative research about the raw materials of bioenergy. For example, the trends in farmers’ arena should be monitored and considered when setting up the biodiesel plant. Technological factors also essential for quality biodiesel production from animal and plant products. The drivers give a capability push that provides technology for the business. The users of energy from biodiesel will be a significant source of finance to the company (Biodiesel Incorporated, pg. 566). The partners must also research the economic trends and energy markets. The advantages of biodiesel fuel will unquestionably promote it among consumers that are environmentally conscious. For proper marketing, the renewable nature of the source, less pollution of the environment, and its sustainability, must be adequately researched. The buying habits of customers and selling patterns of potential suppliers is also a driver that determines the level of success that the business will attain.
Q3. What are the flaws in the current business strategy?
The business is indefensible because it lacks the intellectual property, relevant patents, and has a low barrier to entry. The project also suffers inadequate feedstock, knowledge, and loyalty of the members (Biodiesel Incorporated, pg. 568). The marketing support is insufficient. The business has not set up a promotional strategy for reaching the customers through adverts and proper channels of distribution. The project has not been branded as an environmentally friendly business to make it competitive and more sustainable in the fuel industry. The model makes it difficult for the cooperatives to manage each member because of varying levels of specialization. They have not created more opportunities for the use of their fuel. The business strategy is not flexible since the venture is only perceived as a complete replacement for biodiesel. The existing fossil fuel competitors already have a well set up infrastructure and tremendous assets. They will find it cumbersome to adopt the prevailing engine systems and ensure environmental sustainability at the same time. The quantity of supply of raw materials such as soybeans is highly dependent on weather. Poor weather conditions may jeopardize the supply of plant and animal products. Higher demand for biodiesel may also escalate the prices of vegetable oil.
Q4. What type of financing should they use if they decide to go forward with this?
They can source capital from corporate venture capitalists, seek federal grants, and lobby for financial support by socially responsible institutions (Biodiesel Incorporated, pg. 566). The business can also venture into Payment in Lieu Taxes (PILOT) programs and seek zero interest loans. Credit unions also offer financial support to institutions that have a potential of making profits. They can also try partnerships with farmers of corns, soybeans, and other biodegradable fuel products. All the financier to the consistent farmers will invest in biodiesel startups provided returns are guaranteed. It will also be a good idea for the business to market the environmental friendliness of their project to attract international financiers that seek to protect the environment. Such programs include World Bank initiatives and United Nations Environmental Program (UNEP). Equity financing options are also lured investors with a promise to share the profits and incomes that come out of the operation. The project members can also seek support from the government through Energy Departments.
Q5. What type of distribution channels should they go into?
The business should venture into distribution through a retail channel that will help in providing a platform for their indirect customers. They must consider the role of the channels in communication with consumers, breakage of bulk and assistance with storage facilities. The distributors must, therefore, have a direct link with the consumers and communicate with them on the demand of the clients. The local retail distribution will be an excellent choice considering the availability of the existing infrastructure for petroleum fuel products. The final consumer in the distribution channel should be environmentally conscious individuals. Farmers and user of diesel engine vehicles are a great asset in the consumer end (Biodiesel Incorporated, pg. 566). The business can also adopt a direct sales system with the assistance of environmental organizations. Indirect sales through co-branding by companies such as Shell Oil and Exxon is also a viable promotion and distribution option. A channel where agricultural and petroleum stakeholders are involved will eventually prove useful. Unique manufacturing of biodiesel on behalf of farmers and provision of retailing services to oil companies creates strong business partnerships.
Q6. How can they improve their chances of success?
They should write and promote their business story to potential customers and investors. They can seek the support of environmentally friendly institutions in improving the biodiesel products. The partners should also acquire more skills, knowledge, and experience in the business world of petroleum and biodiesel (Biodiesel Incorporated, pg. 565). Through research and consultations, they can gain a competitive advantage in the market. Each member should also focus on their fields of expertise to ensure maximum productivity. Through an adoption of Cooperative Business Form, they will set up business models that can provide quick returns on investment and low cost of operation. They can also monitor the strength and weaknesses of their competitors to improve the existing market gaps. Through hiring of the right staff, the production and distribution process will always be a continuous process. All the operations lead to an overall success of the business. Through the study of consumer insights, they will learn the best marketing strategize for the biodiesel products. The operation will increase the sales and profits.
Q7. What is their next step?
They should build a business model that makes them more open to investors and help in gaining a competitive shape (Biodiesel Incorporated, pg. 568). They can invent alternative product lines adapted from biodiesel. An example of such are lubricants that have a vast customer base. They can cooperate with other biodiesel producers in order be involved in expertise inventions and fuel management systems. The company can use digital advertising techniques to reach the full range of customers that use the internet. They can also create awareness on the benefits of environmental conservation on social media platforms hence encouraging adoption of biodiesel.
Biodiesel Incorporated. 2006, pp 565-568.