Should Advanced Valley enter the new market of solar installations in Saudi Arabia to increase its profitability

I also give my gratitude towards my teacher, Mr. Mohammed Salem, who was always supporting me in my internal assessment. Research Question Should Advanced Valley enter the new market of solar panels in Saudi Arabia to increase its profitability? Proposed Methodology • Rationale for study: I chose to investigate Advanced Valley on the subject of solar energy, solely because Saudi Arabia is evolving into the new market of renewable energy. Advanced Valley would like to enter this new market as it is an opportunity for them to grow. Therefore, I will be analyzing and evaluating the multiple opportunities and threats presented to Advanced Valley. Cash flow • Unit 4: Marketing • 4. Sales forecasting • 4. Market research • Possible sources of information: Primary: • Interview with Mr. Tariq Alshaghrood, CEO of Advanced Valley • Company information from Advanced Valley Employees • Statistical analyzation of solar market Secondary: • Reports and statistics from governmental institutions • Advanced Valley website • Advanced Valley blogs • Organizations and individuals to be approached: • Methods to be used to collect and analyse data, and the reason for choosing them: Throughout this research I will be utilizing three methodologies to gather and analyse my data.

As shown below: 1. This will enable Mr. Tariq Alshaghrood (CEO of Advanced Valley) to make an executive decision. Thus this investigation aims to answer the question: “Should Advanced Valley enter the new market of solar installations in Saudi Arabia to increase its profitability?” In terms of methodology, I conducted several interviews with the CEO as well as requesting information from the employees. In addition, I used the “Advanced Valley” official website as a source of information. Together with this, I researched governmental polls and statistics which aided in analyzing the market. This has therefore led me to research the following question: “Should Advanced Valley enter the new market of solar installations in Saudi Arabia to increase its profitability?” According to the Business and Management syllabus1, I will be covering 1. types of organizations, 1.

organizational objectives, 1. stakeholders, 3. sources of finance, 3. They are both primary methods of data collection and secondary methods of data collection. An interview was conducted with the Chief Executive Officer (Appendix _). The information provided by the CEO was analyzed and presented in statistical form. The CEO gave important information that formed the basis of the research. Necessary financial statements and statements were obtained from the employees (Appendix). Gross Profit Margin 4. Current Ratio 5. Acid Test Ratio Main results & Findings: (200 words) Market: Before analyzing the organization, I researched the potential market for solar energy and According to the Saudi Arabia Solar Industry Association (SASIA, 2015), the current market value of solar energy is approximately 80-100 billion Saudi riyals. Averaged at about 2. SAR per kilowatt for production and sold at 3. Advanced Valley runs as a privately held company that denies any external factors such as shareholders or loans.

As we can see from the profit and loss account, the cost of goods was limited to 2,800,000 SAR. From this value, the financial department calculated a total of 4,167 solar panels were able to be budgeted. Product: Mr. Tareq Alshaghrood stated that his pricing method will be established upon a penetration market based ideology. SAR) Total Truck Transport 93. riyals/ per solar panel (390,656. SAR) Warehouse rent 187,500 SAR Total Costs 2,875,215 SAR Advanced Valley will be entering the new solar market as a job production. Thus payments will be paid as whole for the costs of these products. Therefore variable costs are paid directly regardless the amount of sales (direct cost); however they average at a price of 645 SAR per solar panel excluding the warehouse rent. Any new player should have a good performance in order to have a competitive advantage or compete favorably with other Companies in the same field.

Return on capital employed (ROCE): It is important that before Advanced Valley Company ventures into a new market of solar installation, we look at the profitability of the Company and the efficiency. The efficiency is in regards to how good the Company is utilizing its capital. Return On Capital Employed was used to evaluate this. It was calculated using the formula below This was our first tool for analysis NB: was obtained by Total assets less current liabilities Return on capital employed (ROCE): = 30. cents for every dollar it sold in 2016 and 29. cents for every dollar sold in the year 2017. This is an indicator of the level of the efficiency that policies of the business are. This is because any successfully policy will result in high profit margin. Gross profit margin This is used to reveal the amount of money left over after subtracting cost of goods sold from the turnover or the sales.

It means that the Company is able to repay its short-term liabilities. This will make the Company to get finance easily from the lenders because of its current ratio. However, Advanced Valley operates only under internal finance, solely to eliminate equity and maximize retained profit. These methods include personal funds, family support, working capital, retained profit, selling assets, and investing extra cash. Advanced Valley can therefore try out the new market of solar installation. The current ratio should also be considered in this case together with liquidity ratio and stock turnover to avoid getting wrong interpretations. Strength Advanced Valley Company has got strong financial base. It has enough resources to take up a big investment. The workers are also experienced in dealing with solar installation. We expect this to extend in electric in its new market.

The investigation shows us that the Company has got potential to venture into this large market in Saudi Arabia. However, the research has its weakness too. The analysis was based only on three years. It would be better if the duration for the analysis was more than three years so that the overall trend could be established easily however that is literally impossible simply because the company was founded in 2015. The analysis has shown that the Company is able to manage its internal operations effectively. This is revealed in the acid-test ratio. Another test was the stock over test. Advance Test should revisit its pricing of its commodities or customer relations so as to increase sales. If these are considered, then it is likely to realize high profits as it enters into new market of solar installation in Saudi Arabia.

END HERE ………………………………………………………………………………… Works Cited Chava, Sudheer, and Michael R.  South African Journal of Economic and Management Sciences, vol.  20, no.  1, 2017, pp. Elsevier. New markets for solar thermal power gain some momentum. The Atlantic. Why the Saudis are going solar.  The Atlantic, 30 Mar.  2018, www. theatlantic. including Zakat 197,591. Net profit after tax 2,436,958. Retained profit 2,436,958. Appendix 3: table of output, sales, fixed, variable and Total Profit Output Sales (1099 SAR) Total Revenue (SAR) Fixed Costs (including expenses) Variable Costs Total Costs Profit 0 0% (0) 0 577,500 0 577,500 -577,500 1 20% (834) 916,566 577,500 537,930 1,115,430 -198,864 2 40% (1667) 1,832,033 577,500 1,075,215 1,652,715 179,318 3 60%(2,500) 2,747,500 577,500 1,612,500 2,190,000 557,500 4 80% (3,334) 3,664,066 577,500 2,150,430 2,727,930 936,136 5 96% (4000) 4,396,000 577,500 2,580,000 3,157,500 1,238,500 6 100% (4,167) 4,579,533 577,500 2,687,715 3,265,215 1,314,318 Appendix 4: a table of revenue, cost, expenses and profits 4167 solar panels (SAR) 999 SAR 1049 SAR 1099 SAR 1125 SAR (average price) Revenue 4,162,833 4,371,183 4,579,533 4,687,875 Total Costs (including warehouse rent) 2,875,215 2,875,215 2,875,215 2,875,215 Gross Profit 1,287,618 1,495,968 1,704,318 1,812,660 Expenses 390,000 390,000 390,000 390,000 Net profit before tax 897,618 1,105,968 1,314,318 1,422,660 Tax 7. Net profit after tax 830,296 1,023,020. Our Company is called Advanced Valley Trading. It is a consultancy and representation company that specializes in ground support equipment.

We operate under the Ministry of Energy and mostly negotiate with governmental institutions. I: Do you face any struggles in terms of customers? T: Yes. Due to our recent establishment, most institutions avoid us. In most cases I have avoided the top down style of leadership where I am supposed to be a boss and impose my will on my subjects. I: What do you consider to be your strength? T: our strength is the courage to face any arising opportunity that comes our way. We are not so much risk investors. We understand that the greater the risk the higher the return. This is why we are even daring a more advanced level of operation that has got many competitors. I: As the CEO, what are some of the challenges that you are experiencing in Advanced Valley? T: The biggest challenge that we have always had is the demand of our products.

As I said before, we do solar installation. This means that our clients are those who are uses solar. This has been not easy here in Saudi Arabia as oil is the main source of power. In fact the Saudi Arabians consume most of the drilled oil in the country. We have responded to this by using pricing strategy. This is where we install solar panels at a discount so as to encourage more people to buy them. However we are observing significant rise in demand of our products. This is after the government advocating for increase in power energy by use of alternative production means away from petroleum. Before this, we had come up with a strategy to focus on foreign markets like USA where they highly demand our products.

Appendix 11: Summary of Information from the Ministry of Energy of Saudi Arabia Figure 1: Electricity Conservation Figure 2: Households who uses Biomass Power Figure 3: Percentage of Households who uses Biomass Figure 4: Sources of electricity in Saudi Arabia Figure 5: Comparison of Households who uses Solar Energy Figure 6: Current and projected power generation by renewable technology Calculations: Return on capital employed (ROCE): = 30.