SRI BALAJI SOCIETY

PGDM – FOURTH SEMESTER EXAMINATION

BATCH: 2018 – 2020
ENTREPRENEURSHIP

Marks: 100

Instructions to the Students:

 Kindly answer all questions/case studies in the assignment.

 All Questions/case studies carry Equal Marks

 Online Assignment would have to be completed and submitted within the mention date
and time back to the Examination Department via the online application Microsoft team.

 Format in which the assignment is to be submitted is as follow:

A. Use MS word /MS EXCEL

B. FONT - TIME NEW ROMAN, FONT SIZE 12

C. Kindly number each page

D. Please do not copy the questions.

 The cover page of the assignment must be in the below format.
 Roll no-
 Name of institute-
 Batch-
 Specialization-
 Semester-
 Subject Name -
 Submitted by-
 Submitted on date-
 Total no of pages written-

 Answer for each questions/cases including sub question should have minimum 4 pages and
max 5 pages.

1
CASE I: ECOWASH: A BUSINESS OPPORTUNITY WORTH PURSUING?

In 2012, Aiden Patel was driving home, full of excitement. He had known from an early
age that he would never have been happy working for someone else. He hoped that
through a business venture, he could achieve a level of autonomy in his future work. His
graduation from the marketing program at the university was approaching and he was
apprehensive about the next step in his life. About a month prior, he had gone to a
wedding and happened to share a table with Madelyn Chao. This meeting presented
Patel with a possible opportunity that was rarely offered to new graduates.
Chao fancied herself an inventor and liked to create new things. While most of her
inventions were created for her own personal benefit, she had recently created
something that she felt could be offered to others. After meeting Patel and learning of
his studies, she wondered if he could help her.
The two exchanged contact information and then set up a time to meet so that Patel
could see Chao’s invention. When they met, Patel was pleasantly surprised to see that
Chao’s invention was further developed than that of a prototype. Chao had taken her
invention out of the laboratory and tested it extensively in the field. The product was
ready to be marketed to customers.
The business opportunity that Patel had been looking for seemed to be in front of him. Not
only was the product ready to be marketed to potential customers, but he and Chao seemed
to get along well. Chao seemed willing to enter a partnership with Patel. The venture was his
for the taking, but was this a business he should be a part of?
THE ECOWASH PRODUCT
Chao called her product “EcoWash” — an all-in-one system that could be used to clean
both the exterior and interior of any vehicle. Unlike most car washes, where the water
used to wash the vehicle was discharged as waste water, the EcoWash system had a
patented wash head that vacuumed up the dirty water as soon as the cleaning solution was
sprayed onto the vehicle’s surface. The wash head featured a soft foam brush, power
spray and vacuum , which were used to whisk dirt and water away without scratching the
surface of the vehicle. The result was an extremely efficient car wash system that was
also very ecologically friendly. A car wash performed using the EcoWash system used
less than two gallons of water. This was a considerable improvement when compared to
the 38 gallons that were typically used at a full-service car wash.
The EcoWash unit was not only efficient, it was also easy to install. The EcoWash unit
and all of the necessary equipment could be mounted on a small pickup truck for use
by a two-person crew. Complete controls would allow the operator to regulate water,
soap mixtures, spray rate and washing speed. Pre- soaking was unnecessary and washing
was fast. Vehicles could be dried with towels to provide the desired finish. In addition to
exterior cleaning, the EcoWash unit also functioned as a carpet or upholstery cleaner.
The powerful vacuum component could clean even the dirtiest carpets and the built- in
sump pump could be used to discharge dirty water into an approved receptacle. As a
result, EcoWash was an environmentally friendly carwash service that leant itself to
mobile operators as well as those who wished to use it from a stationary location;
EcoWash was very dynamic.
THE CAR WASH INDUSTRY
In 2012, there were approximately 183 million passenger cars, light trucks, vans and
sport utility vehicles in the United States. A 2011 customer survey by the Internatio na l

2
Carwash Association3 found that approximately 69 per cent of consumers used
professional car washes to clean their vehicles, an increase of 21 percentage points from
1996. Amongst those who used professional car washes, 35 per cent used full- serve car
washes and 34 per cent used self-serve car washes. Moreover, almost one out of every
three car wash patrons were considered to be “frequent washers” who washed their
vehicle at least three times a month. Consumers who did not consider themselves to be
frequent washers cited price, necessity and time as the top three reasons that they did not
visit a professional car wash more frequently.
A growing concern amongst the American public was the matter of clean water and the
environment. The same 2011 study found that 59 per cent of those surveyed expressed
interest in going to a car wash that was environmentally friendly, and 60 per cent of
those surveyed would tell others about an environmentally wash car wash service. In
addition, frequent washers expressed willingness to drive further and pay somewhat
more for an environmentally friendly car wash. Because EcoWash was an
environmentally friendly alternative to traditional car washes it would have been
attractive to these consumers.
POTENTIAL CUSTOMER SEGMENTS
A lengthy brainstorming session between Patel and Chao resulted in a decision to employ
a business-to- business approach. Rather than selling car washes directly to consum e rs ,
Chao and Patel felt that their chances for creating a successful business would be better if
they pursued business customers. As such, they felt that there were four groups of potential
business customers that might be interested in the EcoWash service:

1. Car dealerships: Car dealers required frequent (typically on a weekly basis) washes
for a large number of vehicles. If dealerships were located in close proximity to
each other it would have been possible for an EcoWash truck to service a large
number of customers with little travel between jobs. Moreover, dealerships
wanted their vehicles to look their best.
2. Fleet vehicles: Vehicles that were part of fleets (e.g., car rental locations, electric
utility vehicles, cable company vans) also required regular washes on a year-round
basis.
3. Valets at shopping centers, malls and restaurants: EcoWash could have partnered
with valet services or parking garages at upscale shopping centers or restaurants to
offer car washes to their patrons. These customers were likely to be less pric e -
sensitive than others, so there may have been potential to generate
more revenue with this customer segment than with others.
4. Other aspiring entrepreneurs: A radical option, posed by Patel, was to sell the
EcoWash unit to other entrepreneurs or small business owners, who would then use
it to offer car washes to others. In other words, the company would be selling a
product rather than a service.
FINANCIALS
An important consideration for Patel when considering the business opportunity was
whether it had the potential to move forward and if it could be profitable on a sustainab le
basis. His preference was to be part of a business that was going to grow rapidly, as it
would likely offer tremendous opportunities for professional growth. Nevertheless, he
also needed a steady paycheck in order to cover his living expenses.

3
Chao and Patel decided to start the business as one that would offer car wash services to
businesses and consumers using the EcoWash product (pursuing customer groups 1–3, as
mentioned in the previous section). They would start with one truck, two car wash
workers, one sales person and one manager. The staff would work a standard 40-hour
week. Of the eight hours that the car wash staff would be working each day, it was likely
that at least two of these hours would not be spent actively washing vehicles. This was
to allow for preparation time before leaving the main office, time to setup and put away
the car wash equipment at each location and time to drive between the various locations.
That left the workers with six hours in which to be productive. After using EcoWash on
their own cars and the cars of their friends, Chao and Patel learned that the average time
needed to wash a car was 15 minutes. Therefore, each team of workers could wash a
maximum of four cars per hour, or 24 cars per day. Assuming that EcoWash charged
customers US$254 per car wash, this translated to maximum revenue of $12,0005 per
month (see Exhibit 1).
CONCLUSION
As Patel stood in line at the university’s cafe, he pondered the EcoWash opportunity.
EcoWash was clearly much more than an idea: it was a real product that could be used
to generate revenue immediately. He and Chao seemed to have complementary skills.
She would create innovative products and he would figure out how to make money with
them. Most importantly, he wouldn’t be an employee, he would be a partner, which
meant he would work with someone, rather than for them.
While it seemed attractive, launching EcoWash wasn’t going to be easy. Because the
unit had already been developed, the immediate challenge for EcoWash was marketing
the product. What was Patel’s plan to quickly find customers interested in EcoWash?
How would they structure the partnership? Patel had little savings, so the only way he
could financially contribute to the business would be if he kept his current job as a
bartender. Could EcoWash be successful if the founders only worked there part-time?

After getting his coffee, Patel hurried to get to his next class. All the while, he was
keenly aware that soon there would be no class to go to and that he’d need to make a
decision about his future.
EXHIB IT 1: PROJECTED FINANCIALS FOR YEARS 1–3

Year 1 Year 2 Year 3

Number of trucks 1 2 3
Number of car wash workers 2 4 6
Number of sales people 1 1 1
Number of managers 1 1 1
Maximum number of car washes per day 24 48 72

Revenues $156,000 $312,000 $468,000

Expenses:
Salaries $100,880 $138,320 $175,760
Supplies & Maintenance $18,720 $37,440 $56,160

Source: Company files.

4
 QUESTIONS:
a) How did Chao go about building EcoWash? What are the potential
problems with this approach?

b) What are the key principles of the lean start-up methodology?

c) How well has Chao embraced “lean start-up” principles in her quest to create EcoWash?

d) Draw a “lean canvas” for each of the following customer segments:

Car dealerships
Fleet vehicles
Valets
Other aspiring entrepreneurs
e) What are the key assumptions in the Eco Wash business model?

CASE II: USING EFFECTUATION TO START UP A NEW VENTURE THROUGH

INSTAGRAM

Alyssa Delaney was midway through the second year of her master of business administration
degree at a prestigious East Coast business school in early January 2019, and she believed she
had a great idea for a new business:

Start-ups often face the challenge of making themselves visible to potential customers. With
a strong and loyal following on Instagram, I believe I can address this challenge by directing
followers to my personal website, where I can sell goods sourced from my friends and contacts.
The concept itself is simple: my social contacts provide the products, Instagram directs traffic
to my company website, and the postal service delivers the products.

The spark for Delaney’s idea came from some conversations with friends and family over
the 2018 Christmas break. She had learned in an entrepreneurship class the previous semester
that it was possible to start new businesses with very little capital, and she was intrigued by
the notion of leveraging her online presence to explore some possibilities. She had also
learned that Instagram had recently changed its platform to facilitate e-commerce marketing
and transactions.

SOCIAL CONTACTS AS PRODUCT SUPPLIERS

Delaney’s first conversation about the business was with her mother, Madison. Madison
designed and fabricated a range of high-quality children’s dolls, which she sold to a locally
based baby products store for prices that started at about US$60. 1 Demand for the dolls was
strong. Madison was happy to continue supplying the store, which added its own markup to the
prices, depending on the kind of doll produced. Delaney wondered whether or not her mother
might be interested in selling some of the dolls online through the new business.

Madison mentioned to Delaney that the manager of the local baby products store faced a
recurring problem: how to dispose of surplus clothing lines that undersold. At present, the
store donated any clothing surplus to a local charity, but the manager had expressed a
strong preference for a more profitable solution that would at least help defray some of the
store’s costs.

Delaney next spoke to one of her close friends, Nathan Smith. Nathan had a full-time job as an
accounts clerk, but one of his hobbies was producing handmade, customized artisan chocolate.
Nathan gifted a lot of his chocolate to friends and family, but he also sold some to his uncle’s

5
restaurant. Nathan’s uncle gave chocolate to customers at the end of the meal to sweeten the
presentation of the bill.

Finally, one of Delaney’s offline friends regularly participated in workshops at a local craft club.
Delaney vaguely recalled that the club consisted of people who were interested in learning and
enhancing their skills in a wide variety of crafts. However, she did not know much about the
club, how it worked, or who its members were. Most of Delaney’s friends were online; she had
thousands of followers on Instagram alone, and these followers seemed especially interested in
the stories she posted featuring fashion, health, and fitness topics.

INSTAGRAM AS A STOREFRONT AND MARKETING TOOL

To use Instagram for business purposes, people or companies posted pictures and stories, and
tagged selected products in the pictures with links to company webpages. For example,
Delaney could post a story about chocolate and illustrate it with attractive pictures, including
examples of Nathan’s products. Interested followers who tapped on a product tag would see
an image of the product, a description, its cost, and a link to Delaney’s company webpage,
where they could complete a fast (possibly impulse) purchase. Because she had a large number
of followers, who had their own social networks to spread news of their purchases, Delaney
felt sure that she could generate a lot of customer traffic, providing the products she promoted
struck a chord with her followers.

To exploit this e-commerce opportunity, Delaney would need to go the settings in her Instagram
application (app) and switch from a personal account to a business account. She would then need
to set up a product catalogue associated with a shop on Facebook, Inc. and link it to her account.
All of these steps were free. She would also need approval from Instagram to gain eligibility,
a process that could take a few days to a few weeks. Once she obtained this approval, Delaney
would be able to use her smartphone to create posts with tagged products. She could then
choose to pay for one of Instagram’s advertising services, if she wished, but she was confident
she would not need them, given her large and growing base of followers.

OTHER COSTS

Delaney was aware of a few modest operating costs that she would face. First, she would need
to register a new domain name for the company, which would cost $10–$20 per year. Second,
she would require shared website hosting, which would cost about $50 per year. She already
had a website, so she did not need to incur costs for that. Third, there would be shipping costs.
Delaney had not yet decided whether she would offer free shipping or charge for it separately.

DECISION TIME

Delaney knew there were several different paths she could pursue with this opportunity.
Three of her many options were as follows:

• Sell artisanal chocolates to the general public. Delaney believed that there would be a
high demand for Nathan’s chocolates, especially if she accentuated their handmade,
artisanal nature. Compared with many of the more expensive corporate products being
promoted on Instagram, handmade chocolates were a fun and affordable treat.
• Purchase surplus clothing from the baby products store and set up as a discount reseller,
making a margin on each item sold. As the baby products store was currently receiving
nothing for its overstock, Delaney believed she could pick up a lot of it for a very low
price, which could lead to significant margins on product she resold, even if she charged a
relatively low price.
• Become an online retail specialist in children’s dolls, selling her mother’s products
together with others sourced from elsewhere. Delaney believed that overstock situations,
whereby retailers were prepared to sell excess stock at a discount, offered an opportunity

6
 to pick up a large stock of dolls at bargain-basement prices. She also remembered reading
about numerous cheap craft products that were made in developing countries, which
might well include dolls. Delaney did not know much about children’s dolls, but she felt
sure there were numerous untapped sources of supply.

Delaney remarked:

I envision my company fulfilling unmet needs of time-starved millennials and growing

very rapidly. The best part of this idea is that my start-up capital costs are minimal
compared to almost any other high-potential business.

Delaney believed that she had stumbled on a high-potential business idea and was eager to
get going. “After all,” she remarked, “lots of successful entrepreneurs started their ventures in
their garages or university dorm rooms, including Mark Zuckerberg.” Eager to jump-start her
company, Delaney wanted to generate as many great opportunities as possible. In addition, she
wanted to identify any barriers she might encounter.

QUESTIONS:

a) Identify general concerns with Delaney’s business idea.

b) Discuss the detailed pros and cons of each of the three ideas.

c) Explain causal and effectual logic. Explain the five principles of effectuation.

d) If you were Alyssa Delaney, what would you do with your new business idea?

CASE III: LIU BAI: A CHINESE SUCCESSOR’S DILEMMA

Liu Bai was 35 and appeared to have the best of several worlds. For the last three years, Bai had been
living in London – and loving the cosmopolitan city life. Bai also had a new job, which was going very
well. Promotion had come quickly – as a result of talent, hard work and connections in Asia.

Bai had brought a bit of life in Asia across to England. The new apartment was full of valuable
oriental furniture and rich rugs from back home in Malaysia. Guests were served unusual Asian delicacies
on porcelain platters. And Bai was quite open about being a member of an extremely wealthy overseas
Chinese business family. As someone who had obviously enjoyed a privileged upbringing, doors always
opened before Bai had to knock.

The past had also left less obvious but painful psychological scars. Years earlier Bai had turned
away from tradition, the family’s business empire, and the family itself – and had fled to the West to
become a voluntary exile in London. Bai’s father, Liu Hong, had been a mentor in some ways but also
a tormentor. There was no other option but to escape from his influence and from the family business.

Bai had earned an MBA in the US and was now working for Tate & Lyle, a company that competed
directly with the family sugar trading company in Southeast Asia. Life in London was beginning to feel
safe and successful. Friends had replaced family ties. Promotion had brought financial security and
independence.

Unfortunately, Bai’s behaviour – living an independent life far from home – was unacceptable to the
family, who felt disgraced by having a child who had upped and left. For an overseas Chinese family, a
child who rejected his filial duty was worse than having a child who had died. Bai had been disinherited
and the family closed ranks around the patriarch, Lui Hong, as they always had. Bai had not spoken to him
in five years.

7
And then, out of the blue, Hong telephoned Bai in London.

He began by saying that, after several years of declining profits, Plantation Sugar Trading, the family
company founded by Bai’s great-grandfather, was struggling. It was a maturing industry and the
Malaysia-based business had struggled from the recent flooding and political unrest in the country. Hong
told Bai that he had no desire to see the family firm swallowed up in an acquisition, but he was old and
no longer wanted to run it by himself. As his other children were not interested in business,
responsibility for the family enterprise fell on Bai. And so Bai would have to return to Malaysia or Hong
would sell the company as quickly as possible, even if that meant selling at a loss. This, he reminded Bai,
would bring disgrace not only on the living members of the family but also on the memory of the earlier
generations.

Bai clearly needed time to think about the proposal and promised to give Hong an answer within two
weeks.

From Bai’s perspective, the decision was extremely complicated. Working for Hong ten years earlier had
brought nothing but a sense of being underpaid, exploited and subjected to irrational and extreme
criticism. Bai had left Malaysia after just two years in the family firm. To return would be to reopen
the struggle for power. Unless Hong could be outwitted this time around, Bai would be left feeling
utterly destroyed.

Everyone in the family recognized Hong as an intense individual with a strong personality. Bai described
him as a critical and unreasonable parent. Meanwhile, Bai’s mother, Yi, was a dutiful but powerless wife
who devoted much of her time to her interest in chamber music.

Childhood in this environment had been a tapestry of luxury, privilege and neglect. The four children,
including Bai’s three younger sisters, were spoiled, mistreated or ignored for weeks on end. Family
problems were never spoken of openly; there was a sharp divide between the public and private faces of
the Liu family. As far as Yi’s own family was concerned, she was expected to quietly bear the situation as
befitted a Chinese wife (an expectation she fulfilled), never revealing the extent of the problem to outsiders.

Although Hong had often talked about turning the company over to Bai one day, it was clear that it would
not be any time in the near future. His behaviour towards Bai seemed particularly controlling and
manipulative. When Bai finally decided that enough was enough, it was not only because the succession
would be a long time coming but also because Hong’s leadership seemed to be endangering the future
of the business. “He was extremely controlling, autocratic and mistrustful. It was hard for him to
keep good people in the company,” he observed.

The decision to leave caused an uproar. “At first he thought it was a joke,” Bai said, “and then considered
it an act of war when he realised I was serious. He then told me I would never find another job, because
all potential employers were either competitors or suppliers of his company.” To add insult to injury, Yi
sided with her husband and said Bai’s decision was unfair to the head of the family.

After joining Tate & Lyle in London, Bai finally felt at home, even though cut off completely from the
family. The new apartment had been bought with no financial support from them. Hong had made it
clear that Bai stood to regain the status of successor and heir on returning to Malaysia, but was that worth
as much as a happy life and successful career in London?

Then came Hong’s call. What should Bai do?

QUESTIONS:

a. What impact does gender have on family business succession?

b. What are the limits of rational business thinking in highly emotional
family situations?

8
 c. How does a family business’s life cycle influence and motivate
succession decisions and actions?
d. Identify the interdependencies and interrelationships of the
succession decision that Bai has to make.

CASE IV: MEMAKSA STEEL

Santi der Majoido, CEO of Memaksa Steel (a manufacturer of specialty steel products in Indonesia) had
just reviewed the R&D reports on her firm’s latest project “Process #887”. Process #887 was a new metal
finishing process that increased the wear time of steel products subjected to intense abrasion by nearly 60%.
The marketing department had concept tested the innovation for use in the manufacturing of custom milling
equipment, and for steel saw blades to be used in the lumber mills of Indonesia. Memaksa’s management
team recommended that they should further investigate the market potential for Process #887 in the saw
blade market.

The company currently sold saw blades to sawmills in one of two ways:

Saw blades and other metal products (such as drive shafts, metal rods, etc.) were sold to industrial metal
implement distributors, who in turn used their own sales force to call on domestic fabricators, saw mills and
industrial manufacturing facilities;

These products were sold to industry outfitters, who in turn resold a broad line of goods, including saw
blades, to the sawmills. At times, outfitters bought these products directly from the distributors.

In general, distributors received a 20% discount while outfitters enjoyed a 15% discount. Memaksa currently
owned a 20% share of the domestic saw blade market. Exports were not a material part of their volume.

Industry outfitters normally called on sawmills with a broad assortment of products that would be required
for use in the sawmills. That is, they sold specialty tools, safety equipment (e.g., safety goggles, boots, and
gloves for the workforce), maintenance equipment (e.g., lubricants, solvents, and scrapping tools) and
treatment chemicals for wood preservation processes. Typically, an outfitter might carry between 3,500
and 6,000 stock-keeping units (SKUs). In contrast, a typical distributor would routinely carry roughly100
metal-based products.

The company was very enthusiastic about Process #887 because the average new saw blade would cut for
nearly 3 hours and 12 minutes. The current blade had a life expectancy of 2 hours and 5 minutes. Changing
saw blades was roughly an eighteen-minute process for the sawmill operator, and required that the
production line be shut down during that time.

The cost to manufacture steel saw blades using Process #887 was 12% greater than current processes. The
company had asked its salespeople what they thought of the new product. The sales force reported,
that “saw blades made of this new alloy could be sold for a price of 35% more than current saw blades”.

The Government of Indonesia had declared this invention to be one of the five most commercially viable
innovations in the country and had given Memaksa Steel a National Science Institute Award. This award,
given to five inventors annually, carried a cash prize of approximately Indonesian Rupiah 500,000,000
(US$ 57,000)1.

Santi sat back and thought: how should Memaksa proceed?

QUESTIONS:

a. What will make this product successful? Why would the company launch this product?

9
 b. How does Memaksa get to market? What does the channel look like?
c. What are the costs of a new product for a distributor, or for anyone else in the channel?
How does this apply to Memaksa’s situation?
d. If the channel does not want this product, what should management do?

CASE V: GHARPAR: THE LEAN BEAUTY START-UP

THE TWIN CITIES EXPANSION (B)

Finally, on November 30, 2018, more than two years after the launch of GP in Lahore, the four partners
brought GP’s women’s services to the capital city of Islamabad. To effectively manage the on-the-ground
operations in this region, Mehvish shifted to the company’s new headquarters in Sector F-10 in Islamabad in
order to personally oversee the company’s first major geographical expansion.

OPERATIONAL DYNAMICS IN A NEW MARKET

To meet their launch on November 30, 2018, for the Islamabad market, the partners recruited four
beauticians through referrals and trained them to support the entire slate of service offerings at launch. The
beauticians were equally split between Muslim and Christian women; a stark difference from the Lahore
market, owing to substantial variations in the mindset of the lower-income class between these two markets.
Specifically, the two Muslim women who had been recruited from a residential cluster near Rawalpindi
with much difficulty, as Muslims in this region were far more conservative than those in Lahore. On the
other hand, the two Christian women had been recruited from a residential cluster near Islamabad with
equal difficulty, as Christians in this region were far more interested in being employed by foreign expats
in Islamabad as highly paid domestic workers, with various in-kind benefits such as free meals, lodging,
and medical care.

As Mehvish stated:

Women from the lower-income class in the twin cities, especially Islamabad, have such high- minded and
unrealistic expectations of how luxurious their lives should be, that it is almost impossible to recruit them
by promising economic independence. They live in this fantasy where a wealthy expat will one day
employ them and look after their family, although most of them are unemployed. It’s so ridiculous!

As such, apart from the four initial beauticians recruited through referrals, subsequent recruitment efforts
had proven difficult, as no new beautician joined the GP platform in the twin cities for the first six months
after launch.

Moreover, although the company offered its entire slate of women’s services at launch on November 30,
2018, in effect GP was only operating in a few sectors [F-6 to F-10] of Islamabad during the first month of
operations. After a relatively slower Shaadi [wedding] season than expected. The company then opened up
to the entirety of Islamabad in January 2019 and expanded into Rawalpindi in March 2019, three months
after the Islamabad launch. However, offering their services to the entirety of the twin cities market, with
only four beauticians at the back-end, proved to be a significant challenge. As Mehvish stated, “Our
beauticians in Islamabad and Rawalpindi just don’t work as hard as our beauticians in Lahore. I have to
call them up and try to convince them to take additional customer orders when it should be the other
way around! I’m losing sleep over this every day.” Additionally, while the partners’ limited market
research had suggested that the majority of their customer demand existed in Islamabad, once they had
rented and set up their headquarters in the relatively expensive Sector F-10 and launched in the city, the
reality was quite different. During the first three months, a larger number of customer orders originated
from Rawalpindi than from Islamabad, even though the company hadn’t formally launched in Rawalpindi
yet. Owing to the large distance [~15 km] between Islamabad and Rawalpindi, managing customer orders in
Rawalpindi through the headquarters in Islamabad proved to be inefficient.

10
As Mehvish stated:

There is no point in considering Islamabad and Rawalpindi as one city as many people do because they’re
geographically widespread enough to be considered distinct markets. We’re finally launching a satellite
hub in Rawalpindi now, six months after our initial Islamabad launch, to manage the area’s operations,
but this step should have been taken from the beginning.

Furthermore, customer acquisition proved to be a significant challenge in the twin cities market, as
Shameelah stated:

We’ve had difficulties with acquiring new customers in Islamabad. Perhaps this is due to the fact that a
larger proportion of women in Islamabad prefer going out to salons as part of their socializing or social
activities as compared to Lahore. The nature of city life is much more outgoing. In that sense, even
Rawalpindi is slightly better than Islamabad because women stay at home more often. Although I can’t say
that we have had explosive demand from Rawalpindi either; nothing close to Lahore at least.

HURDLES TOWARDS ACHIEVING FINANCIAL HEALTH

The company had a similar commission-based model in place in the twin cities as it did in Lahore, with
60% of revenue from a customer appointment went to the beautician and the remaining 40% went to GP.
The processing of payments was automated through the Sim-Sim Mobile Wallet, with fortnightly payroll,
once deductions were made for toolkit instalments, product purchases, and penalties. The beauticians only
had to visit the HQ for the initial training and to purchase new product(s) to use during the service. In the
same vein as Lahore, customer order processing was completely automated through the website and mobile
application and beauticians were automatically assigned to customer orders. However, given all of these
facilities, challenges surrounding the utilisation of beauticians had emerged even more significantly in this
market than in Lahore. Manual assignment of customer orders to beauticians [who were available and
willing to take up the order] would often take precedence over the formal criteria for assigning orders.

Moreover, the company handled an average of three customer appointments per day over its first six
months in this region, with days in between where there were no customer appointments at all. 30% of these
originated from Islamabad, and 70% were from Rawalpindi. Sales revenue increased slightly by an average
of 10% over the first six months, although there were months in between where there was a dip in sales
revenue as well. Moreover, after six months in operation in the twin cities’ region, the cash-flow status of
the company remained negative, with cash outflows exceeding cash inflows at the end of May 2019.

POST-LAUNCH REFLECTIONS

As the partners sat down after six months to discuss how the twin cities’ expansion had unfolded, a sense
of cautious contentment prevailed overall, coupled with a drive to meet emerging challenges head-on.

Fareed expressed:

I know we’ve had a slow start in the twin cities market but I can see early signs of growth, which look
promising. If you ask me, this expansion took place at the right time for our company. If I had to do it all
over again in the same way, I would!

Mehvish, on the other hand, was more reserved and expressed:

I agree that we could not have delayed the expansion further, especially because of copycats. I take a lot of
pride in the fact that the legal action we took against our copycat in Islamabad was successful, and they have
been forced to change their business model and retreat for the time being due to our presence in this market.
But still, I can’t ignore the significant operational challenges we’ve faced, and are still trying to sort out. It
hasn’t been smooth sailing.

Arooj elaborated on Mehvish’s point:

11
We launched in Islamabad based on an assumption of customer demand for which we had taken social media
inquiries and interest from the city as a proxy. However, now I believe that more specific market research
was required, which would have allowed us to reduce our logistical and operational challenges. As it stood,
we basically replicated the Lahore blueprint onto Islamabad by launching our entire slate of beauty services
for women and opening up the entire city too quickly. In retrospect, we might have ‘phased out’ our launch,
by targeting specific services to specific localities where there was a greater demand for them.

Still, despite the challenges and hurdles which lay ahead, the partners were more energetic than ever about
making the twin cities expansion a success. As Shameelah aptly put it:

This is just the beginning for us. We have a lot more in the works. We’re thinking of tackling the rest of
the G.T. road belt soon, starting with Faisalabad, and moving to Sialkot and Gujranwala. We’re as
determined as ever to make GharPar a household name, and we won’t stop until we succeed!

QUESTIONS:

a) Since the inception of the company, have the co-founders consistently carried out hypothesis-
driven decision- making? If not, elaborate.

b) If you were in the co-founders’ shoes, what would you have done differently?

c) Do you think the lean start-up model can be applied effectively to any particular instances in the
company’s timeline?

d) Is this the right time to undertake geographical expansion into the twin cities, or should the co-
founders continue to focus on growth in the Lahore market in the near future?

12