Assignment Detail with Instruction:
Please read the attached case (Neat and Clean Solutions: The Growth Challenge) and PESTLE (See attachments) answer the following:
1.Please write detail financial Analysis of Neat and Clean Solutions. Based on your financial analysis and PESTLE, please analyze Parhawk’s decision to enter the cleaning services industry. At what stage is this industry?
2. Outline and assess/analyze the corporate and business strategies of Neat and Clean Solutions. What are the core competencies of the firm? Does Neat and Clean possess a competitive advantage in this industry? Why or why not?
Microsoft Word - 9B18M116 9B18M116 NEAT AND CLEAN SOLUTIONS: THE GROWTH CHALLENGE Meeta Dasgupta wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
[email protected]; www.iveycases.com. Copyright © 2018, Management Development Institute Gurgaon and Ivey Business School Foundation Version: 2018-08-13 March 2018: When it came to keeping his clients happy, Yudheshwar Parhawk, the founder of Neat and Clean Solutions (Neat and Clean), located in Gurgaon, India, was a successful man. Being in the cleaning services industry allowed him to fulfill his passion of keeping things clean, organized, and in good working order for his clients. He was learning every day, and that was keeping him driven. With new furniture fabrics being introduced daily, he was constantly thinking of ways to modify the cleaning solution he used. He had founded Neat and Clean in 2010, and over the years his clientele had increased to 5,000, and the number continued to rise. With an increase in the population and number of residential complexes in Neat and Clean’s target area, there was a huge market of potential clients (see Exhibit 1). Although Parhawk had managed over the years with the same set-up, he wanted to expand so that he could have an office, buy new equipment and more vehicles, operate in multiple strategic locations, and employ more people. Unfortunately, he lacked the necessary funds to make these changes (see Exhibit 2). “Should I expand the scale of my operations? And who do I approach for funding?” Parhawk wondered. THE CLEANING SERVICES INDUSTRY The cleaning services industry was comprised of a wide range of services for both the commercial and residential sectors. Daily household cleaning services provided by maids, and such tasks as vacuuming and the cleaning of windows, floors, carpet, and upholstery were a part of the industry. Globally, growth in construction activities, investment in real estate, increase in disposable income, change in consumer lifestyle, and growth in the number of working women led to the popularity of these cleaning services. The global cleaning services market was expected to reach US$74.3 billion1 by 2022, growing at a compound annual growth rate (CAGR) of 6.2 per cent from 2016 to 2022, with the residential sector anticipated to grow at a faster rate. The commercial cleaning services segment accounted for a higher market share in the cleaning services industry. Increase in demand from the real estate sector, retail industry, and construction industries contributed to the segment’s growth. The Asia-Pacific region was expected to exhibit the highest CAGR during the period and contribute about 30 per cent of overall revenue for the cleaning services industry. Increase in demand from China, Japan, and India was driving the growth (see Exhibit 3).2 India’s contract 1 All dollar amounts are in US$ unless otherwise indicated. 2 Sheetanshu Upadhayay and Chandradeep Singh, “Cleaning Services Market Overview,” Allied Market Research, accessed February 22, 2018, www.alliedmarketresearch.com/cleaning-services-market; Allied Market Research, “Cleaning Services Market to Reach $74,299 Million, Globally, by 2022,” news release, Cision: PR Newswire, February 15, 2017, F or u se o nl y in th e co ur se M N M T 40 5 S tr at eg ic M an ag em en t R A E a t S ou th er n A lb er ta In st itu te o f T ec hn ol og y ta ug ht b y D on R ae fr om J an 0 7, 2 01 9 to A pr 1 5, 2 01 9. U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. Page 2 9B18M116 cleaning industry, set at $308 million per annum, had a potential to grow at 30 per cent annually. The industry promised the creation of many jobs and offered a huge opportunity for entrepreneurs and start-ups. A business could be started with as few as five workers. The sector was getting more organized, and besides employing people, it was beginning to use more machines and technology upgrades. Ten to fifteen per cent growth could also be witnessed in the manufacturing of cleaning equipment. There were very few Indian companies that manufactured cleaning equipment indigenously (Eureka Forbes Ltd. and Root Multiclean Ltd. were two of them). Most of the companies imported machines from China and sold them in India after rebranding.3 In the commercial segment, the popularity of floor care services had increased in the global market, and vacuum cleaning services was expected to exhibit the fastest growth, with a CAGR of 6.2 per cent. In the overall residential cleaning services segment, daily household cleaning services provided by maids occupied the largest market share, while carpet and upholstery services was expected to show the highest growth rate.4 There was increased awareness surrounding healthier indoor environments, with regulatory agencies also getting involved to ensure that requirements were met. The trend was leading manufacturers to develop products and applications that would meet the benchmarks laid down for equipment sound levels, filtration, and disposal of dirt and cleaning chemicals.5 It was evident that the cleaning business was progressing towards cleaning for health and not just for appearance.6 Overall, the industry faced several challenges: costs had to be kept down without compromising service, vendor consolidation had to be addressed, and employees had to be trained to ensure they worked quickly and effectively to maintain the service schedule and price offering.7 At the global level, an increasing number of competitors in the industry were resorting to partnerships.8 PARHAWK’S JOURNEY Parhawk belonged to a family of engineers and manufacturers who worked in and managed vehicle dealerships and equipment for defence services. In 1977, two years after graduating from a college within Delhi University, Parhawk immigrated to the United States at the invitation of a U.S.-based friend. He enrolled in a course on auto mechanics at Clackamas Community College, Oregon City, Oregon. In his free time, he was involved in a number of activities, such as home remodelling, landscaping, bulldozer operations, and mobile-home operations. As a mechanic, he also repaired cars, trucks, and electrical equipment. These activities helped him to make a living and save money. accessed February 22, 2018, www.prnewswire.com/news-releases/cleaning-services-market-to-reach-74299-million- globally-by-2022-613830813.html. 3 J. Deepthi Nandan Reddy, “Cleaning Business Gains Fast Traction In India,” New Indian Express, January 23, 2017, accessed March 2, 2017, www.newindianexpress.com/business/2017/jan/23/cleaning-business-gains-fast-traction-in-india- 1562490--1.html. 4 Allied Market Research, “Cleaning Services Market to Reach $74,299 Million, Globally, by 2022,” news release, Cision PR Newswire, February 15, 2017, accessed February 22, 2018, www.prnewswire.com/news-releases/cleaning-services-market- to-reach-74299-million-globally-by-2022-613830813.html. 5 “Industry Trends & Projections,” Services, accessed February 22, 2018, http://servicesmag.org/online-digital- magazine/digital-archives/item/1-industry-trends-projections. 6 Ibid.; “Cleaning Industry Trends,” Clean India Journal, October 13, 2016, accessed February 22, 2018, www.cleanindiajournal.com/cleaning-industry-trends/2/. 7“Industry Trends & Projections,” op. cit.; “Cleaning Industry Trends,” op. cit. 8 Allied Market Research, op. cit. F or u se o nl y in th e co ur se M N M T 40 5 S tr at eg ic M an ag em en t R A E a t S ou th er n A lb er ta In st itu te o f T ec hn ol og y ta ug ht b y D on R ae fr om J an 0 7, 2 01 9 to A pr 1 5, 2 01 9. U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. Page 3 9B18M116 In 1984, at his father’s insistence, Parhawk returned to India and joined his elder brother in the family business. He started designing new equipment and soon made a name for himself in the industry. He also started developing automobile diagnostic equipment—an area into which his family had hitherto not ventured. Parhawk’s approach to business, particularly in terms of exploring innovations in the sector, was very different from his brother’s. He chose to follow his own path, leave the family home with his wife and children, and start making electronic equipment. In the initial days, he would make a piece of equipment, take it to the market by bus, sell it, and then use the proceeds to work on the next