BUSINESS OPPORTUNITY ASSESSMENT

MSIN0144: ENTREPRENEURSHIP: THEORY AND PRACTICE

Word Count: 2988

Lecturer: Dr David Chapman

Author: BMRM7 / 16001483

Level 6

FEBRUARY 2019
1. Introduction
1.1 Overview – Swytch Technology LTD
Traditional electric bikes, commonly known as e-bikes, are bicycles that are integrated with electric motors which
provides propulsion forces (Mordor Intelligence, 2018). With the advancement in technology, the global e-bike
market is still experiencing a high-demand growth; according to Statista.com (2017), international sales of e-bikes
are expected to reach 40 million units in 2023. The current major players in E-bike markets, such as Pedego and
Yamaha Motors are selling products that ranges from £1000 to £5000 (McCue, 2018); However, these traditional E-
bikes are often criticised due to their unsatisfactory pricing. There has long been a call for developing an affordable
and high-performance substitution to conventional e-bikes.

Oliver Montague, CEO and co-founder of Swytch, designed an innovative system that can convert any existing bike
to an e-bike for just £500 – much cheaper than traditional e-bikes or e-bike conversion kits. The system consists of a
lightweight package, a hub motor and several sensors. It takes only 10 minutes for the initial conversion (Green Angel
Syndicate, 2018). Most importantly, the conversion is not one-way.

Overall, Swytch Technology Ltd is an electric transport engineering and design company that is responsible for
Swytch e-bike conversion kit. The company aims to transform the current e-bike industry by making electric transport
more accessible, affordable and widespread (crunchbase, 2019) by the public. Seeing the explosive growth of over
1.67 million unit-sales of electronically power-assisted cycles (EPAC) in Europe in 2016, Swytch is now ambitiously
targeting the EU market, which is 12 times larger than its home market UK (Swytch Bike, 2019).

1.2 Aim of the report

The report aims to assess the potential of Swytch Technology Ltd by various business evaluation methods, which are,
the Business Model Canvas proposed by Alexander Osterwalder (White, 2012), Macro market and industry analysis
and Strength, Weakness, Opportunities and Threats (SWOT) analysis. The overall attractiveness of the company will
then be discussed based on previous analytical results. Subsequently, mitigation measures towards current problems
are proposed for a better future of the company. Due to limitation of available information, this business opportunity
report will not be validated quantitively, but rather theoretically.

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2. Business Model Evaluation – Business Model Canvas

The Business Model Canvas (BMC), developed by Swiss business theorist Alexander Osterwalter (2010), is a
strategic business model template for developing/ documenting new or existing business models. An example of
standard canvas is provided below (figure 2). According to Bruce Gitlin (2016), the BMC could help early-stage
business address potential risks and consider more influential factors in marketing, which is perfect for Swytch.

The Business Model Canvas for Swytch can be found in Appendix A.

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7 2

6 3

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Figure 2: Standard BMC used in this report

2.1 Customer Segment

Swytch Technology Ltd targets a relatively simple customer base, that is, people who are interested in riding e-bikes.
The customers can be divided into 2 categories: individuals and organisations. Note that as the company is in early
stage of business, a more detailed customer refinement is thus needed to break through the current market (White,
2012). The general public are not familiar with the term ‘dismountable electronically power-assisted cycles’ and
would rather purchase conventional e-bikes. Swytch aims to attract old, weak, sick or partly disabled people who
need cycling aids, or people living in large mountainous countryside area. When it comes to organisations, Swytch
expects to gain customers from UK bike retailors and UK national transport authorities who runs bike hire schemes
(Morley, 2019). The former one is still in experimental stage with good feedbacks whereas the lateral one hasn’t been
achieved at all.

2.2 Value Proposition

At present, the e-bike industry is dominated by conventional e-bikes. Swytch provides a two-way conversion and is

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the first of its kind (Morley, 2019). It’s affordable when compared with traditional electric transport, which also gives
a larger customer segment. Note that the traditional e-bikes normally cost over £1000, making them less desirable;
Swytch sells conversion kits that costs £550 and can convert 99% of existing bike types to electric power assisted
bikes (Swytch Bike, 2019). Different kit is design to fit different bikes, thus avoiding specialist expenses.

2.3 Channels
The main channel for Swytch to sell products is via its official website with free delivery for EU/UK customers.
There’re also other channels, such as selling via partner bicycle retail stores; this channel is mentioned on Swytch’s
website, however, no available onsite location can be found. In order to expand business and attract more customers,
Swytch is investing heavily on online promotion: social media advertisement, web banners and review websites are
the major options to reach the general public

2.4 Customer Relationships

As Swytch’s main selling channel operates online, personal assistance for individuals cia internet is by all means the
most crucial. Since the company has a self-service relationship with individuals (Swytch Bike, 2019), Swytch has to
provide post-sale service apart from the user manual that helps kit installation and maintenance. Additionally, online
communities on Facebook and its website also functions as a question-and-answer forum.

Apart from retailing business, the company is looking for long-term relationship with organisations. Unfortunately,
there’s a limitation in current channels as no public assess link is available for organisation buyers. The channel is
narrowed down to communication via email and the partnership cost remains undisclosed (Swytch Bike, 2019).
Long-term relationship between organisation will not be achievable unless channels are widened.

2.5 Revenue Streams and Cost Structure

Swytch is a pure engineering product selling company, which means its revenue would come from product sale. At
present, it’s official website released three types of kits with prices ranging from £549 to £950. Swytch’s investor,
Angelsden (R) wrote that ‘Swytch is now selling at the full RRP (70%) margin, implying that the profit for each kit
is £164.7 to £285. Nevertheless, the price of the product was estimated to be £225 in case of mass manufacture; since
Swytch is in early stage of business and the manufacturing line is immature, this revenue stream has great potential
as the cost would gradually reduce.

Once the kits are in stock, there are two major sources of revenue: one is via online sales channel of its official
website, the other is via network retailors; the current partner network has 20 onsite retailors and over 100 in the
queue(Morley, 2019). Oliver Montague mentioned in one of his interview (Green Angel Syndicate, 2018) that every
10 UK stores have bought between 5 to 10 kits. If the partnership with Swytch continues expanding, future revenue
would grow exponentially.

The current expenditure cost for Swytch would be on marketing and advertising, headquarter rental, online website
operation and maintenance, post-sale service and most importantly, manufacturing for the conversion kit. Since the
company has under 10 employees (crunchbase, 2019), the salaries wouldn’t be taking up most of the cost structure.
As being said that Swytch is now seeking to enter EU market, thus marketing and advertising cost is expected to be
the main expenditure.

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 2.6 Key Resources and Key Activities

As the company mainly sells its products online, key resource would be the official website where it provides online
sales and promotion. The other key resource is the kit itself, along with the technology team. The team is expected to
develop more advanced travel methods as business progress forward. Additionally, to support and maintain the
business, post-service is considered important; online communities and user manual are also regarded as key
resources as they establish a relationship with customers and guide them through the installation process.

Following by the key resources, key activities would correspondingly be the manufacturing of the physical product,
marketing, online sales and delivery. With both key resources and key activities, value proposition of the company
can be maintained.

2.7 Key Partners

The key partners to Swytch would be the manufacturer for the conversion kit, as the cost would greatly affect its
pricing and profitability performance. A partnership with technology support ream is essential since they are
responsible for providing customer support and maintenance; good quality of after-sale service gives the company a
better picture. Besides, Swytch has partnership with several UK bike retailors that can widen its sale channel and of
course, gain more profit.

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3. Macro Market and Industry Analysis
The macro environment affects every industry and every single business. The influence of the macro market to the
business depends on how related they are (Frue, 2017). Since the whole e-bike industry is also affected by the external
market environment, an analysis to macro market and industry is carried out. As specific tool, PESTEL framework,
is adopted. PESTLE is a framework for macro environment factors analysis, the result of which is usually used in
SWOT analysis (Kokemuller, 2019).

3.1 Macro-Environmental Analysis – PESTEL Framework

The PESTEL framework canvas can be found in Appendix B.
3.1.1 Economic
Brexit is a major concern. Up to February 2018, the conversion rate between British pound and US dollar is 1:1.2937
which is much cheaper than that before Brexit. If the current exchange rate remains, it will benefit Swytch
economically. According to EconomicHelp (2016), devaluation of currency results in cheaper export. This is perfect
for Swytch as it has an ambitious to embark on EU market. Currency devaluation will make it more competitive and
relatively cheaper to foreigners.

International e-bike market is growing with high speed with CAGR of 4.9% since 2018. From estimation, the market
is predicted to reach £18.42 billion by 2025 (Statista, 2017). The favourable economics situation is perfect for the
development of Swytch.

3.1.2 Legal & Political

Electric bikes are illegal in Northern Ireland, unless they are registered as mopeds (Agnew, 2017). The 350w power
assist is road-legal in the US but not EU or UK (Swytch Bike, 2019), different countries have different laws and
limitations. Additionally, EC proposes an e-bike insurance law; without motor vehicles third-party liability insurance,
the riding is illegal (Reid, 2018).

As mentioned, Brexit took place in 2016 and caused mass political chaos. The incident induced great uncertainty into
business markets, especially for UK companies like Swytch who seeks for expansion.Since the publication of ‘25
Year Environmental Plan’, UK green energy investment halves (Vaughan, 2018). Although politicians still care about
lower carbon footprint, their major attention is driven to Brexit which is not very ideal for Swytch as it is unlikely to
get governmental fund. However, there’re still out-parties that calls for greener industry like the UK Green Party
(greenparty UK, 2019).

3.1.3 Social
According to past researches, the current and future e-bike market is dominated by older consumers, with 70% of
them being over 50s. In some district, 1 in every 3 people are over 65. By 2039, the old population will possibly
exceed 74 million (National Statistics, 2018), which represents a huge opportunity for Swytch to increase its customer
base. A map of UK ageing distribution can be found in appendix E.
Additionally, wage-earning class are more inclined to purchase e-bikes and they take 64% of total population.

3.1.4 Environmental & Technological

Global climate change requires ground-breaking innovations just like Swytch. Nowadays, following by the rise of
ethically and environmentally conscious consumers, low carbon footprint products that require no or minimum non-
renewable resources are preferred.

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The growth of Online commerce enables online shopping, thus making physical stores unnecessary. Besides, as the
technology is getting more advanced, components of e-bike kits are getting smaller. Integration of bikes and e-bikes
has caught attention of not only inventors, but large companies as well.

3.2 Industry analysis – Porter’s Five Forces

An uprising star in bike industry over the past years is undisputedly e-bikes. Before 2017, the government HMRC
reported that e-bikes were recognised as ‘non-reliable’ to the general public. Fortunately, UK introduced a more
defined commodity code to reflect legal e-bikes in 2017, which gave rise to the e-bike industry. Although the market
has experienced rise and falls, the current trend for e-bikes is positive in UK/EU. The strong industry also creates
more opportunities for conversion kit companies like Swytch. Overall, the industry operates well.

This industry analysis aims to determine competitive forces of Swytch (Visual Paradigm, 2018). Porter’s Five Forces
Framework, introduced by Michael Porter (1979), is used in this section. The framework can assess the business
potential and profitability in a certain industry (Mind Tools, 2016).

The Porter’s Five Forces Canvas can be found in Appendix C.

3.2.1 Threat of New Entrants – RELATIVELY LOW & Threat of Substitution – VERY HIGH
The entrant to e-bike industry has high barriers and requires specific engineering knowledge, whether for e-bikes or
conversion kits. Therefore, the industry is harsh for new entrants.

There’re many substitute conversion kits in the market and some of them are cheaper. Nevertheless, those are for 1-
way conversion only and difficult to dismantle. However, manufacture production and labour cost is relatively lower
in countries such as China and Malaysia. New entrants from these countries would pose a direct threat to the business.

3.2.2 Competitive rivalry – VERY HIGH

Competitive rivalry is vey high as the current industry is dominated by traditional e-bikes from multinational
companies. Commonly, well-established rivalry companies have bigger advertising budget and they possess strong
investment supports or even governmental backgrounds (Peace, 2018). Physical e-bike stores are also considered as
threat as some people don’t fancy online-shopping.

3.2.3 Supplier Power – VERY LOW & Buyer Power – VERY HIGH
The supplier exerts minimal influences as Swytch owns its own manufacture line which fully fulfil consumers’
demand. Buyer power, however, is very high as customers can easily check the many alternatives on the internet and
turn to lower-cost products. Buyers in this industry are sensitive to pricing and not willing to spend much (Sutton,
2017).

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4. Situation Analysis - SWOT

While Porter’s model is used mainly for identifying external forces, the SWOT analysis digs into the company and
assess its internal potential (Hall, 2018). The analysis focuses on company strength, weakness, opportunities and
threats. The competitive advantages and disadvantages of Swytch are identified in this section. The BMC, Porter’s
Five Forces and PESTEL analysis carried out earlier had helped spot some strengths and weak points of the company,
and the results are used in SWOT analysis.

Note that the SWOT analysis canvas used for this report is included in Appendix D.

4.1 Strength and Weakness

Some strengths of the company are already identified in Value Proposition section (See section 2.2). As mentioned,
Swytch e-bike conversion kit a compatible with any kinds of bike, and the conversion is two-way, which is very
different to existing conversion products. Moreover, it’s affordable to the general public which is one strength that
traditional e-bikes cannot defeat. The unique value proposition of the product makes it outstanding. In section 2.5
Revenue Streams and Cost Structure, it mentioned ‘high profitability’ as one of its advantages. The booming e-bike
market also provides additional strength to the company as the product is much lighter than competitive kits or e-
bikes.

The weakness of Swytch is obvious. The current selling channel is mainly via online website and the revenue relies
mainly on retailing business (2.3 Channels). What’s more, Swytch holds no large co-operators in bike industry (2.7
Key Partners) or support from government, making it very vulnerable to rival multinational e-bike companies (3.2.2
Competitive rivalry). In addition, people are not familiar with ‘Dismountable power assisted cycles’ as the company
has really poor advertising effects; poor public exposure is the key weakness of the company. Also, there’s no
attendance to public bike fairs, further isolating the company to the general public. In current situation, lack of
physical stores is a serious defect of the company (2.3 Channels).

4.2 Opportunities and Threats

The opportunities in SWOT have some correlations in PESTEL analysis, as PESTEL helps uncover potential business
opportunities that Swytch could try to develop (Frue, 2017). Swytch still could work with UK government on bike
sharing programs (2.1 Customer Segment). Besides, alliance with large bike firms gives an alternative path; rather
than competing, cooperation can be another great opportunity. If Swytch kit can be purchased with certain bundle,
the revenue would grow exponentially as the channel is widened. Swytch has the chance to disrupt the whole e-bike
industry and change the way people think of daily transport.

Threats identified in PESTEL would harm the business in the long term, however, there’re currently few threats to
the business as the product is too competitive. Unfortunately, the patent of the product is pending, which means its
IP is not fully protected (Swytch, 2019). Once rejected, Swytch’s product might get copied. Although there’re no
identical replacement product on the market, similar products with cheaper prices are available such as CycloTricity,
8fun and Tongsheng (Trustpilot, 2019).

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5. Conclusion
In conclusion, with soaring demand in e-bike market, the revolutionary Swytch bike-to-ebike conversion kit places
Swytch Technology Ltd in a favourable position. It’s sustainable and state-of-the-art design makes the company very
competitive and expendable in the long run. From the BMC, SWOT, Porter’s Five Forces and PESTEL analysis, it is
clear that the advantages of the company outweigh its disadvantage. In all, Swytch Technology Ltd has a very good
business opportunity.

To conclude, it is a very attractive product; however, there’re still mitigation measures for existing problems. To
overcome its disadvantage and to defeat its rivalry companies, recruiting more marketing experts are suggested. At
present, the team consists of 4 people overall. The leader and CEO, Oliver Montague is an electrical engineer; Dmitro
Khroma acts as the director of mechanical engineer, and Hayley Bishop is head of technical design. Only 1 of all, the
public relations manager Patrick Trainor is in charge of market connections (Swytch, 2019). Insufficient marketing
strategy might contribute to the poor advertising effect and as well, the relatively narrow channel and customer
segment. Therefore, more detailed market research is required for the next development stage of the company.

In addition, the author suggests a rental plan for the product. As lots of potential customers are not even interested in
buying the conversion kit, an additional rental plan with £200 deposit might be preferred. After they become
acquainted with the kit and starts to appreciate its function, they would probably choose to purchase the product
rather than to rent it. Advertisement banners and pop-ups can be added to the power package or LED screen in front,
creating another channel for revenue.

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6. Reference

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Appendix A1: Business Model Canvas (Expected Business Model)

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Appendix A2: Business Model Canvas (Current Business Model)

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Appendix B: PESTEL Analysis Canvas

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Appendix C: Porter’s Five Forces Canvas

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Appendix D: SWOT Analysis Canvas

Appendix D: Map of ageing in UK

(Age Mobility UK, 2018)

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