A Feasibility Study for Adding Value

1. “Zap”: A Mobile Application for Quartz Air-Conditioning
A Feasibility Study for Adding Value
Bradford University School of Management
Karim Khayat
2014

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Table of Contents
I- Executive Summary
II- Description of Solution
III- Justification of Innovative Nature of the Solution
IV- The Feasibility Study
Market Size:
Characteristics of Demand:
Competition:
Distribution Channels:
Mode of Entry:
Needed Resources:

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I- Executive Summary:
Quartz Air Conditioning manufactures air-conditioning systems that sells to new or re-developed
commercial buildings. The company is based in Brighouse, West Yorkshire, and sells its products as a
whole system and not individually. The company sells its products through building service sub-
contractors for commercial buildings. Quartz sells to the UK mostly because the air-conditioning systems
specifications required in the UK are rigorous and unique, which means a smaller market but also means
less competition with exports as they rarely meet these specifications.
Quartz is facing a vicious cycle for a problem; Quartz is number three in the air conditioning-
systems market, with sales equal to one-fourth of the market leader “Ability Projects”. While the two
companies have the same suppliers (EBM Fans, Torin Fans), Quartz buys at a higher price because the
company buys less material. With higher costs for production of systems in Quartz, the products of their
competitors are cheaper. With price-sensitive customers, Quartz is confronting a problem that needs a
new dimension for a solution.
The desired end result from the solution to Quartz Air-Conditioning’s problem is simply creating
a higher profit margin or generating more net profit. To do so, there are essentially two ways; offering a
cheaper product of the same quality as that of the competitors, or adding value to the existing product.
Purchasing from international suppliers does not end in lower costs for Quartz, and producing at lower
costs seems to be hard to achieve at this point. The way to go seems to be through adding value to their
products.
The solution proposed in this feasibility study is “Zap”, a mobile application for which allows
consumers to navigate the Quartz Air-Conditioning systems.

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II- Description of the Solution:
The core concept of “Zap” is granting control of the air-conditioning systems to the end
consumers in a modern and efficient manner; the residents or tenants would be able to navigate the
systems through their mobile phones. Then the solution is the creation a mobile application that allows
this to be done. The required technology to control the air-conditioning systems is already installed; just
as a remote control panel operates on sending signals to the system through infrared, the phones can
transmit infrared signals as well, and the systems can receive them. They just need a program, namely
“Zap”, that allows the commands from the phone to be received by the systems. The program can be
developed with a one-time cost which can be as low as 2000 pounds, providing a neat and user-friendly
interface. The real expenses come with the marketing of this added value.
The way the application is set up is simple; the serial number of the air conditioning system in an
office for instance would be synchronized with the application on the mobile phone, allowing only the
tenant of the office and whoever they want to share the serial number with access to the navigation of the
air-conditioning systems.

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III- Justification of Innovative Nature of the Solution:
It seems that competition over air-conditioning systems in the UK depends heavily on price wars
(Business Challenge). The quality of Ability Projects, Diffusion, and Quartz is of the same standard, and
as such since the products are so similar, the only thing left is to buy the cheapest one. Since Quartz has
lower sales volumes than its competitors, the competitors purchase required goods at lower prices, thus
affording to sell their products at lower prices as well. It only stands to reason that Quartz should
differentiate their products and add value, and adding a technological edge via a mobile application makes
the product more desirable and personal (Thompson, 2013).
If we consider the end user of the air-conditioning systems that Quartz sells, it is the business
people that rent or buy in the new or re-developed buildings. The people marketing the real estate of these
buildings market the electricity, water, air-conditioning systems, and all the facilities of the building to
possible tenants; if they have an added value in marketing their property, they would also profit more
(Dixit and Nalebuff, 1993). Technological advancement and accessibility have become increasingly
demanded as value in any product or service (Thompson, 2013), and adding the ability to navigate the air-
conditioning systems would appeal to the consumer. The fact that the end user, the intermediary, and the
supplier can all benefit from the added value makes the idea feasible.

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IV- The Feasibility Study:
“Zap” is a feasible solution to the barriers that Quartz is facing. Let us consider the following:
Market Size: The market of Quartz Air-Conditioning is mainly all of the UK; that is to say, any new
commercial building or an old building of the same sort in the process of refurbishment. For Zap, the
market size encompasses the market of Quartz Air conditioning and all people who have smartphones.
Characteristics of Demand: New or re-developed buildings are led by architects who employ consulting
engineers to design the building services; the designs are implemented by sub-contracting building
services, who try to keep the costs as low as possible while meeting the building regulations. To tender for
the project, the sub-contractor will ask for quotations from suppliers of all the equipment to be installed in
the building, and base their price on the lowest tender. The suppliers here are Quartz. The direct
customers for Quartz are the sub-contractors. Also, people are becoming more “app-oriented” by the day,
and customers like control through their phones (See Fig)

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Competition: All air conditioning systems cannot be regarded as competition; only the companies that
deal with subcontractors are the competition for Quartz, which mainly encompass a handful of companies
nationwide such as Diffusion and Ability Projects.
Distribution Channels: No additional distribution channels are needed.
Mode of Entry: Since we are adding value to an already existing product, the only thing needed is to
market the added value. No market penetration required.
Needed Resources: To implement Zap, there are key costs:
Application creation and programming costs 2000 pounds for minimal design and accessibility
according to Ralph Meouchy, a programmer at Murex. Zap could be better designed for up to 5000
pounds, which is also a one-time purchase. The application would be free at Google Play or AppStore,
and could even generate its own profit from advertisement if it works out.

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The other costs would be marketing costs for the application, which can be done in several ways;
the first being through the application download platforms, and the second through traditional advertising
(television, billboards, and social media).
A suggestion for a marketing campaign would be the following:
Other than throwing a direct campaign that expresses the new features, bus stops could be used as good
campaign spots. Quartz air conditioning would be installed in bus stops, marketing the mobile phone
application, showing the serial number of the AC unit in the ad, as well as a description of how Quartz
AC can now work on people’s mobile phones. The end result is that people get to try it themselves
(especially that waiting for a bus gives people ample time to download and test the application), as well as
having them experience the quality of the air conditioning, and maybe even stay warm in the cold weather
of the UK. This would make Quartz memorable to both the end consumer and the subcontractors, who
could be pressured by their employers into having the Zap feature in their “new and modern”
building.

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V- Commentary on the process and usefulness of exercise
People nowadays love to control things, especially from their phone. It is like a telekinesis box
that allows it users to conjure magic. Other than this psychological reason, it has become very practical to
give consumers the power to control their products and customize them the way they want. This has
indeed become the next stem of competitive advantage, and as such, I believe the minimal requirements
for the creation of Zap and the possible outcome are worth the effort of investing in it. Also, the
marketing campaign for Zap can be considered two birds with one stone; Quartz gets exposure as well as
announcing its new available tool.

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References
Dixit, A.K., and Nalebuff, B.J. (1993) Thinking Strategically. New York: W.W. Norton & Company
Meouchy, Ralph. (2014). Phone Interview.
Thompson, C. (2013) Smarter than You Think. London: William Collins.

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Appendices
Appendix A. Concept Statement
Quartz Air-Conditioning Innovation
The problem that Quartz Air-Conditioning is facing is that since it has lower sales volumes than
its competitors, the competitors purchase required goods at lower prices, thus affording to sell their
products at lower prices as well. This seems to be a great disadvantage for Quartz Air-Conditioning
especially in a price-sensitive market. The desired end result from the solution to Quartz Air-
Conditioning’s problem is simply creating a higher profit margin or generating more net profit. To do so,
there are essentially two ways; offering a cheaper product of the same quality as that of the competitors,
or adding value to the existing product. The solution at hand comes in three stages. The first is an idea to
generate cash, the second is an idea for a new feature within the solution that the company provides the
contractors, and the third is a marketing campaign for the new solution provided.
The first part of the innovation is generating cash. This can be done by collaborating with
competitors; the companies agree to buy their raw material together since the have the same supplier, thus
buying in a bulk with lowered costs for all. Should the competitors refuse this proposal, or should they
follow through but a crisis happens later, Quartz can always go back to buying from the supplier directly
as they do now.
The second is the core part of the innovation. The idea is simply making the air-conditioning
systems controlled remotely through residents’ phones. To do this, a receiver chip in the parts of the
systems are inserted as hardware, the mobile phone application should be developed or adapted, and the
software should be made accessible to the users in a manner that makes their systems only respond to
their phones. The receiver chips do not cost much, and the application is a one-time buy. As for the utility,
it can be managed by allowing authentication and access to phones that have the serial number of systems
included, allowing multiple people of the same household to be able to access their air-conditioning

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systems through their phones while people not of the household do not have access. Lastly, the
application will have an easy user interface. This idea incorporates technology and adds value to the end
user, making it an advantage over competitors. Also, since the primary market consists of contractors
rather than individuals, contractors may find this package appealing since they can sell it to the
individuals, and so can the brokers of the real estate in which the air conditioning is installed.
The third stage is the marketing campaign. Other than throwing a direct campaign that expresses
the new features, bus stops could be used as good campaign spots. Quartz air conditioning would be
installed in bus stops, marketing the mobile phone application, showing the serial number of the AC unit
in the ad, as well as a description of how Quartz AC can now work on people’s mobile phones. The end
result is that people get to try it themselves (especially that waiting for a bus gives people ample time to
download test the application), as well as having them experience the quality of the air conditioning, and
maybe even stay warm in the cold weather of the UK.
The clear advantages of this three stage innovation is that no competitor has done it before,
capital can be generated from the first step by saving money from suppliers, the second stage creates a
new feature that no other competitor has, and one that appeals to the end consumer, and the third stage
spreads awareness in a smart way.