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MGT 402 SEU Entrepreneurship and Small Business Discussion

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MGT 402 SEU Entrepreneurship and Small Business Discussion

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Introduction
Premanth Kundurthi and Chaitanya Ammeneni at a young age of 25 years were already wellentrenched into their laundry business since the past two years. In their business circle,
everyone fondly referred to them as PK (Premnanth Kundurthi) and Chaitanya (Chaitanya
Ammeneni), and their business venture named PKC Laundries was a take-off on their initials
but to their customers it stood for Perfect Klinic for Clothes.
It was in the year 2014 that PKC took shape as a brainchild of PK and Chaitanya, friends in
college pursuing their MBA. For this idea, they had won the Young Entrepreneurs award in a
Business Idea Competition hosted by a famous national level Business School in India.
Although the business of providing laundry services was not new, yet the entrepreneurs had
created a unique business model based on the emerging concept of an aggregator start-up
with reliance on the IT technology platform. In the year 2015, they converted their idea into a
reality:
Washing clothes is one of the hectic tasks for everyone. We wanted to start a technology
driven laundry service which would be just be a click away for everyone. We want to provide
quality, cost effective quick and thrilling laundry services to all our customers, say the
founders of PKC Laundries.
Now in the year 2017, the promoters were concerned about their business. There were
challenges involving the day-to-day operational problems of the business. They needed to
come up with solutions regarding strengthening of their supply chain and creating and
implementing robust business processes to ensure reliability of service and quality. The
promoters had also to strategize and have a clear vision regarding the future of their business.
They needed to examine ways to increase their market share and operating margin. They also
needed to evaluate the options of increasing capital investment for backward integration of
operations to reduce costs versus market expansion through the franchise route.
Types and size of the laundry market in India
Types of laundry services
The business of washing clothes or laundering is as old as modern civilization where people
with less time or interest in this mundane chore outsource it to a service provider. In India,
the laundry market exists on four different levels and is different from the Laundromat
concept of the West but similar in nature to the Dry Cleaning services. Traditionally, most of
the households in India still wash and iron their clothes at home. Many a time, a housemaid is
engaged to do the washing and sometimes even ironing. For a little more expenditure, a
“dhobi” (Hindi word for a washer-man) can pick up clothes from home for washing and
ironing. The Dhobi provides this service in the unorganized sector as an individual, and his
business is limited to the particular locality he serves. His quality of ironing is better than that
at home due to the heavier ironing machine used. At the third level are the laundry shops. The
customers have to drop off their clothes for washing and ironing and pick them up later. This
service is available mainly in the metropolitan areas in very few localities and is costlier than
a dhobi but still preferred by many due to the trust in a business establishment. At the top end
of the spectrum are the dry cleaning shops which use petrol wash and chemical wash to dry
clean the clothes and then steam iron them. This is a premium priced service and preferred
only for certain types of clothes like special occasion or party wear or special fabrics like
silks and woolens. These traditional laundry business formats are referred to as “off-line
business” to distinguish them from the web based businesses which are called on-line laundry
services (Exhibit 1).
Market potential
As laundry is a necessary chore for every household, it is one of the markets which is least
affected by economic ups and downs. Even during a recessionary trend people could hesitate
to buy clothes but would not want to avoid spending money to keep their existing clothing
neat and tidy. Hence, the market for laundry in India has always been growing, and according
to euro Monitor International Report, 2015, it has been estimated at Rs 220,000 crore (Rs
2,200bn). The laundry industry which is fragmented has around 767,000 establishments, 98
per cent of which are micro-level Laundries with fewer than ten workers (Choudhury, 2015).
Praveen Sinha, founder, Jabong, an e-commerce portal and an investor in an on-line laundry
service named Wassup India, is of the opinion that 2 to 3 per cent of the entire laundry
market is organized, and out of this, 25 per cent of the business will be online as a large
number of middle class families are now preferring at-your-doorstep laundry services, which
are of good quality and hygienic (Chodhury, 2015). As such the demand for organized
laundry is on the rise and organized players are giving the neighbourhood dhobis a run for
their money. The increasing demand for laundry services has also paved the way for global
players to enter the Indian market, thus creating a scope for the Indian laundry market to
grow bigger and become more quality conscious (Chakravorthy, 2009). The laundry business
model is changing due to wide usage of smart phones and easy availability of IT-enabled
platforms resulting in an increase in number of online startups. “Household and personal
services, including laundry, lack professionalism and accountability in India”, says Nishanti
Tripathi founder Dhobilite, another online laundry service. He opines that “doing laundry is a
necessity and a time consuming chore, hence providing laundry services to people who value
convenience and quality will work”. Many youngsters are all set to disrupt the laundry
market with their startups of online services and are bringing in the necessary professionalism
to the laundry market. As such, the requirement for on demand services is gaining impetus
across various cities of India, and Hyderabad city is no exception to it. Online services are
considered to be the future to deliver goods and services to the customers (Tiwari, 2016).
Several parameters that are driving entrepreneurs to go for online laundry services are as
follows:
• Owing to fast and wide spread information technology in India, consumer-oriented
services have been accelerated.
• Be it grocery, food, doctor services or household services, there is a rise in on-demand
services owing to fast changing demographics of customers.
• Difficulty in getting specialized wash care, unavailability of maids has made the
customer’s look for alternative services.
• Unavailability of one stop solution for all laundry needs is driving customers to go for
online services.
Online laundry services sometimes referred to as on-demand startups are slowly picking up in
India. They work on the principle of aggregation, i.e. they hire delivery professionals and
partner with local dhobis to do the laundry. The benefits of on-demand laundry include
washed and dry-cleaned clothes being delivered right at the door step of the customer.
Vendors too gain since their additional costs and time for pickup and delivery is significantly
reduced.
The entrepreneurs
PK and Chaitanya although good friends since five years are poles apart in their personalities
and in their approach to business but compliment each other’s strength. Chaitanya, is the
workaholic strategist and visionary, who appears reserved but is always available for all
back-end support. In contrast, PK is a gregarious chatter box. His out-going friendly manner
endears him to a lot of people thus he handles the people part of the business by taking care
of the entire business development. However, what had initially drawn the two together was
their similar background. Both were Mechanical Engineers from middle class families with
their fathers in Government Service, which meant limited financial support and knowledge in
the running of a business. Both loved technology and would spend hours discussing applying
information technology to business situations.
About the company
The founders claim that PKC Laundries is a first of its kind in Hyderabad, India. PKC is a
technology-driven laundry service that provides a platform for the vendors and customers.
The founders say that they have a solution for all clothing related issues. As to how they
zeroed in to this business they commented, “People are always running for three generic
necessities which are Roti (Bread), Kapda (Clothes) and Makaan (House). There are enough
services that cater to food and housing but the ‘kapda’ sector is a highly untapped sector and
with PKC we wish to change the outlook of people about the laundry industry” (Das, 2016).
PK and Chaitanya feel that their USP is their uncompromising attitude towards quality. They
vouch for quality being their top priority and promise that there will not be any more
misplaced clothes or colour bleeding of clothes. The promoters also feel that they are being
philanthropic and socially responsible in running their business. According to PK, 21.9 per
cent of India’s population is living below the poverty line (BPL), and the average income of a
BPL person is Rs 33 per day. By providing self-employment to their vendors who are mainly
from the BPL segment, they feel they are able to increase their income to at least Rs 333 per
day, thus uplifting few of the BPL segment.
The PKC Laundries business model
Mission and vision
PK and Chaitanya, while deciding about their business of PKC Laundries, were driven by a
single thought which was to enter a business in which demand would not wane. The Indian
psyche considers the bare necessities of life as essential and sacrosanct and Indians strive to
take care of their needs of Roti (bread), Kapada (clothing) and Makaan (shelter) in that order.
To enter any food-related (Roti) business venture was ruled out early-on due to its perishable
nature. Clothing appealed to them but again their strength was not in fashion or clothes
designing, so being Mechanical Engineers they chose to enter the business of maintenance of
clothes.
Their mission was to offer technology-driven laundry service which would just be a click
away for everyone. Thus, they had created a business without owning or managing back end
assets or operations. After on-boarding customers they would pass on the clothes for
processing as per the customers’ orders to their different vendors. Their investment was in a
website, three small covered delivery vans and rented rooms. These rooms were located in
three zones within Hyderabad city. The rooms were part of the back-end operations and
provided a place for the delivery boys to segregate the clothes.
Their vision for PKC Laundries was reflected in the line “You Care Your Family; We Care
Your Fabric” which was prominently displayed on the home page of PKC Laundries
website. Beside this was a welcome message from the founders PK and Chaitanya “we want
to provide quality and cost effective laundry services to all our customers.”
The services offered by the company include: washing; washing and ironing; only ironing;
dry-cleaning; dyeing, darning, rolling and polishing. They concentrate on apartments, gated
communities and group houses to scout for their customers, as finding a laundry service
provider is a tedious task in these areas. The main features that PKC are banking on are
affordable prices; quick and easy access; free pickup and delivery; and 100 per cent quality
assurance.
The aggregator business
A start-up is considered as an entrepreneurial venture in the small and medium enterprise
(SME) business segment. The Government of India is encouraging start-ups and under its
“Make in India” mission mentions that “Start-up India initiative is designed to foster
innovation, create jobs and facilitate investment. Government is committed to make this
initiative a scalable reality and to provide an environment for our start-ups to thrive in”. So
this is the age of start-ups. Most of the start-ups are driven by the opportunities presented in
the e-commerce segment based on the IT platform of the convenience of apps on smart
phones and websites on computers and modelled around aggregating demand by increasing
the on-boarding of customers and being asset light. It meant doing business without owning
the necessary assets for creating the good or service but relying on third party vendors to
meet the customer demand. Essentially, a start-up aggregator business is seen as one of
merely coordinating various business functions without actually creating the asset pool to
sustain it but relying on other peoples’ assets.
PKC Laundries is built along this aggregator model. Their aim is to bring vendors and clients
on to the same platform.
PKC business process
The startups business model is lean and simple. For the domestic retail customer, pick-upand-drop service for clothes is done in multiple ways to suit the customers’ convenience.
Delivery boys visit the customer at home or the customer drops the clothes for servicing at
designated places inside gated communities during fixed time slots or at alliance shops and
boutiques. The services offered by PKC can be accessed through their website, APP,
WhatsApp, Facebook page or over phone. The clothes to be serviced are bagged immediately
on receiving from the customer and given a number as per the acknowledgement receipt
generated or as per the monthly package membership number. Thereafter, all the bags are
dispatched to the nearest processing hub. At the processing hub, the bags are opened and
individual items of clothing are tagged with radio frequency identification design codes to
ensure no mix-up during the process of cleaning and processing. In fact, PKC Laundries has
invested a substantial amount in acquiring and integrating the RFID technology in their
operations. Once tagged the clothes are sent to the relevant vendor as per the service
demanded. After the clothes are back from the vendors, they are again segregated according
to the address of customer and the concerned delivery boys then deliver them at the
designated locations (Exhibit 2).
The back-end:
To provide the necessary back-end support PKC Laundries had tied up with dhobis (washer
men), laundry shops and dry cleaners within their three zones of operations. To ensure
consistent and superior cleaning, PKC Laundries insisted that dhobis and the laundry shops
use only the detergents and chemicals that they supplied. Within six months of dealing with
the unorganized sector of Dhobis PKC had to deal with their lack of commitment to timely
deliveries or quality output. Hence, they had, on an experimental basis, created their own inhouse team of two families to have better control on the operations. Each team consisted of a
husband and wife who would both work to finish the tasks of the day. They were brought in
from the neighbouring State of Orissa known for its workmen’s positive attitude to work in
the service and hospitality industry. These two families were provided housing
accommodation in apartments which also served as their workplace. So PKC was operating
both the systems in parallel – the existing vendor base along with the experimental in-house
labour.
USP of the business model
A laundry business to be set up on a scale of business similar to PKC Laundries in the
organized sector would require heavy investments in a clothes cleaning factory installed with
all the requisite equipment, machinery, manpower and vehicles for pick-up and delivery as
well as marketing costs associated with promotional launch and marketing campaign. During
an interview with Chaitanya, he had confided that had they not taken the aggregator route
they would have had to consider a project investment of more than Rs 5 crores (Rs 50m). As
against this they had managed an equivalent output with an investment of Rs 10 lakhs (Rs
1m) which was a fraction of the total investment needed. They had easily managed this small
capital investment out of their own funds without going in for any loans or borrowings.
The team
The operations are handled by a team of 30 employees including the promoters. PK is the
CEO and Chaitanya is the COO and under them they have a team of two managers
designated as operations manager and marketing manager. The Operations manager’s team
has two operations executives and 21 delivery boys, whereas the marketing manager has an
executive assistant and two telecallers reporting to him. Chaitanya has the conviction that “A
team is an absolute necessity for a task to be accomplished. Nothing can be done single
handedly and I do not believe in terms like ‘one man army’”. He firmly believes that “If we
keep motivating them (employees); they will work wonders for your company”.
Market competition
Presently in Hyderabad city, PKC Laundries has no direct competitors in the online laundry
service. They faced little competition from Wassup Laundry Service which had its presence
in six other cities as well and Laundry Shine, both of them were not based on aggregator
model. Another firm S-Bricks was primarily providing handyman services for houses and
laundry service was just another service in their bouquet of services offered. As such the
image of S-Bricks did not affect the business of PKC Laundries. Another firm which was a
start-up similar to PKC had folded up about nine months back after trying their hand at the
business for nearly 20 months. The main competition faced by PKC Laundries was from the
conventional off-line service providers in this field where services provided by dhobis for
daily usage clothes were cheaper by almost 50 per cent (Exhibit 6).
Target market
Hyderabad city has grown into a sprawling 650 square kilometers area with a population of
more than 10 million people (Kumar, 2016). The Western part of the city is where the growth
had occurred due to the boom in the IT sector. Not only had it led to the creation of
commercial built space for the offices and commercial establishments but it also triggered a
humongous requirement for residential built space to cater to the housing needs of these
young IT sector professionals. This resulted in ripple effect growth in the real estate sector
where all kind of up market housing was created and the most popular were the gated
community living, multi-tower high rise apartments and luxury villas. Such real estate
developments had anywhere from 200 to 700 families living in them; hence, they became the
first target market for PKC Laundries. After selling the concept of value addition for the
residents through the facilities managers of these housing units, PKC Laundries forged
strategic alliances to gain exclusive rights to service the residents. They would then set up a
temporary pickup kiosk (Exhibit 2) in these housing areas. When the Eastern and Northern
part of the city witnessed development, PKC quickly made its services available in these
zones of the city as well. The three zones were 12 to 20 kilometers apart. In each zone, they
set up two kiosks.
The profile of PKC customers is that they are highly educated and have higher incomes, and
in the upper middle class segment, many are double income families and thus have increased
disposable incomes. They are more conscious about getting value for their time rather than
value for their money. A Harvard study about Indian professionals stated that they are young
and with higher disposable incomes hanker after materialistic goals. This is typical of most
Indian professionals like lawyers, doctors, engineers, bankers, consultants and many others.
For most of them, life’s pleasures have gained more importance. With a five-day work week,
these professionals have higher time for leisure, entertainment and socializing. A lifestyle
which demands the need to keep up appearances, in turn fuels the demand for good clothes
and personal grooming. This leaves them with little or no time to attend to the usual weekend
chores; including doing the laundry. Another driving factor for the demand is the increasing
paucity of house maids in urban metros and attendant problems of their frequent absenteeism
and high wages demanded by them. It is this gap that PK and Chaitanya have chosen to
exploit.
PKC has another set of customers. These are business establishments, i.e. PKC even served
the B2B clientele. Their commercial clients include: hotels and resorts; spas and educational
institutions.
Sales revenue
At the end of the second year of operations, for its retail consumer segment, PKC Laundries
was servicing on an average about 25 plus orders per day which translated to about 300
clothes per day with a per order average ticket size of Rs 500. PKC Laundries’ commercial
business segment was contributing 50 per cent of its revenue in their monthly revenue of Rs
650000-700000 (Exhibit 5).
In its retail segment although PKC was servicing 25 orders per day on an average, it got 40
per cent of its retail revenue on weekends alone.
Under their offer of “we have a plan for everyone” PKC Laundries offered three services
categorized as Basic, Classic and Elite. The basic service covered only ironing of clothes, the
classic service covered both washing and ironing of clothes and the elite service covered the
dry cleaning of clothes. An additional service offered at an additional price point was
starching the clothes. They charge their customers on per piece basis or per order basis
(Exhibit 4). They also have a subscription model where customers can pay 50 per cent of the
charges upfront and the remaining 50 per cent at the end of their monthly plan.
For their commercial segment, the pricing was customized based on the ticket size and the
add-ons required. For example, the spas wanted their towels and bed sheets to be especially
scented, the resorts wanted a special sanitized packaging for their bath and hand towels. The
commercial business was generated from seven spas, four hotels and resorts and seven
student hostels having 2,700 students.
According to the founders, “Financial year 2016-2017 was a very special year as we have
completed one full year of our operations of PKC Laundries. Learnt a lot of things and a big
thanks to all our vendors, suppliers, customers and especially our team who made us
successful”.
Costs and operating margin
At PKC, 60 per cent per cent of the revenue collected was the expense incurred for payments
to the vendors for processing the clothes. Another 15 per cent was spent on salaries, rents,
electricity, website maintenance, internet charges, fuel, vehicle repairs and other similar
overheads. A major direct cost in this was that for pickup and delivery calculated at Rs 100
per order amounting to another 10 per cent of expenses. As such all these expenses left PKC
Laundries with a gross margin of 15 per cent only (Exhibit 5).
Opportunities and challenges
Laundry business is considered to be one of the best ideas for a start-up owing to its nominal
investment, low entry barriers, huge markets and good returns. But it comes up with its own
set of challenges. At present, the laundry market is dominated by many offline players;
majority of whom are unorganized. The pricing by the unorganized sector is perceived as
affordable by the middle class and upper middle class consumers. On the other hand,
organized players mainly cater to the need of premium segments and offer only premium
services. These price points are not acceptable to the larger masses. Hence, start-ups in the
online laundry business are trying to fill this gap by offering comprehensive solutions at
affordable prices (Choudhury, 2015).
Challenges faced by PKC Laundries
As the on-line laundry business can be built up with nominal capital and has a huge
neighbourhood market, it offers reasonably good returns which makes the business lucrative.
Even then, PKC has to sail through a large number of challenges, some of them are as
follows:
• The main challenge in the retail segment is to find a customer base that is ready to pay
a higher price for convenience and in the commercial segment is to find customers
which have high volume business. This is because, though the customer prefers
higher quality laundry services and likes to have the laundry delivered to their homes,
their willingness to pay extra for it is unlikely. The enormity of this challenge to PKC
promoters is reflected in their oft repeated quote “It’s easy to impress anyone with
words but it’s hard to show them the reality of a high quality good service”.
• The business is dependent on aggregating the local vendors, who appear demanding
and exploitative at times. Consolidating and attracting the local dhobis to tie-up with
the on demand laundry services is a herculean task. Apart from that getting skilled
labour is also a major challenge.


The laundry business requires managing of many processes that cannot be isolated
from human intervention and high customer expectations. Hence customizing the
services and making them error free is a great challenge.
Handling the daily pick up and drop is a nightmare in logistics. The most common
problems faced daily are heavy traffic, customer not at home during delivery or pick
up, insufficient delivery team and time management.
Strategies adopted by PKC
In our two years of operations so far we have adopted many strategies and made many tie
ups with various entities like Villas, Gated communities, Spas, Boutiques, Commercial
services. Every experience has empowered us and taught us many lessons; some even costly
but our motivation has not faltered and now we are coming up with a strategy that is already
in place in a new way just like “Old wine in a new bottle”.
Traditional laundry business is a labour- and capital-intensive business with high expenses of
operations and logistics. Hence, investors shy away from investing in this industry and those
who had invested also burnt their hands and came out of the business at the earliest. In
contrast, PKC Laundries, as an on-line start-up is slowly picking up and making a profit of
around Rs 100,000 per month. As of now, the company is exponentially growing without
seeking the help of any venture capitalist (VC) and eagerly waiting to launch its business in
other states.
PKC which gives utmost importance to quality strives to see a happy customer. PKC believes
that to run a successful laundry business, it is important to listen to your customers’ requests
patiently, and act on them quickly as this will ensure the growth of the company (Kumar,
2016). PK says that “delivery executives are the face of the company as they are the ones
who interact with the clients.” The company ensures that these executives are well groomed
and attend to their clients’ needs with utmost care. They make their customer’s feel like a
king. This strategy has helped PKC Laundries to grow organically, owing to the word of
mouth marketing.
Growth strategy and concerns for the road ahead
During a review meeting, PK and Chaitanya were discussing the future of their business.
Chaitanya suggested scaling up the operations, getting funding through Series-A fund
(Series-A fund is given when the new venture starts generating revenue from its business
model) which would enhance their technology and also strengthen their back-end operations
by asset creation of a fully automated factory with imported machinery and equipment. With
detailed calculations, he tried to convince PK of the benefits this decision would bring
including growing the business at least ten times the current turnover and a higher gross
margin of 25 per cent as against the existing 15 per cent gross margin.
PK however had ideas of his own. He was in a hurry to see the business grow and expressed
that funding and setting up a processing plant would require two to three years, and they
would lose advantage to other existing start-ups and new competition that was bound to come
up. He felt that the way forward was with aggressive marketing and strengthening the
existing back-end model of conducting the business. He was not averse to getting some
funding but opined that this money should be spent on a marketing campaign and growth into
other cities. He argued that rapid growth could be achieved just as Pick My Laundry had
done. He stated market acquisition was the only way forward even if profits had to be
sacrificed and cited the example of Uber cabs, Flipkart and Amazon as giants who were
getting funding solely on the strength of their market size and had yet to turn in profits. To
emphasize his point of view PK also suggested that within no time they could be selling their
franchises to other budding start-ups and earns additional revenues from that as well.
With no concrete decision taken, the meeting was inconclusive.
College of Administrative and Financial Sciences
Assignment 1
Deadline: 07/03/2020 @ 23:59
Course Name: Entrepreneurship and Small Student’s Name:
Business
Course Code: – MGT 402
Student’s ID Number:
Semester: II
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: Marks Obtained/Out of
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.
Department of Business Administration
Entrepreneurship and Small Business – MGT 402
Assignment 1
Marks: 5
Course Learning Outcomes:
1. Demonstrate a solid understanding of the potential of entrepreneur in today’s competitive
business world. (Lo 1.2).
2. Demonstrate ability to think independently and systematically on developing a viable
business model (Lo 1.3 & 3.7).
3. Understand the place of small business in history and explore the strengths and weaknesses of
small business. (Lo 1.1).
Assignment – 1
Assignment Instructions and Approach:
1. Login to Saudi Digital Library (SDL).
2. Click on “Open Access” The search engine page will open
3. In search engine of SDL write the following title as keyword and click search button.
“PKC Laundries: a start-up business at the crossroads”
4.
5.
6.
7.
Open the research article, read it thoroughly and answer the assignment questions.
Besides this research paper use other relevant material also to support your answers.
Support your submission with further scientific references.
Use Saudi Electronic University academic writing standards and APA style guidelines
Assignment Questions:
1. Critically analyze the Problems faced by the young entrepreneurs and strategies to overcome
those problems. (Marks 2)
2. Discuss the challenges of PKC as an aggregator business and the scope of what PKC can do
in the future to strengthen its position. (Marks 2)
3. Discuss the various marketing management issues such as segmenting, targeting and
positioning? (Marks 1)
Answer:
1.
2.
3.

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