Entrepreneurship Business Plan - Essay Example

?Entrepreneurship Business Plan of Business: XXX Automobile Telephone: Address: Geneva, Switzerland Nature of Business: Car Showroom Executive Summary XXX Automobile is a car showroom business which will be situated in Geneva, Switzerland. The business will provide Volkswagen vehicles to the customers. XXX Automobile will target the middle and high income group population in the targeted market. A wide range of SUVs, small cars, sedans and luxury vehicles will be marketed through the showroom of XXX Automobile. The objective of the business is to become one of the leaders in vehicle retailing market in Geneva. The operations of the business will be performed by an experienced management team. In order to ensure higher productivity, the business will take assistance from advisors and technical experts and thus can help to secure the business from possible risks. The start-up cost of the business is expected to be ? 3,850,000; majority of which will be collected by availing bank loans. The major drivers for success of the business will be quality products with reasonable price and better customer service. Table of Contents Executive Summary 2 2.0 Business Description 5 2.1 Business Opportunity 6 2.2 Business Model 6 3.0 Products and Services 7 4.0 Market Analysis 8 4.1 Market Size & State of Development 8 4.2 Competition Analysis 9 4.3 Target Market 10 5.0 Marketing Strategy 11 5.1 Pricing Strategy 11 5.2 Distribution Strategy 12 5.3 Promotional Strategy 12 5.4 Sales Strategy 13 6.0 Operational Plan 13 7.0 Organisational Plan/Management Team 14 8.0 Financial Plan 15 8.1 Projected Income Statement 16 8.2 Projected Cash Flow 17 8.3 Projected Break Even Chart 17 9.0 Risk Assessment 18 10.0 Milestone Schedule 19 11.0 Conclusion 20 12.0 References 21 1.0 Introduction XXX Automobile plans to be a start-up car dealership business. XXX Automobile will intend to serve vehicles for middle class and upper class markets. The business is planned to be commenced in the downtown of Geneva in Switzerland City considering the fact that the market of Geneva is untapped and there is high potentiality for car business in that region. People in Switzerland also desire for quality, stylish and world class vehicles. The developed economy of Switzerland along with increasing population and demand of vehicle can increase the probability of success for the business by a considerable extent. The paper describes a detailed business plan for opening vehicle showroom in Geneva city of Switzerland. The objective of the paper is to develop a structured planning for marketing, finance and other significant aspects in order to commence the showroom for demanded vehicles. The paper has also considered the market of automobile along with personnel strategy to conduct the business effectively and ensure profitability. 2.0 Business Description XXX Automobile is expected to be operating as the authorised dealer of Volkswagen Group. The showroom will provide sales and services of new models of Volkswagen. The business will also attempt to procure cars directly from Volkswagen and sell through the showroom to the people of Geneva maintaining a direct supply chain connection with the producer. Therefore, the vision of the business will be to become one of the top-rated Volkswagen dealers in Geneva. The mission of XXX Automobile will be to gain and empower customer loyalty by delivering quality products, services and professional assistance to the customers. The major drivers of the business would be: To manage the threat of other competitors of XXX Automobile through effective advertisements and promotion To deliver products on schedule To control the budget To manage the expenses of business To provide superior customer service To maintain strong network with customers and other business associates 2.1 Business Opportunity The Swiss automobile market has remained resilient throughout the first quarter of 2012 and experienced increase of car registration by 9% than the previous year. The sales of passenger vehicles have demonstrated strong performance in the initial phase of 2012 where the number of new vehicles has expanded to about 80,000 units. In this context, Volkswagen has maintained its strong position in the market of Switzerland. It is also a preferable brand for numerous customers in Switzerland. From January 2012 to March 2012, the automobile market in Switzerland has increased by 8.6%. This development has been significantly assisted by the constant strength of Swiss currency. In the Swiss automobile market, Volkswagen is considered as one of the top selling passenger vehicles. Thus, there is enormous business opportunity for XXX Automobile in the market of Switzerland (Best-Selling Cars, 2012). 2.2 Business Model XXX Automobile will use ‘Bricks and Clicks’ business model where the business will integrate both offline and online presence. The business will also strategically allow customers to order cars from online or directly from the showroom. Business prospective The business prospective of XXX Automobile for three phases is described in the following table: Table 1: Prospective for Three Phases of XXX Automobile First Phase (1-3 years) Second Phase (3-8 years) Third Phase (8-12 years) Increase in sales by 20% Accomplish sales of 50000 units of automobile per annum Expand the car showroom to other part of Europe 3.0 Products and Services XXX Automobile will provide four kinds of cars which are Sports Utility Vehicles (SUVs), small vehicles, sedan vehicles, and luxury vehicles SUV: XXX Automobile will provide SUVs such as ‘Volkswagen Tiguan’ which ranges from USD 22,000 and ‘Volkswagen Touareg’ which ranges from USD 43,000 (Yahoo!, Inc., 2012). Small Vehicles: Smalls vehicles will also be available in the showroom of XXX Automobile, apart from the SUVs. XXX Automobile will provide several small vehicles to the customers such as Volkswagen GTI, Volkswagen Jetta and Volkswagen Beetle among others. These vehicles will be available at a minimum of USD 16,000 (U.S. News Rankings & Reviews, 2012). Sedan Vehicles: The other products of XXX Automobile will be various sedan vehicles. The showroom will provide latest sedan vehicle models such as Volkswagen CC and Volkswagen Passat among other available sedan models. The price of sedan vehicles will start from US$ 20,000 (Yahoo!, Inc., 2012). Luxury Vehicles: XXX Automobile will also supply luxury vehicles. These vehicles are presumed to be quality-oriented and costly being designed essentially for the niche market. The major luxury vehicles of Volkswagen which will be available in the showroom are Volkswagen Touareg and Volkswagen Phaeton. The price of these vehicles will start from US$ 40,000 (Yahoo!, Inc., 2012). Apart from that XXX Automobiles will also provide financial services and after sales services to the customers at reasonable rate. 4.0 Market Analysis 4.1 Market Size & State of Development The improvement in automobile industry in Switzerland was amplified by several competitor brands of Asian and Eastern European region. Presently, megatrends such as modularisation, specialisation, diversity, subcontracting and globalisation govern the development of the automobile industry by a significant extent. The Swiss automobile industry remains relatively unaffected by single division turbulences in automotive sector. Hence, there is enough probability of survival for automobile businesses in Switzerland (ETH Swiss Center for Automotive Research, 2008). Switzerland is also famous for high-tech products in the field of automobile. Majority of automobile organisations in Switzerland tends to work-out on research and development activities along with manufacturing services. Switzerland has positioned itself as “technology leaders” which necessitates significant investment in research and development activities. Almost 37% of automobile organisations invest above 6% of its revenue for research and development in order to secure a leading position in technology (ETH Swiss Center for Automotive Research, 2008). 4.2 Competition Analysis It is in this context that the automobile industry in Switzerland is exceptionally competitive. However, the market players in the industry have to witness a few challenges among which the major challenges can be related with internationalisation, pricing, customer satisfaction, managing of experienced employees, and new product development. Swiss automobile industry further focuses significantly on the minimisation of the global footprint in order to stay competitive. Besides, the accumulation process of automotive parts and components have to suffer from cost pressures due to the major influences of other automobile manufacturers. However, the product life cycle of vehicles are decreasing dramatically which generates the essentiality of product developments particularly in the area of electronics and innovative models (ETH Swiss Center for Automotive Research, 2008). 4.3 Target Market In present days, every person desire for a vehicle and there are several families possessing two or more than two vehicles in Switzerland. In Geneva, the vehicle market will be segmented in four customer groups which are young consumers, professionals, family, and premium class customers. Young consumers: Young consumers are those people who belong to the age group of 20 years to 35 years. These consumers are examined as highly price conscious and prefer safety along with the economic value of the vehicle with high fuel efficiency. Besides, they also prefer flashy looking vehicles. Professionals: The professionals are middle income group people within the age group of 35 years to 50 years. This target customer segment is also price conscious and prefers purchasing small vehicles. Family: The family customer segments are those target groups who prefer spacious vehicles and also desire for quality. In other words, this segment of consumers is identified as less price-conscious being highly inclined towards quality products to which sedan models can be suitable. Premium class: The premium customers are those who belong to high income groups. They are less conscious about prices and prefer consuming luxurious vehicles. The business class persons such as managers, officers, and executives of a particular company fall under this customer group. 5.0 Marketing Strategy The location of the showroom is much important for gaining competitive advantages. In this context, Geneva provides various corporate benefits. For instance, Geneva has attractive tax structure. Geneva is situated in the centre of Europe and thus is quite easily accessible. The city provides highly skilled and stable workforces as essential for businesses. Apart from that, Geneva operates a business friendly government structure which is requisite for automobile showroom. Therefore, the location for the business has been selected for Geneva which acts as a competitive advantage for the business (Why Geneva, n.d.). The other competitive advantage of the business will be to develop an impressive purchasing experience for customers and enhance its position as a leader in providing better customer services. The marketing strategy of XXX Automobile will concentrate on the target customers segments which concentrated on the young generation, professional group of people, families and business group. With this concern, the organisational resources will be expended on advertisements, sales promotion activities and other marketing initiatives such as maintenance of friendly atmosphere within the showroom to make the customers comfortable. 5.1 Pricing Strategy Appropriate pricing will be maintained in all vehicles of XXX Automobile. It is in this context that due consideration will be rendered in deciding upon the prices without surpassing its retail value. In this respect, the business will attempt to sell the vehicles at a wholesale rate with reasonable amount of profit. Simultaneously, the business will also maintain the average industry cost standard for comparable cars offered within the market. 5.2 Distribution Strategy The vehicle will be distributed through direct selling method. Vehicles from Volkswagen Group will be directly distributed through the showroom to the final consumers. The product will be available in Geneva only; therefore high level of customer loyalty will be required, so as to flourish within the concentrated market. 5.3 Promotional Strategy In order to promote the business to the customers, aggressive advertisements will be used. XXX Automobile will thus opt for print advertisements such as newspaper and online advertisements as well to gain reachability to the mass population comprising of professionals, families and young generation people. Besides, events will also be organised in order to promote the products of Volkswagen to the targeted customer segments. However, in order to maintain appropriate pricing, the marketing budget shall range between USD 5,000 to USD 7,000. As a vital facet of its promotional strategies, XXX Automobile will also develop alliance with other local Volkswagen vehicle dealers and showrooms in order to effectively manage the inventory. 5.4 Sales Strategy The sales team of XXX Automobile will concentrate on notifying customers about the advantages they can attain by purchasing the vehicle from the showroom either directly or online. The customers will also be provided with the opportunity of finalising the purchase through mail-order, telephone and/or e-mail. XXX Automobile will further render special concentration on managing the database of customers in order to enhance the order processing and customer service. XXX Automobile will further provide much importance to the sales closure in order to maintain long-run customer relationship. 6.0 Operational Plan In XXX Automobile, customers will have the opportunity to order for purchasing a vehicle through online or even directly from the showroom. Start-up Plan: The start-up phase includes plan for securing licence, securing finance, showroom development and selection of contractors for the business. Fundamental Operations: The fundamental operations of car showroom business comprise of selling operations, decoration of showroom through investment in technology, advertising through particular sales channel and generating profit through vehicle sales. Strategy: XXX Automobile is quite likely to face fierce competition from other automobile dealers operating within the same market. Therefore, advertisement will be the common strategy in order to entice customers towards purchasing of vehicle from XXX Automobile. Therefore, XXX Automobile will attempt to provide advertisement on print media, internet, radio, television and websites. The business will organise campaigns simultaneously making its presence on social websites. Additionally, XXX Automobiles will also render several promotional offers to the customers such as gifts, festive offers, discounts, special acknowledgement, extended customer services and warranty in order to entice customers. Financial Plan: XXX Automobiles requires financial viability in order to maintain cost and increase the amount of sales. The business will optimise resources effectively and drive productivity. In order to maintain sales, proper database of customer will be maintained in order to monitor their preferences and accordingly provide services to them. 7.0 Organisational Plan/Management Team In XXX Automobile, the owner will manage every business operations, especially monitoring and controlling the specified job responsibilities of the sales manager along with an assistant concerning procurement and selling activities as well as that of the marketing manager with a secretary concerning the marketing activities. The management team will include an accountant, a business advisor, and a technical consultant. Additionally, five salespersons will be hired for the business. Gradually, on the basis of business expansion, the number of salespersons will be increased. The following table indicates the expected salaries of entire management team in XXX Automobile: Table 2: Estimated Expenses for management Team of XXX Automobile for Three Years Salary (in ?) Management Team 1st year 2nd year 3rd year Sales manager 30000 35000 40000 Marketing manager 30000 35000 40000 General Assistant 20000 25000 30000 Secretary 15000 20000 25000 Accountant 2000 2500 3000 Business Consultant 1500 2000 2500 Technical Consultant 25000 27000 30000 Salespersons 500000 750000 1000000 Total 623500 896500 1170500 The salespersons will be recruited on the basis of their past experiences and skills in sales. Besides, the management team will also be provided with significant training in order to gain an in-depth understanding about maintaining of good relationship with the customers, handling customer complaints and providing superior services to them. 8.0 Financial Plan XXX Automobile is expected to increase the sales at 20% per annum. Certain percentage of profits will primarily be invested into the business and inventory will be procured in advance in order to store the most-demanded and popular vehicles in the showroom floor. 8.1 Projected Income Statement XXX Automobile anticipates the gross margin in the first accounting year is expected to be uncertain and will significantly increase in second and third consecutive year. The major budgets allocation of XXX Automobile focuses on the components of salary for management team, rent for building, marketing and selling expenses, maintenance costs, insurance premiums, incomes taxes and licensing obligations. It is worth mentioning that the expected annual tax rate is 12% (Deloitte Global Services, 2012). The following table shows the projected income statement for XXX Automobile for three years: Table 3: Estimated Income Statement of XXX Automobile for Three Years Amounts in (?) Year 1 Year 2 Year 3 Cash Sales 13500000 16400000 19500000 Cost of Sales 8000000 8800000 9100000 Payroll 623500 896500 1170500 Interest on Loan 165000 137500 110000 Insurance 2500 2500 2500 Maintenance Expenses 15000 17000 21000 Marketing and Sales 100000 120000 150000 Gross margin 4594000 6426500 8946000 Corporation Tax (12%) 551280 771180 1073520 Net Profit 4042720 5655320 7872480 8.2 Projected Cash Flow The following figure shows the cash flow of XXX Automobile for three years: Figure 1: Estimated Cash Flow of XXX Automobile for Three Years 8.3 Projected Break Even Chart The estimated start-up cost for XXX Automobile is almost ? 3,850,000. Out of total estimated cost of ? 3,850,000, about ? 3,000,000 is intended to be obtained from loans and the remaining ? 850,000 will be availed from personal capital of the owner. The estimated fixed loan interest rate would be 5.5% per annum (Menon, 2012). The projected repayment of the annual loan instalment would amount to ? 500,000. Thus, the break-even point for loan amount can be estimated as 8 years. The following figure describes the breakeven point for loan of XXX Automobile: Figure 2: Break Even Chart for XXX Automobile 9.0 Risk Assessment The car showroom business can be identified as related with numerous risks with respect to finance, inventory and receivables. The business is in great threat for any distressing turnover, as in the initial phase there will be limited cash for paying off the huge amount of debt unless adequate sales and profit is secured. With respect to inventory, there is also risk for XXX Automobile. At times, it takes two weeks or above from invoicing to delivering of vehicles in the showroom. In this context, the owner needs to bear the entire carrying cost of inventory. Although manufacturers can provide assistance in the form of rebate and incentives, the owner is particularly held liable for the risk of loss in sales. The other significant risk can be related with the receivables. Receivable risk can occur from car holdback, or outstanding payment from customers and from financial organisations as well as debtors among others (Casesa Shapiro Group, 2008). Apart from that the other risks of the business can be competitors’ offerings, changing purchase pattern of customers and economic condition of the country. 10.0 Milestone Schedule The following table shows the milestone for XXX Automobile business: Table 4: Milestone Schedule for XXX Automobile Milestones Estimated Time Required Securing Dealership 2 months Development of business plan 4 months Securing Licence and other documentations 6 months Securing finance 2 months Planning location for showroom development 3 months Selection of contractor 1 month Development of technological system 2 months Decoration of showroom 8 months Securing power and water supply system 3 months Development of training curriculum 0.5 month Hiring employees 1 month Selecting insurance service provider 1 week Giving advertisements 1 week Launching Showroom 1 day Total 2.5 Years (approximately) 11.0 Conclusion Gaining an in-depth knowledge of the market trend in Swiss automotive retail industry, it can be observed that the market position of Volkswagen is quite strong and thus, there is high probability of gaining success in the industry for XXX Automobile as its dealer. Besides, the location Geneva can also be regarded as suitable for the business, as it resides in the centre of Europe and has favourable conditions of conducting such businesses. The key for success for XXX Automobile in the market of Geneva is to gain trust and loyalty amid the targeted customers by appropriate marketing and selling strategies. However, it should be mentioned that in order to secure appropriate profit, there is need for maintaining the cost of business operations. From a futuristic point of view, so as to preserve its competency, the business will also try to increase the number of showroom simultaneously accomplishing a significant amount of vehicle sales. 12.0 References Best-Selling Cars, 2012. 2012 First Quarter Top Selling Car Manufacturers & Brands in Switzerland. Car Sales Statistics. [Online] Available at: http://www.best-selling-cars.com/switzerland/2012-first-quarter-top-selling-car-manufacturers-brands-in-switzerland/ [Accessed June 26, 2012]. Casesa Shapiro Group, 2008. The Franchised Automobile Dealer:  The Automaker’s Lifeline. National Automobile Dealer Association. [Online] Available at: http://www.nadafrontpage.com/upload/wysiwyg/Special%20Reports/BenefitsofFranchiseDealers.pdf [Accessed June 26, 2012]. Deloitte Global Services, 2012. Switzerland Highlight 2012. Deloitte International Tax. [Online] Available at: http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2012/dttl_tax_highlight_2012_Switzerland.pdf [Accessed June 26, 2012]. ETH Swiss Center for Automotive Research, 2008. Latest Survey of Structure, Trends, Challenges, and Opportunities. Automotive Industry Switzerland Industry Analysis. [Online] Available at: http://www.tim.ethz.ch/research/swisscar/topics/automotive_industry/Downloads/Studie_Englisch_LV [Accessed June 26, 2012]. Menon, S., 2012. Cheaper Swiss Loans A Big Draw For Indian Firms; Union Bank, SBI Already Tapped Swiss Institutions. The Economic Times. [Online] Available at: http://articles.economictimes.indiatimes.com/2012-04-10/news/31318918_1_swiss-market-swiss-francs-swiss-institutions [Accessed June 26, 2012]. U.S. News Rankings & Reviews, 2012. Volkswagen Small Cars. Best Cars. [Online] Available at: http://usnews.rankingsandreviews.com/cars-trucks/browse/volkswagen+small-cars/ [Accessed June 26, 2012]. Why Geneva, No Date. General Information. Doing Business in Geneva: Excellence, Innovation & Lifestyle. [Online] Available at: http://www.whygeneva.ch/index.php?option=com_content&task=view&id=791&Itemid=198&lang=en [Accessed June 26, 2012]. Yahoo!, Inc., 2012. 2012 Volkswagen SUVs. New Cars. [Online] Available at: http://autos.yahoo.com/volkswagen/suvs.html [Accessed June 26, 2012]. Yahoo!, Inc., 2012. 2013 Volkswagen Sedans. Autos. [Online] Available at: http://autos.yahoo.com/volkswagen/sedans.html [Accessed June 26, 2012]. Yahoo!, Inc., 2012. 2012 Volkswagen Touareg. Volkswagen. [Online] Available at: http://autos.yahoo.com/volkswagen/touareg/2012/ [Accessed June 26, 2012]. Read More