Dough Re Mi Products - Case Study Example

New business start-up and consequent financial outcomes: Company: Dough Re Mi Business venture Dough Re Mi is a start-up organisation that will specialise in the production of pre-made pizza crusts for consumer household purposes. Using only the finest quality ingredients, Dough Re Mi products will offer buyers convenience at an affordable price for consumers with a demand for do-it-yourself pizza products. The business will be launched using rather small-sized production space, in leased building space to satisfy budget needs, and will distribute the product to a variety of domestic grocery outlets. 2. Management Development Dimensions International, Inc. (2002) offers that the average company tends to lose nearly half of its total customers on an annual basis. Dough Re Mi will consider its customers to be the business-to-business client (the retailers) as well as the customers. Because of this high volume of lost clients, Dough Re Mi must establish a well-defined customer relationship management system to improve the B2B relationship and gain more customers. These CRM systems will include database storage information about known customer trends and will conduct opinion surveys bi-monthly to ensure the company is on track to satisfy grocer and customer needs. These will be housed in the electronic CRM systems for immediate management access. The company will require two executive managers and three junior managers in the first year of operations in order to sustain the production and other operational environments. The executive managers will make senior-level decisions related to marketing and production, whilst the junior management team will handle issues of employee control, human resources and customer/vendor relationships. The salaries for the management team are budgeted at the following rates: Senior executive £100,000 Vice executive £75,000 Junior managers £50,000 (each) These managers will work collectively and independently to improve employee motivation and commitment to the organisation and handle special projects related to operational efficiency. They will report to the ownership. 3. The product Dough Re Mi pizza dough is a frozen product that will be available to a variety of different target consumers in grocery sales environments. It will be packaged in boxes that can make use of the graphic illustration (logo) of the animated “pizza man” that will be used in all advertising and promotional efforts for Dough Re Mi. Though this represents a modestly higher price, the marketing impact should offset these costs. Its function is simple: Added convenience to the buyer. 4. The market place The main customer is the business grocery retailer. Currently, there are 92,796 grocery retailers in the UK (igd.com, 2010), providing excellent opportunities for sustainability and growth in distribution of Dough Re Mi products. This market has experienced a growth rate of 4.8 percent in 2008 (igd.com). Using established channels of distribution and existing marketing knowledge from many of these retailers, innovative marketing campaigns will improve customer-generated sales revenues. 5. Market size Frozen pizza dough experienced a 19 percent growth rate in the last year (referenceforbusiness.com, 2010). These products do not appear to have a specific target audience, therefore there are multiple consumer markets that favour these products. Segmenting markets would involve high cost, high involvement research, therefore convenience and quality will be the primary advertising strategy to capture attention of mass market buyers. Since all consumer groups have real-life grocery needs, the market size is virtually unlimited. 6. Sales Plan “Over the past 12-18 months there has been a notable shift away from the value-driven agenda…(marketers) are turning their focus to premiumisation, quality and service to add further value” (the-infoshop.com, 2010, p.1). Taking into consideration this trend, quality over competition will make up a large majority of the sales and marketing strategy. Using the logo character on the packaging is part of this strategy. Additionally, with growth in consumer adoption of online purchasing, new promotional strategies will use this environment to give Dough Re Mi more consumer visibility. The company will also make use of a quarterly newsletter, similar to one competitor, Willmar, to highlight product quality, its production legacy, and inspire possible recipe combinations for consumer use. These will be produced and distributed to local grocers in partnership marketing agreements. They will be sold in large size packages, medium sizes, and multi-packs with two dough balls. 7. Sales forecast Dough Re Mi expects, on average, to sell approximately 138 units per day across the entire sales network. The following represents the total units expected to be sold annually, over a two year period, including profit earned after considering operational expenses of manufacture. Sales Forecast   FY 2011 FY 2012 Unit Sales     Large Dough 120,000 140,000 Med. Dough 80,000 100,000 Multi-Packs 50,000 60,000 Total Unit Sales 250,000 300,000       Unit Prices FY 2011 FY 2012 Large Dough £2.99 £2.99 Med. Dough £2.09 £2.09 Multi-Packs £3.79 £3.79       Sales     Large Dough £358,800 £418,600 Med. Dough £167,200 £209,000 Multi-Packs £189,500 £227,400 Total Sales £715,500 £855,000       Direct Unit Costs FY 2011 FY 2012 Large Dough £0.60 £0.60 Med. Dough £0.42 £0.42 Multi-Packs £0.95 £0.95       Direct Cost of Sales     Large Dough £71,760 £83,720 Med. Dough £33,440 £41,800 Multi-Packs £47,375 £56,850 Subtotal Direct Cost of Sales £152,575 £182,370 Total Annual Profit £562,925 £672,630 8. Production Dough Re Mi will be produced in a rental building at approximately 240 square metres to ensure production space and office space. Equipment required include conventional mixers, sheeting and cutting tools such as extruder and die cutter, and cooling equipment for short-term storage (lallemand.com, 1996). This is a small-scale production line that can be expanded within the space being rented until future expansion and property can be developed. There should be a need for only four full time employees in the first year with minimal training required. 9. Product cost Cost of manufacture is included in the sales forecast and includes flour, gluten, salt, sugar, yeast and baking powder for the recipe. 10. Profit Total profit in year one, including labour and materials, is estimated at £562,925. Mark up represents approximately 60 percent of costs of manufacture, materials and labour/operations. Large packs £2.99 Medium packs £2.09 Multi-packs £3.79 This is competitively priced with existing pre-made frozen dough competitors. 11. References Ddiworld.com. (2002), Customer Service. Development Dimensions International Inc. http://www.ddiworld.com/pdf/serviceplus.pdf. Igd.com. (2010), UK Grocery retailing, IGD – The food and grocery experts. http://www.igd.com/index.asp?id=1&fid=1&sid=7&tid=26&cid=94 Lallemand.com. (1996), Lallemand baking update, Pizza Crusts, 2(1). http://www.lallemand.com/BakerYeastNA/fr/PDFs/LBU%20PDF%20FILES/2_1PIZZA.PDF Referenceforbusiness.com. (2010), Frozen baker products, except bread. http://articles.directorym.net/Fresh_Ideas_in_Frozen_Foods_Willmar_MN-r909222-Willmar_MN.html The-infoshop.com. (2010), UK grocery retailers 2007. Global Information, Inc. – The vertical markets research portal. http://www.the-infoshop.com/report/dc48415-retailers.html Read More