Creation of a German Brand - Stolbergsche Spezialitten - Research Paper Example

Creation of a German Brand - Stolberg’sche Spezialitäten Executive Summary There is little doubt that all the great products that we have today once started small. Therefore there are other products out there that just need a little boost into the market to become the great products of tomorrow (Kotler & Kevin, 2009). This is a business plan written to help just those kinds of products to find a lasting niche into the market. The idea is to bring all the different products together and market them under one brand name. A brand name that sill help boost their brand value by creating and capitalizing on high level brand identity. The products in question are apple juice, dry sausages, biscuits, honey and schnapps; all manufactured by different small businesses, and all to be sold under the brand name Stolberg’sche Spezialitäten. This paper sets out to show how marketing these products under the brand name will help boost their standing in the market. It also explains the need for this kind of project in the market of Nordhausen/Harz, Germany and later in Dresden, Berlin, Halle and Leipzig. It is demonstrated here how there is a market for these products and how active promotion of the brand name can help position them strategically. This paper also explains just what finances are needed to help drive this idea forward and how they shall be used for maximum efficiency and output. It outlines all the plans and projected uses of these finances. It also shows the possible sources from which these finances are expected. Introduction A business plan is a tool for selling. It presents the individual and the company with ideas on how best to thrust, promote and sell the intended product in the market. It involves information on the business model, the market environment and potential of the company involved (Bradley, 2010). This is a business plan for the Stolberg’sche Spezialitäten, a brand name for an assortment of products all to be marketed under this name. The idea behind this business plan is to sell all the products under one brand in order to strengthen the performance of each of them in the market. Though the products involved are manufactured by different individuals and companies, this brand name is offered to all of them as a way of promoting them into the market, in exchange for a small fee. The brand is must be made well known thus giving enough impetus to the products for sale. This kind of selling approach is known in business terms as brand extension. Though brand extension takes a variety of forms, the bottom-line is that a well known brand name can be used to sell other products in order to improve their marketability. The new products benefit from the knowledge consumers have of the existing brand name (Kotler & Kevin, 2009). This is the strategy employed here in order to help the upcoming manufacturers to sell their brands. This paper explains all the strategic planning for the project and the plan of action within a set timescale. It shows the financial plans including sourcing and implementation projections. It also explains the PEST analysis to be carried out for the sake of marketing. The Company Northausenâsche Spezialitäten is a registered company and trademark. It specializes in product marketing. It was started based on the belief that products, no matter how high their quality may be, usually find some difficulty in gaining impetus in the market if they are not accompanied with a proper strategic marketing plan. Marketing is therefore an important service that is always in short supply in the marketplace. Anyone offering this service properly and effectively is not likely to ever go out of work. On the contrary, the demand for this service may become simply overwhelming, provided that people can see the momentum their products gain once they engage this service (Bradley, 2010). Marketing is the process that involves market research; branding and selling of products or services; and, promoting them through advertising to enhance further sale volumes. Modern marketing involves finding out the needs of the customers through the research process and then modeling the products according to those needs right from the manufacturing stage (Joshi, 2005). It then involves meeting the public demand gauged through the same research in providing sufficient products. Further demand is then created through strategic advertising that takes into cognizance the market trends including peak product seasons and the available competition (Marder, 1997). The Northausenâsche Spezialitäten Company has existed for three years now and has mainly been involving itself in small time marketing in the neighborhood of Nordhausen/Harz, in Thuringia State, Germany. The levels of success it as attained and the attendant challenges faced and overcome have propelled and motivated us to gun for greater heights since it is now obvious that we can do it even on a bigger scale than we are currently doing. There is clearly a need for expansion form the current three employees: CEO, Marketing Assistant, Production Manager, Research Assistant and Accountant. The CEO is in charge of overall supervision and implementation of company policy. He is also responsible for human resource management and conducting meetings. The marketing Assistant is charged with branding, selling and promotion of the only company product so far; Schnapps with and alcoholic content of 40% that has been doing fairly well in the market. The Production Manager is the one responsible for hiring and supervising hands at he small company plant which has been producing about 100 liters of schnapps on a daily basis. The Research assistant has been charged with conducting all the marketing research for the product. Finally, the Accounting manager is charged with the keeping of books and conducting internal audit. The company is located in Krimderode North of Nordhausen where it has a small office. It is quite easy to trace using local listings in Nordhausen. This is the nerve center of all operation with the production unit just in the backyard of the office block. It is in this humble location that the big dreams of this business plan are made. The idea of brand extension, is to use an existing brand name to sell other products apart from the original product that was being sold using the name (Kotler & Kevin, 2009). It is not a very common phenomenon in the neighborhood of Nordhausen/Harz. This makes it a fertile ground for pushing this idea at this moment without wasting any time. There are many product manufacturers in the area who come up with highly innovative products but have a serious difficulty in propelling them into the market. The Northausenâsche Spezialitäten Company is therefore where the famed German innovative spirit meets with the marketplace. With time, this alliance is set to go places as the small products that are currently finding it hard to sell in the neighborhood, become bigger and reach out to the wider market all across Germany and further to the international market place. The Market Market research is structured effort meant to gather information about markets and customer needs. It gives crucial information about market size, market needs and available competition (Joshi, 2005). In this way it is the most useful tool for gaining the advantage over the competition. An extensive market research has been carried out by the Northausenâsche Spezialitäten Company at two levels. Schnapps Research The first research was carried out in June 2010 and it was mainly aimed at establishing the available market for schnapps and what the customers wanted it to be like. The research was centered in the suburbs of the city of Nordhausen. Its purpose was to establish what qualities the locals wanted included in the brewing and packaging of their schnapps. This was mainly to establish the available market for the schnapps that the company was producing. The research covered a sample of 200 respondents, both men and women from the age of 17 onwards, who are allowed to access these drinks by German law. It was in form of self-administered questionnaires which were given to the respondents and subsequently collected by research assistants after they were filled in. The idea was to ensure that there was a complete response rate since the assistants were there to help with difficulties in answering questions and to collect the responses. The research revealed that the responses were unhappy with the amounts they were being charged for schnapps since to them it was a local product that should cost less. The schnapps available in the market cost an average of € 20 per quarter litre bottle. The respondents said they would not mind the price if the schnapps were a little stronger in terms of alchoholic content so that they would not have to spend more by drinking too much of it. Another issue they raised was with the packaging quantities. They said that 100 ml bottles would serve them better than 250 ml ones since they would then not be forced to buy a lot of content [250 ml] when all they needed was a small quantity of the drink. 45% of all the respondents indicated that they take schnapps and that they like it very much. 65 % of these respondents indicated that they were aware of the brand name Stolberg’sche Spezialitäten. 55% of them indicated that they trusted the brand name and believed that the schnapps bearing that name was of high quality. However, that means there were a whooping 45% who know nothing at all about the brand. The need for further advertising was therefore established. Research on Other Items The second market research was carried out to establish the potential of selling the other products that the company wishes to sell under its brand name Stolberg’sche Spezialitäten. These products are a follows. The first is Apple Juice to be packaged at the plant of company from apples readily available in the neighborhood at low prices. Secondly, there is Dry Sausages that will be made from locally available deer meat. Deer is hunted on a regular basis in the Nordhausen area. The third product is biscuits manufactured by a local firm called Friwi. These biscuits will be packaged and branded by the company and sold on behalf of Friwi on a franchise basis. Another product to be sold on a similar arrangement is honey which is produced by a small cottage industry in the locality. The other two products are beer and of course the schnapps, both of which are prepared by the company itself. The idea of the research was to find out how all these products can be sold by being packaged using the same colors and the brand name Stolberg’sche Spezialitäten. They can then be sold both individually and as six-pack with all the individual products in one package. The primary market for this kind of packaging is the local supermarkets and tourists who come to the area. In October 2010, a sample of some 1200 people was served with the questionnaires. This time the area was larger covering the whole of Thuringia State. The aim of the research was to find out how the market would receive the new packaging idea. The question was put to the respondents on how they would like to buy certain new products in the market. On average the market demand for the products was as follows: Apple juice 62%, Dry Sausages 61%, biscuits 35%, honey 65%, beer 20% and schnapps 25%. The average demand of all the products under the same pack was 30% provided that the alcoholic drinks were not included, but only 5% if alcohol was included in the six-pack. This made the idea of the six-pack very unfavorable. Instead, it became quite obvious that each of the products would fare much better marketed separately though under the same brand name. This was simply a preliminary research and a more comprehensive one will need to be done to cover even the entire German market. Nevertheless, it revealed some very important information as explained earlier. Areas that still need to be covered include the market trends, with indications on what times of the year particular products tend to sell more. PEST Analysis The Political Economic, Social and Technological (PEST) analysis is the process of analyzing the factors that a project that may interfere with or impair its success (Kotler & Kevin, 2009). An analysis of the environs of this project in Germany has been carried out. Politically, Germany is a stable federal democracy. The leadership pursues a free market economic policy with no controls or interventions on the prices of goods. The government encourages the advancement of economically viable ideas and maintains high levels of security, modern infrastructure and support for such viable projects (Fulbrook, 1991). The country holds elections after every four years through which the Chancellor, an equivalent of Prime Minister is elected to form the government. Sometimes parties compete closely resulting in the formation of coalition governments (Fulbrook, 1991). However, despite such transitions, the governance of the country is always stable. This stability provides a very conducive environment for business growth (Glaab, 2003). Economically, Germany is one of the richest countries in the world. It is a highly developed and industrialized country with high income levels for its citizens and a stable and prosperous economy. Education levels are high thus providing a readily available skilled workforce (Glaab, 2003). Taxation in Germany is levied at Federal, State and Municipality levels. This means that for a business in Nordhausen, there will be taxes leveled at the level of the Nordhausen municipality, the Thuringia State and the German national federal level. However, are specifications for which taxes are levied at which levels (Ebke & Finkin, 1996). Taxes such as, Customs, those on alcopops (malt, wine and distilled drinks), coffee, mineral oil products, electricity, tobacco, and insurances are levied at federal level. There are also supplement provided on income known as solidarity surcharge. States receive taxes on inheritance, real property transfer, cars, beer and fire protection. Municipalities receive taxes on real property, inns, dogs and other beverages. Income tax ranges from 0-45% depending on ones level of income (Ebke & Finkin, 1996). Unmarried persons earning below €8,004 and jointly assessed married couples earning below €16,008 annually are exempted from tax. However, tax rises as high as 45% for individual incomes of €250,730 and couple incomes of €501,460 or more. This makes Germany a very expensive state for high income earners and a friendly one for low income earners thus increasing the threshold for welfare and stability (Ebke & Finkin, 1996). Labor laws in Germany include the civil code, part time and fixed-term work act, employee leasing act and Holydays act, they all outline the rights of employees and employers but are generally friendly to both parties. Adhering to these acts reduces the incidences of conflict between employers and employees, but there is strict enforcement in cases of litigation especially by employees (Weiss & Schmidt, 2008). Target Market Given nature of the products being offered here, the target market for this plan is local households and tourists. Households in Germany greatly interested in high quality products. Pricing is also a factor as indeed it is anywhere else. However with a high quality and serious promotion, the goods provided by this service will still be highly marketable. Marketing in the locality is usually an effective way of endsuring sales since customer loyalty is likely to be higher for local over foreign products. This is more so if the element of developing the local economy is roped into the marketing process (Kotler & Kevin, 2009). As for tourists, many of them who come to Germany are interested in sampling authentic German products. The range of products on offer under the Northausenâsche Spezialitäten German trademark will be authentic enough to generate a positive response from the tourists. The idea is to market the trademark extensively in tourist circles, including hotels, popular sites and via the mass media. This is a highly effective approach in ensuring product mobility (Marder, 1997). Competition These products will certainly face very stiff competition. The major competitors are The northern grain houses Echter Nordhäuser Doppelkorn renowned for their centuries old manufacturing of wine and other drinks. The reputation established over centuries of closely supervised production have earned the houses the lasting legacy of being one of the best wine houses in the world (Karl, 1907). The only advantage however is that they are not too keen on schnapps production. The other products to be offered for sale by Northausenâsche Spezialitäten such as honey and biscuits are not manufactured on a large scale locally and therefore the competition will only be from small scale manufacturers and goods imported from elsewhere. This gives the business and advantage in that with the organized marketing strategy on the pipeline ours will be the most organized assault on the market for the sale of these goods. As for the imports, the idea of a local product will easily give them a run for their money. Pricing One of the major issues of marketing is the setting of prices (Marder, 1997). The products being offered by Northausenâsche Spezialitäten have an added disadvantage for some of the products in this sense because the prices on offer are comparatively higher due to the issue of concurrence. This means that the prices charged include the original price of the product charged by the manufacturer plus the commission charged by Northausenâsche Spezialitäten for marketing those products. However, care has been taken to ensure that the price difference is not significantly higher than that of similar products in the market. Moreover, this will only apply to the products manufactured elsewhere and sold under the Northausenâsche Spezialitäten brand. One 500ml bottle of Tropicana Apple juice for instance goes for an average of € 0.9. The apple juice to be manufactured by Northausenâsche Spezialitäten would go for about € 0.8 per bottle after the manufacturing process is through. This is because apples are bought at € 9 per tone. It is this cheap because the alternative would be to leave the apples to rot in nature due their oversupply in the market and lack of canning services in the area. Since the manufacturing services are offered by Northausenâsche Spezialitäten itself, the pricing for Apple Juice is just the same as the average price in Germany (Prices Europa, 2010). The net profit margin per bottle will still be about € 0.2 per bottle. Deer meat sausages conventionally go for € 75 for a five pound pack while our company will be selling them for € 73 ensuring a profit of € 16 per unit. Biscuits conventionally sell for about € 2. 60 for every 20 biscuits (Prices Europa, 2010). This will go up when they are offered for sale at € 2.8 du to concurrence. Honey sells for € 3 for every 300 grams (Prices Europa, 2010). However, it will be sold at € 3.2 by our company. Schnapps will be offered for € 32 which is higher than the prevailing price of € 19.30. Ultimately, beer will sell at the conventional price (Prices Europa, 2010). The differences in price will not cause too much of a problem since our company will be using intensive marketing strategies that will emphasize on quality thus establishing a strong brand reputation to counter the competition. Sales and Marketing Strategy Northausenâsche Spezialitäten will employ the Solution, Information, Value, Access (SIVA) marketing strategy. This is a customer focused strategy though which the firm focuses its activities and shapes its products according to customer demands (Joshi, 2005). The solution element refers to how effective the solution is in meeting the requirements and needs of the customer. Information refers to whether the customer knows about the solution, how they heard about it and whether they know enough to help them make a decision to buy (Young, 2005). The value aspect refers to whether the customers know how much they are gaining by buying the product, and how much it is worth their money and effort to get it. The model also explains what the customer will have to sacrifice to get the product, for example spending a little extra cash, and the rewards of that sacrifice, like durability, higher performance, efficiency or reliability. Access refers to how easily and readily the customer can get these benefits associated with the product. In other words where, how, how soon can they get the product are the main concerns (Young, 2005). The use of this strategy will include three research steps. The first will be the market research to cover the entire Thuringia State. This will include the hiring of personnel and administering of the prepared questionnaire (Appendix 1). This shall involve a total of 5 research supervisors, 50 research assistants and an overall supervisor. After that there shall be the step of collation and interpretation of the research responses which shall be done at the company headquarters. It shall involve the 10 research and the overall supervisors. The third step shall be the actual implementation of the recommendations from this research. Training Two types of training shall be held. The first shall be the training of orientation research personnel which shall be held for two days at a local conference hall. The costs of this training shall include hall hire at € 160 for the two days. 2 training facilitators shall also be paid € 2000 in total for the 2 days at € 500 each per day. The rest of the costs shall go towards organizing meals and giving transport allowances for the 60 participants including supervisors and the trainers, plus 1 hands-on person, at € 12, 000 in total. The second training shall be held for 10 hired company staff to help orient them with the sales and accounting procedures as they embark on sales. Sales policy shall be designed based on research results and so this training will take place after the research results are in. Budget Item Description @ in € No. of Units Amount in € Market Research Personnel Payment for research assistants per week for1 week 350 50 17,500 Payment for research supervisors 2 weeks 980 5 4,900 Payment for Research supervisor for 2 weeks 1,400 1 1,400 Transport Total transport costs for research personnel, marketing, distribution of goods for one year 10,000 1 10,000 Manufacturing costs Costs of processing products to add value for 1 year 250,000 1 250,000 Branding and packaging costs To brand and package all the products for one year 100,000 1 100,000 Training of research personnel Training cost for research personnel including facilitation costs 7,160 2 days 14,320 Hiring of company staff 1 year cost of hiring 20 staff members to help with sales in the state 12,000 per week 52 weeks 640,000 Training of company staff Training costs for company staff 6,200 2 days 12,400 Total 1,050,520 Projected Income ( Tax at 18%) Item Monthly Pre Tax Profit in € After Tax Profit in € Annual Net Profit Apple Juice 20,000 16,400 196,800 Schnapps 35,000 28,700 344,400 Dry sausages 18,500 15,170 182,040 Biscuits 22,000 18,040 216,480 Honey 28,000 22,960 275,520 Beer 34,000 27,880 334,560 Total 1,549,800 Financing Northausenâsche Spezialitäten company will cater for 30% of the total cost of financing this project. This will be money from previous savings of the company and will be to the tune of € 315,156. The rest of the money is sought by means of selling preferential shares of 40% of the project to willing investors. These shares shall be entitled to dividends at the end of each financial year. The money provided for in this budget will finance the project for the initial one year after which the project is expected to run itself with reducing external financial input from then onwards. This kind of financing is known as investor financing (Wolk, 2004). Appendix 1: Questionnaire Tick in the appropriate box 1. Which of the following products would you like to see sold in the market. Locally made Apple Juice Locally made Schnapps Locally made beer Locally packed honey Locally made biscuits Locally made dry sausages of deer meat 2. Have you ever heard of Northausenâsche Spezialitäten products? Yes No 3. If yes, which product of Northausenâsche Spezialitäten have you ever consumed ………………………………………… 4. How did you find the product? ………………………………………… 5. What do you think of the quality of products like those in question 1 above that are currently available in the market? High Average Low 6. Would you buy the products above if manufactured by Northausenâsche Spezialitäten and you are assured of high quality? Yes No 7. What is your highest priority in choosing a product? Low price Higher Quality Locally manufactured 8. Do you like supporting local industry? Yes No It depends. 9. If it depends please explain …………………………………………………. 10. Any other comments …………………………………………………………….. Appendix 2 Profit and Loss Account 2010 - Profit and Loss Account of Northausenâsche Spezialitäten - For the year ended November 31 2010 € € Debit Credit Revenues GROSS PROFIT 484,265 -------- Expenses: ADVERTISING 9,500 BANK & CREDIT CARD FEES 522 BOOKKEEPING 4,230 EMPLOYEES 108,000 INSURANCE 1250 LEGAL & PROFESSIONAL SERVICES 2,270 LICENSES 940 PRINTING, POSTAGE & STATIONERY 8160 RENT 18,000 RENTAL MORTGAGES AND FEES 92,800 TELEPHONE 2,000 UTILITIES 681 -------- TOTAL EXPENSES 248,272 -------- NET INCOME 235,993 References Bradley, N. (2010). Marketing Research. Tools and Techniques. Oxford University Press. Ebke, F & Finkin, M.W. (1996). Introduction to German Law. Munich: Heinemann. Fulbrook, M. (1991). A Concise History of Germany. Cambridge University Press. Glaab, M. (2003). German Foreign Policy. Munich: Internationale Politik. Joshi, R. M. (2005). International Marketing. New Delhi: Oxford University Press. Karl M. (1907). History north houses of the Branntweins North Living: Self publishing house,. Kotler, P. & Kevin L. K. (2009). A Framework for Marketing Management (4th ed.). New York: Pearson Prentice Hall. Marder, E. (1997). The Laws of Choice—Predicting Customer Behavior. New Jersey: Simon and Schuster. Prices Europa. (2010). Comparative Prices in Central Europe. Retrieved on 10/12/2010 from: Weiss, M and Schmidt, M. (2008). Labour Law and Industrial Relations in Germany. Munich: Kluwer. Wolk H. et al (2004). Accounting Theory: Conceptual Issues in a Political and Economic Environment. London: Heinemann. Young, C. E. (2005). The Advertising Handbook, Ideas in Flight, Seattle, Kotler. Read More