Farmoz - Crop Protection Product Manufacturing Company Products - Business Plan Example

End Users Business Plan Table of Contents Introduction 3 2) of the Products 4 3) of the Market 5 Target market 5 Market Description 6 Anticipated Market Share 7 4) Overview of the Industry and Competition 8 5) Marketing Approach and Strategy 11 Employed Marketing Strategy 11 11 Price 11 Distribution 12 Promotion 13 6) Management Structure and Top Personnel 14 7) Risk Overview 14 8) Financial Projections 15 Projected Income Statement for the Next Five Years (Assumed) 15 9) Financing Required 17 17 10) Goals and Strategies 19 References 21 1) Introduction Farmoz is a crop protection product manufacturing company based in the Australian Market. It has been serving the retailers and the crop manufacturers in the market area over 20 years having its parent company as the Makhteshim Agan Group. The parent company is one of the major producers and suppliers in the international industry (Farmoz, 2010). The product that the company deals with is remarkably essential for the crop production. It not only helps to increase production, but also helps to control diseases, harmful weeds and insects to protect the crops from getting destroyed (Crop Life, 2008). Understanding the opportunity present in the industry the company is planning to market its product directly to its end users. The plan shall be further analysed and evaluated in this paper. 2) Description of the Products Crop protection products are basically used by the farmers to protect the crops from insects and other harmful diseases and unwanted weeds as well. There are basically three kinds of categories, i.e. herbicides, insecticides, and fungicides. Notably, the crop production yield in Australia increases by almost 40% each year as a result of the usage of effective crop protection products (Crop Life, 2008). The company has a wide range of chemical products covering all the three categories of crop protection products. For example, the company has Afalon Flowable, Ametrix 800, and Amigan WG as herbicides; and Alpha-Scud Elite, Amitraz Elite, Aphidex WG as insecticides. A few fungicides produced by the company are Aurora 250 EC, Aurora Turf, Axiom Plus and many more (Farmoz, 2010). Apart from crop protection chemicals the company also produces spraying tools with the characteristics to assist the end users to measure the quantity. The tools also help to measure conversion in terms of distance, area, volume, and weight (Farmoz, 2010). 3) Description of the Market Target market The company productions are targeted to serve the end users both in the local and the export market of Australia. However, the distribution of the product takes place through local resellers in the rural areas. The targeted market of the product comprises of the rural farmers, who can be termed as the ultimate customers of the company (Farmoz, 2010). However, to be mentioned this plan as proposed, is particularly targeted to the wheat producers in the rural hemisphere of Australia, eradicating the resellers in the market. A major reason to focus on this particular segment is that wheat is considered to be one of the most important crops in the economy and also because the production is expected to increase by 22.4 million metric tons in the next fiscal year (Brindal, 2010). Market Description Australia’s Wheat Growing Regions Source: (Australian Crop Report, 2009) The image represented above depicts the major wheat producing regions of the country. To be stated, the key areas of wheat manufacturing are Western Australia, South Australia, and New South Wales. Therefore, the proposed targeted customers of the company can be the local farmers in these key areas. Moreover, the target shall be on the major produces with an input strength of 500k to 2 million and above. Precisely, the market should be much more concentric on the western and the eastern regions rather than the southern parts due to the fact that the production in those lands have decreased from the past few years and do not show a positive sign yet (Australian Commodity Statistics, 2010). Anticipated Market Share Wheat production acquires a huge share of the entire crop manufacturing industry in Australia. A few organisational strengths of the company to be mentioned in this context are its membership with a few the major players like Crop Life, Agsafe, Chemclear, and drumMuster. Moreover, the company is also backed with its parent company, Makhteshim Agan Group, which is also a major participant in the international market. With its service for more than 20 years the company has a large market share in the industry (Farmoz, 2010). Considering all these facts, the company in the first year of implementing the plan can be able to acquire a sustainable position with approximately 20-30 percent of the whole market. However, in its later years the company can focus to expand its target market and increase its market share accordingly. 4) Overview of the Industry and Competition The crop protection industry in Australian economy acquires a great importance. Due to its characteristics, the industry is highly depended on the fluctuations of the crop manufacturing industry. However, concentrating on the part of wheat manufacturing industry in Australia, it is expected to grow in the current fiscal 2010-2011. As projected earlier in 2010, the production was to grow by 21.7 million tons which in real terms grew up to 22 million tons by the mid of the year. This depicts that the wheat manufacturing industry is at its growth stage excluding some areas like Queensland, New South Wales, Tasmania, etc. where the production was witnessed to fall, as it can be revealed from the chart below (Australian Commodity Statistics, 2010). Wheat Production Statistics for the year 2009-2010 Production Area Yield Production Units ’000 ha t/ha Kilo ton New South Wales 4095 1.31 5348 Victoria 1793 1.66 2974 Queensland 984 1.40 1374 Western Australia 5001 1.63 8148 South Australia 2148 1.89 4052 Tasmania 7 3.86 27 Australian Capital Territory and the Northern Territory 14028 1.56 21923 Source: (Australian Commodity Statistics, 2010). Considering all these facts in the present scenario, there is a high competition level in the market. However, a few of its major competitors are Syngenta Crop Protection Pty Ltd., Agnova Technologies Pty Ltd., Nufarm Australia Limited, and other companies which have almost the same product lining; among which the Syngenta Crop Protection and Nufarm Australia Limited can be stated as the most powerful competitor in the market. The company has diversification in its activities expanded to the sector of crop biotechnology as well (Crop Life, 2008). Eradicating the mid-players within the distribution channel can offer some really effective advantages to the company. One of the major advantages that the strategy can offer is the power to control its ultimate price structure in the market. This advantage allows the company to reduce its prices; and even if it is not so the company can enjoy a certain amount of extra profit annually. 5) Marketing Approach and Strategy Employed Marketing Strategy The current market scenario is undoubtedly promising, but it is competitive at the same time. The company till date was into marketing through resellers or retailers in the rural market areas. But with the new proposed plan, the company should emphasise on an appropriate strategic approach in order to ensure its success. Therefore, a suggestible approach can be the penetration marketing strategy with a low price margin. Penetration strategies are basically focussed on the tactic to use a low price margin while entering a new market irrespective of the higher production cost. The strategy is entirely based on the belief to capture a large proportion of the industry and is often used by comparatively small companies. It tends to be more beneficial in a highly competitive market with larger demands similar to the crop protection products. This kind of penetration approach is specifically known as rapid market penetration (Avlonitis & Papastathopoulou, 2006). Price There are many pricing strategies used by different manufacturing and marketing companies in the business practice. A few tend to reduce the production cost, while certain focus on the packaging systems. But in the case of Farmoz, the company cannot reduce its price with effect to its production cost. If the company does so, it is going to affect the quality of the product. Therefore, the company can alternatively reduce its quantity level, which shall assist in reducing the ultimate price level without affecting the quality aspect. Furthermore, the company can use the strategy of ‘loss leader’ in order to reduce its product pricing. According to this particular strategy, the price of one item is lowered more than that of its unit cost, which shall enhance the customer traffic. Farmoz can easily apply this tactic as it has a wide range of product lining. The company can also adapt various discounting strategies with the aim to reduce its price structure for a certain period of time and in turn generate effective brand image (Uva, 2001). Distribution The main objective of this plan is to eradicate the retailers in the rural markets from the supply chain of the company. This reform is definitely going to bring about a change in the distribution channel of the company. In this context, the company can use the direct selling procedure in the initial phase and later introduce warehousing into the distribution chain. The cost incurred in this case shall certainly be lesser compared to the commissions of retailers. Promotion Concentrating on the features of the rendered product and the targeted market, the company can implement sales promotional techniques, such as offering free samples, sponsorships, and discounting rather than using advertisement. 6) Management Structure and Top Personnel The role of management executors to implement a new proposed plan is unavoidable. The management structure and the top personnel present in the company need to take certain preliminary measures to control the new designed approach. In this case, the Marketing Executives can play the key function to organise promotional activities like sponsorships. Complementarily, the company can also organise sales team to execute the direct selling scheme. The Marketing Executives tend to be the most suitable top personnel in the management structure due to their flawless knowledge in the subject and good understanding of the pros and cons of the applied strategic alliances. 7) Risk Overview While implementing a new proposed strategy, there can be many risk factors influencing the effectiveness of the final execution. Some risks that can arise in this plan are the risk of increase in competition and product pricing. In terms of the internal environment, the organisation is likely to undergo a little change which can also affect the organizational stability and in turn affect the execution of the strategy. Furthermore, the focus on ‘loss leader’ pricing strategy can also affect the annual profit margin. However, these risk factors are quite influencing from the short-term perspective, but will not be too much effective in a long-term view point. To be related with the company’s strengths and the market opportunities, the plan can be fairly concluded to be almost risk free. 8) Financial Projections Projected Income Statement for the Next Five Years (Assumed) Years 2011 2012 2013 2014 2015 Sales $150,000 $180,000 $225,000 $274,500 $368,010 Change in sales - 20% 25% 22% 18% Expenses Advertising & Promotion $40,000 $43,000 $50,000 $49,000 $42,000 Rent & Rates $8,000 $8,700 $9,000 $9,800 $10,500 Salaries $75,000 $82,000 $90,000 $94,000 $98,000 Legal $7,000 $5,000 $5,000 $5,000 $5,000 Other Expenses $2,000 $2,700 $2,500 $2,900 $3,200 Total Expense $132,000 $141,400 $156,500 $160,700 $321,400 Net Profit/ Loss $18,000 $38,600 $68,500 $113,800 $46,610 The income and profit statement presented above reflects different variables that can influence the operations of Farmoz in the next five years of implementing the plan. As assumed, the sales figure of the firm is likely to rise with a provided advantage of direct marketing. On the contrary, the expenses are also likely to rise with the provided rate of inflation and other economic factors which directly influence the cost variables. However, the predicted amount of sales shall be higher than the cost incurred in order to attain a certain margin of profit. Notably, the profit margin of the firm (based on this particular plan) shall start decreasing from the end of its third year projection due to lowered demand in the market according to the life cycle theory. 9) Financing Required Along with the revenue structure and the earned net profit, the projected income statement also states that huge amount of expenditure is required in financing the plan. However, to deal with this challenge the company has a number of solutions on its part. First, in the current fiscal year the company has been recorded to be very successful in creating a positive outlook in the eastern states (Farmoz, 2010). The company can use this additional earning to be invested as a capital to execute the plan. Second, the company can use the financing of its parent company, the Makhteshim Agan Group, which is one of the largest manufacturers and suppliers of crop protection products in the international markets (Farmoz, 2010). Third, the company can opt for government grants and bank loans as well, using its goodwill in the Australian Market. Fourth, the company can collect the maximum amount of credits scattered in the market and use it as a working capital to the plan. Fifth, the inventory structure of the company can be reduced, which shall reward an amount of liquid cash to be invested in the program. Sixth, for financing the project, the company can also use its reserves & surpluses and funds, such as equity share capital too. To be mentioned in the context, reserves & surplus, equity shares, receivables, etc. are termed to be current assets of a company. These variables are quite significant for the company to provide it with a certain amount of financial strength and sustainability. Hence, to use the entire amount of any of these variables can affect the strength of the organization. In this case the company can design a portfolio instead of adhering to a particular financing resource. For instance, 30% of the total invested amount can be raised from bank borrowings, 30% can be taken from Government Grants, other 20% from the parent company and the remaining 20% can be acquired from the reserves & surpluses of the company (Goyal, 2008). 10) Goals and Strategies In order to attain the optimum objective the company should have a well designed strategic alliances and specific goals in each of its functional areas such as administrating, and marketing. Relating to this context, the company’s goal for growth should be to capture larger market share while its growth strategies can be aggressive in nature to attain a high level of competency. For instance, the company can adapt a growth strategy through acquisition of certain significant retailers in the targeted market which shall help it to gain an increased profitability (Bagad, 2009). The goal for market positioning should be to locate the appropriate market segment and distribute its product through an efficient distribution channel and promotional technique. This would help the company to build an efficient brand image in the local market and enhance its growth perspectives (Bagad, 2009). In terms of geographic coverage and expansion, the goal should be in the initial stage to emphasise on the part of coverage and once a sustainable coverage is gained the company can move further to expand its functions in other areas. Conclusively, all the goals and strategies designed to attain sustainable growth, market position, or coverage and expansion depends on the marketing strategies adapted by the company. The goal in this case plays a significant role to determine the success of the plan. Hence, the primary goal of marketing in this context should be to increase the market share along with an increased awareness in the market. Therefore, the strategies likely to be adapted are the pricing, distribution and differentiation strategy. To be mentioned, in implementing differentiation strategy the company can emphasise on the technology and the innovation as well. Precisely, the primary goal of the plan is to attain an increasing amount of return on investment through appropriate marketing and growth strategies, i.e. differentiation and acquisition respectively. References Australian Crop Report, 2009. Australian Wheat Growing Regions. Australian Government. [Online] Available at: http://www.abare.gov.au/interactive/09acr_dec/index.html [Accessed December 16, 2010]. Australian Commodity Statistics, 2010. Summary of Australian Statistics for Wheat. Warehouse. [Online] Available at: http://adl.brs.gov.au/data/warehouse/pe_abares99001762/ACS_2010.pdf [Accessed December 16, 2010]. Avlonitis, G. J. & Papastathopoulou, P., 2006. Product and Services Management. SAGE. Pg 44-56. Bagad, V. S., 2009. Management Information Systems. Technical Publications. Pg 1-13. Brindal, R., 2010. Australia 2010-11 Wheat Crop Forecast Lifted To 22.4 Million Tons –NAB. Dow Jones Newswires. [Online] Available at: http://www.foxbusiness.com/markets/2010/08/25/australia-wheat-crop-forecast-lifted-million-tons-nab/ [Accessed December 16, 2010]. CropLife Australia, 2008. CropLife Members. Crop Protection. [Online] Available at: http://www.croplifeaustralia.org.au/default.asp?V_DOC_ID=2206 [Accessed December 16, 2010]. CropLife Australia, 2008. Crop Protection. Crop Life Australia. [Online] Available at: http://www.croplifeaustralia.org.au/default.asp?V_DOC_ID=1901 [Accessed December 16, 2010]. Farmoz, 2010. About Us. Farmoz a Makhteshim Agan Group. [Online] Available at: http://www.farmoz.com.au/default.asp?V_DOC_ID=755 [Accessed December 16, 2010]. Farmoz, 2010. Spraying Tools. Farmoz a Makhteshim Agan Group. [Online] Available at: http://www.farmoz.com.au/default.asp?V_DOC_ID=809 [Accessed December 16, 2010]. Farmoz, 2010. Our Products. About Us. [Online] Available at: http://www.farmoz.com.au/default.asp?V_DOC_ID=755 [Accessed December 16, 2010]. Farmoz, 2010. Farmoz Steps Up For The 2010 Cropping Season. News. [Online] Available at: http://www.farmoz.com.au/default.asp?V_DOC_ID=1003 [Accessed December 17, 2010]. Farmoz, 2010. All Products. List All Products. [Online] Available at: http://www.farmoz.com.au/default.asp?V_DOC_ID=804&function=SearchResults&CompanyID=741781&StartIndex=1&ProductName=AC&MaxReturn=1000&PestGenie=N&MasterTypeID=0&SearchType=All&SelectedList=&GroupBy=NAME [Accessed December 16, 2010]. Goyal, S., 2008. Financing Business Operations-Working Capital. Institute of Chartered Accountants in India. [Online] Available at: http://www.ladderup.com/WORKING%20CAPITAL%20FINANCE%204%20final%20mailed%20corrected.pdf [Accessed December 17, 2010]. Uva, W. L., 2001. Smart Pricing Strategies. Cornell University. [Online] Available at: http://hortmgt.aem.cornell.edu/pdf/smart_marketing/Uva%203-01.pdf [Accessed December 16, 2010]. Read More