Small Business and Medium Enterprises - Example

SMALL BUSINESS PLAN AFFILIATION: Small Business Plan I. Introduction The demand of Small Business and Medium Enterprises (SME) is growing at an accelerating rate and it can be attributed to single most important factor that is the economic recession. Since the economic meltdown has happened globally, many people have lost their jobs and it has become important for various organizations to address the key issue at hand and provide support to the government to help people out of the unemployment trauma. Being a responsible citizen of my country, I have developed a business plan for a new product “Dandruff at bay” which is the anti-dandruff shampoo. The product will be launched by the company L’Oreal as it already has a strong presence in the market. The head office will be located at Suite # 31, first floor, Dolmen Mall, Clifton, Karachi and all the distribution will be done by Vikor Distributors as they have a niche distribution network in Karachi market. The product will be launched for both men and women. The product will definitely help L’Oreal diversifying its product portfolio. Since I am concerned about the community, the price of my product will be reasonable so that every customer can buy the shampoo within the budget and employment opportunities are created for people who are looking for the job. II. Executive Summary: In order to meet the demand of the customers to buy good quality anti-dandruff shampoo at reasonable price, L’Oreal has decided to launch an anti-dandruff shampoo suitable for both men and women. After market research, it was found that there was no shampoo in this category particularly designed for both gender. Dandruff at bay will be distinctive from its competitors as its ingredients will be natural and there will be no chemicals in it. The shampoo will be launched in two sizes i.e. sachets and 100 ml bottles and the prices will be Rs. 60 and Rs. 42 respectively. The pricing strategy is competitive pricing. Since the main aim of my SME is to create employment for the people who have lost their jobs; employment will be created in my head office and distribution network. Although distribution will be done by Vikor Distributors but my people will solely do the distribution of my product. Since the company will be unable to generate profits in its initial years and it is expected that the enterprise will earn the revenues from the third year. From third year onwards, about 10% of profits will be given to Edhi Foundation so that our money is invested in right NGO and we do something fruitful for our community. Hence, according to me, starting up SME will create a lot of employment opportunities for the people and the economic downturn will be addressed simultaneously. Therefore, the launch of this new product will address the unemployment issue at hand and also help the customers to buy their shampoos within their budget range and take care of their hair properly. III. Benefits to community: Since the global economic recession has hit all the countries globally, many people have lost their jobs and it has become the responsibility of the existing businesses to take initiative to support the people who are caught up in such a political distress situation. The demand of daily consumable items is increasing at an accelerating rate. The durable items are needed by everyone these days and in order to curtail their everyday expenses, the consumers need to have adequate amount of money in their hands. That is why the opening up of new head office and launch of distribution network will help the community to meet their everyday expenditures with utmost ease. One of the major benefits that will be given to the community is that the spending power of the citizens will be increased. Since the brand is an international one, the employees will be allowed to learn from the foreign employees’ experiences as well. Alongwith monetary benefits, the employees will be given non-financial rewards in the form of interaction with experienced professionals and by working alongside with them, the local people will polish their skills. Other benefit will be to the government as the economy will get boosted as well. It is expected that the GDP of the country will increase. Since the health care industry is among the vital industries of our country’s economy, introduction of new product by a well-known brand will help the economy in terms of foreign reserves and increased tax amount. Simultaneously, the demand of shampoos will increase as well as people will buy shampoo for taking proper care of their hair. L’Oreal is an international brand and the launch of anti-dandruff shampoo will be beneficial both for the company and the local market and government as each party will gain something from the introduction of the product. Economic development fosters a community’s capacity to generate wealth for its residents by focusing on job creation. When economic development is successful and targets the critical factors – information technology and management, labor, capital – and land it can maintain a high-level of employment and job quality. However, economic development is about more than just jobs and income; it seeks to improve productivity of local resources, encourage business profitability and promote community sustainability and quality of life. IV. FMCG Industry: Since healthcare industry is the major part of FMCG industry so it is always vulnerable to the competitions that exist in the market. The leading and well-knows shampoo brands in Karachi are Pantene Pro-V, Pert Plus, Sunsilk, Head and Shoulders and Garnier Fructis. The most popular ant-dandruff shampoos are Head and Shoulders and Clinic All Clear. Since L’Oreal will be launching the shampoo for this particular market, its direct competitors are Head and Shoulders and Clinic All Clear. According to Hittboss (2011), the healthcare industry is too competitive and in order to stand out from the group of brands, it is vital for each company to do something distinct from other. The most frequently used strategy is to focus on key ingredients and features of the shampoo. According to L’Oreal, none of the anit-dandruff shampoos have focused on introducing shampoo made from herbal ingredients and Dandruff at bay will address this untapped market. The marketing managers’ role is growing in the FMCG industry as they have to discuss the overall market, identify the segments of the market that they will target and provide adequate information about the company’s current situation. Since 2006, the volume of sales in FMCG is growing at more than 10%. The main reasons that the demand and sales volume has increased are demographics, rising aspirational levels and increase in the income range in both urban and rural areas. Last year, consolidation of many organizations took place as companies acquired to spread their reach across the globe. However, on the margins front, they faced pressure due to higher input However, majority of FMCG companies have stated that the earnings were flat and a dip in turnover was accompanied by fairly healthy growth at the net profit level, cost trimming efforts, improved quality of products and courtesy higher efficiencies. The average performance of FMCG companies was better in third quarter of 2007-08 as the sales rose by 12% this quarter compared to the corresponding quarter last year according to a report released by Relegate Securities. In its report the equity research firm pointed out that the quarter saw a moderate growth in the FMCG segment and the trend would continue. The report reiterated rising input prices and increasing competition as the key characteristics of the segment. The supply chain needs to be improved so that the infrastructure facilities get developed. Growth potential for all the FMCG companies is huge as the per capita consumption of almost all products in the country is amongst the lowest in the world. Further, if these companies can change consumer’s mindset and offer new generation products, they would be able to generate higher growth in the future. V. Market Analysis of L’Oreal: L’Oreal has a very huge market size as compared to any other company in beauty industry. It is providing its products to almost every segment of the society. In Pakistan’s population about 74% of the women are working and those who use hair dye are about 50%. Men constitute 55% of the total population and about 23% use hair dye color. L’Oreal offer cosmetics, hair care, perfumes, deodorants and skin care products through its 27 brands that undertake people of all income level. It has earned the revenue of $24,385 million in 2008. L’Oreal’s world market share is 15.8% (L’Oreal, 2012). L’Oreal has recently targeted two emerging markets i.e. men and older people. Increased usage of men towards the beauty products has made L’Oreal to achieve high sales volume. Research has indicated that men are more loyal towards a particular product as compared to women who switch off very frequently to other new products. In this age of fashion older population has more concern about their looks and appearance. Considering this as a potential market L’Oreal introduced anti-aging cosmetics for older class of society. Increasing beauty concerns has made L’Oreal to introduce its products in Asia, Eastern Europe and Latin America and earned the revenue of 32% from these parts of the world. VI. Management Team: Every profitable requires a sharp manager or director who can lead the entire team of it organization. My position in the company will be of Managing Director and I will be the sole person to make the decision. I will ensure that I have an excellent people working under my supervision who can get the work done by their subordinates. The environment in my organization will be participative, communication will be open, information will be shared and every employees’ needs will be addressed. The team working will be highly appreciated in the organization and people will have to abide by the code of conduct that will be developed for the employees. The vision of the organization is to help the community by providing valuable goods and services and creating employment opportunities for its people. Hence, the basics of the strategy will revolve around three key aspects i.e. 1. Develop an efficient workforce. 2. Create a brand image in the market. 3. Introduce simplified products and services. Therefore, a behaviour framework will be developed to help implement the culture in the organization i.e. learn and grow, act with integrity, embrace change, work together, decisive action, think customer, encourage excellence and relate and communicate. Organization chart helps in understanding the chain of command and the responsibilities of executives being delegated during the launch of the product (Fritz, 2006) The finance manager of the company will have to administer the flow of money for a business. His main responsibilities will include making the cash flow forecast, arranging the finances for the company, record keeping of all financial activities, deal with the financial institutions, maintain proper records, get the accounts audited and make sure that the financial budget is properly developed and implemented. In majority of the organizations, Marketing manager and HR manager are given two different designations. Since my company is SME, so there will be limited number of staff and that is why one manager for Marketing and HR department will be recruited. The main responsibilities of Marketing and HR manager will comprise of first doing market research alongwith research and development department; develop a marketing plan alongside the marketing budget; decide about the marketing activates of the product; ensure well-trained and skilled sales people do the job; weekly reports are given to the Managing Director and ensure that the sales turn into profits in the long-term; recruit and select right staff members and compensation package is designed according to the market trends. The main responsibility of research and development department staff will be to conduct research and develop plans to improve the product. The main responsibilities of the person at this designation will be to carry out the research on market analysis to analyze the competitors’ strategies so that he can ensure superior product and service that can give them competitive advantage; the overall mission of R & D’s manager is to broadly spread his project, to sustain accessible project, to help initiating a new project, to build up a new product or service, to guarantee quality of the product provided, to manage the quality and to improve the manufacturing effectiveness and technological competence and ultimately the person will have to design Quality control system to identify and address inaccuracies and blunders in project and to provide regular and consistent check to guarantee precision and comprehensiveness. VII. Manufacturing and Operations Plan: The production of the shampoo will be done on daily basis and semiskilled workforce will be hired for the operations. The wholesalers and retailers from all over Karachi will be allowed to contact the distribution centre i.e. Vikor Distributors. Since the products will be imported so they will be manufactured in a factory in Korangi Industrial Area. The company will make sure that all the rights of the employees are protected and safe and conducive environment is provided for their working. The company will make sure that is abides by all the employees’ and customer protection laws so that the workers are given good pays and all their needs are properly addressed. Since the production will be done in environmental friendly way, there will be no wastage and pollution issues from the company’s side. VIII. Labor Force: The management will make sure that the workforce of the company is highly skilled and professional. The employees and workers will be given adequate training to meet the present market’s demands. They will be given rewards for outstanding performances and it will be ensured that they remain motivated all the time. the performance review will be done on quarterly basis to ensure that the objectives are being met and whether they are satisfied with work or not.. IX. Marketing Plan: Market segmentation Our main interest is to provide the women and men with the serum that can cure dandruff and that could give them the distinctive mix of benefits. We have segmented the market on the several geographical, psycho graphical, demographical and behavioral factors so that we can understand the needs of women segment and can provide them with the product that will give them the hair care solution. Market segment provides better measures for dividing the market into different segments on the basis of different grounds (Croft,2004). Target market This product will provide women and men with complete hair dandruff solution and will provide them the maximum benefit as compared to other hair dandruff shampoos available in the market. Among the selected market segment that is men and women we have targeted young girls and boys who in order to look more attractive are heavy users of hair dandruff shampoo. In addition to this working women and house wives who have diverse needs but limited time are also targeted. Deciding on the target market properly, stream lines the business activities (Moehlman, 2010). Strategic Plans Market Potential Our main focus is on women and men who have a time constraint and we have found potential in working women so we created demand in that class. Market potential lies mostly in trends and fashion. Increasing trend of using hair care products by girls and boys to look more attractive and to keep up with the fashion has given us the opportunity to introduce hair dandruff serum which will remove their hair dandruff within 2 months. Product This hair dandruff serum with natural and mild chemical ingredients will make hair colored, shiny, healthy and give it a beautiful hue. This product will be available in different fragrances (according to your choice) that will make you to get rid from traditional ill smelling of hair dandruff shampoos. Product overview This product will serve as a remedy for hair dandruff. It will be beneficial for those having dandruff. It is a simple home-made product. It will be quite effective and affordable for all those having hair dandruff problem. This product will be launched under L’Oreal’s hair care product line. Product Ingredients Vinegar Hot water Method of preparation: Vinegar serves as one of the effective ingredients in effective dandruff treatment. The preparation of hair dandruff liquid requires mixing 2 table spoon of vinegar into sic table spoons of hot water. The person having dandruff problem will apply this mixture on scalp and cover the head with cloth or sleeping cap so as to avoid stains on your pillow. Name of product: dandruff at bay Description Name signifies the hair dandruff serum will remove dandruff within 2 months Specially designed to remove hair dandruff constraints like ill smelling of hair dandruff shampoos, roughness of hair, destroy the original hair texture, time consuming etc. Available in different flavor of perfumes; according to your choice to make you feel pleasant Very convenient to use Made from high quality ingredients which give hair a new glance Provides permanent solution to hair until you want Doesn’t allow hair color to fade away Price Our price strategy is based on following factors: Market objectives Cost Competition (Smith and Smith, 2011). The product is available in the bottles of 100 ml and 150ml. Special packaging for streaking packs that will contain streaking strips. Cost of 100 ml Ingredients cost Rs.550 Labor cost Rs.20 Marketing & selling expenses Rs.40 Production cost Rs.15 Packaging expense Rs.20.8 Sales tax Rs.13 Cost price Rs.658.8 Selling price Rs.700 Profit margin Rs.42/100ml. Sachet pack Cost of 100ml Rs.658.8 1 Streaking strip Rs.12 After dying shampoo Rs.10 Cost price Rs.680.8 Selling price Rs.740 Profit margin Rs.60/100ml. Place We have two phases of distribution. In first phase we will distribute our product in major cities in order to build product image. In long run we will launch our product intensively. Our sales target in scattered launch is 200,000 units of 100ml. Our distribution channel will be Vikor Distributors as they have good relations with L’Oreal Distributors, Wholesalers, Retailers and Consumers. Promotion Tag line “Unlocking the secrets of hair beauty” We will promote our product on the basis of unique selling feature i.e. hair dandruff serum and also on the basis of our logo i.e. “unlocking the secrets of hair beauty”. Promotional activity will involve the promotion of a product through print media, electronic media and internet. Various media will be used for the promotion of our product. These media are as follows: Online marketing We will market our product on yahoo.com and Facebook so that all those who use internet become aware of our product. Advertisement of our product will be carried out through shots on these websites. Print media According to Wells et al (2007), print media is one the most important marketing tool because it is extensively viewed by almost people of all age group. News paper Magazines Electronic media Television ads X. Financial Plan: Financial feasibility is the very first step and is critical to the success of any business. It answers the most important question that whether we should go for a particular business idea and whether it will generate enough profits for the business to carry out its operations for an indefinite period of time. Financial feasibility provides an in depth insight of the financial moves that are pursued by the businesses and evaluates the attractiveness of the investments by using different types of financial analysis. These projected cash flows have been calculated using arithmetic progression for a period of five years. Years Cash Flows 0 (300,000) 1 298,200 2 328,020 3 357,840 4 387,660 5 417,480 As reflected in the table below, the estimated start-up costs for the company will be $ 1,766,000.  These costs will be financed solely by the owner’s personal cash funds and bank loans. An anticipated Rs. 2,000,000 loan that will be for 10 years will be used as working capital.  Future expansion, growth and franchising strategy will be self-financed. Start-up Funding Start-up Expenses to Fund 1,766,000 Start-up Assets to Fund 1,986,000 Total Funding Required 3,752,000 Assets Cash Required 100,000 Other Current Assets 120,000 Long-term Assets 0 Total Assets 220,000 Long-term loan 2,000,000 Total Capital 2,000,000 Invested amount 48,000 Total Assets, Capital and Liabilities 4,000,000 Total Funding 3,752,000 XI. Exit Strategy: Determining critical roles within the company, identifying and assessing possible successors and providing them with the appropriate skills and experience to present and future opportunities are vital factors for the company’s expansion. As the Managing Director of the company, I will ensure that a succession planning module is designed so that the existing employees are given training to acquire the knowledge, competencies and skills to move up in the organization. The employees will be given opportunities from time to time to show their capabilities and will motivate them by giving promotions for career advancements. "Succession planning is a process by which successors are identified for key positions throughout an organization including vital roles in each department of the organization. It should take into account the strategic vision and objectives of the organization. With good succession planning in place, employees are ready for new leadership roles so when someone leaves the company, another is skilled and ready to step-up to that position. Succession planning can also help develop a diverse workforce, by enabling senior management to look at the future goals of the organization as a whole. So the key issues the HR professionals should consider while developing a succession plan are – Strategic plans and future goals Workforce requirement Knowledge retention and critical roles Talent management strategies" (Succession planning 101, 2007) XII. Critical Risks and Assumptions: Since all the businesses are vulnerable to risks; therefore, I will ask my managers to develop a contingency plan in case of any problem arises. Hence, I will write the potential problems down and discuss the impact on the business. Simultaneously, the plans will be developed to handle the issues and avoid the affect of such situations in hampering the business operations. Some problems that can be encountered are competition price cutting, excessive rise in estimated costs, cash problems, issues in credit terms by banks and unmet schedules. References Croft, M. (2004).Market segmentation: a step-by-step guide to profitable new business. London: Routledge. Fritz, R. (2006).Corporate Tides: The Inescapable Laws of Organizational Structure. San Francisco: Berrett-Koehler Publishers. Hittboss. (2011). Current Market Situation in Pakistan Available at: http://newsflavor.com/world/asia/current-market-situation-in-pakistan/ Retrieved 1/04/2012. Loreal.com (2012).Loreal. Available at: http://www.loreal.com/_en/_ww/index.aspxRetrieved 1/04/2012. Moehlman, M. (2010).Target Market. BeWrite Books LLC. Smith, T and Smith, T. (2011).Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.Cengage Learning. Wells, W., Burnet, J. and Moriarty, S. (2007).Advertising principles and practice, 7th ed. India: Pearson Education. Read More