The Need for Sonic Greens to Have an Online Business - Case Study Example

Business proposal ECO/561 PROF May 20, Introduction The growing need to have an online business is taking root in most parts of the world. This is because of its cheaper cost of funding, its flexibility, and marketability that comes along with the Internet. Thus it would be sensible to come up with a business plan that fits in with this trend since majority of the people can access the market anytime via the Internet. The project It is for this reason that Sonic Greens is launching a website that will deal exclusively with the sale of fresh, uncut, non-canned agricultural produce both in small and large scale. It will deal with fruits, vegetables and cereals. It will also deal with the sale of seeds that are both fresh and cereals. This business is the most suitable for farmers who will then have the opportunity to also sell their products through the company website. Hotel and restaurant owners can also rely on this company to supply them with fresh farm produce in the shortest time possible from the company stores. They can make emergency large-scale orders, which will also come at different costs depending on the time and the location of the hotel or restaurant. The other target group is the family settings, which are the majority of the customers. In each and every major city, there will be a store from which consumers can purchase selected products from the company based on demographic. Event organizers such as weddings and cooperate events can also rely on the company to deliver fresh produce to their sites (Sant, 2012). Once more, this will be contingent on the position of the site and the time frame within which the order has been made. The company will have stores in major towns with small population to avoid wastage and underutilization of resources since the market may not be very responsive to the sale of the products. When a client desires to create an order, they will have to log onto the website and verify their location first before they can be given product options to choose from. Once they make their order and complete the payment, they can expect their produce within the chosen time frame. As for the farmers who wish to sell their produce within the company website, they will pay their subscription fee to continue selling their products in the website. However, they will not be capable of retailing any product of their choice, as it will be disadvantageous to the company. Thus, an opportunity to sell their cereals to the company, which completes the sale to the clients. Another service that comes along with this product is the fact that clients will be capable of receiving alerts of company discounts, new products or produce in season. These alerts will be sent to customers inform of a messages while organizations that mostly deal with blogs will receive email notifications on the company discount rates. Every so often, the company will host events to sensitize people on the importance of eating healthy (Sant, 2012). This will be done through programs like cooking competition to educate the public on ways to properly prepared food in a manner to preserve the nutritional content. The organization will also launch a cooking website in line with this service so that when people buy produce from the company, they are able to get expertise advice on how to cook food for people with various health conditions. All these will be available online to the customers. Supply and Demand The relationship between the price and the elasticity of the various farm produce will greatly depend on the farm products sold. For instance, with fruits, the price elasticity is likely to be inelastic since majorities of people do not feel compelled to eat fruits on a regular basis. Most people view fruits as an after meal affair, and according to them it is very optional. As for vegetable, they are consumed daily by people in almost all age groups as it accompanies nearly every meal. If the price of the vegetable is adjusted upwards, chances are high that people will still buy the goods. Suppose that the price is reduced by a similar proportion, people will still buy the goods. This makes vegetables to be perfectly inelastic. Increasing the quantity supplied to various stores due to the demand will depend on the affected products. For fruits, it will increase the marginal costs of producing the products since the demand will not be equal to the supply, worst case scenario, sales may not even reach the break-even point. Due to this, the manufacturing costs will be high and this will greatly affect the net return. The marginal cost will be high and the marginal revenue will also be very high. Non-pricing strategies will include extensive marketing that informs people of the products available in the company and why they need to purchase such products. Companies willing to sell their products using the company name will be charged a certain price. The company also intends to offer community services so that people get to recognize it not just as a business enterprise but also as a charitable organization. To increase barriers to entry, more farmers will be allowed to sell their produce directly from the farm to eliminate the middle dealers. The produce they sell can then be repackaged and sold off at profitable prices. Also, the farmers who are able to meet certain targets on a monthly basis will be allowed to have their websites from which they can sell their produce through the company. Increasing barriers to entry will also be possible through the many discount prices and the low prices that the company will offer to clear off its inventory. The fixed costs in this business are the stores and the vehicles that will be used to transport deliveries from the farms or the stores to the client destination. Other fixed costs will be the website and the equipment used in the storage of the products. The variable costs are prices of the farm product given the fact that they will be influenced by seasonal factors or the nature of the demand prevailing in the market. In any event there is a variation in the business operation such as more demand than the supply, the company resources will be overstretched. All the resources will have been fully utilized and the company will be maximizing on its resources (McConnell, Brue & Flynn, 2009). Fixed variable such as the stores will not be affected negatively while Variable costs like those of packing the produce will be the most affected. If the demand is high the variable costs will change depending on what other competitors in the market are charging. If the competitors charge low prices the company will have to reduce its value so as to retain its customers. This may not be profitable given the fact that the variable cost of production may not change much. The best decision could be covering the production costs. In the case where there is more supply than demand, there will be more production costs and this will not yield revenue for the company. To protect the company’s profit margins, there will be a need to charge a higher price. This move has the potential effect of driving away customers or similarly forcing them to seek for alternative means of getting the same products. Recommendations and the macroeconomic conditions For the pricing strategies, the company will apply competition based pricing and high low pricing. Currently, there are many competitors selling the same produce with the only difference being their pricing strategies (McConnell, Brue & Flynn, 2009). For the business to thrive in such situations, the competition based pricing is a major strategy that will always take account of what is being charged by other business before deciding on the appropriate price for every commodity. High low pricing will be used as a backup for the competition based pricing strategy on products that are not on high demand. As for the non-pricing strategy, advertising will be the major strategy. Advertising through the websites and during the cooking lessons will be part of the program (Sant, 2012). Other strategies alongside advertising for non-pricing strategy include enhanced service delivery by improving on the quality of the goods through packaging and the stores will also be opened for prolonged hours to provide for late night purchases. During the low seasons for various products such as fruits, the prices will be adjusted based on what the competitors in the market charge. If the products are completely out of stock then they will be preserved for specific markets. The prevailing market conditions are very varied and it would be not possible to have a predetermined price of these products, especially given the fact that a good number of the products are expected to be seasonal. Operating the fixed costs such as fuel consumption and electricity consumption are the ones likely to be affected by the macroeconomic factors. When the market prices increase the prices charged for delivery of products are expected to be high depending on the distance to be covered during delivery and the time frame. Similarly, the electricity consumed when preserving these produce will have to be factored in the costs of the products sold, hence necessitating the need for revising the prices upwards. At the moment, a unit of oil retails at 103.19 USD (Bloomberg). This means that within the locality a unit of oil will go for approximately 106. 25 USD as compared to the usual 104.15 USD. This difference creates an increase in the cost of production hence necessitating the need to adjust the price so as to protect the profit margins of the business. In turn, the customers are likely to seek for alternative markets to purchase their produce unless they are given good discounts (Sant, 2012). Balancing the variation in production costs while at the same time operating normally is difficult therefore the company will have to weigh its options by considering the opportunity costs to be incurred. The local economy’s stage in the business cycle is at the expansion phase and this implies a lot of rivalry from other businesses. To maximize on the peak stage, the business will take consideration on the marketing strategy and the pricing levels to attract and keep more customers in the business. The prices will have to reflect the changes in the market and consequently making decisions will have to focus on the short term goals given the varied nature of the market situations. References McConnell, Brue, Flynn (2009) – Demand, Supply and Market Equilibrium – Introduction to Economics and the Economy (Chapter 3) Sant, T. (2012). Persuasive business proposals: Writing to win more customers, clients, and contracts. New York: AMACOM. Ford, B. R., Bornstein, J. M., Pruitt, P. T., & Young, E. . (2010). The Ernst & Young Business Plan Guide. Chichester: John Wiley & Sons. Energy and Oil Prices: http://www.bloomberg.com/energy/ Read More