A Way of Running Business - Example

Business Plan of Executive Summary The rapid changes and transactions in UAE have significantly influenced lifestyles of people living in UAE. The changing in the living patterns of UAE and globalization has caste impact on the choices of the individuals. It has greatly influences electronic and household appliances industry in UAE. The electronic and house appliance industry is growing with a faster pace, as people of UAE are moving towards premium consumer appliances that have greater functionality and efficiency (Consumer Electronics in the United Arab Emirates, 2014). There is high demand for the value added home appliances because of long working hours. Preference for iced-coffee is becoming popular among the people of UAE because of the hot climate condition. The busy life style and long working hours of people have immensely affected the lifestyle of people want to have instant iced-coffee. ABC Company acknowledges the growing demand and preference for ice-coffee. Therefore, ABC will launch one touch iced-coffeemaker that instantly produces iced-coffee. The One-Touch Iced-Coffeemaker will save your time and provide you best flavored iced coffee in few minutes. This iced-coffee maker automatically brew coffee, comes with multiple options to make iced-coffee very mild to strong iced-coffee. It instantly makes iced-coffee with using raw coffee beans as well as instant coffee. ABC One-Touch Iced-Coffeemaker processes coffee with perfection to create coffeehouse styled iced coffee assorted drinks that are freshly brewed in few minutes. The machines come with on unique option that is produce iced-coffee with the capsule refills that makes iced-coffee process easier and quicker. The primary aim of this report is to propose a business plan for ABC On-Touched Iced-Coffeemaker in the UAE market. 1. Business History ABC Company is one of the leading electronic and home appliances histories having its major operations in UAE. ABC Company has been innovative to assess the needs of customers, focusing on the growing preference and demand of Iced-Coffee in the UAE. The people of UAE are trendy and spend extensively on better living. The growing preference for ice-coffee is becoming trendy and has become a part of daily routine. However, the hot climatic conditions and long working hours of individuals living in UAE seek to have time saving ice-coffeemaker machine with multiple options for different flavored ice-coffee at home. ABC Company acknowledges the growing demand and needs of its customers. The company aims to introduce One-Touch Iced-Coffeemaker that will allow its customers to have instant coffeehouse styled iced coffee at home. The unique capsule refilling options enables customers to make best coffee in few minutes. 2. Description of Product ABC Company aims to launch One-Touched Iced-Coffeemaker that is specially designed for the iced-coffee lovers who are particular to seek the right mix, blend and taste of coffee. The One-touched Iced-Coffeemaker comes with multiple options that make it easier to pick the right blend and strength of the iced-coffee. It comes with five flavor options for iced-coffee that makes it easier one of to prepare assorted flavored iced-coffee at home, office or anywhere. The one touch refill capsule option makes saves time and prepares gourmet style coffee within few minutes. In addition, the company provides maintenance and repair services exclusively for One-Touched Iced-Coffeemaker. 3. Vision One-touch Iced-Coffeemaker blends it to perfection, just according to your taste. 4. Mission ABC Company aims to produce the best quality iced-coffeemaker that is convent, easy to use and time saving. The One-Touch Iced-coffeemaker is specially designed to save time and brew iced-coffee with multiple flavoring options to its perfection anticipating the demand and attain high customer satisfaction. 5. Objectives ABC Company focuses to be the premium maker of iced-coffeemaker machines with the latest technology. It aims to be the most compatible iced-coffeemaker machines by the ends of first year by increasing its sales by 15 percent annually 6. Ownership and Management One-Touch Iced-Coffeemaker will be manufactured and launched by ABC Company. Abdul Rehan is the sole stockholder of ABC Company. He is one of the renowned businessmen who run multiple coffee shops in different regions of the world. Rehan has a great experience in coffeehouses and hospitality industry that would facilitate to develop high functional iced-coffee machine that fits the need of the society. It is a family owned business due to which it will be mainly managed by the Family of Abdul Rehan. In addition, the company hires highly skilled engineers and technicians that specifically design One-Touched Iced Coffeemaker. The company aims to float its share in the stock exchange in the next five years. 7. Location One-Touch Iced-Coffeemaker will be available in the leading electronic and retail stores. The company’s manufacturing unit and head office will be located at Jebel Ali, Dubai. In addition, the company will introduce special customer care and its own retailing outlets in the leading malls of UAE. The main retailing store, as well as One-Touched Iced-Coffeemaker will be retailed at the leading electronic and retail stores. However, the customer service shop will be established in Dubai Mall because of its ideal location. 10. Market Analysis The section of the report presents brief description about the different market conditions and target customers for One-Touched Iced-Coffeemaker. In addition, it discusses the market condition and proposes market strategies and marketing plan for the product. It can be identified that the UAE is multi-cultural community in which the people belonging from different regions of the world are settled (Keillor, 2009). However, the growing demand for iced-coffee is extensively growing and people prefer consuming coffee more than tea. Despite the fact, UAE has been greatly affected by the global economic recession. However, the economy is restoring the economy is growing that has encouraged people to spent on consumer good. In addition, the people of UAE are enthusiastic to adopt advance technology that is easy is use and quick (UAE Ministry of Economics, 2015). The electronic appliances industry has significantly grew in last five years. It is predicted that the advances and innovative technologies in UAE are noted to have higher demand in UAE. 11. Target Market ABC Company focuses on the needs of customers and aims to provide high quality product to satisfy the needs of its customers. The target customers group for the One-Touched Iced-Coffeemaker will be the individuals who are taste conscious and looking for a perfect coffeehouse-styled blended iced coffee. The target customers are mainly the trendy people settled in UAE, specifically working class as they consume more coffee and taste conscious, looking for quicker and easy way to prepare iced-coffee at home and office. The main focus will be working middle and upper class of UAE as they are more trendy due to which they are more inclined to consume more iced-Coffee in different flavor. ABC One-Touched Iced-Coffeemaker comes with the exciting flavor and its refill capsule option rapidly makes it easier and saves the time for the preparation of the coffee. Therefore, the targeted audience for the product will be male and female both between the ages 15-45 years mainly the working class with an average household income of 60,000 Dhiram annually. The focused families will be modern and immigrant individual who have greater preference for coffee but due to hot weather of UAE they want to have iced-coffee in different flavors. 12. Market Segmentation 1. Demographic The target audience for the One-Touch Iced-Coffee making machine will be both male and female between the age group 15-48 years living in UAE. However the main targeted customers will be the middle and upper class focusing who are mainly working in different offices or run their own business. 2. Geographic The product is specifically designed for the people urban areas, specifically in Dubai and Sharjah. The retail stores will be located in the Dubai Mall as it is located in the heart of Dubai. 3. Psychographic The people of UAE are adapting modern lifestyle and want to experience new taste. The people of UAE admire the coffee but due to hot weather, people want to have cold beverage that has eventually increased the demand for Iced-Coffee. In UAE, people belonging from working class are more due to which they consume more coffee at work and home, as it is perceived as a source of energy. In addition, due to busy schedule people of UAE have less time to go to coffeehouse. It has increased the demand for Iced-Coffee and is becoming more like a part of their daily routine due to which they want to have immediate access for iced-coffee. 4. Behavioral The people of UAE have adaptive attitudes towards One-Touched Iced-Coffee machine. The multicultural society of UAE and changing life patterns has increased usage rate of iced-coffee machines at home and offices. 13. Positioning The product will be positioned with the problem and solution positioning. ABC Company acknowledges the needs of the customers due to which they have to go to coffeehouses to have iced-coffee. The machine is designed with the multiple options that is powerful strategy and provides relieve to its customers efficiently. The process of putting the ingredients in the machine and brewing process is lengthy in coffee machines due to which people are frustrated. The easy operation process and multiple options of One-Touch Iced-Coffee machine allows its customers to save their time and prepare gourmet styled coffee at home. In addition, the quality of the product is one of the most important components that ABC Company has ensured. People of UAE prefer high quality products with fancy design, so the product will be manufactured using high quality materials. One-Touch Iced-Coffee making machine’s unique selling point is its capsule refill feature that makes it easier and saves time for the people to pour ingredients in the machine. So the customers can the capsule can be put in the machine to prepare the coffee. Unlike the other coffee machine, it is faster and can prepare the coffee within less than two minutes. The blending and brew technology used in the product is high tech that blends the ingredients to its perfection. Another main point that makes One-Touched Iced-Coffee machine unique point for its customers is because of its multiple flavoring options. In addition, it comes with the different options to make the coffee strong to mild according to the need of customers. None of the iced-coffee making machine provides these options to the customers. 14. Marketing Objective ABC Company’s marketing objective is to increase the sales by 15 percent and increase of 40 percent in the market share in the next twelve months. In addition, it aims to be among the top 10 Iced-Coffee making machines in UAE in next 3 years. Market Strategy ABC Company aims to provide the most innovative technology that provides the best iced-coffee making machine in UAE to the target market (Lennon & Steinbeck, 2013). The company aims to sets the price for the iced-coffee making machine at AED 600 so that it is affordable for the individuals. The increase in the trend of cold beverages because of the hot temperature has provided greater opportunity to bring One-Touch Iced-Coffee making machine for its customers. In addition, the consumers and suppliers are negotiated in order to provide prices at the low prices without any compromise on its quality (UAE Ministry of Economics, 2015). In addition, ABC Company make use of Integrated Marketing techniques for the marketing and promotions for the product. The product will mainly be advertised using printed advertisements on new paper magazines, banner, broachers, flyers etc. In addition, social media and advertisement on television will be broadcasted time to time. The use of outdoor advertisement in the malls during summers, specifically in the summer festival will be done. 14. Strategy ABC Company has a strong financial positioning and reputation in the industry. its prolonged competitive advantage is based on the quality product, pricing and cost efficient strategies that as allowed the company to resonate target market (Kitchen & Burgmann, 2010). The company will make mainly focus on luxurious and exclusive aspects in products to agin larger attraction of customers (Ferrell, 2009). the people of UAE are standard conscious due to which they are much inclined to consume high quality goods, as well as the use of eco-friendly aspects in the product makes one-touch iced-coffee making machine more attractive with the responsibility for additional source of income (Keillor, 2009). 15. Financial plan Startup Capital ABC Company will be undertaking range of promotional actives to promote One-touch Iced-Coffee making machine. The use of the different lucky draws and special discounts for different customers will be provided for limited time. In addition, different out door activities will be conducted to demonstrate the use of the machine and create awareness about the product (Ferrell, 2009). The advertisement techniques and strategies will be constantly changed and new ads will be designed on weekly on the print advertisement and three month later on the flyer drops. The outdoor and BTML activities will be conducted during hot summers, specially Dubai Summer Festival to signage the bright and appeal. The company will also make use of word of mouth advertisement to create awareness about the product. It is essential for the organization to ensure that company’s strategies are efficient to ensure its sustainable operations for three to five years. In order to start a new venture it is important to identify required expenses and resources that would be required to meet it operation. In the home appliance manufacturing industry, it initial start up expenditures requires legal costs, property lease or purchase, logo design, Information technology system, stationary, remodeling and other operational expenses. Assets are one of the core components for the organization to run its operations. Thus, the organization would require short-term assets. The company would also need inventory to generate sales for the company. Therefore, the company should have sufficient inventory for the next two years. In addition, the company requires having sufficient cash in hand for first few months to ensure that the operation of the company is met through its sales. Long-term assets that will be required for the company are its office computers, vehicles, manufacturing plants, security and fire alarm system, storage and warehouses. Start Up Expense AED (Dirham) Legal 84,000 Stationery 5,000 Manufacturing plant 5,000,000 Rent (employee accommodation) 70,000 Marketing Expenses 46,000 Insurance 50,000 Management Salaries 356,000 Warehouse 628,650 Total Start Up Expenses 6,239,650 The warehouse will be 12,573 sq. feet and the annual rent of the warehouse will increase by 7 percent every year (mitula, 2015). The company will bring the labor from abroad due to which the company will incur rentals for employee accommodations. All the expenses mentioned are subjected changes because of the change in the policies, inflation, etc. Marketing Budget The company will allocate the following amounts to different channels of marketing. Marketing Budget Year 1 Magazine 120,000 Brochures 20,000 BTML Activities 150,000 Flyers 25,000 Banners 30,000 Social media 15,000   360,000 Every year the company will increase its marketing budget by 10%. Sales Budget The company aims to set its sales budget as follows based on expected sales of 90% of the total unit produced.   Year 1 Year 2 Year 3 Number of Unit Produced 100,000 130,000 200,000 Expected Sales 90,000 117,000 180,000 Sales Revenues 31,500,000 40,950,000 67,500,000 Operating Expenses Budget The operating expenses budget is presented in the following. The operating expenses are estimated to be 40% of the company’s gross profit every year. Operating Expenses Budget   Year 1 Year 2 Year 3 Operating Expenses 4,335,200 4,146,400 6,721,200 Salaries 550,000 577,500 1,212,750 Factor Overheads 1,500,000 1,283,900 1,944,850 Labor Cost 120,000 139,000 150,000 Utilities Expenses 500,000 500,000 525,000 Marketing 360,000 396,000 435,600 Distribution 250,000 250,000 275,000 Rent 1,000,000 1,000,000 1,100,000 Other Expenses 55,200   1,078,000  Total Operating Expenses 4,335,200 4,146,400 6,721,200 Salaries will be paid to administrative staff, marketing managers and supervisors. Distribution costs are expected to increase by 10% every year. Utilities expenses are related to the expenses allocated to the manufacturing unit and warehouse. Other expenses include costs covering fuel expenses, travelling, public relations, trainings, any other business related expense etc. Projected Profit and Loss The primary aim of ABC Company is to increase its overall profits and cash flows by 26 percent annually. The company will stress on cost efficient strategies, specifically in its advertisement and would emphasize to get higher rating and reviews from its customers. In addition, the labor costs will be relatively low than the other competitors in the industry. It will mainly emphasize on getting and training new graduates from the engineering colleges, as well as hospitality industry for the inducement of the technology advance features in the iced-coffee making machine. Pro Forma Profit and Loss   Year 1 Year 2 Year 3 Sales 31,500,000 40,950,000 67,500,000 Cost of Sales 20,662,000 30,584,000 50,697,000 Gross Profit 10,838,000 10,366,000 16,803,000 Depreciation 281,433 267,361 239,921 Operating Expenses 4,335,200 4,146,400 6,721,200 Operating Profit 6,221,368 5,952,239 9,841,879 Pro-Forma Balance Sheet Pro-Forma Balance Sheet   Year 1 Year 2 Year 3 Cash 5,799,150 10,674,900 14,501,400 Account Receivable 1,575,000 2,047,500 3,375,000 Other Assets 1,033,100 2,681,983 9,164,225 Total Current Assets 8,407,250 15,404,383 27,040,625 Long term assets 5,628,650 5,347,218 4,798,424 Accumulated Depreciation 281,433 548,793 788,715 Total Assets 13,754,468 20,202,807 31,050,335 Accounts Payable 1,033,100 1,529,200 2,534,850 Total Current Liabilities 1,033,100 1,529,200 2,534,850 Paid in Capital 6,500,000 6,500,000 6,500,000 Retained Earnings 6,221,368 12,173,607 22,015,485 Total Equity 12,721,368 18,673,607 28,515,485 Total Equity and Liabilities 13,754,468 20,202,807 31,050,335 The balance sheet of ABC Company is prepared mainly for the internal users and management. The preparations of the balance sheet are done with respect to International Financial Reporting standards and ensure ethical conduct in terms of disclosure, transparency and accurate reporting of the financial figures. Above pro-forma balance sheet is prepared on the bases of the information obtained from the market survey. However, the financial figure may vary due to the change in actual event and external factors. The depreciation costs have been identified on the basis of historical costs of ABC Company. Cash Budget Pro-Forma Cash Budget   Year 0 Year 1 Year 2 Year 3 Cash Receipts         Paid in Capital 6,500,000       Cash Sales   29,925,000 38,902,500 64,125,000 Credit Sales     1,575,000 2,047,500 Total Cash Receipts   29,925,000 40,477,500 66,172,500           Cash Payments         Investment 5,628,650       Cost of Sales   20,662,000 30,584,000 50,697,000 Operating Expenses   4,335,200 4,146,400 6,721,200 Total Cash Payments 5,628,650 24,997,200 34,730,400 57,418,200           Net Cash Flow 871,350 4,927,800 5,747,100 8,754,300 Cash Position   5,799,150 10,674,900 14,501,400 Manufacturing overhead Budget Manufacturing Overhead Expense Year 1 Year 2 Year 3 Direct Material 20,662,000 30,584,000 50,697,000 Direct labor 120,000 139,000 150,000 Factory overhead 1,500,000 1,575,000 1,653,750 Total Manufacturing Overhead Costs 22,282,000 32,298,000 52,500,750 The costs of the material, labor and overheads are estimated on the basis of the information obtained. Moreover, the company aims to imply lean management practices and induce technology advance equipment and machines to improve its efficiency and cut down the labor costs. The company implies advance lean management practices to improve its waste management and lower its manufacturing costs. In addition, the company aims to install energy efficient and systems in the next two years that will allow the company to reduce its factory overhead. Labor Budget Direct Labor Budget   Year 1 Year 2 Year 3 Planned Production   100,000 130,000 200,000 Direct labor Hours per Unit   0.4 0.4 0.4 Budgeting Direct Labor Hour   40000 52000 80000 Cost per direct labor hour   3.00 2.67 1.88 Budgeting direct labor cost   120,000 139,000 150,000 The wages of the labor are estimated on hourly basis according to the prevailing average wages reported by UAE Ministry of Economics. However, there is decline in the per hour wages, as the company intends to shift some of its manufacturing houses in regions like China that will eventually reduce hourly wages. The company also aims to bring labor from the developing countries that can allow the company to reduce the costs (UAE Ministry of Economics, 2015). Conclusion On the basis of above information presented in the paper it can be determined that the One-Touched Iced-Coffee making machine has unique features. However, there is several coffee-making machine currently in the market but the features that are provided by ABC Company are innovative. Hence, it is projected ABC One-Touched Iced-Coffee making machine’s positioning in UAE market is strong. References Badenhorst-Weiss, H., Cant, M., & Bervis, T. (2009). Business Management: A approach contemporary Approach. New York: Juta and Company. Consumer Electronics in the United Arab Emirates. (2014). From http://www.euromonitor.com/consumer-electronics-in-the-united-arab-emirates/report Ferrell, W. P. (2009). Marketing. Mason: Cengage Learning. Freeman, R. E. (2010). Strategic Management: A Stakeholder Approach (Illustrated ed.). Cambridge: Cambridge University Press. Keillor, B. D. (2009). Marketing in the 21st Century: Integrated marketing. London: Greenwood Publishing Group. Kitchen, P. K., & Burgmann, I. (2010). Integrated Marketing Communication. Kotler, P., & Keller, K. L. (2006). Marketing Management (12th ed.). New Jersey: Prentice Hall. Lam, C. (2009). Legal Aspects of Marketing and Eventmanagement. New York: Books on Demand. Lennon, J., & Steinbeck, J. (2013). A way of viewing business. Sydney. mitula. (2015). Retrieved from http://property.mitula.ae/for-rent-warehouses-dubai Monsanto. (2014, April 29). Busines Ethics - Monsanto. Retrieved from http://prezi.com/3tn7tjwom07e/business-ethics-monsanto/ Schloz, L. (2014). Brand Management and Marketing of Luxury Goods. London: Anchor Academic Publishing. Trevino, L. K., & Nelson, K. A. (2010). Managing Business Ethics. New York: John Wiley and Sons. UAE Ministry of Economics. (2015). Retrieved from http://www.economy.gov.ae/English/Pages/UnderConstruction.aspx Werhane, P. H. (2012). Globalization and Its Challeneges for Business and Business Ethics in the tweinteeth Century. Business & Society Review, 117(3), 383-405. Appendix Collection Budget Accounts Receivables 67,000     67,000 1st Half Sales (59) 35400 14160   49560 2nd Half Sales (53)   31800 19080 50880 Total cash Collection 102,400 45960 19080 167,440 Production Budget   Year 1 Year 2 Year 3 Number of Unit Produced 100,000 130,000 200,000 Variables Production costs       Direct material 20,000,000 29,900,000 50,000,000 Direct Labor 120,000 139,000 150,000 Manufacturing Overheads       Factory insurance 500,000 500,000 500,000 Production Supervisor Salary 42,000 45,000 47,000 Total Production Costs 20,662,000 30,584,000 50,697,000 Per Unit Cost 206.62 235 253 Direct Materials Budget Units to be Produced 100,000 130,000 200,000 Cost of Material needed per Unit 200 230 250 Cost of material for unit to be produced 20000000 29900000 50000000 Expected Cash Disbursement 1st Quarter 2nd Quarter 3rs Quarter 4th Quarter Accounts payable 0 First quarter 30,000 30,000 Second Quarter 50,000 50,000 Third Quarter 35,000 35,000 Fourth Quarter 25,000 Total Cash Disbursement 30,000 80,000 85,000 60,000 Read More