Developing Practical Entrepreneurial Ideas - Coursework Example

Developing Practical Entrepreneurial Ideas Introduction Savannah Limited is a company that will deal with organic fruit juice products. The business idea developed due to the shift of consumer demand from juice and energy drinks to juice produced from organic fruits. The lack of fruit blended juice in supermarkets played a role in the process of initiating the business idea. Given the excessive content of sugar in energy and manufactured drinks, consumers have gained preference of healthier drinks. This has increased the market not only for the public who desire to lead a healthy life but also from obese and diabetic individuals around the United Kingdom. The operations of Savannah will be diverse as stipulated in the business plan. Business Plan Executive Summary The name of the business is Savannah Ltd. The company is relatively large in size with 50 shareholders and 80 employees. The business is in the preliminary stage of development. London is the central location of the company. Other than funding from the shareholders, the company receives financial support from financial institutions through loans. The basis behind the business concept is that the United Kingdom comprises of a population that is prone to consuming drinks with a lot of calories (Ferry, 2011, p.75). The purpose of Savannah Ltd is to use organic fruits to solve the problem brought about by health defects of calories. Savannah Ltd has a widely available market as the population in U.K is slowly changing the diet with the aim of fighting against poor health (Ashurst & Hargitt, 2009, p.78). The management team plays an active role in the business operations in an effort to solve challenges and promote success. Savannah Ltd will offer professionalism that will promote positive change in the healthcare of the society and the nation as a whole. Company Overview The company will strive to accomplish its mission of offering quality drinks for healthy living. Several factors differentiate Savannah Ltd from the existing competitors in the market. The company has a wide brand of products. The firm also has a wide capital base that facilitates efficiency of business operations. The central aim for the business is to influence positive living standards by making fruit drink an aspect of every meal (Fredrick, 2006, p.39). Essentially, this move will involve encouraging parents to provide fruit drinks to children. A culture will grow from then on resulting to reduced incidences of illnesses. Secondly, Savannah Ltd plans to associate with health experts to determine additional health defects that fruit drinks can assist in preventing. The strategy is forward looking to cater for future needs of the society. Generally, the target market is the obese and the diabetic part of the population. This is in line with the firm’s purpose, which is to promote a disease free balanced diet. Trends in the market have placed fruit drinks at the peak in terms of diet priorities (Ferry, 2011, p.91). The third goal focuses on the plan to achieve an increase the market share. To do this, Savannah Limited will establish a national campaign dubbed “take control of your diet, live better”. The company expects that awareness created through the campaign will increase the number of customers as a strategy to prevent against diseases (Brown & Hensley, 2012, p.22). The ultimate goal for Savannah Ltd is to diversify to the global community. The company will only take this step following the fulfilment of the objective relating to revolutionizing a healthy lifestyle around U.K. Management and Business Strategy The business structure comprises of a Chief Executive Officer (CEO) the head of the team charged with the mandate of management. The Board of Directors of directors follows suite in a categorical order. The company has the sales and marketing department, information technology department and the research and development department. Other parties are the shareholders in the company who will receive dividends on a semi annual basis (Bailey, 2011, p.83). The CEO will establish the scope of the operations and strategies that will give the company an edge in the market competition. As part of the business strategy, Savannah Ltd plans to invest on developing technology to enable online sales of fruit juice products. For protection purposes, Savannah Ltd intends to obtain patent rights related to the products (Lee, 2011, p.42). The company wants to be in a fair competition by reducing cases of infringement on a legal basis. Products The company understands the increased desire to consume blended organic fruits and therefore offers a variety of brands. Products under the brands, which are all organic in nature, include blended pineapple juice, passion juice, orange juice, Apple juice, strawberry juice and mixed juice (Bailey,2011, p.61). In addition, Savannah Limited appreciates the nutritional value of vegetables in supplementing health care. As such the company will offer blended vegetable drinks for instance green tea (Fredrick, 2006, p.26). In an aim of being more appealing to the customers, the company will offer delivery services. Home and office deliveries will go a long way in making the product popular within the economy. Many are the cases where poor handling of the product results in customer shifting to competitors. Packaging will be critical in ensuring that customers get quality products. Marketing and Sales Marketing will enable the firm to create a difference in the society. Given the fact that the target market is the diabetic and obese section of the population, advertising will be instrumental in marketing the products. Most of the people who love staying healthy work out at gymnasiums. The company will use this to spread information about the existence of the products to potential customers (Bogart, 2013, p.114). Moreover, the company will work hand in hand with hospitals so that the medical centres can recommend patients with health defects to the fruit juice products. As part of the selling proposition, Savannah Limited will establish smoother bars around the United Kingdom (Bailey,2011, p.39) The company will sell the products through wholesale and retail channels in order to reach out to customers at a local level. The company will set prices at a convenient rate for the customers to encourage consumption. Financial Projections Values are in pounds. Savannah 2-Year Profit and Loss Projection monthly Jul Au Sep Oc Nov Dec Jan Feb Mar Ap may Jun Income 5100 5320 5125 5343 5476 5542 7550 7320 7460 7530 7610 7450 Maintenance 8132 9300 9740 10231 11004 12340 13280 14120 15165 18935 20670 21920 Sales 13232 14620 14865 15574 16480 17882 20830 21440 22625 26465 28280 29370 C.O.G.S 600 600 600 600 600 600 600 1250 1250 1250 1250 1250 1250 G.Profit 12632 14020 14265 14974 15880 17282 20230 20190 21375 25215 27030 28120 Expenses Salaries 44500 44500 44500 44500 44500 44500 44500 44500 44500 44500 44500 44500 Selling 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 Office 3200 3200 3200 3200 3200 3200 3200 3200 3200 3200 3200 3200 3200 Other 900 900 900 900 900 900 900 900 900 900 900 900 900 Total 52600 52600 52600 52600 52600 52600 52600 52600 52600 52600 52600 52600 Operating Profit 39968 38580 38335 37626 36720 35318 32370 32410 31225 27385 25570 24480 Interest Income 1023 2450 2045 1640 1434 1120 800 600 400 360 300 245 Net Income 38945 36130 36290 35986 35286 34198 31570 31810 30825 27025 25270 24235 Quarterly 2014 - 2015 Cash Flow £ in millions Q1’14 Q1’15 Change Net Cash used in operating activities £ 3.9 £2.6 (£1.3) Net Cash used in Investing activities £3.2 £1.8 (£1.4) Net money applied in Financing operations £38.9 £27.5 (£11.4) Net increase (decrease) in cash £46 £31.9 (£14.1) Debt Related Expenses Cash paid for income taxes £19.2 £16.4 (£35.6) Cash paid for interest £1.6 £1.2 (£2.8) Cash paid for transactions £5.9 £4.8 (£10.7) Total £26.7 £22.4 (£49.1) Recurring Cash flow consumption £19.3 £9.5 (£35) Break Even Calculation Gross Margin 86% Overhead Costs Rent £2300 Insurance £1000 Administrative Payroll £17000 Marketing £6500 Utilities £700 Taxes £1200 General and Administrative Expenses £2400 Total £31100 Balance Sheet Payments Drawings £7500 Debt Payments £3700 £11200 Total Costs to Cover Overhead £31100 Balance Sheet Payments £11200 Total £42300 Breakeven Point: Total Cost to Cover/ 86% = £49186 Capital Requirement Plan The capital purchases that the company will invest in include computers and the machinery necessary for blending fruit juices. Direct costs will also involve computers that will facilitate operations by the information technology department. The purchase of company vehicles will facilitate the transportation of the product to the market (Opie, 2010, p. 71). Additional purchases will involve resources required by the research and development department. Being a publicly traded company, Savannah Ltd will issue shares to the investors. This will provide extra funds for running the operations of the firm. Other external source of funding will be loans from financial institutions to cater for advanced growth of the company (Lee, 2011, p.102). The Chief Financial Officer (CFO) will ensure effective use of the funds that will generate positive returns. Savannah Ltd will commit to a repayment plan that will see the company pay the debts as required. Competitor Analysis Only three competitors are in the fruit juice market of United Kingdom. The competitors operate on small scale by selling the product through stores. The management of Savannah Ltd is very aggressive in effort of making the product unique (Opie, 2010, p.35). In an effort to stand out from key players in the market, the management will initiate strategies that that would make the product famous. Among the strategies is to continually engage in community activities that will make the society to experience a sagacity of attachment to the organization (Ashurst & Hargitt, 2009, p.173). Savannah Ltd realises that feedback from the customers is detrimental in ensuring that the company delivers on its mandate. Consequently, the firm plans to institute software through which customers will comment on the convenience of using the product. The software will cater for customer needs by answering queries regarding the product. It will be counterproductive for the firm by determining changes in relation to the product that will increase satisfaction. Potential Challenges Political instability is a major threat that may interfere with operations of Savannah Ltd. Instability undoubtedly results to reduced sales and threatens the closure of business. The problem is beyond significant management of the company and the only thing that Savannah Ltd can do is to diversify the business operations in various locations (Savona, 2010, 53). Inflation is an economic problem that may affect the prices within U.K. Effects of inflation would flow to the consumers making it difficult to purchase the product. Government policies in terms of the taxes that the relevant authority will impose on the business may increase the cost of production thereby resulting in increased prices and reduced sales (Bogart, 2013, p.144). Given the fact that the products dealt with are agricultural, bad weather conditions may affect the productivity of the company. To guard against such a risk, the company should consider importing organic fruits from outside the country. Justifying the Expenditure The number of expenses involved relate to the nature of business. To begin with, Savannah Ltd has to preserve fruit and vegetables as the raw materials are perishable. The cost of managing refrigerated stores is very high (Brown & Hensley, 2012, p.44). Running costs of the firm and the maintenance of equipment as well as company vehicles that transport the products to the market are high. The company has a huge budget spending on advertising. Venturing into the United Kingdom market, where few fruit juice competitors exist calls for increasing the awareness of the brands (Ashurst & Hargitt, 2009, p.152) Introduction of online sales by establishing a websites add to the cost. Owing to the technological aspect, sales will most likely go to a higher notch. The company’s investment in customer related program is an expensive move. Nonetheless, the benefits are worth it because good customer relationships create customer loyalty that acts as a driving force for success. Operational Requirements Premises are a key necessity in facilitating the operations of Savannah Ltd. Consequently, the company will require large premises to handle all the departments. The premises should also offer storage facilities for the fruits Personnel in the information technology department will determine and implement the necessary systems for the company. Most importantly, the IT department will work hand in hand with the managers to develop a management system (Lee, 2011, p.97). The management system communicates to the lenders and the public the manner in which the company handles its activities. The system will enhance the flow of information from top level officials to the workers. Assignment of tasks will be easier and more effective through the system. Other requirements involve creating an online database to record both the business transactions and the capacity in the stores. Credibility of the Management The management comprises of competent individuals with diverse skills in the various fields within the company. Skills from all the individuals in the management enhance the compliance with business needs. The leadership of the firm values healthy living and will strive to bring change to the society by encouraging the consumption of calorie free fruit drinks (Alters & Schiff, 2009, p.59) Savannah Ltd management team will be very responsible when it comes to setting policies that will foster growth for the company. Supervision by the managers will enhance coordination of all departments in achieving increased productivity. The business will run on ethical grounds characterized by a code of conduct. Moreover, the management will set rules that will guarantee transparency in the business operations (Lee, 2011, p.74). To prove its commitment to sales, the management of Savannah Ltd plans to use websites such as Facebook and twitter for advertising. Ideally, enlightening the youth about the significance of organic fruit juice products will create a positive impression that will steer the Company to the future. Financial Rewards Financial rewards are incentives, normally monetary ones that employees, managers and investors receive. Investing in Savannah Ltd will be a productive venture for the existing and potential shareholders. Shares bought by investors obligate the firm to pay financial rewards in the form of dividends on an annual basis (Lee, 2011, p.66). The benefits outdo the risks associated with the business because exploiting the large market around the United Kingdom will bring in huge profits. Investors will have a share of the profits based on shareholder contribution. Depending on the performance of the company, the management team and the employees will benefit from bonuses on the salaries (Ashurst & Hargitt, 2009, p.45). In addition to the financial rewards, the shareholders will participate in Annual General Meetings (AGM). The importance of the AGM is to enable shareholder to participate in the decision making process by voting on a given matter of interest. Conclusion Prevalent cases of health defects associated with a high level of calorie within U.K aided the business concept of establishing Savannah Ltd. The mission of the company use organic fruits to create a disease free society. The short-term objective is to promote healthy living. To achieve this, Savannah Ltd will strive to incorporate organic fruit drinks in the diet. The business plan stipulates the business strategy that will direct the operations of the company. Few firms are dealing with the organic fruit drinks as most engage in the business of energetic and sugary juices. The competitive advantage of Savannah Ltd stems from the number of brands of fruit juice as well as the uniqueness in selling through smoothie bars. In the long-run, the company hopes to extend to the global community. The operations of the company will go a long way in improving the living standards of many people. Bibliography Alters, S., & Schiff, W. (2009). Essential concepts for healthy living. Sudbury, Mass: Jones and Bartlett Ashurst, P., & Hargitt, R. (2009). Soft drink and fruit juice problems solved. Cambridge: Woodhead. Bailey, C. (2011). The juice diet: lose weight, detox, tone up, stay slim & healthy. London: Duncan Baird Publishers. Bogart, W. A. (2013). Regulating obesity?: government, society, and questions of health. Brown, E., & Hensley, K. K. (2012). Smoothies for better health: 100 nutrient-packed drinks to boost your energy and supercharge your immune system. Beverly, Mass: Fair Winds Press Ferry, R. J. (2011). Management of pediatric obesity and diabetes. New York: Humana Press. Fredrick, Annie. (2006). Textbook of food and nutrition. New Delhi: Lotus Press. Lee, J. (2011). The right-brain business plan a creative, visual map for success. Novato, Calif: New World Library. Opie, L. H. (2010). Living longer: the heart-mind connection. Oxford: Oxford University Press. Savona, N. (2010). The big book of juices: more than 400 natural blends for health and vitality every day. London: Duncan Baird Publishers. Read More