Analyzing of ABC Company - Business Plan Example

Running Head: Business Plan on App BUSINESS PLAN EXECUTIVE SUMMARY This business plan is an effort of the ABC Company to illustrate details regarding launch of its social application named ‘Find me a seat’ in the city of London, the United Kingdom. The company intends to benefit from the opportunities and avenues opened by the social media industry and from huge base of existing online consumers engaged at different social media platforms. The application will primarily facilitate users in locating their seat at social arenas, such as cinemas, stadium, concert halls, etc, which will save a lot of time, and will help the users in avoiding hassles that they usually face while finding their seat during such social experiences. The business plan includes critical analysis of company’s external and internal aspects through SWOT analysis, PEST analysis, and Porter’s Five Force analysis that will enable the investors to understand viability of the proposed business. The plan discusses briefly different marketing approaches and strategies to be employed by the company followed by financial estimates in the form of cash flow, income statements, and balance sheets. Table of Contents EXECUTIVE SUMMARY 2 This business plan is an effort of the ABC Company to illustrate details regarding launch of its social application named ‘Find me a seat’ in the city of London, the United Kingdom. The company intends to benefit from the opportunities and avenues opened by the social media industry and from huge base of existing online consumers engaged at different social media platforms. The application will primarily facilitate users in locating their seat at social arenas, such as cinemas, stadium, concert halls, etc, which will save a lot of time, and will help the users in avoiding hassles that they usually face while finding their seat during such social experiences. The business plan includes critical analysis of company’s external and internal aspects through SWOT analysis, PEST analysis, and Porter’s Five Force analysis that will enable the investors to understand viability of the proposed business. The plan discusses briefly different marketing approaches and strategies to be employed by the company followed by financial estimates in the form of cash flow, income statements, and balance sheets. 2 Table of Contents 3 1 - INTRODUCTION 4 1.1 Company Background 4 1.2 Mission and Vision 4 1.3 Legal Form of Business 5 1.4 Proposed Entry Strategy 5 2 - MARKET AND COMPETITION ANALYSIS 7 2.1 Market Analysis 7 2.2 Target Market 7 2.3 Achieving Competitive Edge 9 2.4 Industry Analysis 9 2.4.1 Porter’s Five Forces Analysis 9 2.4.2 SWOT Analysis 10 2.4.3 PEST Analysis 12 2.5 Marketing Strategy 13 3 - FINANCIAL PLAN 15 3.1 Projected Cash Flow 15 3.2 Financial Statements of 3 Years 17 3.2.1 Projected Income Statement 17 3.2.2 Projected Balance Sheet 19 REFERENCES 21 1 - INTRODUCTION 1.1 Company Background In recent years, there have been several alterations in the way businesses function in this world. Particularly, a major change has evidently been the introduction of online businesses and the impact of online tools and strategies on consumers, which has opened new avenues and created opportunities for new business ventures in the market. In this regard, this business plan is an attempt to propose a new venture that will include external and internal market analyses along with overview of product and services to be offered by the business with a demonstration of acquiring financial advantages from this proposed business venture. This business venture is an outcome of daily experience of the proposer, as well as people around that usually come out their homes and visit different social places, such as cinemas, football stadiums, baseball and cricket matches, concerts, etc. It is an observation that in such crowded events, it usually takes ten to fifteen minutes to locate the seat, which involves asking different people and moving from here and there, especially when it is a new place. 1.2 Mission and Vision To resolve this issue, the ABC Company will launch this online business with a mission to provide peacefulness to social lovers and to enhance their social experiences. To fulfil this mission, the ABC Company has planned to launch a social application named ‘Find my seat’, which has been designed to help visitors find their seats in an accurate and efficient manner using GPS tools and techniques even in crowded places. The social app will not only locate the seat as per the given ticket number but will also guide the user towards the seat with written and audio instructions. For instance, the visitors to a cinema will only have to enter the ticket number in the application and the app will then locate the ticket seat using its database and GPS tracking techniques and provide mapping with guided features to help the user reach to the seat and enjoy the social experience without any hassles. 1.3 Legal Form of Business The ABC Company will be established as a private limited company that has been one of the easiest and common forms of registered organisations in the United Kingdom. An important reason of establishing it as a private limited company and not as a proprietorship is to ensure security of personal benefits and ensure that business liabilities may not affect personal assets of the owner. Moreover, the private limited company will allow the owner to promote investments in an easy manner since the UK government imposes less taxed on profits of private limited company in comparison to private limited corporation (Tricker, 2009). Research (Company Warehouse, 2010) has indicated that banks also prefer private limited companies to lend money for new business start ups since more than one individual are usually involved in limited companies and therefore, banks easily loan amounts. Lastly, the ABC Company will continue to function and grow even at the death of its owner, which was another reason to launch it as a private limited company, as the users will continue to benefit with this app and service for many more years to come. 1.4 Proposed Entry Strategy The owner has planned to create different versions of social application after getting required investments, particularly Android version and Apple versions that constitute the major market share in the world of social apps. Research shows that Android has 76.6%, whereas iOS enjoys 19.7% market share followed by Windows Phone, Black Berry and other operating systems in the world market of smart phones (IDC, 2014). Considering this, the company intends to create at least Android and Apple versions as a start and as the results will come in regarding company’s performance, the company will invest in other versions as well. 2 - MARKET AND COMPETITION ANALYSIS This part of the business plan will provide critical analysis of external and internal aspects of business environment that will indicate extent of business viability and will help the owner and investors in understanding the level of competitive edge in the market. 2.1 Market Analysis Analysis of social media market has indicated that social apps have become an important and essential aspect of social media industry. Giants such as Facebook and Twitter have launched their own marketplaces for millions of social applications available for downloads and use. Every day companies are investing in expanding their company’s presence by entering into the social media market and a number of companies are investing in their social apps to enhance their consumer base. Research has identified mainly two sectors of social media industry that are enterprise social media and consumer social media. The proposed business will be entering directly into consumer social media sector that involves direct relationship with the users and providing exclusive services to the consumers. Some of the most common forms of apps that are providing services in the consumer social media sector are chatting, blogging, photo sharing, games, instant messaging, and giants, such as Facebook, LinkedIn, Twitter, etc. In 2012, there were more than three billion accounts (The Radicati Group, 2012) in the social media industry that indicates the extent to which this industry offers opportunities for entrepreneurs and new ventures. 2.2 Target Market Since all age groups of people use smart phones and social apps, therefore, people often argue that businesses involving apps do not need to target markets, which this business plan does not agree at all. In this regard, as discussed earlier, the owner is going to launch this business in the city of London, the United Kingdom, therefore, the target consumers will be the residents of London and people visiting the city of London. Research shows that in the UK, almost all the operating systems are in use. For instance, Figure 1 shows different users in the UK having a smart phone with percentages indicating different operating systems, such as Android, iOS, Blackberry, Windows Mobile, etc. Smartphone owners with different operating systems in the UK (O’Neill, 2013) As a start, the ABC Company will be targeting 29% Android users and 30% iOS users followed by 23% Blackberry users in the second run of this proposed business. In addition, the target population for this proposed business will be users that are visiting social places in the city of London. The business will engage these users by its different marketing and promoting strategies (Boone & Kurtz, 2007) discussed in later parts of this business plan. 2.3 Achieving Competitive Edge In an industry where a new app comes to surface every other day, it is a difficult task to achieve competitive edge; however, one can achieve it with implementation of effective strategies. Since major players in the social media industry already exist and dominating in the market, the ABC Company will make use of differentiation (Carpenter, Glazer, & Nakamoto, 1994) and market penetration strategies to achieve competitive edge in the market (Aaker, 2001). The ABC Company will not only market ‘Find me a seat’ as a service but will illustrate and integrate it with easiness and time-saving benefits for the users that will enhance its face value among potential users, and thus, will be helpful for the proposed business to achieve competitive edge in the market. 2.4 Industry Analysis 2.4.1 Porter’s Five Forces Analysis In the year 1985, Michael Porter argued that five forces mainly affect performance of every organisation. In this regard, this business plan will include analysis of the proposed app business of ‘Find me a seat’ from Porter’s aspect. Power of Buyer Buyers in the social media industry are kings and so they determine and decide everything. In other words, buyers enjoy huge power in the application market, as apps are usually free and are available in huge varieties and quantities, which give all the power to the buyer. Power of Supplier On the other hand, suppliers and app creators have lesser control and lesser power in the market. One of the major reasons came into discussion in the earlier section whereas another reason is dependency of apps creators and owners on marketplaces that are usually owned by social media giants resulting in lesser power of supplier in this case. Rivalry Competition ABC Company will be confronting major threat from the intense competition in the social media market and thus, the level of rivalry competition is high in the market. Companies and app creators are usually offering social apps free of cost and integrating different offers with apps that have resulted in a fierce wave of competition going around in the market. As a result, the ABC Company will have to come up with smart and effective marketing and promoting strategies to stand out from other competitors in the market. Threat of New Entrants Threat of new entrants is very high as more and more companies are now looking forward to create an online presence that they do with the help of social networking sites, such as Facebook and LinkedIn, and through social media apps that have become very common globally. Threat of Substitutes Threat of substitutes is moderate in the market, as cinema companies and stadium owners are nowadays hiring people to guide visitors through the complexes and arenas, which however do not give major threat to this application business. Another substitute comes in with the ticket as companies often provide maps with the ticket with advertisements that makes it easier for the people to locate their seat. In this regard, one cannot eliminate chances of substitutes, as they exist and will continue to create challenges for the business. 2.4.2 SWOT Analysis This section of the plan will present SWOT analysis of the ABC Company that will make it easier for investors to understand different aspects of the proposed business. Strengths The most important strength of ABC Company is its uniqueness in terms of its idea of ‘Find me a seat’. This unique app comes out as an attractive aspect of the company that will allow it to achieve competitive advantage over other apps in the social media market. Structure of private limited company is another major strength of the company, which will save it from higher taxed laid on corporations in the United Kingdom. Lastly, the ABC Company is a kind of online company, which will be acquiring financial business through its online app, and advancements in the field of information and technology will allow the company to evolve and grow at a greater speed in comparison to companies depending on physical resources. Weaknesses Since the ABC Company is a new venture, therefore, there is no recognition of its name or brand in the online consumers, which is a weakness that is usually common in new business ventures. Although the United Kingdom, and particularly London is very advanced when it comes to internet connectivity and speed; however, complete dependence on technology is one of the weaknesses of ABC Company. Opportunities The social media industry is another name for opportunities. The ABC Company can benefit by integrating the app with Facebook that will allow the users to share their experiences with other Facebook users. In addition, the company can run campaigns with co-branding strategies that will open up new opportunities for the company. Threats As discussed earlier, dependence on online platforms is a threat to company’s existence. Besides, social media industry faces huge competition in terms of thousands of apps created every year; it poses great threat to the company. One can easily create such an app and thus higher level of new entrants is a threat for the company. 2.4.3 PEST Analysis Political Fortunately, the UK government (Gov.uk, 2015) has been promoting online businesses and thus, the political environment for ABC Company is very viable with lesser taxes that indicate higher profitability in the long run. Economic From economic aspect, the social media industry is still booming and provides opportunity to engage millions of consumers in a single click without huge investments. As a result, the business model for online ventures requires lesser financial expenditures, and therefore, they illustrate economic viability. Socio-Cultural This business is attractive from the socio-cultural aspect since consumers are already visiting different social places in the city of London. In this regard, the company will not have to bring any socio-cultural alterations to make the idea work but will only have to endeavour to engage these consumers through the social app. Technological As mentioned, the UK is well advanced in terms of information and technology as compared to other parts of the world. In this regard, the technological advancements in the UK, and particularly London favour the inception of ABC Company and launch of its social app ‘Find me a seat’. 2.5 Marketing Strategy From the abovementioned analyses, the ABC Company has planned to launch the social app of ‘Find me a set’ through a mixture of differentiation and cost leadership marketing strategy as shown below in Figure 2. Figure 2 – Strategic Positioning of Tea Infusions in the UK Tea Market In this regard, the company will promote the app as not a product but a brand that may illustrate ease in the social experiences and not just an app. The company will collaborate and partner with social sites, such as cinemas, stadiums, concert arenas, etc to promote the app on their event pages and promotional materials that will help the company to reach potential consumers easily and quickly. Besides, a number of sports websites are already functioning effectively on the internet. The ABC Company will benefit from their existing consumer base to reach to the potential consumers by offering free apps during every event. Since the intent of the company is to portray differentiated service, the company will put efforts to evolve the function of ‘find me a seat’ from seat locator to something more. For instance, the users will be able to share their experience from their seat number and people sitting on same seat numbers during different events may share their experiences with one another, which may enhance the function of the app from a seat locator to a social application bringing people of same interests together. Another marketing strategy (Chakravorti, 2004) will be to sponsor different sport events and giving prizes to app users that will be an attractive way of promoting the business in the UK Market. 3 - FINANCIAL PLAN 3.1 Projected Cash Flow Figure 3 below illustrates projected cash flow for a period of 12 months of the ABC Company. Moreover, the company will offer social app ‘Find me a seat’ free of cost to the users and intends to make revenues through advertisements on the application, which will be counted as sales. Figure 3: Monthly Projected Cash flow for 2016 2016 2017 2018 Cash Received Cash from Operations Cash Sales ₤600,000 ₤655,000 ₤700,000 Subtotal Cash from Operations ₤600,000 ₤655,000 ₤700,000 Additional Cash Received Sales Tax, Value Added Tax ₤0 ₤0 ₤0 New Current Borrowing ₤0 ₤0 ₤0 New Other Liabilities ₤0 ₤0 ₤0 New Long-term Liabilities ₤0 ₤0 ₤0 Sales of Other Current Assets ₤0 ₤0 ₤0 Sales of Long-term Assets ₤0 ₤0 ₤0 New Investment Received ₤0 ₤0 ₤0 Subtotal Cash Received ₤600,000 ₤655,000 ₤700,000 Expenditures 2016 2017 2018 Expenditures from Operations Cash Spending ₤139,000 ₤157,000 ₤169,000 Bill Payments ₤330,000 ₤390,000 ₤422,000 Subtotal Spent on Operations ₤469,000 ₤547,000 ₤591,000 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out ₤0 ₤0 ₤0 Principal Repayment of Current Borrowing ₤4,100 ₤4,100 ₤4,100 Other Liabilities Principal Repayment ₤0 ₤0 ₤0 Long-term Liabilities Principal Repayment ₤0 ₤4,250 ₤4,990 Purchase Other Current Assets ₤0 ₤0 ₤0 Purchase Long-term Assets ₤0 ₤2,000 ₤2,000 Dividends ₤0 ₤0 ₤0 Subtotal Cash Spent ₤473,100 ₤557,350 ₤602,090 Net Cash Flow ₤126,900 ₤97,650 ₤97,910 3.2 Financial Statements of 3 Years 3.2.1 Projected Income Statement The ABC Company intends to make huge revenues from its social app after implementation of above-discussed efficient marketing and promotional strategies. In this regard, the plan now shares project income statement of three years that indicates a one-time investment of application creation and its publishing in different versions of Android and iOS. In return, the company is expecting high return on investment through advertisements on its application. Projected Income Statement of the ABC Company 2016 2017 2018 Sales ₤600,000 ₤655,000 ₤700,000 Direct Cost of Sales ₤210, 500 ₤135,800 ₤254,400 Other ₤0 ₤0 ₤0 Total Cost of Sales ₤210, 500 ₤135,800 ₤254,400 Gross Margin ₤389,500 ₤519,200 ₤445,600 Gross Margin % 60 % 60 % 60 % Expenses Payroll ₤139,000 ₤157,000 ₤169,000 Sales and Marketing and Other Expenses ₤27,000 ₤29,000 ₤33,000 Depreciation ₤6,100 ₤6,400 ₤6,500 Rent ₤50,000 ₤54,000 ₤54,890 Rent ₤7,400 ₤7,400 ₤7,400 Maintenance ₤6,900 ₤7,500 ₤8,100 Utilities / Phone ₤10,000 ₤10,700 ₤11,200 Payroll Taxes ₤19,500 ₤22,400 ₤24,100 Other ₤0 ₤0 ₤0 Total Operating Expenses ₤265,900 ₤294,400 ₤314,190 Profit Before Interest and Taxes ₤123,600 ₤224,800 ₤131,410 EBITDA ₤129,700 ₤231,200 ₤137,910 Interest Expense ₤3,000 ₤2,760 ₤2,100 Taxes Incurred ₤35,600 ₤36,400 ₤43,300 Net Profit ₤85,000 ₤185,640 ₤86,010 Net Profit/Sales 14.2 % 28.3 % 12.3 % 3.2.2 Projected Balance Sheet The balance sheet illustrates assets and liabilities for the ABC Company starting year 2016 whereas liabilities and capital indicates amount borrowed from the bank through loan. Projected Balance Sheet of the ABC Company 2016 2017 2018 Assets Current Assets Cash ₤126,900 ₤150,650 ₤180,910 Inventory ₤72,800 ₤227,608 ₤114,409 Other Current Assets ₤0 ₤0 ₤0 Total Current Assets ₤199,700 ₤378,258 ₤294,599 Long-term Assets Long-term Assets ₤70,000 ₤83,300 ₤73,900 Accumulated Depreciation ₤6,300 ₤11,800 ₤17,300 Total Long-term Assets ₤63,700` ₤71,500 ₤56,600 Total Assets ₤263,400 ₤449,758 ₤351,919 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities Accounts Payable ₤28,000 ₤27,890 ₤27,100 Current Borrowing ₤5,400 ₤2,300 ₤100 Other Current Liabilities ₤0 ₤0 ₤0 Subtotal Current Liabilities ₤33,400 ₤30,190 ₤27,200 Long-term Liabilities ₤16,000 ₤12,300 ₤10,550 Total Liabilities ₤49,400 ₤42,490 ₤37,750 Paid-in Capital ₤150,000 ₤150,000 ₤150,000 Retained Earnings (₤21,000) ₤71,628 ₤78,159 Earnings ₤85,000 ₤185,640 ₤86,010 Total Capital ₤214,000 ₤407,628 ₤314169 Total Liabilities and Capital ₤263,400 ₤449,758 ₤351,919 REFERENCES Aaker, D. 2001. Strategic Market Management, 6th edn. John Wiley & Sons. Boone, L. and Kurtz, D. 2007. Contemporary Marketing, 12th edn. UK: Thompson. Carpenter, G.S., Glazer, R. and Nakamoto, K. 1994. Meaningful brands from meaningless differentiation: the dependence on irrelevant attributes, Journal of Marketing Research, 31(August), pp.339-350. Chakravorti, B. 2004. The new rules for bringing innovations to markets. Harvard Business Review, March 2004 Issue. Company Warehouse. 2010. Advantages and Disadvantages of a Limited Company. Retrieved on April 30, 2015: http://blog.thecompanywarehouse.co.uk/2010/02/03/advantages-and-disadvantages-of-a-limited-company/ Gov.uk. 2015. Trade Tariff. Retrieved on April 30, 2015: www.gov.uk/trade-tariff/commodities/8516710000 IDC. 2014. Smartphone OS Market Share, Q4 2014. Retrieved on April 30, 2015: http://www.idc.com/prodserv/smartphone-os-market-share.jsp O’Neill, Clair. 2013. App marketing: competitor and target audience analysis. Econsultancy. Retrieved on April 30, 2015: https://econsultancy.com/blog/62520-app-marketing-competitor-and-target-audience-analysis/ Porter, M. E. 1985. Competitive Advantage: Creating and sustaining superior performance. The Free Press. The Radicati Group. 2012. Social Media Market, 2012-2016. The Radicati Group, Inc. Tricker, B. 2009. Corporate Governance: Principles, policies and practices. Oxford: Oxford University Press. Read More