Business Future Development - Example

Business Plan Student’s Name: Instructor’s Name: Course Code and Name: University Date of Submission Business Plan Part 1. 1.0 Organizing the Company Being a startup, organizing is important to the success of the company as it ensures that resources are able to work together. The resources include the physical, human and financial resources which have to be synchronized for organizational success to be achieved. Before any activities are commenced there has to be an organizational structure that gives various roles that have been identified. For the new company, an organizational structure that gives autonomy to the departments will likely be essential as employees feel as part of the business will likely be suitable to avoid conflict between management and employees. Organizing is essential for enhancing efficiency in an organization as it clarifies authority by ensuring there is a hierarchy based on the organization structure. Where a new product such as the multi-purpose pottle is being launched in the market, employees are able to establish their responsibility and to whom they are accountable to based on the organizational structure. The importance of organizing to the company is that it provides a work environment that ensures employees are productive by bringing about specialization and providing the company with a competitive edge in the market. With a well defined organizational structure the company is able to ensure diversity in their operation through efficiency among employees. In addition organization structure provides the number of employees that the company expects to recruit before production and marketing of the products is done. Therefore, before the company commences business, it is important that an organizational structure is developed in order to develop various departments required so as to ensure coordination among employees. 1.1 Product Position The company intends to produce pottles with four compartments which can serve more than one purpose. Therefore, the selling point of this product is in its ability to be used by customers for more than one use at the same time. Just like a normal pottle, the company’s product will be able to be equal to a half a gallon but in this case measure more than one product. The desire to develop such product is to satisfy the challenges where people have to make use of a single pottle to measure portions that are required to be mixed as it allows for this to be done simultaneously. The importance of this part is that it allows the management to identify the feature of the product before any mass production is done. Further, it will allow the organization to compare its new product with those currently in the market that is able to exploit the area that the others fail to address. In the case of the multi-purpose pottles, the commonly available pottles relate to pots with the capacity of half a gallon but company is introducing one with additional compartments. Product positioning help the product gain market dominance by increasing sales revenues and profits in the long run for the company. In order for the company to position the product, the first-mover strategy may be suitable as it ensures that the company is able to gain market share quicker. Using the first-mover strategy, customers are able to view the pottle as the first product in the market thus positioning the company as a market leader. There is need to deliver better quality products as usually market leaders are associated with bad quality. Such a factor may affect the company’s sales and brand name. The first-mover positioning strategy would ensure the company is able to access limited resources and distribution channels due to a good public image. This ensures that the company is always ahead of the competition with regards to raw materials for the production of the products. Product positioning may also make use of demographic strategies where the product is targeted at different demographic groups compared to the competition’s products. This strategy may be used after the first-mover strategy has established market leadership for the company’s product so as to respond to niche market needs such as premium prices thus ensure increased sales revenues. 1.2 Investment and Building Factory Investment in plant, property and equipment is a costly affair as it requires the company to incur heavy costs in terms of capital investments for the construction of the manufacturing plant. The company may examine the cost benefit analysis of either manufacturing the products by themselves or outsourcing this function to a factory that can mass manufacture the product according to the specifications provided. This might be the cheapest option for the company but requires a robust supply chain management that will ensure that there are no delays in ensuring the product reach their intended customers on time. The other option available might be setting up a production plant from investments contributed from the founders of the company. If the funds are not sufficient there should be provisions to allow the company to seek additional funds from financial institutions for the setting up of a factory for production. This will ensure that the innovations of the new product are guaranteed and prevent competitors from copying the technology. The location of the for the factory also needs to be considered as it should be near the market so as to reduce the distribution channels that the product passes through before it reaches the customer. In addition, the location of the raw materials should be considered when considering where to build a factory as the nearer it is to the raw materials the cheaper the cost of production of the products thus ensuring the prices of the product do not fluctuate and are lower than the competition. Where the company makes the decision to access funding from third parties it is incumbent on them to ensure that the cost of such funds is very low as it has an impact on the bottom-line for the company. Debt capital should always be the last resort when a company what to invest in assets as equity capital is cheaper and originates from the owners of the company. 1.3 Expanding the Business The decision to expand the business is dependent on a number of factors as it requires a collective approach by the business. In order to expand there has to be a motivated workforce that is able to make use of their talents to develop new products and identify new opportunities as the expansion does not necessarily mean a company will make a profit but will incur higher costs due to increased volumes of products. For this company if there are opportunities of benefiting from economies of scale where the cost of the products would reduce due to large production it would be prudent for the company to expand. This may allow the company to stand at a good position in terms of prices for the products given that competitors might reduce their prices. Further, if the company is able to finance the expansion from its internal resources they can make such a decision as expansion involves additional capital investment in facilities, equipment and inventory. There is need to establish whether there exists demand for the company’s products in the market they want to expand into. The decision on expansion should also be informed by the current economic conditions that exist in the market place. For example where there is a recession it is not favorable for business to expand as customer demand is usually low due to low disposable incomes. Finally, expansion dilutes the management of a company as the new locations operate with an element of autonomy thus the management of the company should ensure that they take this into consideration before making such a decision. The company is still in the early stages of its product life cycle as there is no need for it to expand currently. Part Two 2.0 Business Future Development The future for the company is determined by the employees and technology. Employees form an important part of the innovation and creation of ideas within an organization and employment of highly qualified employees who have the necessary talents is essential. The company is dependent on the employees to guide the future for its operation by providing them with an ample working environment where learning is encouraged as a way of enhancing skills. This will ensure that the company is able to always develop new products by embracing new technologies thus make huge cost savings in the future. The company should also be responsive to technology by changing their production process to match new technological developments. 2.1Business Appearance in one and in Three years The company intends to increased the resources under its belt through a strong balance sheet at the end of the first year. In particular, the assets should have grown by at least 50% in the first year. This would have been financed by both internal sources of funds and short term debt financing. In addition, the company will have recruited at least 50 employees to run the finance, marketing and production departments although the production would not have started. In three years, the company expects to have completed the construction of the factory and production commenced. Also, the company will have established subsidiaries in at least three locations to drive sales of the products. We expect the company to be a medium enterprise at this time as it would have more than 500 employees with all the essential departments established including the research and development and human resource departments. In relation to the market, the level of competition is expected to increase as companies enter the market with similar products. The market leadership of the company will not be affected due to the benefits of economies of scale. 2.2 The Product in One and in Three Years On the first year, the company will majorly be dealing in a single product and in particular a single brand with the aim of ensuring brand loyalty at the start and guaranteeing quality. Quantitatively, the company expects to produce and sell at least 10,000 multi-purpose pottles. As the business grows the company expects to increase production to 100,000 units by the third year due to the operationalization of the factory. We expect sales volumes to be 80,000 units as the remaining inventory is held as buffer to cover for any contingencies. 2.3 Customers in One and in Three Years In the first year the customers are likely to be less than the 7,000 individuals and entities as the company will not have established a specific target market to direct their marketing activities. Also, being a single brand it would be hard for it to reach as many customers as anticipated, but the company will benefit from repeat customers. In addition the aspect of being a market leader will hasten its customer numbers as there is less competition in the market. For the third year, customers are expected to have grown to 90,000 because of the expansion strategy of the company combined with its future business development. It is important to mention that the company will have identified at least four niche markets for particular brands by the end of three years and this is likely to hold a customer base of 5,000 customers who require premium priced products. The company projects, customers from the niche markets will address the customer base attracted by competition at the end of the third year as they continue to venture into new markets. 2.4 Financial Forecast for Year Three and Year Four INCOME STATEMENT YEAR 3 ($’000) YEAR 4 Sales Revenue $ 1,195 $3,055 Dividend Income 500 614 Total Revenue 1,695 3,669 Cost of Sales Direct Materials 280 348 Overheads 176 256 Service costs 50 112 Total Cost of Sales 476 716 Gross Profit 1,219 2,950 Operating Expenses Depreciation 15 26 Marketing 56 78 Administration 462 870 Total Operating Expenses 533 974 Income Before Int. and Tax 689 1,976 Interest Expense 45 89 Income Before tax 644 1,887 Balance Sheet Year 3 Year 4 Assets Current Assets Cash $364 $656 Inventories 255 1,451 Accounts Receivable 210 908 Total Current Assets 829 3015 Noncurrent Assets Plant, Property and Equipment Net 450 945 Other long term assets 50 89 Total noncurrent assets 500 1034 Total Assets 1,329 4,049 Liabilities Current liabilities Accounts payable 113 181 Salaries Payable 190 329 Tax Payable 0 0 Total current liabilities 303 510 Long term liabilities Long term debt 282 620 Equity Common Stock 500 500 Retained Stock 244 1,630 Total Equity 744 2,130 Liability and Equity 1,329 4,049 CASH FLOW STATEMENT YEAR 3 YEAR 4 Cash Flows from operating activities Net income 644 1,887 Add: Depreciation 15 26 Changes in operating assets and liabilities Accounts Receivable (241) (847) Inventory (114) (285) Accrued expense 191 137 Accounts payable 115 198 Salaries payable 15 24 Other long term asset (4) 0 Net cash flows from operating activities 621 1,140 Cash Flows from Investing Activities Capital Investment (66) (79) Net cash flows from investing activities (66) (79) Cash flows from Financing Activities Debt finance 572 920 Change in cash 1,127 1,984 2.5 Other Business Goals For sustainability purposes, the company is making plans to diversify their income sources from one source to cushion them from uncertainty in the future. In particular, the company wants to venture into waste management as it provides of opportunities as companies now are going green. Numerous industries and companies and households are seeking ways to safely dispose waste, the company views this as the business for the future and will be able to add income to them and ensure the company’s continued profitability. Further, the company is planning to implement a corporate social responsibility policy to support the society around the manufacturing plant. 2.6 Future Prospects for Business Size The company is anticipating to venture into the emerging markets in Asia such as India and China to drive their sales. Further the company is planning to set up subsidiaries in Europe and South America in order to increase their market coverage and customer base. In future, the company plans to establish a factory in China so as to benefit from the lower costs of production in the country. 3.1 Entrepreneur’s vision of the Company It is our vision to continue to innovate and become a leader in new products that offer our target market freedom while maintaining high quality standards. We aspire to always provide products that provide our target customer with the best alternative to the conventional products at any given time. This vision is what guides our product development process. 3.2 Values and Principles on which Business Stands The company day-to-day operations are guided by the following principles: 1. That quality should always be guaranteed in the company’s products. 2. That the products should manifest feature that reflect the innovative culture at the company. 3. That a customer will pay more for high quality products. 4. That the employee is the link between the organizations resources and new ideas and should always be held with high esteem. 3.3 Source of Competitive Advantage The company derives its competitive advantage from integrating feature in already existing products to adapt to the changing needs of customers from time to time. These features distinguish our company from the competition. Read More