New business on wine - Essay Example

?Accounting Table of Contents Executive Summary 3 Introduction 3 Task One 4 Task Two 4 Task Three 6 Mission ment 6 List of Objectives 6 SWOT Analysis 7 Conclusion 9 References 11 Executive Summary This paper provides a clear picture regarding the possible name of a new business on wine. It also includes the details of the partnership agreement that can be followed by the partners who are going to buy the vineyard. Furthermore, a proper mission statement is also developed based on the current situation of the company. A list of objectives and a proper SWOT analysis is also included in the paper in order to help the management in the decision making process. Introduction In real business world, if noticed carefully, it will be found that most of the businesses irrespective of their size and nature are actually the result of partnerships of two or more individuals. In case of most of businesses starting point was a partnership. However, turning a partnership into a big business is one of the most challenging tasks in the world. There are number of activities and decision making processes that are involved in the entire process. Perhaps the first major activity for starting up a business is choosing an appropriate name that will give a brand identity to the business. This paper is all about such a business that is likely to be concentrated on a vineyard and the wine produced from it. The business needs to be given a proper name and hence the paper includes a suitable name for it. Furthermore, an appropriate partnership agreement that can be followed in conducting the business is also provided in the paper. Over the years it is observed that businesses succeed or fail on the basis of various strategic decisions that are made by the management. However, prior to making any strategic decision, it is very important to analyze the internal and external environment of the company. Hence, the paper includes a proper SWOT analysis for the vineyard business. It also includes the possible mission statement and a list of some major strategic objectives that are required to be met in order to have initial success. Task One The partnership business on vineyard is hereby given the name of ‘Azinert’ which is a combination of last two-three words that are taken from each of the existing product categories – Shiraz, Chenin and Dessert Wine. This will be the new brand identity for the business in upcoming years. All the products that will be produced will be sold under the brand name of Azinert. Task Two Legally a partnership is referred to the relationship between the individuals who are involved into common business with the objective of sharing profits. Usually more than a single party is involved in a partnership and partners must have to agree various terms and conditions which are the pillars of the partnership (Kimuda, 2008). The partnership agreement, in case of Azinert will be made on May 15, 2011. The partners are likely to contribute the capital in the form of cash. There will be a separate capital account for each of the partners. None of the partners will be able to withdraw any portion from his capital account. Based on the demand of each of the partners, the capital accounts will be maintained in a certain proportions in which profits and losses are shared. The net profits as well as the net losses will be divided equally among the partners. There will be a separate income account for each of the partners. Profits or losses will be either credited or charged to the each of the income accounts. In case the income account does not have enough balance, then losses will be charged to the respective capital account (Internet Legal Research Group, n.d.). As far as the salaries are concerned, there will be no such thing for any partner for any services that are rendered. However, partners are allowed to withdraw the required credit balance from their respective income account. Furthermore, no interest will be credited on the initial amount of capital neither there will be any interest on the any subsequent contributions (Internet Legal Research Group, n.d.). The partners are likely to have equal rights and responsibilities in the managerial aspect of the business. Each of the partners is expected to spend his entire available time in conducting the business. Without the approval of all partners, none of the partners is allowed to lend or borrow money on behalf of entire partnership. They are also not allowed to make, accept or deliver any kind of commercial paper without the permission from each of the partners. Furthermore, execution of any mortgage, bond, security agreement, contract to purchase or purchase, contract to sell or sell is prohibited without the approval of all the partners. There will be a bank account in the name of business and all funds that are in favor of partnership will be deposited in that account. Checks will be used for withdrawing any amount and they must be signed by either of the partners. The books of partnership will be maintained at the main office and it will be accessible to all the partners at any point of time. It will be maintained on ‘fiscal year’ basis. The partnership can be dissolved by taking approval from all the partners. Task Three Mission Statement Over the next financial year, the company’s main mission will be to create its own brand equity with a strong retail as well as institutional customer base by providing considerably high quality wine at the lowest possible price to the properly identified target customers. List of Objectives The company still does not have its own brand name. It also does not have a strong distribution network. The only thing that it has is the production facility and a small product line. However, these are not enough to become one of the big players in the national market. During the next financial year the company will have certain objectives which are developed on the basis of current status of the industry, the financial and infrastructural capacity of the company. Furthermore, the objectives are kept in the alignment with the mission statement of the company. First and foremost the company has to build a strong distribution network. Till now the company has been selling its products through the network of another company. However, in order to become a larger player in the domestic market it must have its own distribution network through which the products will be sold. This network will include both dealers as well as retailers. Apart from individual and institutional dealers, popular super market chains will be targeted for selling the products. Secondly the company has to form a strong sales and marketing team that will sell the products to the both retailers as well as dealers. The team will be divided into three sub-groups. Each of them will be responsible for the three existing product categories of the company. A new ‘sale and marketing head’ will be recruited. Under his leadership and guidance the team will take care of everything starting from identifying the target customers for each of the product line to providing the after sales services to the dealers and retailers. Another major objective of the company is to develop and run a new advertising campaign for promoting the new brand identity of the company. Quite expectedly, the marketing team will take care of this campaign. A significant amount of capital will be invested in advertising over the next financial year. The entire campaign can be outsourced to a specialist advertising agency depending on the availability of financial resources. Even if the process is outsourced, the company’s own marketing team will monitor and control the overall show. Significant changes will be made in the management team of the company. Three different departments namely marketing, finance and human resource will be properly developed. The initial process of recruitment will be done by the investors only. At the final half of the year an extensive market research will be conducted for understanding the latest tastes of the consumers regarding wine and other alcoholic products. Based on the findings of this research, further decisions regarding new product development will be taken. SWOT Analysis Usually SWOT analysis is conducted with the purpose of having a clear picture regarding the internal as well as external conditions of the company. The following SWOT analysis of Azinert is done with the objective of having a similar kind of picture. Strengths The main strength of this company is its production facility. The vineyard has the capacity of producing enough vines. Furthermore, there are three different product categories that are already in the market. Certainly there are some market reach of these products and this is another strong point of the company. Another important point is that the products are now getting sold through another large producer. As a result, the new owners can have some knowledge about the market and several of its characteristics from this producer. Hence, they will not be in ‘total darkness’ at the beginning of the business. Weaknesses The major weak point of this company is that its products are not sold under its own brand name. In fact, the company itself is looking for a suitable name. Consumers purchase the products of the company assuming them as the products of some other company. Hence, it has been entirely dependent on the other company. Lack of minimum brand equity in a competitive market is perhaps the most significant weakness of this company. Lack of having its own distribution network is another major weakness. Till date it has no connection with the dealers and retailers of the city. As a result, it has no idea about the basic aspects of marketing and selling a wine brand to the customers. At present there is no such management team that will run show for the investors. The partners who would be the owner of this vineyard need to set up new team. The entire process will require significant volume of resources in the form of time and money. Opportunities There are huge opportunities in this industry especially in the developing countries like India where consumption of wine is increased by almost 65% during 2006-09 (Wine Institute, 2009). However, the most significant increase in consumption of wine is found in the countries that are located in the Middle East. In Kuwait wine consumption is increased by almost 950% over the past five years (Wine Institute, 2009). However, as far as the total consumption in the world is concerned, the rate is declining. Hence, the companies need to look for specific markets. If the domestic demands are not sufficient enough then the products can be exported to foreign markets. Threats The main threat for the company is likely to come from the competitors. Costs of resources also pose significant threat to a newcomer in the industry. Furthermore, retailers and dealers can create pressure at the time of negotiating the price range as it will be a new brand in the market. This is likely to have negative effect on the profit margin of the company and hence this can be considered as another threat. Conclusion The name ‘Azinert’ looks pretty catchy for the vineyard business as well as for the wine products that are to be produced in the due course of time. The format of partnership agreement is properly defined in order to avoid any kind of confusion and miscommunication among the partners. Without a proper agreement, the decision making process is likely to be delayed and this will have significant negative effect on the business. The mission statement and the major strategic objectives are in alignment with each other. The SWOT analysis says that the company is likely to enjoy the advantage of having a proper production facility. However, creating a new brand identity and strengthening that over the period of time is going to be a difficult task as the industry is quite competitive. Despite of having challenges from competitors and costs of running the business, there are several opportunities that need to be capitalized on to run the show for a long time. References Internet Legal Research Group, No Date, Partnership Agreement, [Online] Available at: http://www.ilrg.com/forms/partnership-agreement.html Accessed on May 02, 2011 Kimuda, D. 2008, Foundations of Accounting, East African Publishers Wine Institute, 2009. Per Capita Wine Consumption by Country, [pdf] Available at: http://www.wineinstitute.org/files/PerCapitaWineConsumptionCountries.pdf Accessed on May 02, 2011 Read More