Marketing Plan: Skyline - Case Study Example

Business Plan: Skyline Executive Summary Sky line is a limited partnership company located in Oman. The business of the company is to supply and distribute spare parts and machinery to local and international oil distribution companies. The key partners of the company, Majd Al Maskari, Khalid Al Khanjari, Hilal Al Kiyumi and Hassan Al Habsi, are responsible for heading different departments. These gentlemen have sufficient experience of working in the oil and natural gas sector of Oman and have decided to initiate their own business. The products that the business will distribute are pipe fittings, bolts, gaskets, bearings and fasteners of various size and composition to the oil, gas and water distributors. The business is at the inception stage of its life cycle and has potential to grow and compete with other major players in this sector. The initial objective of the company is to cater domestic as well as international consumers while capitalizing on weaknesses of its competitors. In the long run, the company is planning to sign contract with big players of the oil sectors in order to have a better access to the global market. The factors that will help in facilitating success of the company are presence of its facilities near oilfields, experience of the partners and knowledge about strength and weaknesses of competitors. Skyline has only two sources of fund: capital brought in by partners and loan from bank. The owners have kept the capital structure simple and financial projections of first year for the business look healthy. Hence, it is expected that the company will grow and perform better in long run. Table of Contents Table of Contents 2 1.Marketing Plan 4 1.1Environmental analysis 4 1.2Product (s) description 4 1.3Customer demographics 4 1.4Competition and competitive advantage 5 1.5Pricing strategy 6 1.6Advertising and promotional strategy 7 1.7S.W.O.T Analysis 7 1.8Market research 7 1.9Market Target 10 2.Operational Plan 11 2.1Business Structure 11 2.2Scope of operation 11 2.3Business premises 11 2.4Location 12 2.5Regulatory issues 13 2.6The Production arrangements 13 2.7Credit terms 13 2.8Plant and equipments 14 2.9Quality control 14 2.10Communication 14 2.11Trading hours 15 2.12Commencement date 15 3.Organization Plan 15 3.1Organization structure 15 3.2Skills required 15 3.3Personnel 16 3.4Resume of the head personnel 16 4.Financial Plan 16 4.1Financial strategy 16 4.2Profit and loss statement 16 4.3Balance Sheet 17 4.4Cash flow forecast 19 Cash flow forecast: January-June 2014 19 Cash flow forecast: July-December 2014 20 Reference list 21 Appendix 22 1. Marketing Plan 1.1 Environmental analysis Skyline is entering in the machinery spare parts industry as a distributor of machinery necessary for supply of water, oil and gas. The industry had suffered major slow down during global recession in late 2000s, but significant growth is observed in recent years as with increase in demand of oil and natural gas, investment in machinery as well as equipments. Since oil and gas from Oman is mainly exported, the company will cater to domestic as well as international consumers. Furthermore, the company is targeting oilfield regions and refinery coastal areas for setting up its business as supplying spare parts will be easier from these regions. The company being a late entrant can convert weaknesses of the competitors into its strength. 1.2 Product (s) description The main products of the company and their varieties are pipe fittings (Carbon Steel, low temperature, Alloy Steel and Stainless Steel), bolts (Carbon Steel (normal and low temperature) and Stainless Steel), gaskets (Spiral Wound, Non Asbestos Soft Cut and Ring Joint), bearings (Carbon Steel, Forged Carbon Steel and Duplex Stainless Steel) and fasteners (carbon Steel and Stainless Steel). In addition to the wide variety, the company has also considered stocking products in different sizes so that every kind of consumer requirement is met. Increasing variety in composition and size will help the company in distinguishing its products in the market. 1.3 Customer demographics The company is meant to cater to all local and international companies active in oil and gas sectors of Oman. It is also planning to supply equipments to government and non-government companies involved in water distribution. The clients of Skyline include corporate houses, sole proprietors and partnership firms. 1.4 Competition and competitive advantage The main competitors of Skyline in the market are Oman oil industry supply and services, Oman mechanical suppliers and Technical Supplies LLC. Companies Strength Weaknesses Oman oil industry supply and services The company has products in different price range, a quick delivery system and effective after sale services. Efficient feedback system. Despite varying price range, the company is incapable of stocking sufficient products to meet demands. Oman mechanical suppliers Technological integration in operations that helps in selling products at reduced (competitive) price. Inefficient credit policy. Delivery service is comparatively slow. Technical Supplies LLC The company has installed systems that quickly respond and meet customer requirements with accuracy and smoothness. The company is not adequately flexible to maintain variety in their products. Table 1 (Source: Author’s creation) Skyline is a new company in the industry and has a lot to learn from its competitors about their strategies and policies. The company will be able to develop strategies keeping in view the strengths of competitors and can capitalize on their weaknesses by addressing and avoid committing the same. The competitors of Skyline are well-positioned in the market taking their pricing and marketing strategies into consideration. Almost all the companies serve appropriately to their consumers by maintaining high quality and low price. However, key members of Skyline are well-experienced with adequate knowledge about oil industry. This can be useful in gaining competitive advantage. 1.5 Pricing strategy Skyline has adopted market-based pricing strategy, which is also known as competitive pricing strategy. The company has decided their price using competitor’s price as the base line, while maintaining a margin of 10-15%. In an industry where the equilibrium or saturation has been reached, it is best for a new company to set their price close to that of the competitors. The list prices of products have been shown in the following table: Table 2 (Source: Case study) 1.6 Advertising and promotional strategy The company has considered both direct and indirect modes of promotion. Presentations and campaigns will be used for direct marketing, while printed catalogues, posters and advertisement in weekly free magazine will be published for indirect marketing. 1.7 S.W.O.T Analysis The following diagram presents the strength, weaknesses, opportunities and threat analysis of Skyline. The company can utilize its strengths in attracting more and more consumers. Moreover, it has opportunity of signing long-term contracts with renowned corporations, which will help the business in gaining recognition in the market. The company can overcome its internal weakness and external threat by distributing for big companies and hiring more people for after-sale services. Figure 1 (Source: Case study) 1.8 Market research The company undertook primary market research through questionnaires and secondary study included examining trend in the machinery market from online sources and trade journals. The information from primary market study is represented through pie charts along with the sample questionnaire. Figure 2 (Source: Case study) Figure 3 Figure 4 (Source: Case study) Figure 5 Figure 6 (Source: Case study) Table 3 (Source: Case study) 1.9 Market Target The market target has been represented through the following table: Table 4 (Source: Case study) 2. Operational Plan 2.1 Business Structure In Oman, business entities are governed by The Commercial Companies Law (Royal Decree No. 4 of 1974, as amended) and the Commercial Register Law (Royal Decree No.3 of 1974) (International Business Publications, 2008). The company, named “Skyline Spare Parts Supply”, is a limited partnership company. Limited partnership was considered as firm’s structure because it helps in attracting investors since capital is the only liability. Further, the business does not dissolve in case one of the partners leaves or deceases. Limited partnership also helps general partners of the firm to focus on running the business efficiently (Litvak, 2009). The business has been registered by the partners and date of commencement has been decided. The business will require an Omani license as it intends to do business in international as well as national markets. 2.2 Scope of operation The company currently has a total number of 70 employees including the partners. The main area of operation includes supplying of pipe fittings, bolts, gaskets, bearings and fasteners of different sizes and compositions at national and international markets. 2.3 Business premises The company has registered in Muscat and will have its office in the city, while it is still evaluating a number of locations such as, Fahud, Burhaan, Barik and Mabrouk, for setting up operational facilities. Since the operational facility location has not yet been finalized, it is only possible to provide rent of the office floor, which is 700 OMR per month. The Layout design of the operation facility is as follows: Chart 1 (Source: Author’s creation) The premises will have supervisors from the company as well as security guards to safeguard the premises for 24 hours. The company has ensured that facilities have sufficient power and water supply so that supervisors and other indirect workers do not face any problem. 2.4 Location The operational facilities of the company are expected to be located in Fahud and Burhan. These locations were selected owing to presence of major oil fields. This will help the company to access clients in an easier manner. The business office of the company is located in Muscat as it is the capital as well as largest city of Oman. Naturally, it is the business hub for national as well as international trading and an office in the capital will help the company to cater to local oil companies as well as foreign firms. 2.5 Regulatory issues Considering that the business is supply-oriented in nature, it needs to comply with a number of regulatory factors and must acquire certain licenses and permits. These mainly comprise approval to establish factory and warehouses, that of the industrial set-up project, license regarding drinking water and water for other purpose, license for laying infrastructure, health and safety permit, permit to extract underground water and sign-boards license in Muscat (International Business Publications, 2008). 2.6 The Production arrangements The products (inventory) will be stored in facilities located near the oil-rich regions. The company has decided to place direct employees as supervisors in the facilities. However, the company has planned to contract the service of delivering spare parts to clients and that of procuring inventories from suppliers. This will help to reduce the cost. The company has decided to keep sufficient stock of inventory, but not to over stock. Material will be issued using First in, First out (FIFO) method. It has further taken into consideration economic order quantity and Just-In-Time practices in order to avail stock on time. Also, arrangements have been made that if there is over-stocking, the company can immediately return those to suppliers. 2.7 Credit terms The company is in its inception phase. Hence, it is expected that the company will follow conservative on credit and liberal on collection policy. This policy is helpful in the initial phase as during this period, companies prefer to take less risk for stabilizing its business in the market. This policy helps to have less credit and more cash customers. It will ensure that liquidity is maintained in business as in the beginning due to requirement of high working capital and liquidity (Gertler and Kiyotaki, 2010). It is expected that credit terms for customers will be 1 month, while that with the suppliers will be 1.5 months. In this way, the company can pay suppliers with receivable amount. It was also observed that this credit terms perfectly suit the cash flow. 2.8 Plant and equipments The company deals in supply and distribution of spare parts. This does not require any plant and equipments under direct cost. However, equipments will include office furniture, fittings, selves and racks in the warehouse as well as trolleys, pulleys and trucks necessary for movement of products. It was also observed that furniture and equipments at facilities are basic necessity. Thus, company has to purchase them, but can always hire trucks, pulleys and trolleys for rent so as to reduce cost. 2.9 Quality control The company will maintain standard quality management methodologies such as, Six Sigma and ISO 9000. These quality practices will be employed by the company to ensure that cost is minimized, procurement cycle time is reduced, orders are placed and availed at right time and overall quality of service is improved. In addition, the company will have quality inspector responsible for inspecting and reporting quality of the stock as and when received as well as before delivering to consumers. 2.10 Communication Communication is very crucial for maintaining connection between suppliers and buyers. The suppliers and buyers can communicate with Skyline employees through telephone, fax and electronic mails (e-mail). Telephone number: +968 83365454, +968 23145856 Fax number: +968 23291111 E-mail: queries@skylinebusiness.org.om 2.11 Trading hours The trading hours shall be 10:00 AM to 6:30 PM in the evening. 2.12 Commencement date The partners have decided to commence the business on 01 January, 2015. 3. Organization Plan 3.1 Organization structure The organization structure shows the main positions in hierarchy of the company. Chart 2 (Source: Author’s creation) 3.2 Skills required The skills that are primarily necessary for managing the company are: Inventory and supply management Public relation management Human resource management Finance and account management 3.3 Personnel The names of key personnel of the organization are: Majd Al Maskari: Group fund controller Hassan Al Habsi: Overseas supply and inventory coordinator Hilal Al Kiyumi: Account control Khalid Al Khanjari: client relation coordinator 3.4 Resume of the head personnel Resume of Mr. Majd Al Maskari has been attached in the appendix. 4. Financial Plan 4.1 Financial strategy The financial strategy involves various details regarding the money that is to be invested in the business. It includes source of funding, type of finance, investors and so on. In Skyline, apart from capital that is to be brought in by the partners, the company has taken loan of 40000 OMR from Oman International Bank under SME (Small and medium enterprise) scheme, named TEJARATI. 4.2 Profit and loss statement Profit and loss statement (Stickney, et al., 2009) of Skyline, assuming the following details for the year ending 2015: Sales: 36232 OMR; Purchase: 8000 OMR; office expenses: 400 OMR; Water and power charges at facilities: 200 OMR; Rent: 100 OMR; Rent of trucks, trolleys and pulleys: 400 OMR; Salary: 2400 OMR; interest paid at 7%; Tax: 5700 OMR. Table 5 Particulars Amount (OMR) Amount (OMR) Sales 36232 Less: Purchase 8000 Gross Profit 28232 Less: Operating expenses Office expenses 400 Water and power charges 200 Rent 100 Rent of truck, trolleys and pulleys 400 Salary 2400 (3500) Earnings before interest and tax 24732 Less: Interest (2800) Less: Tax (5700) Net Profit 16232 (Source: Author’s creation) 4.3 Balance Sheet Balance sheet (Stickney, et al., 2009) of Skyline assuming the following details for the year ending 2015: Furniture: 20000 OMR; Equipments (Selves and racks): 18000 OMR; Cash in hand: 10000 OMR; Trade receivables: 25000 OMR; Inventories: 20000 OMR; Trade payable: 20000 OMR; Capital brought in by partners: 20000 OMR; Prepaid expenses: 3432 OMR, outstanding commission of contractor: 200 OMR. Table 6 Liabilities Amount (OMR) Assets Amount (OMR) Long term liabilities Fixed Asset Capital 20000 Furniture 20000 Loan 40000 Equipments 18000 Net profit 16232 Current Assets Current liabilities Cash in hand 10000 Trade payable 20000 Inventories 20000 Outstanding commission 200 Trade receivables 25000 Prepaid expenses 3432 96432 96432 (Source: Author’s creation) 4.4 Cash flow forecast Cash flow forecast: January-June 2014 Journal has been referred for preparing format of the forecast (DeFond and Hung, 2003). Table 7 Particulars January February March April May June Sales 2701.42 2755.42 2810.56 2866.77 2924.10 2982.59 Purchases 2000 2000 Salary 200 200 200 200 200 200 Rent 25 25 Rent of vehicle 100 100 Office expenses 100 100 Water and power expenses 50 50 Total expenditure 2225 200 450 2225 200 450 Profit/ Loss 476.42 2555.42 2360.56 641.77 2724.10 2532.59 (Source: Author’s creation) Cash flow forecast: July-December 2014 Table 8 Particulars July August September October November December Sales 3042.24 3103.39 3165.14 3228.45 3293.02 3358.88 Purchases 2000 2000 Salary 200 200 200 200 200 200 Rent 25 25 Rent of vehicle 100 100 Office expenses 100 100 Water and power expenses 50 50 Total expenditure 2225 200 450 2225 200 450 Profit/ Loss 817.24 2903.39 2715.14 1003.45 3093.02 2908.88 (Source: Author’s creation) Reference list DeFond, M. L. and Hung, M., 2003. An empirical analysis of analysts’ cash flow forecasts. Journal of Accounting and Economics, 35(1), 73-100. Gertler, M. and Kiyotaki, N., 2010. Financial intermediation and credit policy in business cycle analysis. Handbook of monetary economics, 3(11), pp.547-599. International Business Publications, 2008. Oman Mining Laws and Regulations Handbook. USA: International Business Publications. Litvak, K., 2009. Venture capital limited partnership agreements: Understanding compensation arrangements. The University of Chicago Law Review, pp. 161-218. Stickney, C., Weil, R., Schipper, K. and Francis, J., 2009. Financial accounting: an introduction to concepts, methods and uses. UK: Cengage Learning. Appendix Read More