Modern Marketing Management: Business Plans - Dissertation Example

 Modern Marketing Management: Business Plans Introduction A business plan is a summary of how a business or entrepreneur intends to organize an entrepreneurial endeavor and implement various activities necessary and sufficient for the venture to operate successfully. It is a written explanation of the company’s business model for the venture in question. Business plans are also developed for ventures in both business and government. It is used informally for management and planning and also can be utilized to convince outsiders such as banks or venture capitalists to invest money into a venture. A business plan can be divided into three distinct types a under:- The Miniplan Working plan Presentation plan. In a miniplan, the executive summary may consist of about 10 pages and should include at least a cursory drawing of attention to such key matters as business concept, financing needs, marketing plan, balance sheet etc. It is a good way to test the interest of potential partners or other minor investors in joining business. It will contain a working plan which is a tool to be used to operate the business. It may be a lengthy detail but can be short on presentation. A presentation plan differs from a business plan, and here more attention is paid to attractive formatting, formal language and conciseness. It is the appropriate format suitable for present action to bankers, investors and other interested parties outside the company. BUSINESS PLANS FAIR VALUE PRODUCTS AND SERVICES (A Decorator’s Works Room) [A unit of Fair Value Business Group] Index Executive Summary: Introduction Company Analysis: Objectives Mission Company Summary Marketing Analysis and Plan: Market Analysis Services and Product Plan Service Business Analysis Competitive Strategies: Main Competitors Strategy and Implementation Summary Pricing Strategy Marketing Strategy Ethical Concerns: Financial Plan and Analysis: Break even Analysis Profit and Loss Cash Flow The Company’s Future: Reference: Executive Summary: Introduction The Fair Value Enterprises is a well-established decorators workroom. The Company is engaged in the production of slip covers and other textile products in accordance with the designs and concepts of interior designers. The company has recently expanded its production facilities and is well positioned to market its workroom production beyond its present client base. For Value company is dedicated to providing the highest quality workmanship, meeting the agreed delivery dates and executing the custom work exactly in accordance with the designers concepts. The focus of this business plan is to identify its future target clients, explain its marketing strategy and to improve its internal procedures. So it can substantially increase profitability. The Company Analysis Company Summary The Fair Value Products & Services is a company located in London, U.K and soft window treatment represents the major share of the company’s production. Shares of this market are channelised through designers and decorators. The company is a sole proprietorship concern and has been operating for nearly 25 years. Objectives The company intense to further penetrate the interior designer controlled share of the window treatment market within the next 12 months. Towards this end, it has set an objective of marketing the 15 targeted Designer members of U.K. & American Society of Interior Designers. To substantially increase profitability, the company will encourage price sensitive jobs to go elsewhere by formalising the pricing mechanics. This will allow for attention to a more high and custom work to be performed for the less price-sensitive designer market sector and help in improving administrative machinery of the operation. This will allow a reduction in the owners’ involvement in single administrative task flow from 50% of the time to 20%, which turn will allow them more time for sales and marketing tasks. Mission Fair Value Products & Services are best suited to serve the interior designer share of the textile treatment market because the clients of interior designers are mostly from the upper echelons of society, and can afford expensive materials and custom solutions. The Company is not unable to compete with large work rooms geared to mass production runs, nor can its pricing strategy compete with the many “Moms & Pops” homes’ work rooms. The Company is dedicated to providing the highest quality of worksmanship, meeting the agreed delivery dates and executing the custom work exactly in accordance with the designers concept. Market Plan of Analysis The population of the 17 communities in close proximity to Fair Value is high. This means that this area comprises a total soft window treatment market in excess of € 2.7 million annually. All of their treatment must be produced in decorator work room. The company’s share of this in nearby market is approximately 7.5%. The company is in the process of shifting its focus from current target market of interior decorator clients to the area of higher and more lucrative interior designer market. this change will improve the profitability levels since the designer segment is less price sensitive and provides great margins and the potential customers have greater buying power. The designer includes high income home workers that demand unique products and a high degree of customer services. This, in turn, requires a high contact service environment –between the designers and workrooms that can be best served by a company such as Fair Values products Service Group. The Market Analysis According to the U.K. department of commerce the entire window treatment category reached € 7.8 billion in 2006. The paint and Decorating retailers Association states that 30% this was made up at soft window treatment. Fair Value has not, in the past; invested in advertisement and promotion. But despite this their client base and volume of scales has grown steadily. The work generated through the highest echelons of interior designers requires a higher level of quality and expanded skills to achieve it. This work is also not price sensitive. The capability of the company to produce high quality textile treatments is on par with workrooms who have established high images and, who often have clientele located far afield from London. By increasing Fair Value’s image through advertising and networking within UKSID and ASID membership and elsewhere, the potential market will expand enormously from its present localised boundaries. This strategy should also result in improved margins as more and more higher timed, less price sensitive designers would bring their work to Fair Value Business Group Potential customers Growth 2002 2003 2004 2005 2006 CAGR Interior designers 2 % 15 15 15 15 15 0.00 % Interior decorators 2 % 22 22 22 22 22 0.00 % Hobby decorators 4 % 12 12 12 12 12 0.00 % Others 5 % 33 35 37 39 41 5.58 % Total 2.35 % 82 84 86 88 90 2.35 % Services of Products – planning Fair value business group provides sewing services in the creation of high quality soft window treatment products, such as, draperies, swags, jabots, slip covers etc. Although the company could be considered as a unit making products, due to the reason that clients furnish the fabric for each customer crafted unit, it actually only provides the sewing and installation services to its customers. There are relatively very meagre sourcing costs because the company does not have to directly provide for fabric, which is the most expensive input in the production process. Hence, the Fair Value Group Company produces for the higher end segments; the two most important aspects of production are quality and scheduling. The company’s clients have a tremendous buying power as they represent the reputation of the workers to the final consumer. Therefore, if the company does not produce the necessary items with the required specifications when needed, the loss of future revenue from a client can be significant. The company does not foresee any new service development in the near future. Competitive Strategies Service Business Analysis In setting a foundation on which to build a suitable market strategy for Fair Value Business Group, players were contacted by phone. These players are located near by areas of London. Main Competitors The top designers in the London area are “Finelines”, “Paul Brown” and “Inside –Outlook “. All these companies advertise heavily in “Design Times” and all three have full page Ads in American Society for Interior Designers (ASID) Directory. The long term marketing strategy of Fair Value Group Company is formulated to bring it up in image to the ranks of competitors. Other contenders who compete hard in Interior Decorators category. Market Segmentation The market for soft window treatment reflects the buyers income bracket and standard of living is much the same way as that of the furniture market in segment like Mutual Outlets Drapery Specialists Hobby Decorators Interior Decorators Interior Designers At the bottom of the pyramid also outlets such where drapery material could be chosen and purchased. The person would have to buy rodding at the hardware store and install it all by himself. Quality is the lowest. Here in Drapery Specialists care we would have to be waited on and how fabric samples. A sales person with some feel for colour and décor will assist you and perhaps suggest a few alternatives. They would come to your home, take measurements, and then do the needful for installations etc. Then Hobby Decorators will advertise in local newspapers. In the “Service” Section of classified. They will give more attention to the client and make the client feel that they are dealing with a professional. In Interior Decorators category, Decorators are average quality. They still expect quality from their work room. These decorators have more ordinary, straight forward work and also more cost conscious. The Fifth Segment, Interior Designers is the category have passed successfully the testing of American Society of Interior Designers (ASID) & U.K. Society of Interior Decorators (UKSID). Those individuals are demanding in their insistence on quality and usually have jobs that involve creative solutions. The prices charged by the workrooms their designers work with are several times higher. Competition & Buying Pattern The Fair Value Business Group exists in a purely competitive market in which there is potentially unlimited competition and easy entry/exit in the market. This situation is mitigated by the fact that almost all competitors are small companies that have very restricted geographic reach. One of the factors influencing choice of workrooms is the professional credentials and reputation of the company’s proprietor. Interior designers and decorators seek to establish long term relationships with their suppliers to ensure that their suppliers to ensure that their clients strict demands are also met. Therefore, the process of choosing a workroom requires a lengthy evaluation period and the establishment of close ties among principals, both of which may not be possible with larger workrooms. The industry is geographically located with most of the client working on a local basis. Very few designers and decorators carry on business beyond a local or state level. Here, price is often not a major issue when, dealing in the interior designer segment,since the quality and uniqueness of the product is the overall driver of business for the clients. There exists three major competitors in the area who compete in the interior designer segment. STRATEGY AND IMPLEMENTATION SUMMARY Image is a key factor in making inroads in to the higher echelons of interior designers. Their work is desirable because it is less price sensitive. Far Value Strategy is to lift its image, through advertising, in prestigious trade publications, joining and networking UKSID & ASID membership, and actively marketing a selected group of 15 interior designers located in close proximity to the company’s targeted market area. The company seeks to establish a competitive edge in its new target market segment by increasing the level of customer contact and service that other competitiveness seem to often times lack. Additionally, Fair Value business group possesses the necessary skills to produce the high quality products that also needed in this field .It will ensure greater service and will strengthen the contacts that promote word of mouth marketing and networking. Market Strategy It is important to the marketing strategy to develop an attractive image to the trade. This can be done through Advertising Join societies for Interior Designers Participate in show houses, etc Most of them suggested that “Design Times” as the best plan to advertise. Quarter pages of few magazines like “Draperies & Window Coverings “. Interiors and sources were to be used for advertisement. These two publications have directories and there are no separate charges for inclusion of Fair Value in the directories. Development of top quality logo and photography which can be used in ads, brochures, name cards etc. Not counting printing costs, which relate to quantity and quality of paper chosen, the design costs for this would run about €1,500. A day’s photography would be additional € 850-1600. The image of Fair Value Group would be elevated by joining UK Society of Interior Designers (ASID) etc. The advertising in these societies Directory is worth mentioning. Another image building marketing policy is participating in show houses. These show houses are usually for the benefit of some charity event. This would require time and effort, but not much in the way of money. This should be co-ordinate with the company’s favourite designer to insure satisfaction with the design concept when doing a show houseroom. In addition to these activities for the company’s image it is essential to market directly the selected 15 target clients who are all members of Designers Societies. Marketing these prime prospects must be carried out in a thoughtful organized way. Colour literature, including newly designed logo should be completed first step. It will be important to present a portfolio of “Fair Value” Group’s most innovative work /products. A relaxed face-to-face meeting resulting in good communication between designer and the owner should be all that’s needed to generate first order. Networking is also very useful. Once the logo is completed and artwork is obey it is important to introduce it to improve play in the design world. Pricing Strategy Pricing of work room products is not cut and dried. An attempt was made to compare prices charged by various work rooms. Three rather generic items are chosen and interior designers were asked to submit prices based on what their workroom charge. These are: 1. Swag & Jabol – (40” Width, 5” Length) Formal style.coordinating lining in jabot, watted - edges. 2. 1½ “ Panel each side each side (3” width)- draperies lined and interlined. Applied fringe on land-edges. Pinch pliant bending (Finished drapery 60”X90”) 3. Working balloon shade on clutch roller 45” Wide and 60” long. Shirmed heading. The fact that few designers contributed to this survey is an indication of that selective unimportance of the workroom cost. The fact that only one was willing to share the name of his/her workroom is an indication of how close to the chest designers/decorators hold their cards in respect of workrooms. Fair Value products & services pricing based on the scheme mentioned elsewhere. In this place, and which is used for purposes of financial projections, places the company slightly below – the average of item one, slightly over the average of item two, and 30% more expensive for item three. None of the respondents quoted prices charges by the high image work rooms which have been tagged as members of community work rooms to what the company would like to belong. All indications based on numerous interviews is that prices charged by the more prestigious work room are, at least, double the price of the company and perhaps even more. In view of image “Fair Value Products and Services “ intend to create, consistent with its quality and skill level, it is advisable from marketing point of view not to be the cheapest price- wise. SALES STRATEGY & SALES FORECAST The marketing strategy in this plan mention will generate the designed sales. These sales will begin with a phone call to Fair Value group. It is a stated objective to transfer the administrative burden away from the owner, freeing up their time to meet with clients, to network at Interior Designers Society and design certain furnitures and to mark the list of 15 prospective clients. This means that someone else will be anwering the incoming calls. This person must be carefully trained to recognize whom the owner must call by immediately. The interior designer heads- and – expects- closer contact with the work room principal. The designer is under pressure to get a quotation together. The more successful the marketing strategy is in making inroads into the designer share of the workroom market, the more important – this communication response will become. In respect to the prospective lists of clients, it is essential that a “ salesman” approach be adopted to insure an organized orderly approach to each product. Notes need to be kept on each client. Follow up and persistence will pay off. Sales Forecasts The Sales Forecast is divided up to the major categories of sewing products .The work room creates, unit sales includes the yearly forecast of each unit per category based on an average of 10 –15 labour hours per item and forecast capacity given the personal charges The unit prices reflects the average cost per item based on passed pricing strategies. Since the company deals with providing custom services, this can vary wildly between items. Due to the target market shift, estimated increase in unit prices is reflected in years 1999 and 2000. Direct Unit cost reflect direct cost in producing the item does not including labour and fabric is estimated by year 2000.Revenues will reflect an 11% market share of the local soft window treatment market. THE ETHICAL CONCERNS This company provides sewing services in the creation of high quality soft window products and furnish the fabric for each custom-crafted units that means provides the sewings and installation services to its customers. The company has a very low cost of goods sold account and therefore, high gross margin for customers. The hourly wage includes the basic wage plus 7.6% social security, 2% unemployment tax and 3% workers compensation as the social responsibity of the company to the employees and workers. It is the fact that being an economic enterprise. Fair value business group is an organ of society and as such it must justify the continuance by fulfilling its role and responsibilities to the society. Here we provide a fair return on capital to share holders and provide regular, accurate and full information about the working of the enterprise. The manag3ement is ready to provide opportunities to the workers for meaning full work. Here they try to win the cooperation of the workers by creating the right condition in the enterprise. The fair value group is providing the goods and services needed by the clients at the most reasonable possible prices. Also it guarded against adulteration poor quality, lack of service and courtesy to the customers, misleading and dishonest advertising etc. The fair value business group is respecting the law and order, paid taxes regularly and honestly and to devote attention to housing and workers living condition. Also they are maintaining proper relations with the community through the press and its meetings. Being an economic institution functioning in socio-political environment, they have justified the expectations of the community. FINANCIAL PLAN AND ANALYSIS The marketing research and tailored marketing strategy described in this business plan of FAIR VALUE BUSINESS GROUP will result in after- tax profits of € 43000 in 1998 increasing nearly € 75000 in after tax profit within three years. It was estimated that by year 2000 revenue would reflect an 11% market share of the local soft window treatment market. Monthly break-even stands at 35 units. The company must keep stitches busy producing a mix quota of 35 units per month to break-even total production expected break-even is at 30% of capacity initially. Because it is the policy of clients to provide the fabric for the soft window treatment products, the company has a very low cost of good sold account and there for a high gross margin. Further more, the custom nature of the business means, there is no inventory cost to speak of or accounts payable. Finally the company does not possess any debt or long-term capital asset that would affect the cash flow. With the ability to generate so much cash flow, it is assumed that the company will seek to use this asset to expand its markets and production capacity in the near future. Break-Even Analysis Average per unit revenue and variable cost are weighted average based on sales/cost of each category of “products” it is assumed that each unit is a 15-hour-job involving 2.5 installation hours. Total fixed cost are total of all other cost not including production wages monthly break-even stands at 35units and break even is at 30% capacity initially. Break-even analysis Monthly unit Break-even Monthly Revenue Break-even 35 units € 8,212 Assumptions Average per unit revenue Average per unit Variable cost € 231.37 € 27.76 Estimated monthly fixed cost € 7,226 Profit & Loss- Projected Some of the intrinsic facets of the projected profit and loss of Fair Value products & Services are: Cost of Sales reflects direct materials needed to carry out the sewing services, such as threads, sewing supplies etc. Miscellaneous operating expenses are projected to remain flat at approximately € 3,800 annually based on historical numbers; All Sales and marketing is performed by the principal, salary is not paid to her, as this is sole proprietorship. 1998 will require a substantial outlay in advertising promotion. In years 1999 and 2000- this can be cut back a bit. Car expenses of €560 monthly consists of insurance (€ 1000 Annually), depreciation and maintenance, taxes and inspection etc. ( € 3000 Annually) and fuel (€ 2800 Annually). The various general and Administrative expenses are projected based on present actual expenses. The salary of the administrative assistant includes social security (7.65 % ) unemployment ( 2%) and Workers Compensation ( 3%) CASH FLOW - PROJECTED As per the Cash Flow, the Fair Value Business Group has number of advantages that provide for a large amount of growth in the Company’s cash account. Because it is policy of Company’s clients to provide the fabric for the soft window treatment products, the company has a very low cost of goods sold account and therefore, a high gross margin. Furthermore, the custom nature of the business means that there is no inventory cost to speak of or account payable. Finally, the company does not possess any debt or long term capital assets that would affect the cash flow. With the ability to generate. So much cash flow,it is assumed that the company will seek to use this asset to expand its markets and production capacity in the near future. THE COMPANY’S FUTURE The interior designer market segments needs can be said that, High Quality, achievable forecasts and product delivery and high customer service. This company has satisfied the need for high quality as per the designers. Clients include the high-income homeowners that demand unique products, therefore the workroom can compete. Additionally, the end customers expect their tastes and wished to be pampered by the designers. In the case of Fair Value Group requires a high contract Service environment- where client/workroom communication and customer service is a must – Finally, since interior alterations to a home are often very disruptive, meeting deadlines is crucial to maintaining the reputation of the company. The milestone of Fair Value Group shows a future prospective growth of the company. Fair Value products & Services have a big year forthcoming. In order to achieve the sales and marketing goals that have been outlined through out in this business plan, the company has deadlines to meet and ideas to implement these also. 1st December 2007 is the date mentioned by “Design Times” as by deadline after which 15% discount is no longer offered for ads to be placed in 2008. January 29,2008 is the deadline given by “Design Times” to submit final films, for ads appear in the April/May edition of Design Times. Joining UKSID & ASID is key to the marketing/networking effort. Should be effective immediately after submitting application and membership fee. Participating in show house is mentioned as important to desire image building for MRS. the workroom does not get paid for its work. By March 1,2008, plans should be fixed up for participating in at least one Show house during 2008. Networking materials, printing costs are involved in printing brochures, name cards, and in putting together portfolios of work. An additional € 3,000 is available from the total marketing budget for 2008. These funds yet to be earmarked. KEY TO SUCCEED IDENTIFIED FOR FAIR VALUE BUSINESS IN FUTURE Being a professional workroom will not have private clients. If private clients contact the company they should be referred to a designer who works closely with the company. The designers are under a lot of pressures here in the Fair Value Group. Designers also need to feel that his workroom considers that they are most important persons in the world- workroom might be busy with others designers’ work. The work room must be true to its word. The work room must be executed exactly accorded to this business plan. The quality of the production supervisor is key. They must ensure that jobs quoted at 15 hours do not take 20 or more. Profit goals cannot be reached if individual production stitchers do not work efficiently or are idle. References : Books 1. Marketing Management – Millennium Edition. By Philip Kotler – Page No. 76 -79 90-93 2. Modern Marketing Management – Principles and Practices By- RSN – Pillai & Bagavathi- Pages 122 to 125 3. Fundasmentals of Business Organisation off Management by Y.K.Bhushan Pages – BE- 3 to 9 FM- 1 to 4 Internet 1. http:/ en.wilkipedia.org/willei/Business plan. 2. http://www.bplans.com/spv 3. www.google.com Read More