Developing New Small Business - Essay Example

BUSINESSPLAN Business plan for a ‘Cloud7’ TABLE OF CONTENTS Introduction 3 Mission ment 3 Market Research 3 Market Overview 4 Target Market 5 Marketing Plan 6 Product Strategies 7 Pricing Strategies 7 Positioning Strategies 8 Promotional strategy 8 Advertising strategy 9 Financial Plan 9 Break Even Analysis 11 References 13 Introduction This paper presents a model business plan for a fictitious new chocolate company named ‘Cloud7’. ‘Cloud7’ chocolates will be exciting small treat that would fulfill a personal goal of providing the target market with exceptional chocolate experience. Cloud7’s gives high priority on quality chocolate products with organic ingredients and at fair trade standards within UK chocolate market. Mission Statement Our mission is to continually provide our customers with quality small treat chocolates at lowest possible prices. The mission is to provide great tasting chocolates as well as to offer efficient and friendly services throughout our retail and confectionary market outlets because customer satisfaction is imperative. The priority of our chocolate products is given to customer satisfaction by providing right service along with right information at right time and right place. The main target audience of Cloud7 will be women and school children. Women play a vital role in chocolate market as they are the largest purchasers of chocolates either for home consumption or for giving gifts. The most remarkable fact about UK chocolate market is that people over 55years of age consume chocolate worth 700 pounds every year, which accounts to be 21% of the total chocolate consumption. Consumer’s eating habits and lifestyles are constantly changing as general public due to busy life schedule depend mostly on chocolates and short snacks to make up for missed meals. Even though few have concerns and awareness about sugar and fat in chocolate, they regard it to be an affordable daily treat. Market Research In recent years, chewing small treat chocolate has been one of more dynamic sectors with in the confectionary market, especially in United Kingdom. The latest reports show that people in the UK consume larger number of chocolates than in any other European country and their love of chocolates and sweets continue to flourish day by day. It was accounted that UK consumed 30% or more of the total chocolate consumption in Europe, that comes around 660 900 tonnes per year. Chocolate confectionary accounted for 70% of the total sales value in the UK market and the per capita chocolate consumption was valued as 11.25kg per person. Market Overview For a new chocolate brand Cloud7, it would be a tough time to get a market where the competition is fierce and is dominated by multinational companies like Cadbury, Mars and Nestle who fight each other to keep hold of their profitable portions of this £5.3bn market. For the last five years, Cadbury had been very strong and sharing more than 30% of the chocolate market. Around one third of all the chocolate the UK people eat is made by Cadbury. It concentrated mostly on consumer awareness and understanding which in turn led to the lunching of many successful new product developments. Mars and Nestle are the other leaders in the market who had been sharing the market up to more than 25% and 20% respectively for the last five years. Nestle, the world’s biggest food and drink group, had been focusing more on UK chocolate market and it resulted to 16% hike in their annual earnings. Demand for dark chocolate has been increasing rapidly up to an incredible growth of 45% since 2004 and is still expected to continue to rise mainly because of that the consumers are influenced by its high levels of antioxidants. Even though Black Magic, the most recognized dark chocolate from Nestle, uniquely dominated UK market and helped retailers largely to take the benefits of fast growing consumer demand, there is an opportunity for a new dark chocolate with more innovative product development and targeted marketing activity that it can produce a successful market. Cloud7 also plans for dark chocolates and considers it to be imperative in this competitive market. Target Market Opportunity for a new chocolate can be developed and brought to the market only by understanding the consumers’ needs and wants and evaluating the levels that they are satisfied with. For a dynamic and complicated market like UK confectionary market, a new product must be developed by assessing different segments and identifying the consumer behaviors and buying motives. According to the UK social class segmentation put forward by the Institute of Practitioners in Advertising (IPA), first three levels of population namely A, B and C1, which itself is about two third of the total population, play vital role in chocolate consumption (Dave Hall and Rob Jones- 2001) C1 and C2 classes also purchase chocolate for own consumption that accounts to be about 25% of the total chocolate consumption. Eating habits of high and middle level professional and managers constantly change as they, with busy life schedule, are becoming ‘time-poor’ and they take chocolates or snacks to make up their meals. Exel Pvt Ltd needs to establish chocolate snacks targeting these classes, as consumers buy chocolate products for physical hunger satisfaction. The chocolate buyers mainly include four categories. 1. Those who buy for immediate eat. 2. Those who buy for home stock. 3. Those who buy for gift purpose. 4. Those who buy during festivals and seasons. Immediate eaters, particularly children, buy chocolate to satisfy hunger, or as a snack, or for freshening the mouth. This group is one of the largest segments that is mainly driven up by impulse purchase. The second group, especially mothers buying for children or for family, continue to increase in the UK market. Many people nowadays buy chocolates for sharing with friends or celebrate and reward for a different occasions that share 20%of the chocolate market. There are great sales during Easter and new-year seasons. ‘Cloud7’ needs to be developed based on the tastes and satisfactions of customers of all these different segments. Marketing Plan Product Strategies Cloud7, by taste, size, contents, softness and packages, would achieve a success in satisfying the needs of these small treat customers. Cloud7 small treat products are most appropriate for the immediate eaters; meanwhile it will be developed in a proper way for home stock, gift and season purposes. For immediate eat segment, size and taste are some factors that decide on the impulse buying. Because of that the immediate eat group consists of children, teenagers, men women, and old aged people a new product should provide varieties of small treat chocolate products in such a way that it would be able to rank in their mind as a better small treat. While consumers make their selection based on an immediate personal need, often as an impulse buying, or quite an unplanned selection, ‘Cloud7’ can possibly change the consumer’s buying motive in to ‘small treat’ motive and make a successful change in UK chocolate market. Pricing Strategies Approximately more than 80% of all the new products launched into the confectionary trade sector fail to hold a reasonable share in the market in their first years itself may be because of their pricing strategy or poor brand development. As a new product, market oriented pricing based upon the analysis of the current situations of the market would be much beneficial than any other strategy to Cloud7 products. The proposed prices will be in between ₤ .5 to ₤ 2.5. This is comparatively the best lowest chocolate prices available in the market. The middle men in the channels of distribution are playing major role in our marketing system and hence we will set reasonable margins of 20% to 30% which varies accordingly. Being highly competitive market the new product has to get an access into, Cloud7 would penetrate the market so as to persuade the consumers to develop the habit of preferring the new product and to encourage the wholesalers and retailers to purchase large quantities of the product and as a result to gain a significant slice of market. In the present UK market, being inflation is up, household bills and fuel prices are up, unemployment is also up; and same time financial crisis is becoming a great threat, a major population would concern the price hike in what ever they buy. All segments of functional buyers of chocolate, except gift segment more or less would concern small treat for less prices. Though it would be a tough task to Cloud7 to penetrate in the market where prices of cocoa have risen nearly up to 70% recently due to bad weather and political instability in major countries producing it, still it only can bring a success, especially when competitive brands like Cadbury chocolate bar prices have been increased this year. Positioning Strategy The basic positioning strategy of Cloud7 is that, when ever there is a product developed according to customers changing attitude and life style, they will rank it in their mind. Cloud7 is not going to be a big size treat for customers as many other brands, but as a small indulge that they will be satisfied with all their needs and at all occasions. The recent trends in UK market show that chocolate eaters always prefer small treats. According to the market research, sale of small chocolate cakes have grown by 28% between 2003 and 2007. Same time, sales of large chocolate boxes have remained at the same level. This tendency of small treat doesn’t mean necessarily a step down to wish to eat less chocolates and fatty treats for any health reason, but consumers with busy schedule and having less time to take lunch or afternoon tea with family members go for small treats. This is the main reason they prefer smaller chocolate packages that they can have it any time and on the go. Promotional Strategy Recent research made by Fair trade Foundation argues that UK public, especially confectionary consumers are ever more aware of fair-trade chocolate, and public awareness rose from 24% in 2007 to 32% in 2008. Now the consumers think of ethical products. Consumers all over the world, more or less, think about whether the farmers and laborers are paid fair price for cocoa products and concern about 15000 or more child slaves working on cacao in Africa. There is a big majority who concern about health and wellness, and how it is being affected by different products available in the market. Cloud7 primarily focuses on passing information through TV and web about its ethical value and antioxidants that can be provided by Cloud7 so as to increase the demand and to build a brand loyalty. It also plans to put advertising billboards at busy areas like traffic lines. Digital billboards will be considered to be an effective media because it can provide much information with effects of both sound and videos and hence it can show the ethical values regarding Cloud7’s fair trade movements. Advertising Strategy Being new product to a cut throat competitive market, Cloud7 needs to persuade the consumers by providing samples from supermarkets and other groceries for the first few weeks. During that time, it can be available for ‘point of sale advertisement’ so as to attract more large scale retailers and eventually hold a share of the market after the promotion. Cloud7 would be advertised as a source of ecstatic pleasure for wedding parties as there is an increased demand for small and readymade chocolates for wedding parties in UK, especially if it can add bride’s and groom’s name along with. Financial Plan Financial success is most important to us and hence the restaurant management believes that this financial success can be achieved through high quality customer oriented services and excellent organic food and drinks. The market and financial analyses show that Cloud7 will increase sales by more than £ 200,000 over three years while maintaining a gross profit margin of 75%. Since the start-up is so speculative, the belief and commitment of the management to the potential investors will be to pay a generous rate of return. Once the business becomes more established and strong, our ability to pay an improved return of capital will be proved by an increased rate of 15% of original principal. We will be able to commence business in April 2009 turning back a profit by the end of the month and be profitable in the next year. We plan to commence with a total of £ 80,000 in capital and £ 150,000 as a loan to start up the business. Start-up Start up expenses Legal Expenses £ 1500 Stationary expenses £ 1500 Other Expenses £ 2000 TOTAL START UP EXPENSES £ 5000 Start up assets required Cash Balance on the date of starting £ 130,000 Other current assets £ 100,000 TOTAL CURRENT ASSETS £ 230,000 Long Term assets TOTAL ASSETS £230,000 Total Requirements £ 235,000 Funding Pip Academy £ 60,000 Investor 1 £ 10,000 Investor 2 £ 10,000 TOTAL INVESTMENT £ 80,000 Current Liabilities accounts payable £ 2000 Long term liabilities Loan £ 150,000 TOTAL LIABILITIES £ 152,000 Loss at starting up (£ 2000) TOTAL CAPITAL £ 78,000 TOTAL CAPITAL AND LIABILITIES £ 230,000 Break Even Analysis Break-even analysis of Cloud7 is based on the average of the first-year numbers for total sales by meal served, total cost of sales, and all operating expenses. We realize that this is not really the same as fixed cost, but these conservative assumptions make for a better estimate of real risk. These are presented as per-unit revenue, per-unit cost, and fixed costs. Monthly Break Even Point References Dave Hall, Rob Jones and Carlo RAFFO (2001) Business Studies, Second Edition, Cause Way Press Ltd, Ormskirk, Lancs Bruce R Jewell (2000), An Integrated Approach to Business Studies, 4th edition, Pearson Educational Limited, Edinburg gate, England. Read More