COMPANY X BUSINESS PLAN

COMPANY X BUSINESS PLAN

 

EXECUTIVE SUMMARY

Introduction

Company X is a business enterprise that will predominantly deal with car care products. The business plan will attempt to show the potential of the company and its products as well as the challenges that the company is likely to face in its businesses especially in a new product that it will introduce to the market. The executive summary will provide an overview of the business concept, the opportunity that the market presents with regard to the business, the description of the product, and the background information. In addition, it will give a brief summary of the market situation and the marketing strategy, the competitive advantage of the business, the team that will be working on ensuring the success of the business, the economics of the business as well as the offer that the business will give. Company X’s main target market comprises trades people.

Business concept

The University of Technology, Sydney has developed a new tool cube, whose idea is to solve problems that trades people face. This is because either the tool boxes available in the market are attached permanently to the base of the van or they keep moving in the van. The concept behind this new toolbox is that its magnetic feet enable the user to secure it to the base of the vehicle, thereby ensuring that it does not slide around the van and at the same time, these magnetic feet function as connectors between units. Similarly, the movable tool cube helps trades people the convenience of using one tool cube in more than one vehicle.

 

Opportunity

Up to this moment, vehicle owners and other motorists depend on toolboxes, which have to be either permanently attached to the base of the vehicle or keep sliding on the floor of a moving vehicle. A survey conducted indicated that when choosing a storage device, versatility is one of the major factors that people take into account. The conventional storage boxes in the market do not offer this feature, which is a key factor that the new tool cube affords. In addition, most people are concerned with the price of acquiring the toolbox. Trades people with more than one vehicle are afforded an opportunity of cutting down their cost by buying one movable tool cube and using it in more than one vehicle. Even when it is possible for the traditional storage boxes to be shared between vehicles, it means that the user will not attach it to the vehicle making it keep sliding in the vehicle. Additionally, given that the tool cube will be made from sheet metal, coming from recyclable material, this will help to reduce the cost of production enabling the company to transfer the savings to the customers thereby creating an affordable storage device for the trades people.

A recent survey (Fig 1 and Fig 2) revealed that an item sliding around in the vehicle is one of the major issues that people are concerned about and the new toolbox will address this.

Figures: Showing the results of the survey

From the figures above, it is apparently clear that trades people value organization and space in their tool boxes. Sliding of the tool boxes together with insufficient space featured prominently as the most detestable feature of a tool box.The features of the new tool cube should ensure that the product takes a quick uptake in the market and this will only be made possible if the tool cube addresses the concerns of the trades people as captured in the survey.

Product

The tool cube shall use magnets as feet; this will help to prevent the box from sliding in the vehicle by securing it to the base of the vehicle. The magnetic feet help to prevent the storage box from sliding around the back of the vehicle. Additionally, the tool cube has an added advantage in the sense that the magnetic feet can also act as a connector between units to allow the creation of an organized storage and workspace. To protect the tools and equipment in the box, the box has a lid that also doubles as a bench space when the vehicle is not moving. Recyclable sheet metal will be used as material for making the tool cube.

Background

The tool cubes are handy for trades people as they enable them to make any repairs during their trade travels. When one is on the road, sometimes one may need to make some repairs to get to the destination (Ritter, 2000). The vehicle can break down at any point of a journey and sometimes it might not be possible to get hold of the mechanic. At such an instance the trades person can reach into the tool cube and extraxt a tool that will help him fix the problem and continue with the journey. It is imperative that trades people carry with them a well equipped tool cube which will come in handy during any brakedowns. The toolboxes available in the market have two main shortcomings; one requires to be permanently fixed in the vehicle and this prevents sharing of the tool box especially if a trades person has more than one vehicle. The other variant, which can be shared between vehicles has a shortcoming in the sense that it keeps sliding as the vehicle moves. The proposed tool cube comes with a magnetic feet that allows it to be attached to a vehicle and detached when needed in another vehicle. The magnetic feet holds the tool cube in place preventing sliding.

 

 

Target Market, strategy and projections

The automobile industry is large enough to make this business venture a success. The target market for this product shall be the trades persons who own more than one vehicles. The local market in Australia is lucrative given that more and more trades people are buying utility vehicles (Hutchens, April 13, 2013). The new product can thus use this platform to estab;lish a market presence within the vehicle buyers. Low profile approach to sales, during the first years, and the emphasis on the importance of having a flexible and versatile tool cubes will ensure that Company X succeeds in the market. Beginning with Sydney, the potential clients shall be approached in sales pitches on one on one basis. Then the company will expand its sales attempts throughout Australia. Company X will capture 5% of the market in the first year, which will yield $ 2,000,000 dollars in revenues. By the end of the fifth year, the company will capture 55% of the market $30,000,000 in sales per a year.

The only major threat to Company X is that the product’s design is relatively simple making it easy to be copied by competitors. To safeguard its designs and bar the competitors from making similar products, company X will have to avoid any public and high profile advertisements during the first two years of the business. The company will majorly employ a low profile strategy to evade capturing the attention of the competitors who would be so eager to create imitations. The sales employees will have to move from one place to another speaking directly to the potential clients.

 

Competitive advantage

Company X will have a competitive advantage in the market given the low cost of operation hence lower selling prices, protected intellectual property, and the innovative combination of direct marketing strategies. Potential competitors are likely to take longer to produce a similar product due to the struggle to meet the required standards while ensuring that they do not infringe on innovation patents of Company X. The technology employed in coming up with the product is readily available hence it will be easy for the company to roll out a mass production plan. In addition, the portability, and the versatility of the product will make it more attractive in the market. The key success factors in this business shall be the services that the company shall be providing to the clients, that is, enhanced warranty offers and quick delivery of the product.

Team

The board of directors and the management team of Company X have extensive experience of more than 20 years in the automobile industry. The technical researchers who came up with the tool cubes are engineers who have worked for renowned automobile companies for over a period of 10 years and their products have always taken a market lead. In addition, the management team has had an extensive experience in the market and employing the services of an experienced Business Consultant will see Company X become a market leader.

 

 

Economics

Company X will break even by the close of the second year and start taking profits returning positive cash flows in the second quarter of this year. The business is expected to return a gross profit margin of  70% on average each year of operation and a net profit margin of  45% in the 5th year. The value of the business will be pegged at about $60.1 million in the 5th year. The cost breakdown per unit is as tabulated hereunder:

Since the cost per unit is pegged at $55.20, the selling price must be set in a level that it will yield a positive return to the company.

Offer

Company X requires an initial investment of $500,000 to establish the business. The investors will be given a share of Company X with an estimated value of about $8.5 million at the end of 5 years, which is an equity position of about 30%.

 


  1. PRODUCT

Current products

The current market has many different types of storage boxes. However, these tool boxes require to either attached to the base of the vehicle permanently or keep moving about the van or the Ute. These products do not offer flexibility and versatility to the liking of the trades people. In an effort to bridge this gap Company X introduces the revolutionary tool cube.

Description of the new product

The Tool Cube will predominately be made from sheet metal, which comes from recyclable material and thus help reduce the cost of production and allow company to pass the savings onto the customer, creating an affordable secure storage solution. The base of the storage box shall be made up of magnetic feet, which will help to prevent the vehicle from sliding at the back of the vehicle by securing it to the base of a van or the Ute.  All that the user needs to do is to place the storage box onto the base of the vehicle or the Ute and then the magnetic feet will secure the tool kit to the base of the vehicle of the Ute. As such the magnetic feet will ensure that the box is secured hence does not keep sliding around the back of the van. Aside from the magnetic feet helping to secure the storage box at the base of the car, they also work as connectors between units thereby allowing for the creation of an organized storage space and workspace. One can actually attach a number of other storage boxes to the magnetic feet and this satisfies the customers’ requirement for a versatile storage box. This is a feature that other storage boxes do not have. The tool cube has a lid, which is useful in protecting the tools and the equipment in the storage box and functions as a bench space when the vehicle is stationary.

Product development

Product development involves the real and manufacture of the product (Annacchino, 2003). This process begins with the design and manufacture of a prototype, which facilitates testing the market. Depending on the outcomes of the tests, the organization then decides on whether it should undertake a large-scale production or not (Annacchino, 2003). The unique feature of the tool cubesis its magnetic feet that make it simple, flexible, and versatile to use. It can be used in any type of vehicle and the magnetic feet can be used as connectors between units.

The tool cube can be tested easily and quickly as it only involves placing it on the floor of the vehicle and the magnetic feet will have it secured. The testing will also involve attaching other storage boxes to the magnetic feet to demonstrate how the feet can function as a connector between units. The product has already been developed and it is envisaged that in under a week, the marketing officer shall be taking it to the market for market testing. It is expected that taking the product to the market for testing will cost between $800 and $1000.

Technical advantage of the product

The tool cube offers two major technical advantages that others in the market do not offer. First, the product offers flexibility as it can be used in a number of vehicles. It does not have to be attached to a vehicle permanently, as the magnetic feet ensures that the box is secured to the vehicle and at the same time, it can be removed at will. Lastly, the product ensures an organized workspace and storage space in that it can be part of a modular. The magnetic feet can function as a connector between units.

 

Proprietary advantage of the product

Company X does not use an existing technology and it is an innovative approach in designing the product. Currently, the company does not have any patent protection that may restrict the use of the design by other competitors. Company X can acquire a patent right to prevent companies which may attempt to imitate the product from doing so. Through an appropriate marketing strategy, company X will have a proprietary advantage and the product can be patented because the idea is original.

Limitation

The tool cube will not be big enough to offer a relatively big storage and working space. However, its ability to be connected to other units will help to address this limitation. Maybe in the future, there will be a modification to meet the requirement. Similarly, although the magnetic based storage box’s feet can double up as a connector between units, this will only be limited to storage boxes made from magnetic materials. Storage boxes made from non-magnetic materials such as plastic cannot be attached to the magnet-based storage box.

Conclusion

The tool cube is a very versatile and flexible product that will provide the potential customers with a beneficial and cost-effective storage solution. The magnetic feet are a great asset as they not only help to secure the box to the base of the vehicle while ensuring that the box can be removed at will, it also can be used to attach other boxes for a bigger storage and working space.

 

  1. RESEARCH AND ANALYSIS

Introduction

Any successful businesses worldwide have to conduct market research to stay tuned to shifting market trends as well as preserve their competitive edge. Regardless of whether a business is in an expansion phase or a start-up stage, market research and analysis is very important for understanding the vital characteristics of the target market in order to increase sales revenue, Return on Investment, profit, and the general business successes (Palepu, 2007). When doing a business research and analysis, one can take various approaches. In this section, a SWOT analysis will be performed and the key success factors are determined, a competitive advantage analysis will be conducted, and an environmental analysis carried out. This is to be able to understand the market dynamics and be able to put measures in place that will ensure that the company retains a competitive edge.

SWOT analysis

The SWOT analysis is a beneficial tool that will help to enhance decision-making (Pahl, Richter, and University of Applied Science Berlin, 2007). The following is the SWOT analysis of Company X.

 

 

 

 

Strengths:

  • Unique products
  • Strategic business location
  • Sustainable marketing strategy
  • Experienced management team
  • Low cost of production
 Weaknesses:

  • Company X is new
  • No established distribution channel
  • Limited human resources
  • Weak brand name
  • Lack of patent protection
Opportunities:

  • Capacity for international growth
  • A high purchasing power of Australian population
  • Development of new technologies
 Threats:

  • Easy to copy
  • Developed potential entrants
  • Internal research projects likely to fail
  • Economic pressure

 

Strengths

  • Company X provides products that are unique and offer measurable solutions to motorists
  • The business location is strategic making ease of access by customers, savings on transportation cost and proximity to the manufacturing partners
  • Company X employs a sustainable strategy in its marketing strategy
  • The Company’s board of directors and the management team have extensive experience in business and have a wide knowledge of the market
  • Company X incorporates patentable innovation that gives it a competitive edge
  • Low cost of production because of the use of recyclable material for the manufacture of the products

Company X will take advantage of the experience and the reputation of the members of the board of directors as well as its management team in marketing the product. The focus shall be on the capacity of the product to solve the clients’ issues of sliding items in a vehicle as well as environmental problems given that the material used can be recycled.

Weaknesses

  • The company is totally new and as such lacks sales, procedures and reputations
  • The company does not have an established distribution channel
  • The company has limited human resources and staffs
  • Currently, there is lack of patent protection
  • The brand name is still weak

In order for Company X to succeed in its business, its operations strategy will have to ensure that the company scales quickly. The company also should employ staffs with excellent marketing and sales skills to be able to market the company and its products among the potential customers. In addition, the company should seek patent protection to guard it against companies that may attempt to imitate the product design. Lastly, given that the brand name is still weak among the potential customers, enhancing the brand through quality and innovative products is a great way to ensure a strong brand name (Mullin, Hardy, and Sutton, 2007).

Opportunities

  • Long-term capacity for international growth
  • Large number of vehicles bought every year in Australia
  • Development of new technology to enhance research and expand customer base

The most important immediate opportunity is the large number of vehicles that are bought each year, which will provide a large market for the product.

The company shall only consider secondary opportunities after the immediate opportunities have been exploited effectively.

Threats

  • Some other company could duplicate the Company X capacities without having to transgress its patent
  • Potential entrants include very large and developed companies with international infrastructure
  • It is possible for the internal research projects to delay or fail
  • Economic pressure which may make the company to face financial problems

Company X shall ensure that it secures the most general patent possible to prevent the entrants from employing a similar technology to achieve closely related results.

Company X can adequately serve the initial target market even though the research projects are delayed or fail.

Conclusion

Company X has numerous strengths, which if well managed can result in a huge business success. Although there are a number of companies offering car care products, including storage boxes, they do not offer products that will match or go beyond those of Company X. The flexibility, versatility, and ease of use of Company X’s products are an advantage to the company. Given that other companies do not offer storage boxes with a magnetic base, it is apparent that Company X does not have direct competitors. What Company X is offering, is a product, which allows users to have a flexible, and versatile storage boxes for their vehicles. These are some of the most sought features by customers with regard to storage kits. If the market is approached well, the market will readily embrace a new product that will meet their expectations largely.

Although there are substitutes in the market, they are indirect substitutes that do not have most of the features of the tool cubes. As such, the product will not receive a stiff competition if marketing is done in a very creative and appropriate manner. The only significant weakness of this product is that it is easy to imitate. However, the company will have to take a low profile approach in the initial years to avoid capturing the attention of any companies with the potential of imitating. Meanwhile, the Company should seek a patent protection that is as general as possible to cushion it from entrants.

 

Key success factors for the company

The key success factors are the elements that will affect the business’ ability to perform well in the market (Li and Solis, 2013; Palepu, 2007). The key success factors for Company X are:

  1. Retaining the customers of the product and attracting new ones to buy the product
  2. Hiring and retaining excellent employees and this should be measured using job vacancies, employee turnover, and customer satisfaction
  3. Successful introductions of new product, which will be measured by costs and sales
  4. Successful promotional activities which will be measured by sales and cost
  5. A robust distribution channel or network to ensure that the product gets to the market at the appropriate time and within a very short notice
  6. A robust supplier network to be able to meet the demands of the manufacturer
  7. A low cost structure, which will ensure that the company gets high profits from the business
  8. Thriving product positioning
  9. Unique and differentiated product that customers will appreciate for its unique and valuable features
  10. Easy and quick delivery of the product to the customers

Competitive advantage analysis

A competitive advantage is an obvious performance degree of difference over the competition with regard to factors, which are important to customers. Competitor actions will have an explicit effect on the business’ profitability. The following is a summary of the competitive advantage analysis for company X.

Entrants- moderate A number of entrants are expected

The product is simple to imitate

Employing a low profile approach during the first years will help to curb the problem of imitation
Customers- favorable A huge market of more than 18 million potential clients in Australia alone

There is a need for a continual source of customers including getting to the international markets

 

 

 

 

Substitutes-moderateA number of companies are providing storage boxes

Company X’s storage boxes are much superior to those available in the market

The box ensure portability while allowing it to be secured to the base

The box allows versatility with the ability to attach other boxes

 

 
Suppliers-favorableNumerous suppliers of the materials available

Regular sourcing required
Company X

+
Entrants

  • Once the market for the product, a number of companies are likely to produce a similar product especially if the patent right is not general enough. Company X is exposed to future competition from fresh entrants
  • The design of the new tool cube is very simple, which is a further setback to the barriers of new entrants. The competitors can easily copy it.
  • To raise the barriers to new entrants, Company X will seek a patent that is as general as possible and sponsor a strict Australian standard for vehicle tool kits
  • In addition, a low profile approach during the first years, especially before acquiring patent protection, will ensure that the number of new entrants is limited.

Suppliers

  • An ongoing supply of the materials used to make the tool cubes is needed
  • The Tool cubes will be created using simple and recyclable materials such as sheet metal.
  • The required materials are readily available from a number of suppliers
  • The simplicity and wide availability of the materials implies that the supplier bargaining power is weak

Customers

  • Company X’s customers will be companies in the transport industry and private vehicle owners
  • A large potential market for the product is available
  • The business could be marketed to any person who has a vehicle and needs a storage box that is portable, versatile and one that has to be attached to the vehicle
  • The business has the potential of extending to the international markets given that the product is unique and has superior features compared to the ones already in the market
  • Every person in Australia who is old enough to own a vehicle is a potential customer of the product

Substitutes

  • Although Company X will have to compete with a number of substitutes, there are no direct substitutes of the product
  • There are a number of products which offer similar products but they lack the combined features of potential to be portable and ability to be secured to the base of the vehicle. In addition, the available storage boxes do not offer versatility that the new Tool cubesoffers in that one can attach other boxes to the magnetic feet.
  • The existing companies cannot compete with Company X’s new Tool cubesin terms of flexibility and versatility

Conclusion

Company X will have a competitive edge in the market over other potential competitors. This is because the features of the Tool cubesare much more superior as compared to those in the market. If Company X is able to convince the potential customers of the versatility, and flexibility that the new product offers, then the Company will be much ahead in the market.

Environment analysis
Political
Trading: the country of Australian has favorable trading policies with the neighboring countries, and its trades are in favorable conditions. This will enhance the growth of Company X to attain an international status.
Pressure Groups: There are a number of pressure groups in Australia, which will make the company to think about Ethics and the Corporate Social Responsibility that it should consider and practice in the country.
Wars and Conflict: Australia is not involved in any kind of war or political instability within and without the country. Therefore, the political environment appears to be sound making the business to thrive given that there are no tussles threatening it.
Government Policies: The Australian government has an open door policy that will always motivate a number of international investors to invest their resources for the benefit of the Australian people. As such, it will be difficult to get investors who will finance the Company.
Election system: Australia holds the voting election for the House of Representative after every 3 years using Australian election System. As such, even if the political environment is reasonably steady, there is a possibility of the revision of business regulations when a new government takes up power.
Economic
Home Economic Situation: the Australian country is facing recession, as well as the inflation rate of about 2-3% and an unemployment rate of around 6% (Count, 2013). This might make the cost of production go up.

Taxation Issues: in Australia, there are a number of implied taxes, including corporate tax, sales tax, pay as you earn tax, and progressive income tax among others (Australian government, 2013). The corporate tax rate in Australia is very competitive when compared to other major economies making it a favorable place to start and run a business.
International Trade: the Australian trade is majorly focused towards the Asia countries and other pacific countries (Department of Foreign Affairs and Trade, 2013). These countries are progressively becoming world giants with regard to trade and this focus towards the countries will help boost the company’s expansion to international levels, especially in the Asian countries. Currently, Japan, India, China, the Republic of Korea, and other Pacific countries purchase about three quarters of Australia merchandise exports (Department of Foreign Affairs and Trade, 2013).
Monetary Issues: the Australian interest rate is about 2.5% (Reserve Bank of Australia, 2013), which is favorable enough for investors since they can receive financing at a lower cost. This will make the business less costly for Company X hence it will boost its profits.
Social
Media Views: in Australia, the media has an immense influence on the people’s life. As such, the advertisements that Company X will post in the media will have a great impact on the customer’s choice of the products.
Education: approximately 99% of the Australian population are literate (Central Intelligence Agency, 2013). Given that the customer is very much educated, Company X will have to provide highly qualified goods.
Living Standards: the Australian population has a high purchasing power party that is good for the Company products because the higher the number of cars bought, the greater the demand for the tool kit.

Technological

With the coming up of the new age with regard to technology, organizations have wholly incorporated themselves with all the up to date shifts, which have taken place. One of the most recent trends, which has largely picked up and something, which almost each business is turning towards, is the Social Media. The explosion of the social media has enabled for an increasingly interactive commitment to the customers with real time results. As such, Company X has to remain ahead of all the technological developments, which take place while keeping in mind of how the consumers are utilizing technology for their gains and how Company X can reach out to them in order to carry on in growing the brand engagement and brand recall.

Conclusion

In general, it is apparent that the Australian environment is a robust one with regard to establishing a business there. The current state of the Australian political system, economic status, societal attitudes, as well as the available technologies makes the Company X product a favorable proposition. This favorable environmental condition will ensure that Company X reaches its break-even within a relatively short time and ensure that the company receives steady profits throughout the lifecycle of the new product.


  1. OPERATIONS AND PERSONNEL PLAN

Operations plan

The operations plan for company X shall be in two phases. During the first phase, company X shall use engineering workshops to create prototypes, which shall be used for marketing and demonstrations purposes. The second phase shall involve producing the product in large quantities to sell to clients across Australia.

Sourcing

PHASE ONE

During this phase, company X shall have to source a few supplies, which shall be used to construct prototypes that will be used for marketing and demonstration purposes. At the same time, this phase shall be used to lay the groundwork for phase two, as it will be used to assess suppliers to determine the ones who will be able to meet the demands of company X. It will also involve introducing the suppliers to the assembling firms that will be contracted to assemble the parts into a magnetic base toolbox. All the materials shall be sourced from the supply companies that supplied the initiators of the project.

PHASE TWO

At this phase, the company shall have identified the appropriate suppliers, who will be able to supply the materials required in a short notice to meet the market demands. It will be the responsibility of Company X’s manufacturing partners to procure supplies in adequate quantities from the suppliers. This however does not mean that the company management shall not have links with the suppliers. They will be monitoring all the links with the suppliers.

Operations

PHASE ONE

During this phase, company X will be focusing on the engineering one to create prototypes, which shall be used in the marketing of the product and demonstrations of how it works. In addition, the phase shall be used to lay the groundwork for the second phase, which shall involve identifying the manufacturers and distributors who have the capacity to assemble and deliver the Tool cubes in large quantities within a very short notice to meet the demands of the clients. The company senior management shall oversee the preparation of tender documents that will be used to select manufacturing and distributing partners.

PHASE TWO

All parts required for the manufacture of the product shall be acquired from external suppliers and as such, the assembling process should take about one hour. The manufacture cost shall be about $10 given that the storage box shall be predominantly made of recycled material. Once the boxes are assembled, they are ready for supplying to the major distributing partners.

Facilities and equipment

Office rent for the business shall be rented within Baulkham Hills in one of the industrial complexes within the vicinity.

The equipment shall include communications facilities such as office telephones, computers, and other miscellaneous equipment. The following assumptions shall apply with regard to the facilities and equipment:

 

Office rental cost: $ 350 per m2 per annum

Office floor space requirements: 10m2 per an employee

Office space required (including the second phase): 1600m2

Office rental: $560,000 per a year

Electricity: $200 per month

Equipment will be categorized as communication, computer hardware, computer software, and miscellaneous equipment.

Computer hardware requirements:

Item Allocation No Unit Cost Total cost Due date (Month)
Computer storage Office 1 $5,000 $5,000 2
Desktop computer Marketing officer 1 $3,500 $5,000 2
Laptop computer Managing director 1 $4,000 $4,000 1
Laptop computer Research manager 1 $4,000 $4,000 1
Desktop computer Service technician 1 $3,500 $4,000 3
Desktop computer Account managers 3 $3,500 $10,500 15
Total hardware cost $32,500

Computer software requirements

Item Allocation No Unit cost Total cost Due date (Month)
Microsoft XP Office 15 $1,500 $22,500 1
Total software cost $22,500

 

Communications requirements

Item Allocation No Unit cost Total cost Month
Premium mobile Managing director 1 $500 per a month $500 per month
ADSL Office 1 $500 per a month $500 per month
Mobile phone Account managersResearch manager

Service technician

Total

3 

1

 

1

 $100 per month$100 per month

$100 per month

 

 $300 per month$100 per month

$100 per month

$500 per month
High-use mobile Sales managerMarketing manager 1 

1

 $500 per month$500 per month $500 per month$500 per month
PABX Office 1 $300 per month $300 per month
Total communications requirements       $2,800 per month

 

Miscellaneous requirements

Item Allocation No. Unit cost Total cost Month
Copier/printer/fax Office 1 $5,500 $5,500
Workstation Service technician 1
Accounts manager 3
Sales 1
Marketing 1
Finance/admin 1
Total 7 $1,500 $10,500  
Phone system Office 1 $7,500 $7500
Total miscellaneous cost $23,500

 

Service

During the second phase, the company shall put in place a website and a telephone hotline, which the clients shall use to lounge any complaints and provide any information necessary to enhance the product. In addition, the management shall ensure that they develop a guarantee form, which a client should fill and the client can return a defective product for repair within a period of three months. The following is a table of the major service activities and the schedule for implementing them:

Task description Responsibility Due date
Setting up of a complaint information system Managing director December 2013
Setting up of a guarantee system Operations manager June 2015

 

Inventory

The company shall maintain an inventory of the supplies, which shall be used to manufacture the boxes. The company shall use a computerized manual system and at the same time keep manual inventory system as a backup.

Action plan

The following table gives a list of the major activities as well as the schedule for implementing them:

Task description Responsibility Due date
Location Board of directors December 2013
Inventory Operations manager December 2014
Labor Operations manager December 2014
Facilities Management team December 2013

 

 

Personnel plan

Positions

The following is the structure showing the position currently at the company.

 

 

Action plan

To enhance the activities of the Company, the organization shall employ an operations manager who will work side to side with the managing director to ensure a streamlined flow of information in the organization. The following shall be the organization structure of the company during the first year.

 
During the first year, Company X shall have only one managing director to be the general overseer of the company and the operations manager, who shall be reporting directly to the managing director, shall be responsible for the daily operations of the company. To guide the business operations and provide consultancy services shall be the business consultant. The business consultant is important because he will assist the organization to get started. A marketing officer shall also be responsible in marketing the new product in the target market by providing free samples and conducting demonstrations of how it works.

Function Responsible person
Sales, general management Managing director
Marketing Marketing officer
Advertising and promotion Operations manager
Business consulting Business consultant
Operations and services Operations manager
Accounting Outsourced

 

In the third year, the organization shall employ an inventory manager and other sales staffs to enhance the handling of inventory and sales activities.


  1. COMPANY DIRECTION

Mission Statement

Company X is an innovative storage company that aims to build up and market a secure, reliable, and cost-effective storage device for the customers.

Vision statement

In five years, Company X shall be recognized as a pioneer and a leader in the manufacture of innovative storage devices that provide measurable solutions to clients. It will have developed in the storage industry and be a benchmark for other companies in the same industry.

Objectives

Financial objectives

The financial objectives of Company X are:

  • Profitability in the second quarter of year two
  • A revenue of $ 30,000,000 in the fifth year producing a net profit before tax of $16,500,250
  • Attain a stable profit growth in the first two years at about 50%and this essential given that the business is targeting on building cash
  • A company which is valued at $60.1 million at the end of year 5
  • Recruiting new employees at the end of year four to enhance the Company growth while further increasing profit growth at around 66% to 70%

Strategic objectives

The following are the strategic objectives that will help to strengthen the Company X business position and competitive viability:

Year Strategic objective
1st Employ a manager and three technical staffs to help in productionEmploy an accountant and an administrative assistant

Begin marketing
2nd Establish a market baseEmploy two sales staffs
3rd Expand into several markets in Australia
4th Employ more staffs to help in marketing the boxesAcquire an exclusive license to distribute Magnetic Base Storage  boxes
5th Look into franchising optionBuy a second warehouse to help in storing the boxes to supply distributors across Australia

 


  1. MARKET PLAN AND STRATEGY

Market strategy

The marketing strategy for the Company X is the central part of the most important strategy (Dibb, and Simkin, 2008):

  1. Lay prominence on support and service
  2. Put up a relationship business
  3. Concentrate on transport businesses and individual car owners as the key target markets

Sales Strategy

There is a need to sell the company, as opposed to selling the particular product (McDonald, 2007). The management should sell Company X and not the product or the brand names.

Strategy and Implementation Summary

  1. Emphasize service and support

Company X must differentiate itself from other companies in the same business. Company X needs to establish its business offering as an apparent and viable option for the target market.

  1. Building a relationship-oriented business

Company X should build long-term relationships with its clients, as opposed to single-transaction deals with clients (McDonald, 2007). The personnel in the company should be made to understand the value of creating and maintaining the relationship.

Marketing plan

Position

Strategy

Given that the target market is narrow, the general positioning strategy shall be based on differentiation. Given that the company is newly established, the focus shall be beginning on serving a single market niche with a product, which shall appeal and suit the customers. In order to enhance the company’s competitive advantage, the company shall deliver the best products and provide services that will attract and retain customers including flexible, customized, and personal services, and just in time delivery (Smith, and Flanagan, 2006). In case this strategy succeeds, then the company will be in an advantaged position with regard to competitiveness.

Environment 

Customer profile

  • Customers consider products differences valuable. For example, the magnetic feet, which enhance portability while ensuring that it is secure to the base.

Target market segments

The table that follows shows the short run target market segment because other customers including companies that own vehicles, not necessarily for commercial purposes, may later need the storage boxes.

 

 

Regions Transport businesses Private car owners
Inner city 300 150,000
Inner west 500 126,000
Eastern 300 300,000
North shore 300 100,000
Northern 450 110,000
South 600 89,000
West 250 90,000
Northern Beaches 300 100,000
North West 350 90,000
Total 3350 1,149,000

 

Pricing

Strategy

The products will be charged using a “cost plus pricing” strategy, which involves pricing the products by adding the total cost of a product to some profit margin (Rao, 2009). The full cost plus pricing usually seeks to set a price, which takes into account all the applicable costs of production. These costs could be calculated as shown:

Total budgeted cost of factory + selling and distribution costs + all other overheads + Mark-up on the cost

Given that the product is unique, customers will be more concerned with the value that it will add to them as opposed to having to get comparative products at a lower price (Jensen, 2013). A flexible cost-plus strategy will be used to allow flexibility, which will allow the organization to vary the prices on special circumstances such as when the cost of material changes (Czinkota, 2007). During the first two years, the profit margin shall be 15% in order to create a market demand but after the third year, the margins shall be increased to 35%.

The following is a summary of how the Company will arrive at the price of a single unit of the storage boxes during the first two years period:

Fixed costs
Research and development $ 300,000
Administration and other overheads $400,000
Factory manufacturing costs $1,000,000
Fixed selling costs $600,000
Total fixed costs $ 2,300,000
Variable cost
Variable costs per a unit $10
Mark-up
The mark-up percentage required 15%
Budgeted sales units
The sales units for the budget 500,000

 

The following is a summary of the total costs of production:

Total fixed costs $ 2,300,000
Total variable costs (£10.00 x 500,000 units) $5,000,000
Total costs $7,300,000
Mark up required on cost $7,300,000 x 15%) $1,095,000
Total costs (including the mark-up) $8,395,000
Divide the total costs that include mark-up by the budgeted production of 500,000 units to get the selling price per unit
Selling price per unit $16.79

 

 

 

 

The following is a summary of how the Company will arrive at the price of a single unit of the storage boxes after the second year period:

Fixed costs
Research and development $ 200,000
Administration and other overheads $800,000
Factory manufacturing costs $1,000,000
Fixed selling costs $600,000
Total fixed costs $ 2,600,000
Variable cost
Variable costs per a unit $10
Mark-up
The mark-up percentage required 35%
Budgeted sales units
The sales units for the budget 500,000

 

 

The following is a summary of the total costs of production after the second year period:

Total fixed costs $ 2,600,000
Total variable costs (£10.00 x 500,000 units) $5,000,000
Total costs $7,600,000
Mark up required on cost $7,600,000 x 35%) $2,660,000
Total costs (including the mark-up) $10,260,000
Divide the total costs that include mark-up by the budgeted production of 500,000 units to get the selling price per unit
Selling price per unit $20.30

 

The key success factors are:

  • Good guarantee offer – 3 months
  • Service – quick reaction any complaints or concerns, just in time delivery

Distribution

Strategy

The customer can buy the product from mail orders, direct sales, and channel partners including distributors, retailers, and wholesalers.

 

Location

Location is an important factor because the cost of transportation and delivery needs to be cut as minimal as possible. The location shall be so strategic by taking into account transport, access to the raw materials, access to the clients and how they purchase.

Channels

Company X will have five persons who will be dealing with the distribution of the product. These will be one marketing officer and four sales representatives.

Action plan

Task description Responsibility Due date
During the first year, there will be no distribution activity as the customer focuses on attracting as many clients as possible before commencing on distribution activities. In the future, the business will attempt to seek exclusive distribution of the product Achieve the target sales to enable the company to get exclusive distribution from the identified distributors Around Year 3, or when the Company could have achieved the target sales required

 

 

 

 

 

Promotion

Strategy

The product is easy to understand and may not call for special handling techniques. The company will begin by creating awareness among the potential clients on the benefits that the product offers, which other products in the market do not offer.

Advertising and media selection

Advertisement will be made through the newspaper and direct mail. The advertisement shall target both the commercial and private owners of vehicles. Commercial owners of vehicles shall be contacted through direct mail while private vehicle owners shall be targeted through mouth to mouth convening and through the newspaper.

During the first year, the company shall employ a low profile strategy for its product to avoid duplications of the innovation. This is to avoid an unnecessary competition from other companies, while strategizing on the way forward with regard to patent protection. The following are the assumptions made with regard to the financial requirements for advertising:

Year Amount required (in dollars)
1st year 2,000
2nd year 5,000
3rd year 15,000
4th year 6,000
5th  year 3,000

The response rate for private car owners is expected to be about 2% to 7% from the first year   to the fifth year. On the other hand, the response rate for the commercial vehicle owners, the response rate is expected to be about 8% per a year during the first five years.

Action plan

Task description Responsibility Due date
Advertising on media Brochures, community and national radio, social media, state and local newspaper Weekly
Send emails and direct mails to commercial vehicle owners Transport companies as the main target of this strategy Monthly

 

Product

Stage of development

The product has already been developed and is in the product launch stage.

Proprietary advantage

Currently, there is no contractual agreement, which provides for proprietary rights to the product. However, the company management is working hard to ensure that they attain annual target results of $800,000- $1,000,000, which will make the identified distributors happy to grant the company exclusive rights to Company X.

 

Action plan

Task description Responsibility Due date
Product development Update the product to attain eligibility to be sold in the market Whenever there is a new regulation on the product standards as shall be set by the ministry of Fair Trade or government
Intellectual property protection Explore the possibility of having a patent protection which is as general as possible to prevent other companies which might attempt to manufacture similar products that offer comparable results without infringing the patent rights As soon as possible before the product gets a high profile in the market
Packaging Company X As soon as Company X gets exclusive rights to the product
Labeling Company X On getting exclusive rights to the product

 


  1. RISKS AND CRITICAL ISSUES
Risk category Risk Likelihood Impact Risk reduction strategy
Marketing The Company is not likely to receive exclusive proprietary rights from the identified distributors  Moderate 

 

 

 Moderate Applying an appropriate amount of marketing in the first years will make sure that the Company gets a comfortable position in the years that will follow
The new entrants likely to design and market similar products  that will offer the product a stiff competition  Moderate Moderate Seeking for a patent protection that is as general as possible to raise the barriers against potential imitators
Operational The business does not scale effectively when it is expected to scale Low Moderate There is a need for extensive and early planning before the success of sales will ensure that the business scales rapidly
Organizational Decision making process is slow and complex Low Low The founders of the organization have made a decision to keep a flat structure of the organization in order to enhance the decision making process and eliminate complexities in the process of communication and decision making 
Staffs are likely to resist the rapid changes, which will be initiated after the second year to enhance a rapid growth for the Company Moderate Low From the beginning, involve the staffs in the planning process for the rapid changes aimed at enhancing a rapid growth. In addition, initiate a reward process where appropriate changes are rewarded
Technical Research projects either fail to succeed or are slow to deliver Low Low The initial marketing strategy is based on the existing strengths of the product. Then the enhancements to the product will be unveiled as and when the product is ready for shipping
A competitor duplicates Company X’s abilities without necessarily transgressing the patent Moderate Moderate Focus on securing the competitive advantage by employing aggressive operational plan and first mover advantages
Financial Company X cannot raise the amount of money required for the rapid growth of the Company in a bid to enhance its sales through intensive marketing and sales campaigns Moderate High Company X should realize good profit margins in the initial years in order to ensure that the Company remains afloat for more marketing and promotion activities

 

 

 

 

References

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Jensen, M. 2013. Setting profitable prices: A step-by-step guide to pricing strategy – without hiring a consultant. Hoboken, N.J: John Wiley & Sons.

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Palepu, K. G. 2007. Business analysis and valuation: IFRS edition, text and cases. London: Thomson Learning.

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Smith, J. L., & Flanagan, W. G. (2006). Creating competitive advantage: Give customers a reason to choose you over your competitors. New York: Currency/Doubleday.

 

 

 

 

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