Business Planning for Fresher - Assignment Example

? BUSINESS PLANNING ………………………….. College ……………………………… ……………….. Table of Contents Table of Contents 2 Executive Summary 4 2. The Industry 5 2.1. The industry Overview 5 2.2. Market trends and opportunities 6 2.3. Porter’s five-force analysis 7 2.4. The Fresher’s relative market position 9 3. Environmental Analysis 10 3.1. SWOT analysis 10 3.2. PESTEL analysis 11 4. The Product 13 4.1. Product description 13 4.2. The benefits of Fresher’s products 14 4.2. Contributing to competitive edge 14 5. Marketing Research 15 5.1. Targeted customers 15 5.2. Market Share 16 6. Marketing Strategy 16 6.1. Marketing Mix strategy 16 6.2. STP Strategy 18 7. Processes 19 7.1. Quality Control 19 7.2. Equipments 20 7.3. Policies 20 8. Personnel 21 8.1. Management team 21 8.2. Organizational Chart 21 9. Finance 22 9.1. Financial Projections 22 Conclusion 23 References 24 1. Executive Summary ‘The Fresher’ is an exciting start-up logistic business with unique approach to helping large scale supercentres and hypermarkets across London to provide its customers with freshest fruits and vegetables than those that are presently available in large retail outlets. The business idea behind this start-up is that customers across London are extremely concerned about fresh, natural, genuine and quality fruits as well as vegetables distributed by both large and small scale retailers, but they hardly get satisfied. The Fresher takes it not only as an opportunity to be commercialized, but also as a social responsibility to meet customers’ specific need for farm-fresh goods. In today’s highly competitive business contexts, marketers need to think strategically to develop certain strategies to help them achieve competitive advantage and to survive in the market. It is also required for a start-up business to be successful. ‘Going global’ is a very significant and effective strategy for that it widens the market potential and helps the firm grab further marketing opportunities. The Fresher begins its business from farmers across different countries and extends its services to local retailers in London to provide farm-fresh goods, and therefore, it not only goes global but also comes back to local to gain maximum advantages of logistics. The Fresher’s market involves customers who come to large as well as small to medium sized retailers to buy fruits and vegetables. The Fresher is going to bring wide variants of foreign fruits and vegetables that were never before available in London market and this adds up to the market potential of the company. The financial projections show that the company will generate quite impressive profitability within the first year. Strategic marketing activities, extensive R&D, integrated communication and promotion activities will help the company build a strong brand image among its customers. 2. The Industry 2.1. The industry Overview For the last two decades, fresh fruits and vegetables represented the most important product category in the UK market. According to United Nations Publication (2003, p. 231), out of the total turnover of the organic food in UK, 33 or more percent are generated by fresh fruits and vegetables in 2001 and more than 85 percent of all the organic fruits and vegetable sales were taken place in supermarket chains. As of 2006, fruits and vegetable represented 27 percent of UK’s organic food segmentation and 75 percent of the organic food sales were carried out by Supermarkets (UK Organic food, 2006). Almost all the large scale retailers, mainly Sainsbury’s, Tesco and Waitrose already offer core assortments of organic fruits and vegetables. UK’s fresh fruits and vegetables market has been valued as worth an estimated ?9.52 billion in 2010, with an increase of 4.3 percent from the previous year figures despite the fact that the market has been severally affected by rising food-price inflation. The industry in 2010 reported an increase of 29.5 percent total turnover in comparison with the figure of 2006 (Fruits and Vegetables market report, 2011). Even though inflation has pushed up the prices for fresh fruits and vegetables in the UK market in recent years, people are becoming increasingly aware about the hygienic factors of fresh fruits and vegetables and they are found to consume more than they were in previous years. Mintel (2011) reported that the UK fruits and vegetable market, which was estimated to reach ?12.3 billion in 2010, has experienced 24 percent growth between 2005 and 2010. Nine out of ten consumers were found to use fruits and vegetables and they were found eating six or more different types for their varying consumption. It is predicted that innovation and technology can bring major changes in the market due to that consumers are highly concerned about foods and that their needs, tastes and lifestyles are varying widely among them. 2.2. Market trends and opportunities Most of the prevailing market trends in the fruits and vegetable segment pose wider opportunities for the Fresher’s new business idea. Consumers are increasingly health-conscious and therefore this has brought more users to fruits and vegetable segment driving a growth of ?12.3 billion in 2010. UK market will continue to experience price increase for fresh fruits and vegetables over the next few years causing the market value to reach to approximately ?11.93bn by 2015 (Mintel, 2011). The price hike is mainly driven by various factors including general inflation increase, rising population to cause increased supplies, ongoing climate change etc. This poses challenges to major retailers that distribute fruits and vegetables in the market, but is an opportunity for the Fresher since its market idea is to distribute them for significantly cheap price for that it proposes to collect them directly from countries like India, Sri Lanka, Bangladesh, Bhutan etc. The fresh fruits and vegetables from these countries will cost below 20 percent (it varies between countries; for instance, it may be below 10 or 5 percent in Bhutan and Bangladesh) of the present market price for same products in London market. Even though transportation, advertising, cold storage and technology may add up to around 20 percent to the total costs, the Fresher can still offer its goods for as cheaper as 50 percent less than the present market price. The Fresher, thus, brings a strategic idea forward for supermarkets and other retailers to defense the price-rise challenge. APEDA- Agricultural and Processed Food Products Export Development Authority of India (2013) reported that UK market accounts for half of the European ethnic food market with Indian foods being the market leader. The Fresher’s main target for supply is India since the company can tie-up farmers in India to collect best in-class fruits and vegetables to be marketed in London and also for that Indian products are more demanded in London market. 2.3. Porter’s five-force analysis To predict competition rivalry and to measure the relative industry position of the company, it is critically important to analyze major industry factors that influence competition and competitive advantages. Porter’s five-force analysis is an invariably important tool that is undertaken from the perspective of an incumbent organization with a view to measure and analyze the forces within the industry which affects its performance and hence its profitability as well (Henry, 2008, p. 69). Michael Porter in 1985 produced his study of market structure and he developed the framework for analyzing the industry-related factors from the perspective of a firm’s competition position. He identified five major forces; they are competitive rivalry, bargaining power of suppliers, bargaining power of customers, threats of new entrants and threats of substitutes (Gillespie, 2007, p. 188). As Cheverton (2004, p. 80) noted, Porter’s five force analysis comes in two stages, one is the analysis and the second is related to the conclusion and action based on the analysis. The five-force analysis of the Fresher is depicted below: The five-force analysis depicted above illustrates the following facts: 1- Since the Fresher is pioneer of the market idea, it may not have to experience severe competition. But later, if there are more entrants to the segment, the company will have to face competition. 2- There are possibility of new entrants because of that presently dominating logistics firms may think of the idea to grab better slice of the opportunity slice. Moreover, the large supermarket such as Tesco have their own potential to come in alliance with farmers abroad due to that they have branches in foreign countries. 3- Packaged fruits and vegetables are substitutes. However, this may not affect Fresher’s business since there is greater difference in pricing. 4- Suppliers are less likely to bargain because they are going to get new market opportunities and rewarding returns for their efforts. Farmers in countries including India, Bangladesh and Bhutan are often deprived of better returns for their goods and most of them have less access to large markets due to fewer facilities. 5- Supermarkets may not bargain since there is no alternative option available. 2.4. The Fresher’s relative market position Based on the above five-force analysis, it is very evident that the Fresher is unique in the market and it is less likely to experience fierce competition in the beginning. Fruits and vegetables represent a major portion of organic food market in the UK and this is distributed mainly through supermarkets, the Fresher will play significant role in the organic food market. Though the company is the first of its range and segments, it is the market leader for logistic business that collects fruits and vegetables from abroad and distribute to customers in London through supermarkets and other large as well as small scale retailers. The Fresher can largely influence the life style and buying patterns of consumers across London and when the business become successful, the business idea will take its route to all other parts of UK and to dominate the fruits and vegetable markets through almost all large scale retailers such as Tesco, Waitrose, Sainsbury, Marks and Spencer and so on. When the company goes for own-labeling, it will significantly establish a strong brand positioning among millions of customers across UK. 3. Environmental Analysis 3.1. SWOT analysis SWOT analysis is an important strategic tool to scan factors that influence internal and external environments of a firm. As Tiffany and Peterson (2011) noted, SWOT analysis allows constructing a strategic balance sheet for a company by bringing together both internal and external factors. The SWOT analysis of The Fresher is depicted below: Strengths Weaknesses Emphasis on quality, fresh, natural and genuine fruits and vegetables. Company’s social responsibility perspective to help poor farmers abroad Dependence to retailers for distribution. Heavy investment for transportation, technology etc Opportunities Threats Going global for supplies and local distribution through retailers Rising price for fruits and vegetables Highly advanced technology for transportation and cold storage- Innovation. Legal constraints to get in alliance with farmers abroad Readily available packaged foods distributed from foreign countries. Fluctuation in exchange rates 3.1.1 Internal Factors The Fresher’s business idea is to bring freshest, natural and genuine fruits and vegetables, which are fully free from pesticides and other chemicals, from foreign countries and to distribute them to customers through supermarkets and other retail outlets. Since consumers in UK are increasingly aware about the need for fresh and quality fruits and vegetables to avoid diets and other health risks, the Fresher’s business idea is rewarding. Its social responsibility approach towards poor farmers in developing countries also will be impressing to media and business experts. However, the company has to depend on supermarkets and other retail outlets to distribute fruits and vegetables. Eliminating middle men can help a firm reduce the price that consumers have to pay for its goods or services. As the company has to ensure on-time transportation of goods from farms to London, it has to arrange fast shipping as well as air transportation and this needs major upfront investment. 3.1.2. External Factors The company goes global for collecting fresh goods and marketing them in local London markets through retailers seem to be unique opportunity for the business. As fruits and vegetable market is vulnerable to the price hike due to inflation, The Fresher’s business may bring an effective solution to fruit and vegetable market. Moreover, highly advanced technology ad innovation will be added advantages for the company. The company has to face a number of regulatory constraints to get in to alliance with farmers in countries like India. Some of the readily available packaged fruits and vegetables may pose challenges to Fresher’s business. Fluctuations in exchange rates may cause uncertainties in taking proper pricing decisions. 3.2. PESTEL analysis 3.2.1. Political Environment Food wastage has become a major concern across the UK. It was reported that UK households throw approximately 7.2 million tones of foods, mainly fruits and salads every year. If fruits and vegetables distributed to supermarkets take quite a long time for turnover, it may increase the rate of food wastage and thus affect the business of Fresher. 3.2.2. Economic Environment UK markets are influenced by economic crisis and inflation. The fruits and vegetable markets will be affected by price rise due to increased demand for these goods. However, this can positively impact the business of Fresher since it proposes to offer fruits and vegetables for a price which is equal to half of the current market price. 3.2.3. Socio-cultural Environment UK market is experiencing a positive trend towards healthier food. UK consumers have strong concerns about environment-friendly packaging. The Fresher will impart an awareness among targeted customers that it is coming to market with freshest, pesticide-free and perfectly genuine fruits from farms abroad. The company will take maximum efforts to make its products eco-friendly not only in packaging, but also in all the aspects that it may influence customers’ awareness. 3.2.4. Technological Environment Technology almost every day changes the way business is carried out and thus the social life too. The Fresher proposes to install latest technology for modern transportation and cold storage to ensure highest possible effectiveness in its logistics. This will be an added advantage for the company. 3.2.5. Ecological Environment The Fresher’s business has no specific impact on ecology since it has no manufacturing or food processing except when it uses transportation such as freezer-trucks. The company will take measures to avoid environmental pollution and other issues when it transports and uses cold storage facilities. 3.2.6. Legal Environment Since the company goes global for supplies, it has to face a number of legal and regulatory requirements that are set by individual state as well as central governments to secure the job and other needs of farmers within the country. The company has to study in detail about those requirements and take necessary arrangements to avoid legal risks associated with collecting fruits and vegetables from farmers directly. 4. The Product 4.1. Product description Fresher’s goods include more than hundreds of wide varieties of fruits and vegetables. Apart from the goods that are presently available in London supermarkets, Fresher will also provide certain region-specific and country-specific fruits and vegetables from abroad. In countries like India, Bangladesh and Bhutan, different regions grow quite different types of a single line of fruits or vegetables. Importers and wholesalers including NFB Imports Limited located in Preston and Oliver Kay Produce located in Bolton import large scale of fruits and vegetables from abroad to distribute them to local markets in UK apart from Hotels, hospitals, universities, sports stadia and so on. The Fresher is going to take a significant slice of their markets since it can offer fruits and vegetables cheaper than the price they offer. 4.2. The benefits of Fresher’s products The Fresher focuses on ‘Fresh, natural and genuine’ aspects of goods with a view to meet customers’ individual-specific preferences and requirements. It promises to offer most fresh, quality, natural and genuine fruits to customers. Consumers’ main benefits by choosing Fresher’s goods are; Fresh, natural and genuine fruits and vegetables, Very competitive pricing Any-time contact with company, supplier and farmers Eco-friendly packaging Fully-free from pesticides Health benefits of each item described along with information-tag in the product 4.2. Contributing to competitive edge A number of market forces such as competition, technology, globalization, corporate strategies etc profoundly impact businesses to formulate strategies that can help them achieve sustainable competitive advantage. A firm can be said to achieve competitive edge when it is able to create more economic value than its competitors create. A firm can create more economic value than its competitors through a specific strategy such as differentiation, innovation, low-cost leadership and so on (Markman and Phan, 2011, p. 187). From the strategic management perspective, a firm is able to gain competitive advantage when it is able to grow out of the value it is able to create for its customers in excess of firm’s cost of creating it (Amason, 2010, p. 10). The value based view of competitive advantage emphasizes that a firm gains competitive edge when it creates value more than its competitors do and more than its customers expect. Customers in London market are paying higher amounts, especially in supermarkets, for fruits and vegetables. Elgot (2013) reported that fruits and vegetables in supermarkets are highly expensive. They are found 35 percent cheaper in some local shops. The Fresher is going to change the trend and that is how it will achieve competitive edge. The company will focus on low-cost leadership strategy by finding supreme quality fruits and vegetables from cheapest farms from various countries. The Fresher will be able to sustain low-cost competitive advantage on its competitors such as NFB and Oliver Kay produce. 5. Marketing Research 5.1. Targeted customers Supermarket chains and other retail outlets in London are the major customers of the Fresher. Though the company does not sell directly to consumers, it has to study about the behaviour, attitude, individual preferences of customers for fruits and vegetables. Out of hundreds of supermarkets and hypermarkets in London, Tesco, ASDA, Morrison’s, Sainsbury’s, Waitrose and Marks and Spencer take more than 95 percent of all the stores. Supermarket customers are segmented based on all different criteria such as demographic, geographic, psychographic and behavioral factors. Income, family status and age groups are the major three factors that drive relatively more customers to supermarkets and hypermarkets. Customers with higher income and with high family status are found to depend heavily on supermarket rather than small retail shops. Their major concerns are quality and freshness of fruits and vegetables. The Fresher proposes to maintain a long term relationship with customers by keeping on its promise of fresh, quality and natural aspects. 5.2. Market Share The Fresher is one and only logistics that collect fresh fruits and vegetables directly from farms in other countries and distribute them through supermarkets. It is the pioneer of this business idea as well. There are leading importers and wholesalers for fruits and vegetables across London, but their business and Fresher’s business are quite different. They collect goods either from markets abroad or local farms whereas the Fresher collects it directly from farmers by giving them right reward for their efforts. The importers, wholesalers and distributors of fruits and vegetable including NFB and Oliver Kay Produce share a significant portion of the market. As a startup business, it may not be able to dominate the market and it takes relatively a smaller percentage of the market-share. 6. Marketing Strategy 6.1. Marketing Mix strategy The Fresher is planning to take an integrated approach to its marketing mix elements, namely product, price, place and promotion. As Wilson and Gilligan (2005, p. 536) noted, affirm in its start-up stage and while preparing its business plan is required to coordinate and effectively manage all the four marketing mix elements in order to ensure achieving of highest marketing synergy. The marketing mix strategy of the Fresher is depicted below and it illustrates following facts: 6.1.1. Product Mix The main value propositions that add greater advantages for Fresher’s goods is its promise to keep fresh, natural and genuine fruits and vegetables. Thousands of customers who buy these goods from supermarkets are anxious about risks of associated with chemicals and pesticides that corporate farmers use to grow fruits and vegetables. Moreover, when its business is able to penetrate the market, the company can think about own-labeling and branding the goods so as to launch its own-retailing to promote the sales and to take further advantages by eliminating middle-men margins. 6.1.2. Price Mix Price is the main determinant of its competitive advantage. The Fresher takes low-cost leadership strategy and it is going to offer its goods for a price which is very less to be less that 50 percent of the present market price. When fruits and vegetables are available for less than its half price, the demand for these goods will incredibly increase and the company can dominate the market slowly. It also provides high margin for supermarkets so as to get supported by them in the start-up stage 6.1.3. Place Mix Supermarkets, hypermarkets and other retail outlets are the distributors of the goods. It can enjoy economy in advertising as a single advertising can help all supermarkets drive demand for its goods. 6.1.4. Promotion Mix Apart from seasoned promotions to boost up sales, The Fresher plans to implement integrated marketing communication to ensure maximum results and constant growth for revenues and thus to establish a better brand awareness. Integrated Marketing Communication is a careful, effective and strategic coordination and integration among various promotional activities to ensure consistency in every message and at each and every contact a firm approaches its customers (Lamb, Hair and McDaniel, 2008, p. 413). The Fresher will use varieties of media such as trade journals, trade fairs, television, websites etc to continually inform both supermarkets and ultimate customers about fresh, natural and genuine fruits and vegetables. 6.2. STP Strategy STP, segmentation, targeting and positioning strategy will be at the very heart of Fresher’s marketing strategy because no business will be long-term successful unless it recognizes the right customers, target them with right goods or services that can meet their needs or wants and establish a brand image in their minds. All successful companies segment its market by breaking down the total market in to sub-groups. For Fresher, the ultimate consumers are the customers of supermarkets and it is imperative that the company should segment them in to distinct sub-groups according to their behaviour, attitude, buying patterns etc. Fresher’s market comprises of high-income people and people from higher life and family status and therefore the company has to analyze their needs, wants and preferences to ensure meeting these requirements. A company may target a group of people or organizations by setting, implementing and maintaining a specific marketing mix in order for the company to meet the needs of that specific group (Lamb, Hair and McDaniel, 2008, p. 220). Brand positioning is critical to strategic marketing. The brand being communicated to customers must be positioned in customers mind so that the company will be able to retain them for a longer time to ensure constant growth. In order to establish the brand image, the Fresher will use creative and eco-friendly packaging, own-labeling and informative advertising about how it deals with farmers abroad and how it uses advanced technology to distribute them quickly in supermarkets. 7. Processes 7.1. Quality Control Quality is one of the main aspects of Fresher’s business idea and it is at the core of its value proposition. As quality is one of the major concerns of the company, the Fresher will maintain a specific system for quality assessment and quality control to keep on controlling the quality issues. The company will ensure maximum quality in each and every steps in deals with farmers, deals with transporters and deals with supermarkets. In order to ensure quality, Fresher will appoint a quality control department to see whether fruits and vegetables coming to Supermarkets lack quality levels that customers expect from the goods. With a view to promote its business idea, the Fresher is proposing to contract with a technology company to build a new machine that can measure and assess the quality of fruits and vegetables. This machine can be installed in any supermarket for facilitating customers to check the freshness and quality of the goods they buy. This machine is supposed to check fruits and vegetables and give detailed results regarding the quality and freshness. With help of latest technology, the machine should illustrate when the fruit and vegetable was plucked from the plan and how old is it after it was transported from the farm. It can also measure the level of chemicals or pesticides used in growing the goods. With this machine, the Fresher will be able to keep on its promise to offer quality and fresh fruits and vegetables and thus to increase the credibility of the brand. 7.2. Equipments Some of the major equipments the company needs to use include; 1- Freeze trucks 2- Cold storage vehicles and storage terminals 3- Modern trucks and tractors to be used in farms to help poor farmers 7.3. Policies 1- Company is not responsible for storage in supermarkets. Company is responsible for ensuring quality and freshness only until they are distributed to supermarkets. It is not responsible if the goods become less consumable due to less facilities or due to lack of cold-storage in supermarkets. 2- Consumers can contact both supermarkets and the company for further clarification. 3- Company is not responsible for wastage of fruits and vegetables at supermarkets or at households. 8. Personnel 8.1. Management team Fresher’s management team comprises of 8 well qualified, experienced and creative people from London and 6 regional assistants with expertise in business and farming from India, Sri Lanka, Bangladesh and Bhutan. Mr. Joby Jose, qualified as Post Graduate in Business and Administration and experienced in a multinational company for more than 5 years will be appointed as the CEO of the company. Other 7 management members will be from different backgrounds with better expertise in management and business administration. All these members are yet to be recruited. Out of them, three managers will work as sales and marketing executive to work with supermarkets for distributing goods. The Fresher needs 6 managers from other countries for better handling with farmers in their countries and also to handle issues related to government and legal restrictions. All these six managers will be from botanical background with minimum post graduation along with experience of two or more years in business. 8.2. Organizational Chart 9. Finance 9.1. Financial Projections The Fresher strongly believes that it can achieve financial success only by providing high quality customer oriented services through continually supplying premium quality and freshest fruits and vegetables by reducing operational expenses. The financial analysis shows that the company will increase sales by more than ? 100 million by the end of third financial year while maintaining a gross margin of more than 40 percent. Conclusion This paper has presented a detailed business plan for the Fresher including industry analysis, product analysis, environmental analysis and marketing research as well as marketing strategic analysis. The Fresher’s business process begins by buying fruits and vegetables directly from farmers in other countries in bulk quantities and transporting them as quickly as possible to London to distribute them to supermarkets. What makes this business unique is its promise to keep fresh, natural and genuine goods to its customers. What is most interesting about this business idea is that the company can offer its goods for less than the half of the present market price of fruits and vegetables. 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