Mp3 Importing and Marketing Firm - Assignment Example

BUSINESS PLAN FOR AN MP3 IMPORTING AND MARKETING FIRM 0 Executive Summary This business plan is prepared in response to the banker's demand for granting a loan. The report covers almost all aspects of the business, both qualitative and quantitative information have been incorporated to substantiate the variability of the proposed plan. The business proposed is importing Mp3 players from China and marketing in the home market. Though the business is not of innovative nature, the product features and unique marketing strategies proposed make the business innovative and flourishing. 1.1 Objectives Falcon Entertainment (name of the firm) is a start-up firm, which has exciting business opportunities in the locality where it is intended to be started. Falcon is likely to achieve 150 % of what its competitors are doing because of favourable location and other completive advantages. An initial market research finds that the firm would be able to achieve the 200% sales in the next 2 years from the date of commencement of business. 1.2 Mission The mission of the firm is to become one of the best MP3 player marketers in the locality and make available the best quality products to the customers at their places at convenient time. 1.3 Keys to Success At present there are three firms doing similar kind of business in the locality. But, all of them import from some other countries and pay high price for the goods imported. So the first and foremost key element of proposed firm's success is that MP3 players can be marketed at high margin where competitor have no market and at low price where they have market. Both strategies will result in high sales and income. Another key area to be focused upon to bring more sales is the introduction of innovative strategies. When the retailers are given special selling offers and discounts and long credit period to trustworthy customers, more sales can be brought in more turnovers and high profit. Similarly, human resources-the sales people- must be inspired and encouraged to market the product and make the product popular among the retailers. Last, but not least, management of finance must be given equal importance as any other resources. 2.0 Company Summary 2.1 Company Ownership To start with the business takes partnership form of business with two partners of equal share. Accordingly, a partnership deed is created and the firm is registered as per the Partnership Act. It must be given in the partnership deed that both partners should take part in the business and have equal share in the profit earned and loss incurred by the firm. Once the firm achieves major share in the market, the firm is indented to be converted into a privately owned company with few more shares to be distributed among the relatives of the partners. After a few years of successful operation, the company will expand its operations to other markets with diversified products of similar nature. Then, the company will convert itself into a public owned company with limited liability to enjoy all the benefits of a Public Limited Company. 2.2 Start-up Plan The start-up plan begins with athree month start-up period (September to December, 2008). During this period the firm will give emphasis primarily on setting up an office premises and developing an efficient and effective marketing plan and resources including sales personnel. The start-up expenses include expenses associated with opening an office, legal expenses, initial marketing expenses and those associated with hiring people.A part of the initial expenses can be met with the legacy amount inherited from one of the partners' uncle. The rest of the expenses is intended to be met out of the loan sanctioned by a bank. The expansion expenses in future are financed from sales revenue. Initially, the firm is leasing a property in our local high street for which an amount of 200,000 pounds has to be given to purchase the leasehold of the property for ten years in addition to a monthly rent of 15,000 pounds. The following office equipments are necessary at the time of opening the office: Office Equipments including full-fledged computer system with broad band internet connectivity Furniture for office purposes (sales and administrative staff) Telephone and cell phone Fax machine and photo copier Delivery Van with two sales people The start-up table below exhibits the start-up requirements: Table No.1 Start-up Requirements Start-up Expenses Legal 15,000 Stationery etc. 2,500 Marketing Consultants 3,000 Insurance 800 Rent 15000 Research and Development 3,500 Expensed Equipment 20,000 Personnel 10,000 Delivery Van 2000 Total Start-up Expenses 71,800 Start-up Assets Cash Required 15000 Start-up Inventory 10000 Delivery Van 40000 Furniture 15000 Office Equipments including Computer 25000 Total Requirements 176,800 Start-up Funding Start-up Expenses to Fund 71800 Start-up Assets to Fund 105000 Total Funding Required 176800 Assets Non-cash Assets from Start-up 90000 Cash Requirements from Start-up 15000 Additional Cash Raised 100000 Total Assets 205000 Liabilities and Capital Liabilities Current Borrowing 0 Long-term Liabilities 105000 Accounts Payable (Outstanding Bills) 0 capital 100000 Total Liabilities 205000 The above table exhibits that the firm needs a total capital of 205, 000 pounds to invest in various assets including current assets. It is clear from the table that the firm is in need of 186, 800 pounds to invest in current assets, majority of which is in the form of cash. The non-cash assets need a fund of 90, 000 pounds. The partners have contributes a sum of 100, 000, which was inherited from one of the partner's uncle. This fund is treated as capital contributed by both partners and the rest of the finance required for the project is intended to be raised by means of loans and advances. The firm decides to raise the remaining fund by means of a long term loan, either from a bank or any other financial institution. 3.0 Products and Services 3.1 Product and Service Description Falcon Entertainment imports and markets MP3 players. The firm imports products of various brands and prices are imported from China and locate different retailers market with personalized service. 4.0 Market Analysis Summary Importing MP3 from china market is new to the present market where all similar firms import goods from countries other than China. The market research consultant states that sales will increase by more than 200% of what competitors are doing by the end of two years from now. The consulting firm ensures after the market research that there are high possibilities for market to grow in the next five years for MP3 players, especially for those from China market. This is a good signal for the firm and can be taken as the green signal to move further in the course of starting the firm. The market research by firm's consultant put emphasis on the following: Wholesale consumers Retail Consumers 4.1 Market Segmentation The market segmentation focuses on two groups of consumers, namely Wholesale Consumers and Retail Consumers. It has been found of the research that the target consumers have not been satisfied so far in terms of quality, price and service. 4.1.1 The Wholesale Segment This segment constitutes the largest buyers of the product in terms of the number units to be bought. They usually place bulk orders for which the firm has to give credit period not less than one month. This move will enhance the sale by motivating the dealers to hold more of the product and canvass the ultimate customers to buy one which are always in stock. Further, the firm has also a plan to offer a trade discount to wholesalers to inspire them to purchase the product in bulk so that the efforts of the firm to reach the entire market are not needed. In addition to trade discount, the firm is also planning to offer a cash discount to those who have a good track record with the company and are willing to remit their dues before deadline. 4.1.2 The Retail Segment This segment includes all those who directly sell the products to ultimate consumers. This segment is more profitable than wholesale segment as wholesale dealer is eliminated here and it accrues a profit to the firm in the form of commission not being payable to them. Naturally, the business focus more on retailers and in future the business has a plan to directly selling the goods to retailers only by eliminating the wholesale element from the distribution channel of the firm. Table No. 2 Market Analysis (No of units) Potential Consumers January February March April May June Wholesale Segment 5000 7500 6000 8000 7500 8000 Growth 30 20 60 50 60 Retail Segment 2000 2500 2800 3500 4900 5500 Growth 25 40 75 145 175 4.2 Market Analysis The partners of the firm along with the marketing consultancy firm have market research to explore the opportunities for the product and analyses the competition and major players in the market. The research shows that a large number of Mp3 products are available as of now in the market to meet varied needs and preferences of customers. Therefore, getting a market share is not a simple job especially for an electronic article for which customer support can be availed only after certain period of introduction. Market analysis comes out with the certain results (see table No.2), which exhibit that sales through retail segment is likely to increase more than wholesale one. It indicates that the firm needs to concentrate the business more to retailers. The market study also helps the firm to fix and decide on the Four Ps of marketing for the product. Also the market research comes out with market trends and market growth, which are discussed below: 4.2.1 Market Trends The present era of market is looking for cost efficient and fast products and services. Consumers of all types- literate and illiterate- prefer those with high quality and cost efficient. Therefore, MP3 players, which have high quality and cost effective, can attain the market share in the short run. However, the product must be changed from time to time in conformity to the changing needs and preferences of consumers. 4.2.2 Market Growth During the six months period, the market for the product shows an increasing trend. From the table No. 2, it is clear that in the second month itself, sales have increased by 30 percent showing a positive signal to the business that the firm can achieve more sales in future. Thereafter, the firm could achieve 60% growth in two months, namely April and June and 50% in May. But, sales in the month of March shows a growth of 20% only, but it was recovered in the coming months by high sales. 4.2.3 Four Ps of Marketing There is a unique marketing efforts and marketing strategy for each and every product in the market. Similar product may share some of the common methods and efforts of marketing. The totality of all efforts, tools and efforts used by manufacturer/marketer to market his product and/or service to reach the ultimate consumers are called the product's Four Ps of marketing. The partners have decided upon the marketing efforts for their product, Mp3 player. The following paragraphs discuss the Four Ps of marketing. 4.2.3.1 Product As mentioned already the product intended to be marketed is Mp3 players imported from China. The product does have high quality when compared to similar products available in the local market. The manufacturers have tried to add innovative features to the product from time to time to update the product. However, there are limits for an importer to add anything new to the product, except packaging and after sale service. 4.2.3.2 Price Price is the second most important element in the marketing system of a product. As mentioned already the price is fixed by the firm after taking into account the price paid to the seller in China and all other importing expenses such as freight and legal charges. The product is priced in the range of 58 to 64 pounds depending on the market conditions and the likely increase/decrease of price in the foreign market. The price of the product is an important determinant for effecting sales and achieving the market. To motivate and encourage the traders to sell more the price may be fixed near to 55 pounds, but not less than 55 pounds at any time. Similarly, those achieving minimum sales will be priced close to 61 pounds and not less the 61 pounds. The firm will try to reduce the price as much as possible as one of the firm's marketing slogan is that firm offers a cost effective product. At the same time the firm will not sacrifice the quality of the product as there are similar products are abundantly available and any limitation of one firm will be capitalized by other firms. The manufacturers have tried to add innovative features to the product from time to time to update the product. However, there are limits for an importer to add anything new to the product, except packaging and after sale service. 4.2.3.3 Promotion Sales promotion means and includes all efforts made by a firm to boost up the present sale by means of a variety of methods. It includes discounts, offers, samples to dealers, gift coupons to customers and so on. The partners want their sales promotion distinct and innovative so that no other seller in the market should have similar strategies. In addition to sale through dealers (wholesalers and retailers), the firm is planning to attain the market and customers through exhibition sale. It is expected to attract more customers at exhibition hall and attain customer's confidence for the product. These efforts will improve sales and attain more market share. 4.2.3.4 Place As far as the place of the product is concerned, as already mentioned, the firm tries to market the product n the local market initially. However, in the long run, the firm has a vision to enter the market for similar products imported from China. As mentioned already the product intended to be marketed is Mp3 players imported from China. The market segmentation focuses on two groups of consumers, namely Wholesale Consumers and Retail Consumers. The Wholesale Segment constitutes the largest buyers of the product in terms of the number units to be bought. They usually place bulk orders for which the firm has to give credit period not less than one month. This move will enhance the sale by motivating the dealers to hold more of the product and canvass the ultimate customers to buy one which are always in stock. Further, the firm has also a plan to offer a trade discount to wholesalers to inspire them to purchase the product in bulk so that the efforts of the firm to reach the entire market are not needed. In addition to trade discount, the firm is also planning to offer a cash discount to those who have a good track record with the company and are willing to remit their dues before deadline. The Retail Segment includes all those who directly sell the products to ultimate consumers. This segment is more profitable than wholesale segment as wholesale dealer is eliminated here and it accrues a profit to the firm in the form of commission not being payable to them. Naturally, the business focus more on retailers and in future the business has a plan to directly selling the goods to retailers only by eliminating the wholesale element from the distribution channel of the firm. 4.3 Business Service Analysis As the firm deals with electronic good, it needs to pay much attention to after sales service and thereby customer retention. The firm will continue to undertake market analysis based on the feedback from dealers and consumers to stay with the market trends and keep the momentum in selling and service. This will enable the firm to develop insights and devise marketing strategies to make sure future success and avoid decisions on blind assumptions. 4.3.1 Competition and Buying Patterns In the market for MP3 players, consumers are looking for innovative and cost-effective product at their convenient places. Competition is faced from both small as well as large firms who are importing from foreign market and/or producing in the home market. The products from China is found and acclaimed to be the most cost effective and innovative with multi features. 5.0 Strategy and Implementation Summary The firm will be marketing its products through conventional sales efforts, such as advertising in local news papers and publications and fixing hoardings and flux at important places of trade and other functions. The following efforts are intended to be taken in this respect: 5.1 Differentiate the firm from its competitors It is possible by selecting a unique selling strategy and selection of intermediaries. Intermediaries have a prominent role in effecting sales and make the firm unique and differentiated from its competitors. One of the most important arguments in marketing strategy is that the product is cost effective when compared to those available in the market. 5.2 Build a relationship-oriented business Customer Relationship Marketing (CRM) is the order of the day and marketing efforts without customer orientation is meaningless in the modern market. To establish a sound and lasting relationship with the dealers and customers, the firm has to meet the dealers' needs for commission, offers and discounts, and quick response to dealers' and customers' query. Feel always that they are an important component of our business network and their role must be given paramount importance. 5.3 Focus on target markets In addition to the establishment of relationship with intermediaries, the firm needs to focus on the ultimate customers to whom the product is sold by the intermediaries. It is necessary to emphasis more on the sales and marketing efforts to succeed and survive in the target markets. Being a start-up company, customer attention and relationship alone can give a sudden sales and growth. 5.4 Competitive Edge The competitive edge of the firm mainlylies in the product features and unique selling strategy. Another competitive edge is the product positioning in the market through timely and relevant advertisement and other communication tools. Moreover, the marketing approach to build a relationship based business is also a competitive advantage for the firm. It is firmly believed that longer the relationship stands, the more the firm is able to achieve the sales and meet the customers' needs. 5.5 Price The price of the product is an important determinant for effecting sales and achieving the market. The product is priced in the range of 55 - 67 pound per product and the determination of the exact price is based upon the sales volume achieved by a dealer (trader). To motivate and encourage the traders to sell more the price may be fixed near to 55 pounds, but not less than 55 pounds at any time. Similarly, those achieving minimum sales will be priced close to 61 pounds and not less the 61 pounds. 6. Management Summary Being a start-up firm with small investment, it is not necessary to hire many people and invest a huge amount in hiring people. Initially, as many as five people are enough to carry out the activities. The firm will pay much consideration to employee as it believes employees are the real assets of the firm. Moreover, while selecting the employees much attention must be paid to their experience in selling and handling similar jobs, especially electronic articles. In the beginning, the day-to-dayoperations of the firm will be managedby its partners, who would like to have a close, hands-on approach to all areas of the firm. As the firm grows, more employees will be added on the payroll to take care of specialized jobs. 7. Financial Plan At this juncture, the firm is not making a full-fledged financial plan. The only capital with the firm is the legacy amount inherited from one of the partners' uncle. The amount so inherited is comes to 100, 000 pound. The firm needs no machinery and other factory equipment as it deals with finished goods imported from China to be sold in the home market. The firm's success basically depends upon how effectively market the product and how long the customers are retained and satisfied with high quality and cost effective product. In order to meet the start up costs such as office machinery and the like, the firm proposes to undertake a loan from a bank. The major and regular investment to be made by the firm just like any other trading firm is in the form of inventory. 7.1 Projected Profit and Loss The Profit and Loss account prepared to project the sales, cost of sales, and operating expenses for the first six months of working is given below: Proforma Profit and Loss Account for the first Six Months ending June, 2009 January February March April May June Sales (units) 5000 7500 6000 8000 7500 8000 Price 58 60 61 58 64 60 Sales (value) 290, 000 450, 000 366, 000 464, 000 480, 000 480, 000 Direct Cost (per unit) 50 50 50 50 50 50 Direct Cost (total) 250000 375000 300000 400000 375000 400000 Other direct cost 0 0 0 0 0 0 Total Direct Cost 250000 375000 300000 400000 375000 400000 Gross Margin 40, 000 75, 000 66, 000 64, 000 105, 000 80, 000 Payroll Expenses 2000 2000 2000 2000 2000 2000 Advertising 3000 3000 3000 0 0 3000 Lighting and heating 200 200 200 200 200 200 Rates 0 0 300 0 0 300 Telephone 150 150 150 150 150 150 Insurance 0 0 250 0 0 250 Total Operating Expenses 5350 5350 5900 2350 2350 5900 Net Margin before interest and tax 34650 69650 60100 61650 102650 74100 References Abrams, Rhonda & Eugene Kleiner, 2003, The Successful Business Plan: Secrets & Strategies, 4, revised, The Planning Shop, 2003, 417 pages Barrow Colin, Paul Barrow & Robert Brown, 2008, The Business Plan Workbook: The Definitive Guide to Researching, Writing Up and Presenting a Winning Plan, 6, Kogan Publishers, 384 pages Blackwell Edward, 2004, How to Prepare a Business Plan, 4, Kogan Page Publishers, 2004, 184 pages DeThomas Art, Art, Lin Grensing-Pophal & Lin Grensing, 2001, Writing a convincing business plan, 2, Barron's Educational Series, 2001, 262 pages Pinson Linda, 2001, Anatomy of a Business Plan: A Step-by-step Guide to Building a Business and Securing Your Company's Future, 5, Dearborn Trade Publishing, 200, 278 pages Stutely Richard, 2002, The Definitive Business Plan: The Fast-track to Intelligent Business Planning for Executives and Entrepreneurs, 2, FT Press, 2002, 312 pages Mc Keever, Mike P., 2007, How to Write a Business Plan, 8, Nolo, 2007, 273 pages Schwetje Gerald, Sam Vaseghi & Jodi Gentilozzi, 2007, The Business Plan: How to Win Your Investors' Confidence, Springer, 2007, 179 pages Read More