Business Plan of Road Runner - Assignment Example

Road Runner A Business Plan BY YOU YOUR SCHOOL INFO HERE HERE TABLE OF CONTENTS 0 Executive Summary............................................................................................... 2.0 Company description............................................................................................. 3.0 Service Description................................................................................................. 4.0 Marketing strategy and plan................................................................................. 4.1 Environmental analysis................................................................................. 4.1.1 PEST Analysis................................................................................ 4.1.2 SWOT Analysis.............................................................................. 4.2 Competitive analysis...................................................................................... 4.3 Services.......................................................................................................... 4.4 Pricing............................................................................................................ 4.5 Promotion....................................................................................................... 4.6 Place............................................................................................................... 4.7 Process............................................................................................................ 4.8 People............................................................................................................. 4.9 Physical evidence........................................................................................... 5.0 Financial analysis and projections.......................................................................... 5.1 Profit and loss forecast................................................................................... 5.2 Risks and assumptions.................................................................................... References Appendices 1.0 Executive summary Road Runner will be profitable after the first year of start-up beginning May 2013. Using a blend of promotions, relationship development, and brand-building, Road Runner delivery services will gain new market attention and build long-term brand loyalty. The cash flow forecast illustrates a cash position of over $180,000 by fiscal year end 2014, sustained by sole trader competence in business administration and the ability to establish a competitive brand identity. 2.0 Company description Road Runner is a sole trader organisation that will be providing a variety of different delivery services to commercial and residential customers throughout the London region. Road Runner is a concierge/porter service which will take responsibility for postal package retrievals and deliveries, prepared food and grocery deliveries, and will also include direct-to-you automobile detailing as part of a consumer convenience model for busy customers in the commercial environment. The administrative responsibilities will be managed by the sole trader, including accounting, general business management, budgeting and all other operational process developments required to sustain the business. 3.0 Service description Diversity of the business model is what makes Road Runner stand apart from competition. Expedient services combined with convenience will position Road Runner as a recognised leader in delivery and porter-oriented services. Road Runner offers both competitive prices combined with opportunities for customers to modify service to custom fit their road-running needs which might include, but is not limited to, chauffer services, pick-up and delivery of clients’ automobiles requiring mechanic services or facilitating delivery of catered food products for special events. Whatever the client requires, within the capabilities and capacity of the business model, will satisfy all needs for expedient, flexible delivery processes for a diverse group of market segments in London. 4.0 Marketing strategy & plan In order to make Road Runner a competitive and industry success, the new start-up business will require a solid marketing strategy in order to properly position the business in the minds of desirable customer segments. The business ownership has established three distinct objectives aligned with short- and long-term growth and sustainability opportunities: Establish brand recall in the London region with target segments by December 2013 Capture at least four percent of London delivery and concierge services by February 2014 Build brand loyalty with the most profitable market segments by April 2014 Having a marketing strategy and plan are critical to the success of Road Runner as building attachments to the brand with target segments allows a business to establish moderately higher pricing structures and even increases the impact and frequency of customer word-of-mouth advertising (Chaudhuri and Holbrook 2001). 4.1 Environmental analysis Road Runner will be competing with many different rivals in a variety of sectors. These sectors include established grocery and other food delivery service companies, chauffer service businesses, and general local delivery companies including, but not limited to, the Royal Mail and United Parcel Services. However, these major competitors in the package delivery industry are mass market-focused, thus giving Road Runner an opportunity to customise service modelling with a much more targeted approach aligned with specific consumer or business-to-business client lifestyle characteristics. In order to successfully compete, an analysis of the industry environment must be performed to align the business to meet competitive demands. 4.1.1 PEST Analysis Political forces are not generally relevant to success or failure of Road Runner as the United Kingdom provides ample support for business development in a region where government is stable and generally free of risk associated with national stability and security. Compliance issues associated with local regulations provided by Council administration and authority will require legal consultation with relevant attorney services and through consultation with various business authorities in the London region. Economic considerations are highly relevant to Road Runner in order to be adaptable as a diversified business in the London region. The UK economy continues to slide closer to recession, driven by a continuous inflation risk and recent austerity efforts of the UK legislature that included national interest rate reductions designed to stabilise a troubled economy (BBC News 2013; Elliott and Stewart 2012). Currently, the inflation rate in the United Kingdom is 3.3 percent and has remained stable at this high rate for the last several months (BBC News 2013). When inflation rates increase and interest rates decrease, it depletes the disposable income of consumers and also impacts the profitability of business organisations. Inflation in food prices, service industry pricing structures, and many other elements involved with the commercial supply chain puts a financial stress on many desirable target markets. Therefore, there is going to be a risk of price-sensitive business and consumer clients that are going to impact the purchasing intention of certain markets. Michael Porter (1985) illustrates that a main concern for businesses is the level of buying power that consumers maintain. Since there are many rivals in the delivery and concierge service industries, there are low switching costs for many customer segments to select an existing competitor. Compared to the total national consumer market, the delivery and porter services provided by Road Runner are representative of a niche market. Therefore, there are many available suppliers and only small volumes of interested customer segments which give the buyer the ability to influence and control pricing structures that will be considered appropriate and viable for their financial capabilities. According to Thompson, Gamble and Strickland (2005) price-sensitive buyers can significantly impact how the business must structure its competitive pricing structure and approach to building purchase intention. Social considerations are also relevant for the success of Road Runner. Research indicates that older consumers, the markets that will most utilise shopping and food delivery services, maintain predictable characteristics related to their social condition and social needs that influence buyer behaviour. A recent report on the consumer behaviour of markets between 55 and 75 indicated a two-thirds respondent majority that these markets seek services and products that have ideologies aligned with their values and beliefs (Myron 2012). Furthermore, a common concern for many older consumers is a fear of being alone (Sachteleben 2006) and these important markets for the food and grocery delivery business segment find considerable psychologically-driven happiness when they have established meaningful and warm interpersonal relationships (Singer 1993). For Road Runner, this will translate into markets that are seeking more relationship-oriented service providers that can satisfy their social needs whilst also providing services that are relevant to their personal values and ethical systems that dictate their current and future purchasing intentions. Social considerations with the commercial business-to-business markets are not as relevant, as these markets generally are price-oriented, focused on service competence and quality, as well as their providers’ dependability record; much more so than the dynamics of socially-oriented business arrangements. The technological environment is also favourable for sustaining growth with this new start-up company. New advances in mobile credit card payment systems allow for on-site payments to be instantly delivered, thus providing consumers with convenience and ensuring more rapid cash flow replenishment for the business and avoiding elongated accounts receivable issues common with many small businesses. 4.1.2 SWOT Analysis Strengths Strong internal understanding of market lifestyles and needs that translates into better relationship management system development Low start-up costs requiring less long-term financing and loan payment requirements Diversity of business service practices ensuring that one division can offset potential losses from another segment in the event of unexpected demand declines Strong knowledge in investment and hedging activities that will secure additional capital growth Weaknesses No established brand presence or brand recall with London markets Start-up capital resources preventing more labour payments in the operational model to improve speed of business growth short-term Limited knowledge management systems influenced by the high demands of expedient service delivery that prevent internal cross-collaborations from occurring. Opportunities Viral marketing and social media for promotion Establish alliances along the supply chain to ensure better cost controls and negotiation for products required to achieve effective service delivery. Possible long-term expansion into other regions in the UK to gain more revenue growth. Threats Very high volume of competition in multiple business divisions Managerial concerns due to the uniqueness of the Road Runner model with a diversified service ideology Rising petroleum prices impacting the cost of service delivery and general operations 4.2 Competitive analysis The industry maintains many small competitors that service local regions in the UK, however they do not maintain the competitive prowess or brand identity required to stand out amidst a group of industry rivals operating small business models. The most significant threat to the business, however, is growth in the online grocery and food delivery services offered by major supermarket companies such as Tesco and Sainsbury. Tesco has managed to capture £356 million in revenue growth with a strong online grocery delivery model sustaining an operating margin of only five percent (London Business School 2009). Tesco employees “pick” online client orders which are then delivered via courier van to awaiting customer segments. However, Tesco is mass market-oriented and does not focus on the interpersonal dimensions of customer relationship management which is forbidden by capacity issues with using internal labour resources to facilitate more customer-centric strategies. Though Tesco maintains a great deal of market loyalty, there is no evidence that this business or Sainsbury are equipped to establish psycho-social relationships critical to building a sense of brand attachment with important market segments for Road Runner. There are a variety of chauffer services available to busy executives and other commercial leaders in the London region, including Capital Limousine and London Limo, two powerful and recognised brands in this industry. However, these services include the costs of risk management for sustaining the limousine asset integrity and other associated service fees that are quite high in the chauffeuring industry. Road Runner will be providing a more low-frills model, simply focusing on expedience and service competency that will be more attractive to the small business leadership in terms of pricing as an alternative service option for assisting in mobile business needs. Road Runner does not believe that other industry-saturated, potential rivals from taxi services will pose much risk as these are often considered undependable by many markets and risky for meeting immediate client delivery timeline needs. 4.3 Services Food, catering and grocery delivery services Mobile transport of homebound and older citizens for shopping facilitation Commercial customer chauffeuring services Direct-to-you auto detailing services Mechanic and repair car delivery and return services for busy segments 4.4 Pricing The following represents the projected pricing structure for the business. Food and grocery £20.00 + £.50 surcharge per mile Shopping facilitation $25 per hour Chauffering $30 + $.60 surcharge per mile Detailing Services $60 flat fee rate Mechanic and repair delivery services $30 flat fee rate + $.60 surcharge per mile Custom Service Delivery Needs $30 flex rate + $.50 surcharge per mile 4.5 Promotion Road Runner will require ongoing investment into advertising in order to meet the objective of establishing short-run brand recognition and long-run loyalty. The business will rely heavily on direct mail strategies delivered to consumer segments and commercial segments. Newspaper advertisements in local community publications will also support knowledge of the company in the London region. Additionally, promotion will consist of using an informational and online scheduling website providing opportunities for service ordering and knowledge of the brand values of Road Runner. 4.6 Place The business will be setting up a storefront on the outskirts of London where commercial rent is less expensive. A 300 square metre facility with adjacent 800 square metre lot for housing delivery vehicles and performing maintenance will be required. Place marketing is not relevant for Road Runner as the business maintains mobility in all service models. 4.7 Process Order fulfilment will involve correlating online customer contracts with in-store purchases which will be facilitated through daily master scheduling via technology support. Employees offering the tangible services with interaction with customers will be trained on the fundamentals of relationship marketing and quality service delivery. This will be a foundational success factor for building trust in competency and service friendliness. 4.8 People The business will require one executive leader (the sole trader), one on-site manager working a 45 hour schedule, and six supporting employees during the time of start-up to handle maintenance, tangible deliveries, and ensuring customer service via the online sales channel and in-store walk-ins. 4.9 Physical evidence The in-store environment will be highly professional as is illustrated by the very sophisticated and rugged logo representative of Road Runner. The servicescape will be critical to maintaining a direct correlation between brand ideology for competence and expediency, taking into consideration the characteristics of commercial segments and older market segments. All decor and in-store promotional materials must be relevant to the brand philosophy. 5.0 Financial analysis and projections See Appendices for Cash Flow and profit/loss projections. Cash flow sales/revenue forecasts are based on an average per-unit price multiplied by expected consumer demand in each service category per month. Cash position at end of fiscal year one is estimated at $183,600 for the sole trader. 5.1 Profit and loss expectations Income £ £ Sales 206600 Services 0 Other Income 0 Total Income 206600 Expenses Advertising 6000 Motor Vehicle 7200 Rent 33600 Repairs and Maintenance 12000 Wages and On costs 72000 Legal and licensing 2000 Loan Capital Payments 36000 Total Expenses 168800 Profit/Loss + 37800 5.2 Risk and assumptions Road Runner will not be able to predict demand levels immediately until the sales and service histories have been quantitatively analysed. There are risks that demand could be sporadic during the period where the business attempts to establish its marketing and competitive presence, thus any products necessary for service delivery provision should be utilised under a lean procurement model to avoid high inventory holding costs and general cost control in the supply chain. References BBC News. (2013). Economy tracker: inflation. [online] Available at: http://www.bbc.co.uk/news/10612209 (Accessed: 18 April 2013). Chaudhuri, A. and Holbrook, M.B. (2001). The chain of effects from brand trust and brand affect to brand performance: the role of brand loyalty, Journal of Marketing, 65(2), pp.81-93. Elliott, L. and Stewart, H. (2012). UKs economy falls into recession deeper than expected, The Guardian. [online] Available at: http://www.guardian.co.uk/business/2012/may/24/uk-economy-contracted-2012 (Accessed: 18 April 2013). London Business School (2009). Ocado: An alternative way to bridge the last mile in grocery home delivery?. [online] Available at: http://www.sba.pdx.edu/faculty/melliep/458/ocado.pdf (Accessed 17 April 2013). Myron, G. (2012). Conscientious consumption. [online] Available at: http://www.demodirt.com/index.php/baby-boomer-trends/consumer-spending/527-conscientious-consumption (Accessed 17 April 2013). Thompson, A., Gamble, J. and Strickland, A. (2005). Strategy: winning in the marketplace, 2nd edn. McGraw Hill. Sachteleben, M.K. (2012). Top 10 gift ideas for senior citizens and homebound. [online] Available at: http://voices.yahoo.com/top-10-gift-ideas-senior-citizens-homebound-115217.html (Accessed 16 April 2013). Singer, P.D. (1993). Practical ethics. Cambridge: Cambridge University Press. Cash Flow Forecast Road Runner Pre-Startup EST May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 Total Item EST Cash on Hand (beginning of month) 3,000 3,000 17,600 32,200 46,800 62,400 78,000 94,600 111,200 127,800 145,400 164,000 183,600 183,600                               CASH RECEIPTS                             Cash Sales 0 18,000 18,000 18,000 19,000 19,000 20,000 20,000 20,000 21,000 22,000 23,000 23,000   TOTAL CASH RECEIPTS 0 18,000 18,000 18,000 19,000 19,000 20,000 20,000 20,000 21,000 22,000 23,000 23,000 0 Total Cash Available (before cash out) 3,000 21,000 35,600 50,200 65,800 81,400 98,000 114,600 131,200 148,800 167,400 187,000 206,600 183,600                               CASH PAID OUT                             Auto maintenance 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000   Advertising 500 500 500 500 500 500 500 500 500 500 500 500 500   Petroleum 600 600 600 600 600 600 600 600 600 600 600 600 600   Rent 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800   Licensing and Legal 2,000 0 0 0 0 0 0 0 0 0 0 0 0   Wages 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000   SUBTOTAL 0 5,280 5,280 5,280 5,280 5,280 5,280 5,500 5,500 5,500 5,500 5,500 5,500   Loan principal payment 0 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 0 Capital purchase (specify) 0 400 400 400 400 400 400 400 400 400 400 400 400   TOTAL CASH PAID OUT 0 0 0 0 0 0 0 0 0 0 0 0 0   Cash Position (end of month) 0 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 0 3,000 17,600 32,200 46,800 62,400 78,000 94,600 111,200 127,800 145,400 164,000 183,600 203,200 183,600 Read More