Smart Clothes Limited - Business Plan Example

Name Smart Clothes Limited Business Plan Course: Tutor: Institution: Date: Executive Summary The developed business plan represents the nature of business, objectives, business model and marketing strategies for Smart Clothes Limited. The business plan enumerates the process, procedure and steps through which the business venture will be stated, conducted and developed overtime. The business venture will comprise of online and physical clothes retail stores headquartered in London and with other physical branches in Wales and Manchester. The business venture focuses on children wear and identifies with children below 15 years as its market segment and target. In Its objectives, the organisation intends to raise a minimum start-up capital of 80 million pounds with 30 million as equipment expenditure. It targets to attain a positive profit margin within two years of operation. In addition, the organization intends to develop an increased market influence through the use of its unique market approach strategies. The organization adopts a unique business model where it operates on both the online and physical markets. It earns its revenues through sales and subscription models. With regards to its costs structure, Smart Clothes Limited anticipates inevitable administration, supply chain management, and marketing costs. On its pricing strategy, the enterprise intends to apply the decoy pricing strategy to enhance increased sales and quantity based profits. Finally, the plan highlights supply chain management challenges and competition as key risks but also outlines the adopted proactive mitigation measures such as partners monitoring and customer based market approach strategies. Finally, the business plan attaches the organizational start up balance sheet under appendix 1. Table of Contents Table of Contents 3 1.0 Purpose and Business Sector 4 1.1 Business Nature 4 1.2 Products 4 1.3 Stores Organisation and Process 4 2.0 Financial Objectives 5 2.1 Start-up Capital 5 2.2 Forecasted Profitability 5 2.3 Market Share 6 3.0 Business Model 6 3.1 Customer Targeting 6 3.2 Communication 7 3.3 Revenue 7 3.4 Cost Structure 9 4.0 Marketing Strategy 9 4.1 Target Market Segment 10 4.2 Marketing Mix 10 4.3 Risk Identification and mitigation 11 References 13 Appendices 14 Appendix 1: Start Up Balance Sheet 14 1.0 Purpose and Business Sector 1.1 Business Nature The business set up due for operation will be a cloth line retail outlet. The organisation will be headquartered in London, UK with initial 5 retail outlets, three in London, one in Wales and a last one in Manchester. The organisation will operate under the business name Smart Clothes Limited and will operate as a registered company in the United Kingdom under the companies Act 2006. In this case, the business enterprise will have its established offices, executive management and staff across its stores. The executive management will comprise of a chief executive officer, financial officer, a human resource office and a chief operations officer. 1.2 Products The enterprise, unlike other cloth line outlets will offer a blend of physical and online stores for children wears. The target customer base will be the children and their parents both in the UK for the physical stores and abroad through its online stores. For customers who order the products online, the enterprise will present them with options of booking the cloths online and picking the m physically on the available outlets or paying online and requesting for shipment to their residence. The e-commerce platform in conjunction with online payment systems is aimed at making the enterprise omnipresent regardless of the clientele geographical location. 1.3 Stores Organisation and Process The organisations physical stores will be strategically located. In essence, due to its targeted population, the stores will be erected near learning institutions and leisure parks where parents can combine children’s outing with shopping or dropping or picking children from school and shopping. This offers the organisation a unique selling point as none of its competitors has adopted such a strategy in the past. Aesthetically, the physical stores will be designed to provide a children friendly atmosphere. On the interior, the interior decor will be coated with colourful colours that appeal to the kids as well as kids’ friendly shopping trays and trolleys, where they can have fun while shopping. On the other hand, the exterior design will be built to allow space for children play ground where the kids can play and have fun as the parents shop in the retail store. Additionally, the online stores websites will be fitted with children friendly features such as games to enhance repeat online visits by both the parents and children. 2.0 Financial Objectives 2.1 Start-up Capital The organisation intends to start up the enterprise business with a stat up capital of 80 million pounds. In this amount, 30 million will be invested in equipment capital that include the lease and purchase of the retail outlets as well as purchase of necessary equipments and design for the retail outlets. Moreover, part of the equipment capital will be used to fund the online retail store development. The development of the organisations balance sheet and forecasted income structure as demonstrated below is informed by an evaluation of its market competitor’s financial statements. 2.2 Forecasted Profitability The retained 50 million working capital will be utilised as working capital to fund the organisational activities and cater for its short term liabilities and expenses. Moreover, a summary income estimates table is listed under the table below. The first year demonstrates that the organisational expenses are higher than its sales due to the capital investments incur at its start up. However, towards the second year, the organisation will stabilise and through its marketing strategies, and shareholders funding, it is forecasted to gain a profit before tax of 11.4 million pounds Year 1 Year 2 Year 3 Year 4 Sales (Million pounds) 13.4 26.6 30.1 37.8 Expenses 17.7 15.2 15.75 15.9 Net Profit before Tax (4.3) 11.4 14.35 21.9 2.3 Market Share The organisation targets the establishment of a market share of an average 3% upon its entry. Moreover, it intends to increase its market share to a forecasted 25% within five years of operation due to its unique business approach in the market. This will be a share grab from current market competitors such as Marks & Spencer who dominate the market. The company announced profits worth 665.2 million pounds its 2013 audited financial reports (“Marks & Spenser”, 2013, p.2). 3.0 Business Model Smart Cloths Limited intends to use a flexible customer oriented business model that is adaptable to continuously dynamic customer needs. The model prioritises on the retail store value proposition to its customers, its sources of revenue and the inevitable business costs for the enterprise (Kiron, Kruschwitz, Haanaes, Reeves & Goh, 2013, p.7). 3.1 Customer Targeting The business aims at delivering quality children wear to its clientele at affordable costs and at their convenience. Unlike other stores that charge high prices for their products, the retail store targets to utilise the quality management systems to ensure quality products, as well as efficiency in distribution and supply of the products. Consequently, the enterprise will reduce on its production costs thus availing products at reduced products. Additionally, the enterprise with its target consumers as parents and children will adopt a business approach in which the stores unlike the existing clothes outlets where existing relationships are limited to transactions, the outlet intends to establish a membership program through which its customers can register and interact through semi-annual gatherings organised by the enterprise. In this case, the enterprise hopes to establish relationships. The organisation will establish partnership relationships with its customers to ensure mutual satisfaction for all stakeholders. 3.2 Communication In communicating with its clientele and other stakeholders, the organisation will publish a monthly newsletter dubbed Smart Cloths News, which will highlight key issues in the enterprise, any stock line changes and showcase on customer and other stakeholders’ contribution and reactions. With respect to after sales services, the retail management will from time to time review its after sales policy to indicate the quantity of products purchased by its customers that will warrant discounts or/and free deliveries. More so, for the online shoppers, the retail will contract a third party logistics company to provide delivery services to its customers. 3.3 Revenue In order to initiate and retain business operations, the organisation requires start up capital. The required funds will initially be acquired from the partners through share holding contributions. Afterwards, the partners will henceforth be acknowledged as the retail shareholders and owners. The ratio of ownership by the enterprise will be determined on the percentage ratio of contribution by each partner at the business start. It is upon these proportions that profits will be shared. Moreover, the enterprise will raise funds from loans sourced from financial institutions and other lending organisations. Such loans will be treated as long term liabilities and will be serviced on a pre determined rate subject to annual profit margins in the organisation (Pride, Hughes & Kapoor, 2010, p.480). The enterprise aims at not only providing value to its customers but also enhancing shareholders value maximisation. Smart Clothes limited will adopt two revenue models, the sales and subscription model. On one hand, the retail outlet will acquire revenues from sales proceeds. This will be in both the physical and online stores. On its physical stores, the retail will establish a point of payment where customers after selecting their preferred children wear will be required to pay prior to taking possession of the products. On the other hand, on its online stores, the retail store will establish appropriate payment means through which customers can purchase the items online. Additionally, the organisation will charge booking fees. Under this revenue model, the organisation will charge customers who only wish to book products online but collect them physically from its stores. Although this will be an additional cost to its clientele, the organisation will enhance reduced failed bookings, where customers book products online but fail to physically purchase and collect them from organisational stores. Additionally, the organisation will adopt a subscription revenue model. This will be a unique revenue model that sets it apart from market competitors. The retail clothes industry has over the years relied on the sales revenue model alone. Introduction of a subscription revenue model will not only enhance increased retail store profitability, but also increase customer satisfaction and knowledge. The subscription stream will enrol customers through their online accounts. Through this service, the organisation will update customers on a regular basis of new stocks in its retail shops at semi-annual and annual subscription programs. Through this revenue stream, the organisation will earn revenue as well as increase its market competitiveness through increased customer knowledge and developed relationships that enhance customer loyalty. 3.4 Cost Structure For any enterprise to execute its business mission, achieve its objectives and run on a daily basis, costs are inevitable (Boyd, 2004, p.102). In this case, appropriate cost structures development becomes a necessity for increased efficiency and reduction on production costs. Smart Clothes limited as a retail store enterprise will incur costs in the purchase of children wear to be availed in its outlets. The retail will not manufacture the wears itself but instead partner with manufacturers to ensure timely delivery as well as quality products. In this case, the enterprise will incur supply chain management costs such as products acquisition costs, transportation costs, storage and warehousing costs as well as distribution costs. Moreover, the organisation will incur marketing and administrative costs in the process of its advertising and promoting its products in the market. Additionally, the enterprise will incur staffing costs for the remuneration of its human resource capital. Finally the enterprises will incur initial property acquisition costs for the purchase of its store outlets and for the lease of others. 4.0 Marketing Strategy Surchi (2010, p.259) on a study on the marketing strategies for fashion brands, observed that the establishment of a business enterprise and the availability of ideal market oriented products are not enough for market success. In this case, organisations need to establish their influence in the market through marketing strategies. Such strategies include the identification of an organisations target market segments, its differential advantage and appropriate use of the marketing mix components. To these effect Smart clothes Limited has developed an ideal marketing strategy for the retail outlet. 4.1 Target Market Segment The organisations target market segment is on the children who are between zero to 15 years (0-15). This is the segment that is growing and continuously has to change their wear. The retail store focused on this market segment due to a range of factors. One, the market is not highly competitive. While as a majority of fashion stores have focused on the adults wear, fear, especially in the UK, have focused on children. A majority fail to establish a correlation between children wear and fashion that the enterprise seeks to major on. Secondly, the children market segment is ever growing as children grow physically demanding for wear change which increases buying frequency as compared to adults wear that is majorly income and fashion drive hedged. This changed market focus approach offers Smart Clothes a competitive advantage over its competitors. 4.2 Marketing Mix The enterprise intends to use the decoy pricing strategy as its marketing tool. In this case, the retail store intends to bundle children wear on the basis of their supplementality. For instance, baby coats, will be bundled up with baby blankets as the two are jointly used and supplement each other. In this case, the bundling up will enhance increased sales as customers buy related items together. Through this approach, the enterprise customers will earn discounts for bundled purchases which will in turn increase their satisfaction as well as earn value for money. On the other hand, the pricing strategy will enhance increased sales and the company will consequently earn increased revenues through economies of scale and quantity sales. Smart Clothes Company will ensure that it has a pool of qualified staff in its management and customer service lines. In this case, the enterprise will recruit its staff through interviews both physical and online to allow for diversity and equal representation for all in its staffing process. In order to nurture and grow its staff professionalism, the enterprise will offer fully funded training sessions for its staff upon recruitment. Moreover, it will facilitate for annual short courses to enhance career development as well as update the staff on market emerging issues in order to boost t synergy. In order to retain qualified staff in the highly competitive industry, the organisation offers attractive remuneration and reward packages such as overtime compensation, provision of a medical insurance cover and the establishment of a review committee to review staff remunerations on an annual basis. In its product features, the company intends to build on its differential advantage by offering exclusive children wear as its unique selling point. In this case, the organisation will achieve profitability through market targeting strategy merits. Through segmentation and targeting, organisations establish, develop, and avail products that are market specific and driven. In this case, such products supersede those of competitors who focus on general market with no special attention to specific market needs and preferences. Finally, with regard to promotion, the enterprise intends to conduct promotional activities through the media. These will include, advertisements, sponsoring activities and endorsements. On one hand, the organisation will place advertisements on the media to establish market knowledge of its existence. On the other hand, it will participate actively in children related activities through sponsoring and requesting for endorsements from children social workers and other professionals working with children. Such strategies will enable ease of establishing relationships where the organisation can even in the future utilise the sponsorship programs as part of corporate social responsibility programs to the community. 4.3 Risk Identification and mitigation Every business enterprise success is hedged on appropriate risk mitigation strategies. This is because every business venture is coupled with numerous risks. Similarly, Smart Clothes Limited faces numerous business risks in its execution. The enterprise faces the risk of competition from the already established firms such as Marks & Spencer who already enjoy the economies of scale, wide customer base, and customer loyalty. Moreover, the organisation faces the risk of supply chain management challenges where its partners such as the product suppliers and outsourced distribution and transportation firms’ systems may fail, negatively impacting on the enterprise delivery system. In order to overcome this challenge the enterprise will adopt a unique marketing strategy of endorsements in order to gain market influence over the already established competitors. Moreover, the enterprise will use suppliers and distributors information systems in order to continuously monitor their operations to establish deficiencies and possible risk sources and consequently recommend proactive measures to avert supply chain management challenges. References Boyd, E.A. 2004, "Dramatic changes in distribution will require renewed focus on pricing and revenue management models", Journal of Revenue and Pricing Management, vol. 3, no. 1, pp. 100-103. Kiron, D., Kruschwitz, N., Haanaes, K., Reeves, M. & Goh, E. 2013, "The Innovation Bottom Line", MIT Sloan Management Review, vol. 54, no. 3, pp. 1-20 Marks & Spencer 2013, Annual Report and Financial Statements 2013, Author. Pride, W. M., Hughes, R. J., & Kapoor, J. R 2010, Business. Australia: South-Western/Cengage Learning. Surchi, M. 2011, "The temporary store: a new marketing tool for fashion brands", Journal of Fashion Marketing and Management, vol. 15, no. 2, pp. 257-270. Appendices Appendix 1: Start Up Balance Sheet Balance Sheet (all numbers in 000 pounds) ASSETS LIABILITIES Current Assets Current Liabilities Cash $15,000 Accounts payable $16,000 Accounts receivable 7,000 Short-term notes 4,000 (less doubtful accounts)   Current portion of long-term notes 7,000 Inventory 22,000 Interest payable 2,500 Temporary investment 2,000 Taxes payable 500 Prepaid expenses 4,000 Accrued payroll   Total Current Assets $50,000 Total Current Liabilities $30,000 Fixed Assets Long-term Liabilities Buildings 11,000 Mortgage $7,000 (less accumulated depreciation)   Bank Loan Bank Loan 20,000 Plant and equipment 7,000 Total Long-Term Liabilities $27,000 (less accumulated depreciation)   Furniture and fixtures 3,000 (less accumulated depreciation)   Shareholders' Equity Total Net Fixed Assets $30,000 Capital stock   Retained earnings 23,000 Total Shareholders' Equity $23,000 TOTAL ASSETS $80,000   TOTAL LIABILITIES & EQUITY $80,000 Read More