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Description of the business Survey Report of bread consumers Brief company history Mission Statement Target market Market size Design of product Quality level of product Competitors Style of product
Pricing strategies Per unit cost Total cost Forecasting sale Customers feed back Promotional modes Cost of promotional modes Available budget Expected target market Distributional channels Producers to distributors modes
36%
85% 45% 35% 23%
64%
15% 55% 65% 77%
So to solve all these issues we develop an idea of introducing multi flavor bread for the convenient of consumers The size of our opportunity is huge and the demand for it is excessive and it is growing day by day. The change in peoples taste is the trend which supports our idea.
Mission Statement
Fruity bread mission statement is to provide a product of the greatest possible value to our customers, thereby gaining and holding their respect and loyalty while achieving sufficient profit to finance our business and it's growth
Objectives
The objectives for fruity bread are:
To establish the market presence needed to support marketing and sales goals and to attract customers. To reach Rs.30,000 monthly sales by the end of 2010, Rs.33,000 average monthly sales by the end of FY 2011. To achieve profit margins over 10%. To develop top-rated relationships with 2-4 well-respected, all encompassing distributors. Prove to be a best idea generating and consultancy firm Terminate the old tastes and set up new tangs
Keys to Success
The keys to success in this business are:
Marketing: promoting a new company, product, and delivery channels to a rural community. Product quality and consistency. Pricing effectively with respect to the project quality and customer value proposition. Management: products availability, costs controlled, marketing budgets managed. There is a temptation to fixate on growth at the expense of profits. Reporting and controls in place for inventory and financials.
Competitive advantage
Competitive advantage is a position a firm occupies against its competitors. Our company has a great competitive advantage with respect to our competitors. The reason is that the product of company as a huge desire in the market. Although many breads are available in the market but with same old taste but we are with the different one with new taste and quality Some of the potential competitive advantages to be considered are:
Cost
Fruity bread always tries to produce low cost product with the good quality because quality is our ingredient
Price
Fruity bread have great control over the price as we are the first one in the market to produce multi flavor bread so we are the price setter and we have complete control on price and our prices are nominal
Channels
Fruity bread has a huge list of distribution channels through out the country who willing to do work with us.
Business Model
Demand Forecast
This is done by considering demands of customers. Our target customers relates to: Elite class Upper Middle class Lower middle class
Raw Material
We buy milk from farmers located at different parts of the city and eggs from poultry farm located near Raiwind Lahore. We buy raw material from wholesalers as well.
Production
Our production is done at Fruity bread own state of the art production plant.
Distribution channel
Wholesalers Retailers Hyper Star Metro etc
Sales to customers
Selling products to the customers through retailers, wholesalers and collecting feedback from customers.
Start-up Expenses
Amount (Rs)
Professional Fees (Legal, Accounting, Consulting) 1,800 Placemats, Stationery, Business Cards Renovation Marketing Rent Expensed Equipment 1,100 8,300 2,500 2,000 5,000
Fruity Bread
The future prosperity of our business depends upon the following important aspects: Our passion, desire and interest will play a key role in moving towards success Management expertise and commitment to the business Sound strategies Close eye on the future competitors Good name recognition Increased quality and excellence of the services
We will give due care to these factors as they can be of vital importance for our future survival.
Start-up Assets
Amount (Rs)
Start-up Funding
Amount (Rs)
Assets
Amount (Rs)
Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised
31,550 23,100 0
23,100 54,650
Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities
Capital
Amount (Rs)
Planned Investment Investors Owners Additional Investment Requirement Total Planned Investment 15,000 30,000 1,000 46,000
Intellectual Property
FRUITY BREAD
Name is registered
Logo is registered
Patents
Fruity bread has registered its process and product under the patents ordinance 2000 and follows all the patent rules 2003 so according to this no other firm is allowed to follow the same process and products used by Fruity bread.
Trademarks
The logo, name and slogan of fruity bread are registered as a trademark.
Copy Rights
Fruity bread has registered under the copyright act 1962.
Industry Analysis
Industry analysis is a business research that focuses on the potential of an industry.
Industry Trends
Right now all of the bread industry is producing the similar type of bread with same flavor and no new innovation has taken place in the bread industry for the long time. There are only three types of bread available in market Normal Bread Sugar Free Bread Milky Bread These breads are available in three different sizes Small Medium Large Bread for Sandwiches So the window of opportunity is very much open for our product Fruity Bread which is multi flavored bread having different types of flavors in single bread so with our new innovative product we have a first mover advantage in the industry and with the strength of our management team combined with the Gourmets name and trust which people have on Gourmet we can capture the market.
Industry Size
Size of bread industry is very large as there are many different bread producers in the country which produce the regular bread in the country but few of them are producing it on large scale and have major market share the rest of the bread industry consist of small bread makers which usually dont even have a name for their product these small bakers usually operate in small villages and bread made by these small producers is not even up to the standard maintained by branded bread producers. Few firms which have major share of the market are Dawn Bread Shezan Gourmet Cakes and Bakes
Industry Attractiveness
Bread industry is very attractive and its is growing phase as more and more firms are entering into it but its window of opportunity is still open as there is no producer of multi flavored bread so by introducing a new innovative product such as multi flavored bread we can consolidate the market as our surveys has shown that people will love to have a bread which has different flavors.
Profit Potential
The industry has great profit potential generally the profit potential of an industry depends on these forces 1. 2. 3. 4. 5. Threat of substitute Threat of new entrants rivalry among existing firms bargaining power of suppliers bargaining power of Buyers
Threat of Substitutes
Threat of Substitutes
Our bread has no direct substitute because we are introducing new bread in the market but as added measure we have our concept registered.
Secondly the closet substitute our bread has is normal bread available in market but price we are offering is very competitive and our quality is also great so people will be more attracted toward our bread and prefer it over normal bread.
Copy Right
As we are introducing a new product we have our idea registered Other then copyright the significant barriers to entry which will be created by us will be.
Economies of Scale
As gourmet already have a vast network of branches and distribution we can generate this barrier by doing mass production which will result in lower average cost
Product Differentiation
We will create this barrier by developing bread which is new and different from breads which are already available in market
Capital Requirement
Since gourmet is a established name and already invested a lot of capital it will be difficult for new firm to enter in market with that much capital
Management Team
Our management team is very skilled and has lot of experience in the food industry which creates a sustainable barrier to entry
Attractiveness of Breads Industry Using Five Forces Model Competitive Forces Threat to Industry Low
Threat of substitute Threat of new entrants Rivalry among existing firms Bargaining power of suppliers Bargaining power of customers
Medium
High
Children
We are specially targeting school going children because usually children get bored very quickly with same old bread with only one flavor and mothers have lots of problem in feeding them in
breakfast this can be solved with multi flavored bread which has flavors like mango, strawberry, chocolate etc which children love to have.
Unique Product Brand Name Recognition Access to distribution channels Quality Of Product Price
service
This competitive analysis grid shows us that gourmet has competitive advantage over its competitors in unique product, Quality of product and access to distribution channel this information can be used in making firms marketing plan
Marketing Plan
Market is sea. Marketing plan of fruity bread is constructed after a deep study of the market. Firstly we divide the market in different segments so that we can collect pure information about our idea.
Market Segmentation
When selecting a target market, a company usually engages in some form of market segmentation. This involves subdividing the market into clear subsets of customers that act in the same way or that have comparable needs. Fruity bread also divides the market in different segments for the marketing plan.
Questionnaire
Do you like the idea of multi flavor bread? (a). yes (85%) (b). no (15%) How many flavors would you recommend? (a). 5 (40 %)
(b). 4 (36 %) (c). 3 (24 %) How many sizes would u prefer? (a). 3 (55 %) (b). 2 (35 %) (c). 1 (10 %) Do you like the taste of flavor bread (a). yes (80 %) (b). no (20%) Which flavor u like the most? (a). Chocolate (45%) (b). Mango (35%) (c). Strawberry (20%)
Marketing Objectives
Maintain positive, steady growth each quarter. Experience a growth in new customers who are turned into long-term customers. Realize an increase in occupancy each subsequent year.
Marketing Mix
The fruity bread marketing mix is comprised of the following approach to pricing, distribution, advertising and promotion.
Product Line
Fruity bread has designed a product line that will create positive impressions in the leading market today. Products need to be readily available to consumers and distinguishable from competitors products. This plays a positive role in marketing our products, as the tastes are unique. The key to this product line is promoting our new product, the fruity bread. The unique product qualities include our focus on both taste and hygiene factor.
Packaging
Fruity bread products are sold in stylish packaging, in order to reflect the companys ethical stance on environment. Fruity bread has a great reliance on packaging of the product. The only essential feature would be appropriate labeling and marking key benefits of proteins and vitamins in the bread
Promotion
The promotional plan to be adopted by fruity bread, has two key objectives. That is, gaining new product acceptance and increasing sales for the company. Promotion of the fruity bread will mainly involve above-the-line promotion techniques including advertising in specialized industry journals and magazines, internet promotion and to a more limited extent; television. Our focus on magazine advertisement reflects a growing Pakistani trend, with 8 out of 10 Pakistani reading at least one magazine, with readership increasing by 6.4% over the past five years (Magazine Publishers of Pakistan, 2010). Combining this with internet advertising will reflect a recent study which revealed natural synergies between magazines and the internet (MPP, 2010). Fruity bread will be adopting a product development strategy, in relation to the promotion of the Fruity bread. This will involve targeting an existing market of bread consumers, with a new and unique taste of bread.
Placement
Fruity bread will be acting as a distribution channel to retail stores and wholesalers initially in three Pakistani capital cities such as Lahore, Karachi & Islamabad. These retail stores will consist of specialized wheat products. Our intentions would be to expand distribution to every state within two years. Our website will also allow for direct sales. The placement of the main warehouse is in the Lahore which will allow distribution via both land and air. The fruity bread is relatively light and small and so transport will be easily contractible.
Pricing
By employing a cost-plus pricing strategy, the organization will be earning fixed gross profit. This will also enable a better control of costs, to ensure that manufacture of the Fruity bread does not exceed Rs35. This price is derived from a development cost of Rs20 per unit and a mark-up of 35%. This mark-up is based on rule-of-thumb mark-up figures provided by The University of central Punjab
Almost half of survey participants indicated that the quality of the product was of higher importance than the price or value of the good. This suggests that the demand for the product is relatively inelastic. For this reason, we have no hesitation in suggesting that the price of our good reflects the willingness of consumers in our target market to buy.
10%
15%
40%
35%
SWOT Analysis
Fruity bread is entering an industry as a sole producer of flavored bread. As such, a myriad of opportunities lie in the fact that as a first mover, there are no direct substitutes to compete against. The key threat therefore, is the potential for competitors entering the market. The development of strategic measures is the key to manifesting the strength of having obtained a unique product concept. However development will be required in terms of building relationships with retailers and direct customers through research and communication.
SWOT Analysis
STRENGTHS
1. DELIVERY 2. MARKETING 3. MANAGEMENT/INFORMATION 4. PROCUREMENT 5. COMMITMENT TO TECHNOLOGY 6. HUMAN CAPITAL 7. REPUTATION/ IMAGE 8. FINANCIAL POSITIONING
WEAKNESSES
1. HEALTH RISK 2. HEALTH CONSCIOUS SOCIETY 3. ATMOSPHERE (Dull) 4. NON MOTIVATIONAL EMPLOYEES 7. COMPACT LOCATIONS 9. AVAILABILITY
OPPORTUNITIES
1. INCREASE IN DEMAND FOR MULTI FLAVOUR 2 EASILY ACCESSIBLE 3. INCREASE IN POPULARITY 4. VALUE ADDED SERVICES (DELIVERY, DISC CARDS) 5. POSSIBILITY OF OFFERING MORE DIVERSIFIED MENU 6. CREATING INELASTIC DEMAND THRU
ADVERTISEMENT 7. GROWTH IN OTHER CITIES 8 CATERING TO HEALTH CONSCIOUS PEOPLE 9. EASILY AVAILABLE TECHNOLOGY.
THREATS
1. STRENGTH OF COMPETITION 2.NOT ACCEPTABLE BY SOME PORTION OF SOCIETY 3. EMERGING NEW CHAINS 6. HEALTH RISK 7. DECLINE IN CONSUMER BUYING POWER 8. POLITICAL INSTABILITY 9. LOSING POTENTIAL CUSTOMERS DUE TO PRICE
Target Market
The target market for fruity bread is children teenagers and adults as well, who is part of a distinct segment The geographical location of the market will initially be Lahore, Islamabad and Karachi which each have over 4,000,000 people The demographic of the market is approximately 45% male 55% female. The psychographic qualities of the market are middle or upper class citizens who hold quality in higher esteem than price.
Operating Expenses
The annual operating expenses necessary to run the business will initially total Rs.968,000 including staff, utilities, marketing, loan repayments and interest. These expenses will vary each year and will gradually drop; yearly estimates follow
Year 1
Year 2
Year 3
Year 4
Year 5
Rs.600,000 Rs.600,000 Rs.500,000 Rs.400,000 Rs.200,000 Rs.50,000 Rs.50,000 Rs.50,000 Rs.50,000 Rs.50,000 Rs.50,000 Rs.50,000
Loan Rs.168,000 Rs.168,000 Rs.168,000 Rs.168,000 Rs.168,000 Repayment Interest Rs.50,000 Rs.40,000 Rs.30,000 Rs.20,000 Rs.10,000
Totals
Promotion Schedule
The implementation of fruity bread promotional schedule is a critical aspect of the success of the product. The companys promotion will include the following. Paid magazine articles and advertisements to generate sales and brand awareness. Fruity bread event sponsorship to create brand awareness. Creating affiliations with sales websites to capture the online sales market. Placing classified advertisements in newspapers. TV commercials
Operations Plan
Method of production
For Fruity Bread we use same method of production as it has been using by other bread manufacturer, we mean to say that our production operation for manufacturing of multi-flavor Rainbow Bread is same as it is using by other bread companies except we add extra fruitful and delicious flavor in the each slices of the bread.
The three main steps involve in bread manufacturing: The mixing of raw material. We process the raw material in bread manufacturing plant. After manufacturing desire shaping and packing of bread.
1 1/4 cups water 1 tablespoon sugar 1 teaspoon salt 3 1/2 cups flour 1 1/4 teaspoons yeast Fruits Vegetable oil Coconut
For bread machine: Measure ingredients into baking pan in order given. Set for dough cycle. When the dough is ready, proceed with "To Colour" below. For hand mixed: In a large bowl, Disolve sugar in lukewarm water. Add yeast. Let sit for 10 minutes. Stir. Add 1 1/2 cups flour and salt. Mix vigourously for at least 5 minutes. This will reduce the kneading time. Add balance of flour 1/2 cup at a time until dough is smooth and no longer sticky. Turn onto a floured board and knead for 10 minutes. Cover dough with a clean tea towel and let rise in a warm place for 1/2 to 1 hour, until it doubles in size. Punch down to remove all air bubbles. To Colour: Divide dough into 3 or 4 equal parts (one part for each colour desired). Poke a hole in the dough with your finger. Put food colouring into the hole. Use a little (5-6 drops) for light colours, more for bright colours. Pinch the hole closed and knead the dough for 5 to 10 minutes, until the colour is well mixed in. Use a rolling pin to roll the dough out very flat. Use a little water to moisten the top of one piece so the next piece will stick to it. This is very important if alot of extra flour was used to keep the dough from sticking during kneading. Roll the dough into a log and place it in a greased and floured bread pan. If you do not have a bread pan, it can be placed on a greased and floured cookie sheet. Let rise for 45 to 60 minutes. More rising time will produce a lighter bread, while less time will result in a denser bread. Heat oven to 350'F. Bake bread for about 25 minutes. Remove bread from pan immediately when done. Bread should sound hollow when tapped on the bottom. If it does not, it is not cooked yet. Cool 10-20 minutes before cutting.
Quality control
Because our product is initial in the market, to make it the successful there should no compromise in the quality of the bread. Because it is matter of users health and also as our most targeted individuals are children and teen agers, these individuals are very conscious about their fitness and health. So, to provide best quality we use fresh raw material and put strong consideration on the cleanliness of labors operators and clean plant and equipment daily. Also because we start new business, we concentrate to fulfill the entire requirement for acquiring quality assurance award from ISO-9001 and ISO9002.
We use joint venture firm Gourmet outlet for the regular sales of our product and also other famous big superstores of the region, we did not want to provide it in backward areas initially. The reason behind it is that as we are beginner, we need support from conscious customer which comes from the sale of product from well trained salesperson of the outlets who knows the important of the specific products and then conveys it to potential customer, for this purpose we leave big profit margins for big superstore with best quality as compare to other bread so our initial sales will be boost up.
Financial Plan
Salaries and rent are the two major expenses, while depreciation is another significant cost that will increase as the company develops. We want to finance growth mainly through cash flow. We recognize that this means we will have to grow slowly. It should be noted that the owners of Fruity bread do not intend to take any profits out of the business until the long-term debt has been satisfied. Whatever profits remain after the debt payments will be used to finance growth, mainly through the acquisition of additional inventory.
Important Assumptions
Key assumptions for Fruity Bread are:
We do not sell anything on credit. Monthly sales are the largest indicator for this business. We assume access to capital and financing sufficient to maintain our financial plan as shown in the tables.
Break-even Analysis
For our break-even analysis, we assume per month running costs which includes payroll, rent, utilities, and an estimation of other running costs. Based on our anticipated margin, what we need to sell per month to break even is shown in the chart and table below. Our sales forecast indicates that monthly sales are expected to be much greater than the breakeven point mentioned in the table.
Break-even Analysis
Rs.17,581
Assumptions: Average Percent Variable Cost Estimated Monthly Fixed Cost 67% Rs.5,838
FY 2012 Rs.472,085
FY 2013 Rs.608,670
Rs.245,154
Rs.314,147
Rs.402,472
Rs.121,865 33.20%
Rs.157,938 33.46%
Rs.206,198 33.88%
Depreciation Vehicle Expense Credit Card Surcharge Inbound Freight Charges Office Supplies Security/alarm Telephone Accounting Costs Rent Utilities Insurance Payroll Taxes Other
Rs.4,140 Rs.1,700 Rs.3,498 Rs.4,964 Rs.600 Rs.360 Rs.2,650 Rs.1,500 Rs.19,200 Rs.2,400 Rs.840 Rs.0 Rs.0
Rs.4,140 Rs.1,850 Rs.4,547 Rs.5,497 Rs.780 Rs.360 Rs.3,445 Rs.1,500 Rs.19,200 Rs.2,400 Rs.840 Rs.0 Rs.0
Rs.4,140 Rs.2,000 Rs.5,911 Rs.6,036 Rs.1,014 Rs.360 Rs.4,478 Rs.1,500 Rs.19,200 Rs.2,400 Rs.840 Rs.0 Rs.0
Rs.70,052
Rs.86,579
Rs.116,937
Profit Before Interest and Taxes EBIT Interest Expense Taxes Incurred
Rs.36,269 9.88%
Rs.49,951 10.58%
Rs.62,483 10.27%
Cash from Operations Cash Sales Subtotal Cash from Operations 367,019 367,019 472,085 472,085 608,670 608,670
367,019
Rs.472,085 608,670
Expenditures
FY 2011 FY 2012 FY 2013
Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations 26,400 253,470 279,870 39,680 382,218 421,898 66,016 478,195 544,211
279,870
421,898
544,211
87,149 88,149
50,187 138,336
64,459 202,795
Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets 29,000 4,140 24,860 141,825 29,000 8,280 20,720 195,981 29,000 12,420 16,580 266,682
FY 2010 Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities 27,555 0 0 27,555
FY 2011
FY 2012
31,761 0 0 31,761
39,979 0 0 39,979
0 27,555 Capital
0 31,761
0 39,979
Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital
Net Worth
114,269
164,220
226,703
Business Ratios
Business ratios for the years of this plan are shown below.
Ratio Analysis
FY 2011 Sales Growth 0.00% FY 2012 28.63% FY 2013 28.93% Industry Profile 4.90%
Percent of Total Assets Inventory Other Current Assets Total Current Assets Long-term Assets Total Assets 20.32% 0.00% 82.47% 17.53% 100.00% 18.84% 0.00% 89.43% 10.57% 100.00% 17.74% 0.00% 93.78% 6.22% 100.00% 47.50% 28.90% 76.40% 23.60% 100.00%
Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets 4.24 3.20 19.43% 45.34% 36.53% 5.52 4.36 16.21% 43.45% 36.41% 6.26 5.07 14.99% 39.37% 33.47% 2.03 0.59 54.70% 3.50% 7.60%
10.13 27 2.59
12.17 28 2.41
12.17 27 2.28
Debt Ratios Debt to Net Worth Current Liab. to Liab. 0.24 1.00 0.19 1.00 0.18 1.00 n.a n.a
Liquidity Ratios Net Working Capital Interest Coverage Rs.89,409 Rs.143,500 Rs.210,123 0.00 0.00 0.00 n.a n.a
Additional Ratios Assets to Sales Current Debt/Total Assets Acid Test Sales/Net Worth 0.39 19% 3.20 3.21 0.42 16% 4.36 2.87 0.44 15% 5.07 2.68 n.a n.a n.a n.a
To avoid any kind of management risk we have given sufficient incentives and make key managers as equity holder of our firm so they remain with us for the longer time for lower level employees we are giving salaries which are above than local market we are also giving them bonus as a result our employees are satisfied and give their maximum efficiency.
Marketing risks
Marketing consists of advertising and promoting of product or service in order to sell it. Marketing is to lets potential customers know that they are available for sale. Sales, advertising, and public relations are each essential components of marketing and each require specialized skills and expertise. Fruity bread have only one person performing all these functions under the marketing umbrella, knowledge of each area is important to develop a focused effort. Marketing Manager having focused on what the customer wants and needs is essential to successful marketing efforts. This customer-orientation should go hand-in-hand with the company's objective of maintaining a profitable volume of sales. Marketing is a creative process combining all of the activities needed to accomplish both of these objectives.
Operational risks
Operational Plans are those plans that specify the details of how the overall goals are to be achieved. At Fruity Bread, once a goal has been set, plans are made to ensure that goals are being achieved. The way this goal is being achieved at the moment is that the employees are trained to take the order as fast as possible, then input it in the system, forward it on to the production, and then place the order as soon as possible. The employees are trained to do this as fast as possible and we carried out a study to check how long the entire procedure takes and then based on the results, the management set a target that in how much time the order should be placed and then the product should be at the shelves of the seller.
Financial risks
To avoid financial risk we raised our reserves to sufficient level to avoid any kind of financial stress for that we have Mr Bilal who is chief financial officer of Habib bank who can arrange finance for us if we face any problem in finance