Professional Documents
Culture Documents
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Table of Contents
1. Introduction:........................................................................................................... 3
1.1 Background of business:............................................................................................ 3
1.2 Objectives of the business:......................................................................................... 4
2. Analysis of the process involved in the entrepreneurial venture:...........................4
2.1 Idea Generation:...................................................................................................... 5
2.2 Planning:............................................................................................................... 6
2.2.1 Selection of country:........................................................................................... 6
2.2.2 Conduct of market analysis and identifying target market:.............................................6
2.2.3 Projection of sales:.............................................................................................. 7
2.2.4 Production plan:................................................................................................. 7
2.2.5 Direct material plan:............................................................................................ 7
2.2.6 Direct labor plan:................................................................................................ 8
2.2.7 Planning of production facility:.............................................................................. 9
2.2.8 Overhead plan:.................................................................................................. 9
2.2.9 Selling and Administration overhead expenses:.........................................................10
2.2.10 Cash Budget:................................................................................................. 10
2.3 Resources collection:.............................................................................................. 11
2.4 Legal processes:.................................................................................................... 12
2.5 Building facilities:.................................................................................................. 12
2.6 Implementation:.................................................................................................... 13
3. Statement of financial projection:........................................................................13
4. Conclusion:........................................................................................................... 16
5. References:........................................................................................................... 16
6. Notes and assumptions:....................................................................................... 17
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1. Introduction:
In todays hyper competitive business environment, assurance of cost effectiveness and ecofriendliness can help every business organization to run business operations successfully.
Through bringing new business venture which can reduce environmental pollution and reach the
underserved or poorly served market segment, Coats Bangladesh Ltd can protect the human race
from extreme population and poverty. Plastic which is a major cause of pollution can be used to
make polyester yarn. The PET (Polyethylene terephthalate) bottles used to meet human needs of
serving mineral water, soda and other different sorts of beverages can be used in this purpose.
Coats Bangladesh Ltd. can use these PET bottles as raw material for producing polyester yarn
which will not only reduce the ecological threats but also will contribute to the textile industry.
1.1 Background of business:
Coats PLC is the largest sewing thread manufacturing company in the world. It was founded in
1755 in UK. It is an unrivaled industrial thread manufacturer operating in over 70 countries and
employing over 20000 people (Coats official website). Almost 1 in every 5 garments and textile
industries in the world use the thread manufactured by Coats. It has a long heritage of over 250
years and is famous for producing quality sewing thread. For more than 250 years, it has been
acclaimed a pioneer in industrial thread manufacturing. Coats Bangladesh is a subsidiary of
Coats UK Ltd. and has been operating in Bangladesh for quite a long time.
1.1.1 Mission and vision statement of Coats Plc.:
Proposing a specific and feasible polyester yarn business idea in terms of the
appropriateness and market structure of a geographic location.
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ii.
Describing the ins and out of the venture and the possible challenges in the
iii.
Planning
Resources Collection
Legal Processes
Building Facilities
Implementation
Coats Bangladesh Ltd. will start their business operation of making polyester yarn from recycled
pet bottles in Bangladesh by 1st July 2015. To make the project marketable, they will require 18
months to complete as this project will be started from 1st January 2014.
The company will utilize the following time frame to implement the venture as it is required to
make it feasible.
1
10
11
12
13
14
15
16
1
7
18
Idea generation
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Planning
Resources
obtaining
Legal
processing
Building
facilities
Implementatio
n of venture
2.1 Idea Generation:
The Business Idea is generated for Coats Bangladesh which includes production of polyester
yarn for the company from recycled PET bottles in Bangladesh. Bangladesh is a country with
great potentials in Ready-made garments (RMG) sector. In 2011, RMG sector contributed to
almost 13% of the GDP in Bangladesh (The World Bank, 2012). Although Coats is producing
polyester yarns in Bangladesh, the idea of producing polyester yarn from recycled PET bottles is
new in the country. Also it will be cost efficient for the company and will reduce the cost of
production by approx. 55%. Supply of Polyester yarn produced from Recycled PET bottles will
reduce PET bottles out of landfills and, consequently, decreases the amount of trash(Centre for
Policy Dialogue (CPD) Bangladesh. 2002.).
bottles in 2009. And every year this amount increases by approximately 20% (Bangladesh
Bureau of Statistics, 2009). Production of Polyester Yarn by Coats Bangladesh will prove to be
an excellent strategy since it has both domestic and foreign demand.
Although there are certain challenges and opportunities that will likely be faced by the company.
The challenges include:
1. Availability of adequate skilled worker.
2. Bureaucratic behavior of the country.
3. Corruption in the country.
The opportunities are also tremendous for Coats Bangladesh. Its greatest opportunities are:
1. No restriction regarding the amount of foreign investment is imposed.
2. Since Textile is a potential industry in the country, government subsidizes and helps the
organization helping textile industry.
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3. There is not much of a competition of Coats and certainly none as polyester manufacturer
in Bangladesh.
2.2 Planning:
2.2.1 Selection of country:
The PEST analysis can help to identify the influential factors in case of country selection.
2.2.1.1 PEST analysis:
i.
Political Factors: The prevalence of political factors impact the overall performance of
the industry. The government of Bangladesh patronizes and encourages this textile
ii.
iii.
2006.)
Sociological Factors: The availability of input and the higher demands of Bangladeshi
products instigate the Coats Bangladesh Ltd to pursue this cost effective venture in
Bangladesh. According to a statistics of 2009, in Bangladesh there were about 27500 tons
of waste PET bottles that year and every year this amount increases by approximately
iv.
Rivalry among the competitive firms (high): There are so many companies are running
business operations in this industry such as Muslin Textile Mills Ltd., Jamuna Group,
Partex Group etc. which make the market of polyester yarn more competitive (William
ii.
E., 2002).
Potential entrants (high): Higher level of potential of the industry instigates other firms
to enter into the industry which increases the threat of potential entrants.
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iii.
iv.
yarn using the PET flakes is not so easy because of the cost effectiveness of PET flakes.
Bargaining power of suppliers (low): The bargaining power of suppliers is low as the
v.
Through having a look over this analysis, the higher market potential of the venture in the textile
industry in Bangladesh seems quite satisfactory.
2.2.2.2 Segmentation Targeting and Positioning Model:
The following STP model can be used to identify a strategic position for the venture.
Market positioning
Market targeting
Market segmentation
Identifying suitable
Figure: The STP Model
Evaluating
Segmenting the
positioning strategy
effectiveness
of each
As there
is anaccording
ever-increasing
demand of
polyester yarn
in
market
to
Developing and
Bangladesh,
making necessary yarn fromsegment
recycled pet bottles
variable
communicating the
Selecting target
Developing profile
can be a great business opportunity to the company because
chosen strategy
segment
of
market
segment
of the cost effectiveness of production and abundance of pet bottles. As the textile industry of
Bangladesh contributes 81% of the export earnings of the country each year, there is an ever
increasing domestic and international demand of polyester yarn. The initial target market of is
RMG (Ready Made Garments) sector. Currently the total market of polyester yarn in Bangladesh
is BDT 275, 83, 96,210. After fulfilling the demand of domestic market, the company can grasp
the opportunity of exporting in future. For capturing the market, Coats Bangladesh .Ltd. can
focus on 3R as a marketing strategy which refers to the reuse, recycle and reduce.
2.2.3 Projection of sales:
Sales Budget
Budgeted unit sales(metric
Year 1
800
Year 2
1000
Year 3
1150
tons)
Average selling price ()
Budgeted sales revenue ()
950
760000
950
950000
950
1092500
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Year 1
Year 2
Year 3
800
1000
1150
Total requirements
800
1000
1150
800
1000
1150
Year 1
848
2120
2120
2120
Year 2
1012
2530
2530
2530
Year 3
1159
2897.5
2897.5
2897.5
Quarter 1
Quarter 2
Quarter 3
2247.2
2809
3223.15
145
145
145
Cost of material ()
325844
407305
467356.75
Year 1()
Year 2 ()
Year 3 ()
51,000
51,000
51,000
51,000
51,000
51,000
800
1000
1150
63.75
51.00
44.35
workers
Year 1
110,000
Year 2
110,000
Year 3
110,000
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Factory building
Machineries
Vehicles
Office building
70,000
85,000
55,000
80,000
70,000
85,000
55,000
80,000
70,000
85,000
55,000
80,000
Year 2
1012
Year 3
1159
320
320
271360
323840
370880
3500
8500
5500
3775
21275
292635
21275
271360
345.0884434
3500
8500
5500
3775
21275
345115
21275
323840
341.0227273
3500
8500
5500
3775
21275
392155
21275
370880
338.3563417
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Year 1
Year 2
Year 3
800
1000
1150
20
20
20
16000
20000
23000
4500
4500
4500
ministrative cost
2000
2000
2000
6500
6500
6500
22500
26500
29500
riable Expenses:
xed Expenses:
dvertisement
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Year 1 ()
Year 2 ()
Year 3 ()
1,000,000
689296
1080651
Sales Revenue
760000
950000
1092500
1760000
1639296
2173151
Material Cost
325844
407305
467356.75
51,000
51,000
51,000
Collections of Cash:
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Factory Overhead
271360
323840
370880
22500
26500
29500
Land
110,000
Factory Building
70,000
85,000
Vehicles
55,000
Office Building
80,000
1070704
808645
918736.75
689296
830651
1254414.3
Fixed Assets:
i.
ii.
iii.
Challenges:
1. In most of the cases the soil in Bangladesh is not perfect for building a very high storied
facility.
2. It is often hard to finish building the facility in time.
3. Often natural calamities hinder the construction.
Opportunities:
1. The labor cost for building facilities is lower than other countries.
2. There is availability of high quality building material at the country.
3. The government of Bangladesh appreciates industrialization and building of facilities at
the country.
2.6 Implementation:
Often the actual operation may vary widely from the planning segment. Proper observation must
be given to align the implementation as planned earlier. The main steps can be as follows.
Year 1
725546
0.909
659521.3
2288413
Year 2
830651
0.8264
686450
Year 3
1254414
0.7513
942441.4
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Initial investment
NPV
3.2 IRR of the project:
-1000000
1288413
Internal rate of return is a discount rate at which NPV of a project is zero. It means it is a rate
when PV of cash inflow = PV of cash outflow. To find out IRR, lets have a look over three
scenarios.
NPV calculation
Year 1
Year 2
Year 3
Cash inflow
725546
830651
125441
4
0.8333
0.6944
0.5787
604597.
576804.
725929.
190733
1
Initial investment
100000
0
NPV
907331.
1
NPV calculation
Year 1
Year 2
Year 3
Cash inflow
725546
830651
125441
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4
Present value factor
0.7407
0.547
0.4064
537411.
454366.
509794
150157
2
Initial investment
100000
0
NPV
501572
NPV calculation
Year 1
Year 2
Year 3
Cash inflow
725546
830651
125441
4
0.6667
0.4444
0.2963
483721.
369141.
371682.
122454
6
Initial investment
100000
0
NPV
224545.
8
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Therefore, NPV will close to zero only when the discount rate is quite more than 50%. In this
regard, the IRR will be more than 50%. If the IRR of the project is larger than the prevailing
market rate of return, then the project should be accepted.
3.3 Break-even point of the project:
Sales price per unit = 950
Variable cost per unit = 320
Fixed cost = 400000
Calculation of BEP
Price per unit
VC per unit
Year 1
950
339.2
Year 2
950
323.84
Year 3
950
322.504
FC
400,000
400,000
3
400,000
654.878
638.814
637.454
Tons)
622134.
606873.
605581.
Year 1
800
339.2
400,000
500
950
839.2
110.8
Year 2
1000
323.84
400,000
400
950
723.84
226.16
Year 3
1150
322.5043
400,000
348
950
670.33
279.67
4. Conclusion:
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From the above discussions, it is clear that there is a constant demand of polyester yarn and
threads in both Bangladesh and other countries. And building a facility which will recycle the
harmful PET flakes into wearable Polyester yarn will not only be cost effective but also will help
in maintaining the ecological balance of the environment. So if a renowned company like Coats
comes forward produce polyester in Bangladesh, it will financially benefit the company, help the
increasing demand and give Coats Bangladesh a competitive edge in their operations.
5. References:
1. Bangladesh Bureau of Statistics. 2009. Environmental Census. Ministry of
Environment and Forest.Statistics Division. Government of The Peoples
Republic of Bangladesh.
2. Centre for Policy Dialogue (CPD) Bangladesh. 2002. Contribution of RMG
Sector to Bangladesh Economy.Paper.50.
3. Coats PLC. 2013. Polyester Yarn.Online.Available at http://www.coats.com/index.asp?
pageid=18.Extracted on 26th August, 2013.
4. Drucker P. F. 2006. Innovation and Entrepreneurship.Reprint edition.Harper
Business.page. 217.
5. Islam R. Ahmad, M. 2004. Living in the cost problems and opportunities
and challenges.Ministry of Water Resources.Government of The Peoples
Republic of Bangladesh.
6. Kawasaki, G. 2004. The Art of the Start: The Time-Tested, Battle-Hardened
Guide for Anyone Starting Anything.First edition.Portfolio Hardcover, page.
68.
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Item
Sales
COGS
nt
760000
95000
10925
669479
0
80342
00
91051
1.8
Gross Profit
90521
14658
18198
22500
0
26500
8.3
29500
Net Profit
68021
12008
15248
8.3
Year 1
Year 2
Year 3
()
325844
$51,000
292635
()
407305
$51,000
345115
()
467356.8
$51,000
392155
Total Cost
Cost of material
Cost per Metric Ton
COGS ($)
669479
325844
836.8488
669479
803420
407305
803.42
803420
910511.8
467356.8
791.7493
910511.8
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70,000
3500
85,000
8500
55,000
5500
80,000
3775
Total
Current Assets:
Cash
Total
110,000
110,000
110,000
66500
63000
59500
76500
68000
59500
49500
44000
38500
76225
378,725
72450
357,450
68675
336,175
689296
1,068,02
830651
1,188,10
1254414
1,590,58
1,000,00
689,296
1,080,65
0
68021
120080
1
152488.3
$0
0
1,068,02
$51,000
327,725
1,188,10
$51,000
306450
1,590,58
nt
Year 1
Year
Year 3
2
Cash flow from operation:
Net income
Add: Depreciation
Factory building depreciation
Machineries depreciation
Vehicles depreciation
Office buidling and warehouse
68021
1200
15248
80
8.3
21275
2127
21275
89296
5
1413
17376
55
3.3
3500
8500
5500
3775
depreciation
110,0
Factory Building
00
70,00
0
85,00
Vehicles
Office Building
0
18750
80,00
0
0
0
Total Cash flow from investing
activities
363,75
0
Total Cash flow from financing
1,000,0
6892
10806
activities
00
96
51
725546
8306
12544
51
14
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