EXECUTIVE SUMMARY
The most important part of business plan is the executive summary. It includes the main business idea, market potentials, unique selling points, the service we are trying to sell, the profit making process, the company vision and finally the financial forecast. Our report is mainly concerned about the planning of online grocery business and Electronic business. Our strategy is to build an impressive shopping website that not only take the order but also deliver the goods to the doorstep for people who want to avoid the rush of shopping mall, traffic. The marketing of the site will be built around the core value that the site will offer. Although our competition has built a simple store for ordering the product, this site will be reviewed by Web award companies as a great destination for the all needed customer. We will build our revenue and market share around this traffic and value added service. Our business model is based on the sales of the products over the website. Because the site is also intended to increase brand equity, awareness and best available product in cheapest market price, we are building for high traffic. Our model requires giving users an excellent free experience and to develop trust to increase sell-through. We may lose money for at least three to six months while we build the traffic and develop our position for the long-term future. Our first class design, product quality and user friendly design are critical to our positioning as a dot-com company - we should be the best reviewed website in our category, and that will become the key to future sales. However, the core experiences for the every household have always been better, and with a better design team and a round of financing, our company is ready to grow with the market. The company will distinguish itself from its competitor as a full capacity center, rather than just a store front.
The target customers of our site are all affluent; we have the luxury of using the latest technologies to impress the visitors with excellent design and animation. We plan to release the site entirely in groswave format as almost 90% of our visitors will already have internet is connected. We will carry on the colorful and extremely well branded design of our company literature and logo - the decisions on basic aesthetics will not get in the way. The site will have a colorful and intelligent design, taking the ad campaign and product art into an interactive medium on the Web. Our e-commerce site will be built on a three-tier structure. Driven by SQLTM servers and an IISTM Web server backed with bandwidth, the site will be coded mostly in ColdFusionTM and ASPTM. We will be taking our registration databases live to be able to email updates on products and the website to customers. We will offer customers the option to take themselves out of the list. The information architecture will be based on four fundamental arenas - the free valuable information arena, the product detail arena, the final purchasing arena, and the purchase administration arena. The purchase arena will require a VerisignTM certificate and a CybercashTM connection. That will begin immediately because dealing with CybercashTM can sometimes be a lengthy process. The administrative arena will be hosted on mirror servers that query to the live databases for migration into local databases. This server is hidden from Internet traffic and kept under high security even within the company. The entire set-up will be somewhat costly. We will need five servers, 2 for in-house reasons, and three for Web hosting reasons. Two of the Web host servers will be serving traffic through ColdFusionTM and ASPTM in cluster, and the third will be a dedicated SQLTM server.
MISSION
Our business plan is created through some motives. Here we tried to explain our missions and objectives.
Product Mission:
We will serve better quality productthrough a variety of domestic goods.
Economic Mission:
Operate and grow at a profitable rate through sound economic decisions. We want to capture the market share and replace a great portion of conventional super shops items. Our goal is alittle bit economical. We are forwarding toreach our break-evenpoint within one year and if we can manage to double up our revenue within 3 years we have a plan to extend ourbusiness.
VISION
Our visionary view of this business is that we don't want to see any body's panic. We want to makepeople having a good likeness inbuying. We would like to make their day-to-day life easier. Moreover, ensuring customer satisfaction is ultimate goal.
LIMITATIONS
Lack of experience about merging
High setup cost
High maintenance cost
Trying to find the best
Existence of Comparison
Likeness varies from person to person
INTRODUCTION
Our business idea is all about web based. We would like to provide services to people with a view to making their day-to-day life more comfortable and easier. We will provide customers with grocery items as well as electronic goods. And provision of these goods will be done through web in the form of e-commerce. Our business will be beneficial for people who want to avoid the rush of shopping malls, traffic, etc. People can order us through web and thus well be able to know their demands, wants, etc. Then well be able to act accordingly. Customers can check samples of the products they want in the web. Well receive orders and then will take every step to provide them the goods. Our services will save a lot of time of the customers. The ultimate goal of our business plan is to ensure customer satisfaction.
ORIGIN OF THE REPORT
This report is prepared for IMS, Lucknow as a partial requirement of the course. Our course instructor has assigned to the students of MBA, to make report on Business Plan. This report is prepared during the 2nd Year and would be submitted in the same yearr. The standard procedure for the long, formal report is followed here as part of the instruction of the course instructor.OBJECTIVE OF THIS REPORT
Acquiring the concept of various Business Plans.
To show the various aspects of our business plan.
Probability of new business plans in India.
DESCRIPTION OF VENTURE
ONLINE SHOPPING
Day by day online shopping concept is developing by region in the world. The idea of online shopping was found few years ago and statistic show people are doing their shopping more than 50 percent online. Flipkart, Snapdeal, EBay and Amazon have been running successful business in the world. Last two or three years many companies have launched online shopping facility. One can browse product in their website and choose then have to give order and have to choose ones payment option .After making payment they will send the order product in ones address.
Few numbers of reasons behind the necessity of online shopping in India are the following,
a) Improved productivity: Using e-commerce, the time required creating, transferring and process a business transaction between trading partners is significantly reduced.
b) Best bargain: It is possible as one can visit numerous shops /suppliers
c) No national boundary: As one can order products from any place within the national territory.
d) Easy payment system: Making payment is easy.
e) Streamlined business process: Use of internet and with automation of business process can make business more efficient
f) Saving time and cost: The cost savings stem from efficient communication, quicker turnaround and closer access to market.
g) Better Customer service: Customer can enjoy the convenience of shopping at any hour and anywhere in the world.
h) Variety: The choices one can get for products are amazing. One can get several brands and products from different sellers at one place.
In Lucknow this concept is not popular still now but day by day online shopping in Lucknow has been growing rapidly. There are some websites which provide online shopping option in Lucknow with delivery the products ordered and also offer return policy. Rather some shopping websites charge high cost and are not up to date with the price and products of the market. They rarely modify the products and prices of day to day market.
We have planned to establish a business of online shopping and modify it with some more contemporary approaches and privileges. Some of them are the following,
1) Cash on delivery
We want our customers to enjoy the opportunity of paying cash on delivery. Cash on delivery (COD) is a financial transaction where the payment of products and/or services received is done at the time of actual delivery rather than paid-for in advance. In India, it remains a popular option with internet-based retailers, since it is far easier to set up for small businesses and does not require the purchaser to have a credit card. Most small businesses prefer cash payment over credit card payment.
Ecommerce has changed the way people shop for products and services and the manner in which a business sells its services to the customers. Shopping from an online store is no longer restricted to a few elites and techno savvy people, as more and more customers are realizing the benefits of online shopping. From books to electronic gadgets, garments to food items, customers can purchase anything under the sun from the comfort of their homes and offices.
Some of the advantages that our customer will get through CoD are,
Trust Factor Some customers have always been wary about paying for a product of service without actually getting in then and there. The fact that many customers fell victims to online scams worsened the situation. The Cash on Delivery concept allows the customers to make the payment only when the product or the services is delivered to them. This increases the trust factor between the customers and the businesses resulting in more sales and revenue for the online store. The entire transaction remains transparent between both the parties under this model.
Easier Transaction Model In India most online stores depended on Credit Cards and Internet Banking for payments and transitions. Serving customers using these payment methods was easy in the developed countries, but in developing countries, many customers didnt have access to any electronic means of payment. This is the case in India. Cash on Delivery has brought this category of customers into the purview of Ecommerce. Thus, increasing the market size and penetration for the online stores substantially.
Quality Improvement The customers pay only when they receive the product and are satisfied with its quality. They have the right to refuse poor quality products. This has ensured that online stores need to sell high quality products to the customers resulting in better quality and customer satisfaction.
Legal Aid Unless a customer has paid for a product he/she doesnt have the legal right over it. This works to the advantage of the online store as this keeps them at bay from legal responsibility over late delivery of the product or no delivery due to unavoidable circumstances. In case, our online store fails to deliver a product we can ask customers for an alternative product of their choice without having to worry about any monetary compensation or legal hassles.
1) Return policy
We also plan to provide our customer with 30 days return policy. They can return the product if it is not satisfactory.
The following items may NOT be returned:
Any item without a return authorization slip.
Used or damaged items
Discontinued products
Products that are not in their original packaging and containing all accessories
Items over 30 days of the receipt date
2) Creating a contemporary website:
a) Picking a domain name- A domain name is ones signature on the Internet. We have to select it first.
b) Registering a domain name- Then it has to be registered. Domain names are acquired through authorized domain name registrars. All registrars have access to the same list of reserve names, but they may have different fee structures.
c) Finding a Web host- We have to develop the website. For business transactions involving payment by customers, then a hosting package that includes space on a secured server is usable. Secured servers are servers that contain additional layers of encryption to protect the identity of the individual and the data that is being transacted from unauthorized access.
d) Web design- After that we have to arrange web developers to design the website. There are also web designers who design web sites for a fee.
Examples of host and design websites in India are,
www.godaddy.com
www.websitedesignIndia.com
e) Financial transactions on the Web- In addition to having access to a secured server, we will need to design a transactions page that collects the customers financial information, transmits it to a service that can verify the transaction, and stores the data in our files. The unique feature of the website will be a very user friendly search engine for the visitors along with multiple categorical options. In addition there will be places for advertisement where we can put other multimedia flash advertisements with a payment.
f) Linking the site- We have to link the site with other, already recognized sites increases the chances of being found by both our prospects and by the search engines.
Creating a website needs a Systems Development Life Cycle. Five major steps in the Systems Development Life Cycle are:
1) Systems analysis/planning
2) Systems design
3) Building the system
4) Testing
5) Implementation
SYSTEMS DEVELOPMENT CYCLE
LOGICAL DESIGN FOR THE ONLINE SHOPPING WEBSITE
PHYSICAL DESIGN FOR THE ONLINE SHOPPING WEBSITE
COMPONENTS OF A WEBSITE BUDGET
INDUSTRY ANALYSIS
1) Competition
Competition always makes a business more challenging. Competition motivates and sometimes compels a business to perform better and better. The most important thing is to identify the competitors and their natures. In our business we do have related competitors but some business is flourishing now-a-days in this area. Our competitors are some web based online shopping business in our country.
There are some websites which provide online shopping option in India but neither delivers the products ordered nor offer return policy. Rather they charge high cost and are not up to date with the price and products of the market. They rarely modify the products and prices of day to day market.
The advantages of our competitors are,
They have an earlier market entry.
People have more knowledge about them.
They have rather more customers than us.
We also have some strength in contrast to them,
Offer benefits such as Cash on delivery, return policy etc
Provide a wide range of products and make the search engine very user friendly.
Offer a contemporary website.
To overcome the competitors strengths and advantages we need to focus on time as they had an earlier entry. We will go for an exposing advertising to ensure the very effective entry in this entry. If we can attract the customers by massive advertisement through social networking sites and websites we can be assured of our business increasing.
2) Current market situation
In India, Internet services are available in major part of country. In January 2015, the Internet facilities were extended to all states except some Northeast states and some part of Kashmir. The internet services expanding very fast and today almost every part of India getting Internet facilities. Followings are the points of e-commerce in India:
a) Vast number of users of web sites;
b) Good telecommunication infrastructure with fixed-line access, wireless LAN, reliable connectivity and high bandwidth now expanding to 4G;
c) Lack of technically efficient personnel;
d) Limitations of supportive legal system. Such as, exchange controls, protection of telecommunication monopolies, restrictive trade practice and prohibitions;
e) People's mindset is not very open to online shopping.
OPERATIONAL PLAN
1) Business goals
Short term goals
a) Provide efficient service with good price
b) Satisfy consumer needs with variety of products.
c) Make sure every transaction is fulfilled successfully from ordering to delivering.
Long term goals
a) Increase sales by 30 percent in 12 months;
b) Improve profits by 15 percent within two years.
c) Increase the variety and number of products with every passing year.
d) Expand the business with each increasing year.
2) Resource requirements
a) Capital investments
Preliminary investment- Preliminary capital of around Rs. 600 thousand (Rs. 6 Lakh only) shall be contributed.
Loans and borrowing: Amount up to Rs. 400 thousand can be borrowed from bank.
Land and Building- An office with 800 square feet will be enough for primary operations. The office building can be either be rented or bought.
Utilities- Electricity and power cost should get emphasis which will be around Rs. 6000 per month.
Miscellaneous Assets- Other items like office furniture, working tables in the office, exhaust fans, storage racks and bins etc. are likely to cost Rs. 40,000/-.
b) Personnel requirement
There should be appointed efficient data entry officers who are expert in technical knowledge of computers and internet. There should be reliable field workers for delivering the products.
3) External resource for business expansion
In case of business expansion we will have to collect resource from external means.
4) Products
We will primarily start with two types of products
a) Electronics: Television, computers, mobile phone, air conditioner, laptops, cameras, watches, water purifiers, kitchen appliances etc.
b) Groceries: Rice, flour, oil, seasonal fruits etc.
5) Implementation
a) Order: We plan to make contract with the companies with related products for five years to supply us with the asked products when they are ordered by our customers. When customers will order products through our websites it will be added in our shopping cart software. If they want to take collect on delivery system then they will have to give their address, number. They can also pay through credit cards. After getting the selling price we will payback the company with related products.
b) Delivery: We plan to deliver in two ways, either by cash on delivery or by credit card within 3 days. We will also offer 3 days return policy.
c) Billing: We will bill the product at their market price and will add minor commissions for delivering.
d) Customer service: We plan to provide utmost customer service with our transactions. Our foremost concern would be the satisfaction of customers.
6) Risk Assessment
Areas of risk are
a) Demand: Whether the fluctuation of demand of customers be satisfactory or not.
b) Supply: Whether the supply and delivery of products be in proper time and please the customer or not.
c) Technology: Get the help from the latest technology and using it in minimum cost.
d) Security: To address proper security system to protect the website from unwanted hacking and cyber crime.
e) Economical: Whether the resources are providing good value or not.
f) Implementation: Whether the plan is implemented by right or wrong people.
Ways for addressing risks are
a) Reduce risk: We can get through the demand risk by ensuring quality and reduced tariff for the advertisers.
b) Spread the risks- Risks can be spread among related entrepreneurs
c) Plan B- If risks can not be diminished by multiple attempts rather increases then we will turn our product shopping website into service related website.
Organization Structure
MARKETING PLAN
Market potential: Market potentiality means the estimated maximum total sales revenue of our products in the market during a certain period. For determining the market potential of our service we first need to identify who are our target markets and then future prospect.
We will serve the people who are from mid income level. We do not have any geographical barrier as it is a web based business. But we can state it in a different way. Our geographical expansion will be like that we will be covering areas beyond Lucknow i.e. other divisions (other Uttar Pradesh Districts and northern States i.e. Delhi NCR, Bihar, Punjab, Rajasthan, Haryana, Uttarakhand)
Target markets: We are targeting two distinct groups of customers, individuals and corporate customers:
Individuals- The individuals are people who are looking to give a friend, relative a gift or trying to satisfy his needs. These customers typically do not have the expertise in recognizing the peaches among the mixture of lemons and peaches nor the time to bargain over the products in the market. Individuals aging 16-35 are our main concern for electronic products.
Corporate- The corporate customer typically buys electronic products in a large scale from the manufacturer or from the direct distributor at a lower rate. We will provide same product at the same rate as the direct distributor does. Moreover we can supply the necessary grocery in case of special event (e.g. picnic)
Market size: The rapid growth of digital technology is fundamentally changing the world as we know it. Our business is fully web based and so the number of internet users determines the potential market size of our product. The internet subscriber base in India (excluding mobile) currently stands at 15.1% of whole population. However, total desktop/laptops internet users in India is actually far greater than that number, likely driven by heavy usage in offices, internet cafes and multiple users accessing the internet from a single household. Local industry estimates suggest that in 2014 access to the web having grown 300% since 2010 and expected grow a further 500% by 2020 (BCG, 2010).
Factors that will affect the potential market size
Culture
Environment
Regulation
Economy
Industry practice
Demography
Trends
Infrastructure
Market Strategy: The marketing strategy will first seek to create customer awareness regarding the products offered, grow the customer base, and work toward building customer loyalty and referrals. The long-range goal is to not only dominate the online store business, but to create an icon brand. Initially we will:
Engage in Web-based marketing for the next year to generate awareness of the website and product information. Because Internet-based advertising has declined in recent quarters, the prices for advertising have consequently significantly dropped making the expenditure more cost effective.
Utilize outdoor advertising, providing general awareness to the public at large and direct individuals to the company's website.
a) Product classifications: we will sell two types of product throw our website:
i. Electronic products (laptops, mobile phones, mp3 players, dvd players etc)
ii. Grocery
b) Pricing policy: Product pricing is based on offering high value to our customers compared to most price points in the market. The price of our products (grocery) will considerably be lower from the market rate as we will collect them directly from the manufacturer. In case of electronic products we will become business partners or direct distributors of the popular brands so our price will be slightly lower than that is in the market. We are intended to attract customers to our website so the overall pricing policy will be as such that it makes our website different from those of the prevailing web based selling stores. Moreover we will offer better quality and selection.
Factors that influence pricing
Supply and demand
Competitive pricing
Cost and profit margin
Affordability
c) Product packaging: We will use sophisticated packaging measures to ensure the safety of the products (grocery) and in case of electronic products, as the products are already packed by the manufacturer, we will just use a sticker containing the identity of our website.
d) Distribution policy: We will distribute the products to the customers with our responsibility. Initially we will only concentrate in distributing the products within the capital and gradually we will expand our business to other cities.
Sales Forecast: Our sales will be tracked using the same system that tracks our website visits and contact requests. We project sales of our product will remain roughly equal throughout the first year, with both categories rising from 30-50k per month at the beginning of the year to 75-100k per month by the end of the year.
Sales growth should be based on
a) Market penetration
b) Market expansion
c) Expansion of product range
d) New sources of revenue
Market Promotion: The plans for marketing and promotional strategies are:
Popular websites (e.g. Facebook, Google+)
IT-based pages of newspaper(e.g. Onno Alo)
Front pages of newspapers
Online editions of daily newspapers to reach the NRBs(Non Resident Indiais)
Press release
Free registrations in websites (e.g. Web India, Google)
Leaflets/Banners
Stickers
FM band radio stations of India
Marketing Budget:
Particulars
2015
2016
2017
Advertising
8,75000
9,00,000
17,00,000
Sales Promotion
5,75,000
5,25,000
4,25,000
Direct Marketing
50,000
75,000
75,000
Total
15,00,000
15,00,000
22,00,000
Analysis (SWOT)
1) Strength
Very effective expected advertising channel
Easy payment system
Providing variety of products
Main purpose is to provide better customer service rather than making profit only.
2) Weaknesses
Earlier entry by other few related websites.
Lack of technically efficient personnel.
Minimum number of users of web sites.
Poor telecommunication infrastructure with low bandwidth.
3) Opportunities
The growing trend of using internet
The popularity of online shopping is increasing
The buying process by people without being physically present lowers their concerns.
The time constraint of people of buying from showrooms is reduced
No bargain hassles
4) Threats
Limitations of supportive legal system.
Cybercrime ex: Hacking which needs adequate security system.
Peoples mindset is still not very open towards online shopping.
ANALYSIS OF COMPETITIVENESS
We have analyzed the current market situation by the five factor model of Michael Porter. In this model there are five forces. By those forces we have identified the competitiveness of the target market. It is the renowned process all over the world to evaluate the appropriateness to enter into a business.
Competitive Rivalry within an Industry:
Withinthismarketwehavesomestrong existingcompetitors.SuchasFlipkart, Snapdeal, Amazon etc. But as we are going to start with the necessary items we don't have such type of competitor. It is a stable business because it is related with day to day life. So it is appropriate business to enter. Exit barrier is also low, so certainly it is an attractive segment ofmarket to choose.
Threat of New Entrants:
Threats of new entrants for a business are always true. So we have always risk of those new entrants. For this business entry barrier is not very high, as a result in that sense it is an unattractive segment. In grocery business new entrants are always available, but if we can build ours as a brand name and gain the major portion of the market share we will certainly be able to avoid the threat of the new entrants.
Threat of Substitute Product:
We are going to compete with super shops. We have various types of readymade good, in this field we don't have real substitute products. Other industry such as our Grocery industry can be substituteproduct. But as those are not our real substitute product, it is certainly an attractive market.
Threats of Buyers Growing Bargaining Power:
Our buyers would not bargain with the pricebecausewe areoffering in fixedprice. As weare starting from afixed priceit would certainly fulfill the customer demand,because customers are always price sensitive. It is also avoidable because the switching cost of our goods would be much high. Our product would be cheaper than that of super shops.
Threats of Suppliers Growing Bargaining Power:
We are going to launch a new trend of the grocery business. So the suppliers of that field are so much concentrated and organized. We emphasize on collecting items from diversified groups. We will collect specific items from specific places. As a result our suppliers are widened in Dhaka. So, low bargaining power of the suppliers makes the target market so much attractive.
BUSINESS EXECUTION
The first and foremost task before the commencement of business is licensing the business under partnership act. We have to set up the business with the help of capital expenditures. And then these will be supported by personnel to continue operation and in case of expansion we will get the help from the external resources. We will continue the research on development of our website through regular online survey participated by the customers.
When an operational space will be collected by means of rent or buying along with the necessary equipment and personnel it will be right for us to start the operation. Last but not the least we have to arrange a good web developer who is ready to develop our online shopping website for us according to our requirements.
Expected number of consumers for a particular financial year will be estimated, after that time periods we will compare the projected and the actual number of customers. In case of material deviations we will find out the reasons operating behind the deviations and find out what is to be done to overcome this.
a) Evaluate whether proper marketing promotions are going on
b) Perform a survey regarding what more customers want from us
c) Watch whether the staffs are performing their duties properly.
FINANCIAL PLAN
Here are financial highlights for projected five year
Pro Forma Income Statement
The following table presents the pro forma income statement for projected five years.
Particular
2013
2014
2015
2016
2017
Sales
1,00,65,000
1,17,60,000
1,34,75,000
1,22,29,000
1,26,00,000
Less- COGS
6039000
7371000
8385000
7637400
7360000
Gross Profit
4026000
4389000
5090000
4591600
5240000
Operating Expense:
Advertising
20,00,000
20,00,000
15,00,000
15,00,000
22,00,000
Salary
5,16,000
5,34,000
552000
612000
648000
Offices Supplies
50000
52500
55000
60000
65000
Rent
4,80,000
4,80,000
4,80,000
4,80,000
4,80,000
Utilities
72,000
72,000
72,000
72,000
72,000
Depreciation
30,000
42,000
37,000
45,000
57,000
Miscellaneous Expense
30,000
35,000
47,000
53,000
48,000
Interest (15%)
6,00,000
6,00,000
6,00,000
6,00,000
6,00,000
Total Operating Expenses
3778000
3815500
3343000
3422000
4170000
Income before Taxes
2,48,000
573500
17,47,000
11,69,600
10,70,000
Taxes (40%)
99200
229400
698800
467840
428000
Net Profit
148000
344100
1048200
701760
642000
Pro Forma Balance Sheet
Here presents pro forma balance sheet for projected five years.
Pro Forma Balance Sheet:
Particular
2013
2014
2015
2016
2017
Assets
Total Fixed Assets
18,25,000
16,05,000
16,25,000
15,03,000
16,40,000
Total Current Assets
45,00,000
48,00,000
51,50,000
49,25,000
50,50,000
Total Other Assets
2,25,000
3,20,000
3,00,000
3,75,000
4,35,000
Total Assets
65,50,000
67,25,000
70,75,000
68,03,000
71,25,000
Liabilities & Owners Equities
Liabilities
Total Current Liabilities
8,50,000
9,75,000
11,00,000
9,75,000
10,25,000
Total Long Term Liabilities
40,00,000
40,00,000
40,00,000
40,00,000
40,00,000
Total Liabilities
48,50,000
49,75,000
51,00,000
49,75,000
50,25,000
Owners Equities
17,00,000
17,50,000
19,75,000
18,25,000
21,00,000
Total Liabilities & Owners Equities
65,50,000
67,25,000
70,75,000
68,03,000
71,25,000
Project Analysis:
The discount rate has been calculated using WACC. The cost of debt is 15% as it is a low moderate
Risk project and a speculative return on equity is 20%, based on the expectations of the entrepreneur. Therefore the WACC stands at [(15*0.40) + (20*0.60)] = 18%.
Parameters
Value
NPV
16,59,821,32
IRR
57.32%
Payback Period (in years)
5.88
Discounted Payback Period (in years)
6.47
Ratio Analysis:
Ratio
2013
2014
2015
2016
2017
Current Ratio
5.29
4.92
4.68
5.05
4.93
Net working capital (Rs.)
36,50,000
38,25,000
40,50,000
39,50,000
40,25,000
Gross Profit Margin
40%
37.07%
37.78%
37.55%
41.59%
Net Profit Margin
1.14%
2.93%
7.78%
5.74%
5.10%
Debt-equity ratio
2.85
2.84
2.58
2.72
2.39
Debt-Asset ratio
0.74
0.74
0.72
0.73
0.71
Return on asset
2.26%
5.11%
14.82%
10.32%
9.01%
Return on Equity
8.70%
19.66%
53.07%
38.39%
30.57%
Break Even Analysis:
Accounting breakeven point is the sales level that results in a zero project net income. In the initial stages of new venture it is helpful for us to know the point where we can avoid loss. This will provide us the insight into the financial potential for the start-up business. So that we will calculate break-even by this formula,
Sales, S = (Fixed Cost + Variable Cost - Depreciation) * (1 Tax Rate)
Following table shows the break even sales for projected five years.
Year
2013
2014
2015
2016
2017
Total Fixed Cost
3283600
3773500
3306000
3377000
4113000
Total Variable Cost
6039000
7371000
8385000
7637400
7360000
Depreciation
30000
42000
37000
45000
57000
40%Tax Rate
40%
40%
40%
40%
40%
Break Even Sales
5575560
6661500
6992400
6581640
6849600
Graphical representation: The graphical representation of the break even sales presents below
Break Even Sales
Variable Cost
Fixed Cost
Stress Analysis:
Stress test has been done by increasing the sales by 5% and decreasing direct cost by 5% for the best cost scenario and vice versa fro worst case scenario. Here NPV is still high even in worst case.
Stress Analysis
Base Case
Best Case
Worst Case
Units Sold
5% higher than normal
5% lower than normal
Variable Cost Per Unit
5% lower than normal
5% higher than normal
NPV
16,59,821.32
21,33,761.59
7,23,853.55
Performance Analysis:
Sales
1,00,65,000
1,17,60,000
1,34,75,000
1,22,29,000
1,26,00,000
Gross Profit
4026000
4389000
5090000
4591600
5240000
Net Profit
148000
344100
1048200
701760
642000
020000004000000600000080000001000000012000000140000001600000020132014201520162017SalesGross ProfitNet Profit
Appendices
Projected Ravenue from Selling:
Revenue
Particulars
2013
2014
2015
2016
2017
Income from Electronics Products
Mobile
11,25,000
18,40,000
19,40,000
15,34,000
17,20,000
Laptop
55,50,000
60,50,000
72,75,000
65,50,000
65,75,000
Monitor
5,25,000
4,75,000
7,35,000
4,25,000
5,00,000
Television
2,25,000
3,75,000
3,50,000
3,50,000
3,85,000
Income from Others Electronics Products
7,20,000
8,50,000
8,75,000
9,00,000
9,25,000
Total Income from Electronics Products
81,45,000
95,90,000
1,11,75,000
97,59,000
1,01,05,000
Income from Grocery Products
12,00,000
14,50,000
15,80,000
17,50,000
17,75,000
Income from Other Sources
7,20,000
7,20,000
7,20,000
7,20,000
7,20,000
Total Income
1,00,65,000
1,17,60,000
1,34,75,000
1,22,29,000
1,26,00,000
INTREGRATED MARKETING COMMUNICATION:
The firm uses pull strategy as its promotion mix strategy which is spending a lot on advertising and consumer promotion to build up consumer demand. It makes the promotion mix efficient enough to activate customers to ask for the product. Here is a graphical view of the pull strategy:
DemandMarketing activities
Customer
Firm
33