Aims and Objectives
Aims
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To produce high profits/sales profit needs to be produced in order to run the business, it can start from a low amount however it should produce a certain amount of profit so that the business can start to run. Once the sales have kicked in promotion could be held in order to increase the amount of profits/sales.
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Gain at least 10% higher market share compared to competitors within the next 8-10 months more sales need to be produced compared to the competitors to gain a higher market share, for the aim to be achieved of gaining the 10% market share customers requirements need to be met.
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Expand to medium sized business in the next three-five years. To be one of the leading manufacturing companies’ sales needs to be high, customers need to be satisfied so that the business can take its next step. This is to expand into a medium sized business, once the business is recognised this aim can be achieved.
Objectives
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Ensure that prices are 5% lower than competitors- by keeping lower prices more customers will be attracted towards the product, as it will be a new product if its cheap only then will most the customers try it. Once the recognition of the product has been achieved and accepted by customers, only then the prices should increase to meet the competitor’s standards. This objective will allow the aim of producing high profits to be achieved as well as the other aims.
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To ensure that 60% of customers return to buy within 3 months of their first purchase- making sure customers are satisfied with the product once they have tried the product, then setting a target for them to purchase the product continuously. Getting at least 60% of customers to be satisfied with the product. And to be able to return to purchase the same product.
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Innovation- innovating new products, introducing something different for customers. To retain and gain customers something new and different needs to be introduced to attract their attention to it. This way they won’t feel there’s only one product available for them to choose from. in addition to this it will allow the aims to be met.
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Motivate, develop and reward employees to run the business successfully employees are one of the most critical path to it, if the employees produce high quality products it will gain the business success. Therefore employees need to be motivated and one way to do this is by rewarding the employees with bonuses, setting them a certain target to complete with in the day and if completed they should be rewarded. This reduces the risk of loosing employees and from producing low quality products.
Market Segmentation
Market segmentation is a marketing approach that encompasses the identification of different groups of customers with different needs or responses to marketing activity. It supports market understanding and is critical input to product definition and market research.
Galaxo has to have a target market which is to whom they will sell the product to; Galaxo will sell its products from the age of 10 - 30. After conducting my research I evaluated that chocolate is preferred mainly by children as well as adults. Because I will be distributing my chocolates to supermarkets, where children as well as adults visit. Therefore I will target my customers from the age of 10 – 30, people between theses ages eat more chocolate in comparison with other age groups.
Marketing Strategy
Product- the product that I will be producing is plain chocolate called ‘Galaxo’ this product is being designed after having taken a lot of different researches. In order to decide whether to launch the product or not, whether it will survive in the market. After knowing the product will be bought by consumers it was taken from their to introduce Galaxo.
This product will be different all the customers satisfaction will be tried to be met, hoping to produce a high quality product moreover making it taste better compared to competitors. The product will be packaged in a unique way, it will contain two different colours which will be dark brown and light brown. The two brown shades will be blended in on the package.
To produce Galaxo the business will require milk, sugar, cocoa mass, coca butter, vegetable oil.
The chocolate bar will be a standard size that weighs 50grams the bar will have blocks which will make it easier to eat. Each block will be printed with name ‘Galaxo’ on it, the shape of the bar will be standard rectangular shape.
The primary and secondary research also suggests that the chocolate should incorporate high quality ingredients which will be made into a high quality product.
With the increasing obesity levels there is increased interest in healthy eating. Therefore the product is being launched fat free; this will make the product more appealing to other groups who are health conscious this will also raise the amount of potential customers.
In the near future when Galaxo becomes successful a new organic chocolate can be produced. With the rise in organic trends the chocolate can be made appealing to organic groups by being produced out of organic ingredients. Gradually Galaxo can introduce various different products meeting different groups of customers needs. For instance the organic produce would be aimed at more of A to C category people, in the socioeconomic group since the prices for organic products are higher compared to the normal ones.
From the primary research I undertook I concluded that 50% of the people eat chocolate everyday, this shows that there is a high demand for chocolate. Chocolate is a type of product that is eaten by everyone at anytime, children tend to eat it during their lunchtimes in schools or at home whilst watching TV, applying the same to adults. However for the more elder ones they tend to eat on occasions such as Christmas, Easter etc. moreover chocolate is also bought to give as gifts for others.
In addition to this, Galaxo has decided to incorporate high quality within their product, reasons being because of the primary and secondary research that was conducted stated quality should be put ahead of everything.
Galaxo should be able to appeal to a wider variety of potential customers, this should also lead to increase in sales and profit margins, which will allow Galaxo to become successful.
Place- As the business is going to be a manufacturing business therefore, I will be distributing the products to all major supermarkets. After conducting my primary research the people within the questionnaire stated how they normally purchase chocolate form supermarkets’. Therefore it was taken from there to supply Galaxo to supermarkets such as Tesco, Asda, Morrison’s etc.
In addition to this it has to be made sure that there is enough of the product being supplied, so that the customers don’t have to buy competitors product due to Galaxo being out of stock.
Once the product has been distributed and the sales begin to increase, the amount to produce and supply could be then taken from there. This can show which supermarket is selling the most Galaxo chocolates, and how much to supply to what supermarket. The delivery has to arrive at the supermarkets on time so that they are able to sell it on time.
Price- As it’s a new business in the market therefore to attract customers attention and for them to try out the product. The prices need to be reasonable and affordable, as this will get the customers to try out the product. Consequently if the prices are affordable there’s a high chance of customers wanting to try out the product. Therefore once they buy galaxo only then will they return to purchase it again. Prices have to be lower then competitors for the first couple of months until the customers have fully tried and are satisfied with the product. However promotions can also be held such as buy one get one free, 2 for 1.
Cheaper prices and various promotions held will attract customers, therefore for the business to survive sales need to be produced and this is one of the ways how sales will start.
The chosen prices for Galaxo are based on the results of both the primary and secondary research. Within the questionnaire the results concluded that 50% of the target customers would be most wiling to pay between 51p-£1.
Penetration pricing
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.
This is the type of pricing strategy I will be using for my product.
The pricing strategy will need to be cheap but effective method because of Galaxo’s low budget. Therefore Galaxo has decided to choose the penetration pricing, by starting with low pricing and gradually increasing the price once the market share has been achieved. Overall the price of Galaxo for starting will be 35p; in comparison with Cadbury there plain milk chocolate is priced at 40p. This shows that Galaxo is 5p cheaper compared to Cadburys, therefore customers would want to purchase Galaxo since it’s cheaper. However the prices will increase gradually until it reaches 40p, the price will change in comparison with competitors pricing.
Promotion-
The means of providing the most persuasive possible selling message to the right prospects at the lowest possible cost.
Reduce Prices
One of Galaxo's objectives is to reduce prices by 5% as this will encourage sales. Customers would want to try out Galaxo as it will be priced lower to competitors prices, therefore customers would try out the product and decide whether they like the product or not.
By reducing the price of the product Galaxo will loose out on profits, this will mean Galaxo will have to sell more of its products to make up the target profit margins as there will be less money coming in for each product sold.
The method of sales promotions has a benefit because it is likely to attract customers yet also has a drawback since it requires a lot of sales to meet a satisfactory profit margin. However the benefits are likely to exceed the drawback because once the product is distributed lots of customers would want to try it out.
Sales promotion
A sales promotion is non-personal promotional efforts that are designed to have an immediate impact on sales. Sales promotion is media and non-media marketing communications employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. For example:
- Discounts and sales ( buy one get one free)
Since it will be a new business therefore during the first few months to attract customers towards the product, promotions such as buy one get one free will gain more customers to purchase the product. The advantage of this type of sales promotion is that it also encourages customers to buy the product because for each product they purchase they will receive another one free. This means that it is more likely to attract more customers because it would be a better deal to buy Galaxo's product rather than Galaxo’s competitors such as Cadbury.
Displaying the product
Once the products are distributed they will be displayed in such a way to attract customers and to gain their attention towards the product. Compared to the way the competitors display their products within the similar way Galaxo will also be displayed using the same technique. Holding promotions in the similar way as competitors will allow Galaxo to gain more customers as they will be able to see the new product introduced and the promotions held upon them.
Advertising
Using the research I have gathered, I have conducted that the ideal place to hold the advert to create awareness and generate sales. Is to place the advert on a billboard costing £100 per week, through this the customers will become aware of the product moreover once the product is more recognised and gains high sales. The advert can be placed on more effective mediums such as TV.
Billboard is also a good medium to advertise on as everyone going past it tends look at it, the size of the billboard is good as you could see what is being advertised from a far distance. Therefore for a start of I think its good enough to attract customers, as the business increases its sales more adverts can be placed in various places.
Resources
Physical Resources
The production place Premises, Machinery and Equipment.
Galaxo will be produced within a factory from were it will then be distributed to all the major supermarkets.
The factory will be located in Harrow; the cost of the premises is £30,000 I will be renting the premises paying £400 a month. Because it’s a new business the premises cannot be bought due to the amount of expenses to pay. By renting also includes the additional expenses incurring such as insurance, electricity, business rates etc. therefore you have to keep all these things in mind as different expenses incur everyday.
By renting the premises reduces the responsibility for maintenance, if anything gets damaged or stops working the owners of the premises will be responsible to repair it. Therefore for a new business renting out the premises is far more better then buying it as there are fewer complications.
There are also chances that you’re unable to get 100% mortgage which leads you to pay a large sum of deposit. Which you may be unable to pay due other expenses that have occurred and need to be paid of.
Once the business starts to perform well, and the sales increase the business may need to be relocated as a bigger premises will be required. My business has started of through a small factory with a maximum capacity to produce 36,000 units. Because am producing a new product which no one is aware of therefore it’s starting of with a small capacity. However once I supply my product to all the supermarkets and it gains more awareness and the market share increases by 10% within 8-10 months. I will consider of relocating the factory in a bigger premises as it will be required to produce a higher number of units to meet customer demand.
Once my Aims are met I will be able to afford a bigger factory were the capacity will be double the amount compared to the present factory.
Equipment and Machinery
The equipment which will be required for the business are the machines within the factory that will produce the chocolate. There will be several machines required within the factory. All the machines will be bought they will not be leased as once the business considers to expand it will not have to re-buy the machines. If there are additional machines required they can then be bought however the same ones will not have to be bought. By leasing the machinery is not any use as it will not benefit the business, moreover by purchasing the machinery the expenses will increase which will reveal lower profits this will lead to paying less tax.
Vehicles
As my business is a manufacturing business it will require for a start of 2 delivery vans. To deliver the goods to all the supermarkets, the two delivery vans will be bought because they will be required through out therefore, it’s better to buy it rather than leasing it. There will be additional costs with the vans such as the vehicle insurance, road tax, MOT, subscription to recovery (AA). The business will cover all these cost it will cost £3,200 for the first month as it will not require insurance road tax etc every month therefore the cost will then reduce to £1,200 for the following months. The two delivery men will be recruited who will have experience for a certain period of time in delivering goods.
Office costs
My business will have a small office, in which there will be a computer fitted in with all the essential software’s (Microsoft word, excel, publisher, PowerPoint, Access) and internet access. It will also have a printer, including a photocopy machine. With 2 filling cabinets and one desk, there will be all the basic stationery (papers, envelopes, pens and pencils, business cards etc).
For the first month it will cost the business £1,200 as it will be purchasing the computer the photocopy machine as well as all the rest of the furniture e.g. the cabinet, the desk etc. However, for the following months it will cost £50 as it will only need to purchase the basic things such as paper or ink.
Stock
As it’s a newly starting business the stock of raw materials will not be bought a lot for starting. The stock will be kept as low as possible; once Galaxo has been distributed it can be taken from there to decide how much stock to purchase. This will reduce wasting the raw materials, by purchasing a lot in one go could mean wasting money having to put it into the bin as the date may expire or fewer products may need to be produced. Therefore working slowly then increasing will benefit my business as this will save the money.
To control the stock I will use the Just-in-time production method, however once the business starts to run well and more products need to be produced the business can then decide to purchase a lot more as then the demand will increase hence more stock will be required.
By looking at the research I conducted it stated that 70% of the people had said that they might try the product when it is launched. Were as the rest 30% said that yes they would try the product this shows that there will be people wanting to try out the product. One of the good things about it was that no one stated that they wouldn’t try the product; this simply means my product is likely to survive and be preferred by a lot of people. Once Galaxo has been distributed the demand may increase then more stock can be bought to produce more chocolate.
Human Resources
People are essential to any business, therefore for my business I will require 8 employees from which 3 will be full-time workers, the 2 will be part-time workers 1 will be the manager were as the rest 2 will be the delivery men. All the employees will be working within the factory producing chocolate; the manager will be there to make sure everything is being done correctly. He will be the one in charge of everything assuring every employee is working efficiently and are motivated towards their work. The employees will be doing repetitive work; they will be trained on how to use the machinery keeping in mind the health and safety issue. The two delivery men will be given a van in which they will be directed to deliver Galaxo to all the shops.
The manager will give each employee a task to perform each day, this way no employee will be standing and doing nothing. The employees as well as doing their job they will also be asked to clear everyday, to make sure the factory is clean and tidy everyone will share this job. This will make the working environment much more pleasant to work in, the employee who performs well and completes the task they are told to perform they will receive a bonus.
By rewarding the employees for their hard work it will motivate the employees even more, seeing this they will work more efficiently.
Layout of premises/Factory
Confectionery market share
The table above represents the market share for different chocolate companies. By looking at the table Cadbury Schweppes has the highest market share, followed by nestle and then mars. This shows that Cadburys products are more preferred than any other brand, Cadbury is a well known company producing various products including confectionery as well as beverages.
Cadbury and nestle will turn out to be strong competitors of Galaxo, as they are well known in the market were as for Galaxo it needs to attract lots of customers in order to survive. With such high competition Galaxo will need to produce a high quality product at an affordable price to start of with.
Galaxo is not a normal chocolate bar after conducting all various researches, the decision to produce a low fat chocolate bar was taken from there. This unique point will allow Galaxo to attract more customers compared to if it was a normal chocolate bar. The research stated that far too many people are now concerned about their health, therefore they have decided to eat healthy. Galaxo is a healthy bar which will meet a lot of people’s expectations.
However, the competition will still remain very high due to the recognised chocolate companies such as Cadburys who have been producing chocolate for over 100 years. People are aware and satisfied with their product they trust the brand; they have many ranges of chocolate and mainly the quality of their chocolate remains high. In spite of this the prices of the product are quiet high.
Therefore to gain a certain percentage of the market share Galaxo has been produced meeting customers requirements in addition to this it has been placed at a low price.
This will allow to attract as much as possible customers during the first few months, until it is well recognised and customers are willing to purchase Galaxo over its competitors.
PEST Factor
Political Galaxo will be affected by the different legislations, as there are some laws which need to be taken in to consideration. As Galaxo will be produced in a factory were there will be a lot of various machineries around therefore the Health and Safety Act will affect the business. The employees who will be working for Galaxo need to be trained on how to use the machinery, so that there isn’t any risk for the employees whilst there working within the factory.
They need to be trained on exactly how they are required to use the machinery as well as how to keep the working environment clean, tidying up all the equipment that was used to reduce any accidents from occurring.
The Working Time Regulations Act will also affect Galaxo as the employees need to be treated fairly and to their consent. Under this act the employee cannot be forced to work more than they are required to, unless they agree to work more only then can they be allowed to work otherwise the business will be breaking the law.
If the business requires the employee to do an overtime shift, the employee’s permission will be treated first. Because if they don’t wish to do the overtime shift they cannot be forced to do so.
Noise at Work Regulations Act this act is made to reduce the risk of hearing damage to employees. Because the factory will contain a lot of machinery which will create a lot of noise, under this act the employees will be provided with ear protectors. This will protect the employee’s ears from the amount the noise they will be hearing through out the day.
Sex Discrimination Act making sure that there isn’t any discrimination being made against the sex of the person whether they are male or female.
Equal Pay Act making sure the employee’s receive the equal pay amount, if they are doing the same job or of equal value this entitles them to receive the same wages.
Economical if inflation rate increases/decreases Galaxo will be affected through this change. As my business is intending to borrow money therefore if interest rate goes up it will result in the business having to pay more. The higher the interest rate the more money Galaxo will have to pay however, if the interest rate falls this will benefit the business as less money will need to be paid. If less money is being paid more money will be saved within the business to be spent else where.
Moreover if interest rate goes up this will mean the business will need to increase their prices of the product in order to cover up for the increase in inflation. Through this change in prices there’s a chance for Galaxo to loose out on customers, this will mean the prices should not be raised to high as there will be a high risk of loosing customers, which will mean they will go and purchase from the competitors. This will mean the people’s spending will decrease as they will have less money to spend.
Increase in inflation rate will mean more money to pay and as Galaxo is a new business with not a lot of money to invest the rise in inflation rate will impact upon the business highly. Decrease in inflation will increase peoples spending as they will have more money to spend on things.
Therefore such issues need to be kept in mind whilst borrowing money whether if the inflation rate increases or decreases and how the business will deal with it. Galaxo has to keep a certain increase in price if the inflation rate goes up.
Moreover, if there is high unemployment then this will result in less people with money to be able to buy products such as Galaxo.
The fluctuation of exchange rates will influence how much tourists can spend on buying products like Galaxo. Increase in women’s working proportion population will increase Galaxo’s sales as they are part of the target market.
Social Galaxo will be particularly affected through social habits of consumers. Since Galaxo is a chocolate from which customers are likely to switch, recently of the new change in consumer habits of ‘eating healthy’ has become a very big issue. Therefore I had to keep such an issue in mind whilst planning on what type of chocolate to produce. In order to meet customers satisfaction moreover their needs and wants towards a product, I planned to produce a low fat chocolate the decision to produce a low fat chocolate was taken from the market research I under took in which most the customers stated that they would prefer a low fat chocolate. Going with customers demand allowed me to produce a low fat chocolate bar, by producing a product which meets customers satisfaction means it will be approved by a lot of customers. Since its new product it is being produced after having taken a lot of market research the product is likely to satisfy the customers and be bought over competitor’s product.
Once the product is launched it’s likely to gain a good percentage of market share as the customers will receive the product they require. Such a success will allow Galaxo to be able to meet its aims and objectives, moreover it will be able to expand and introduce various more products such as organic chocolate. The organic chocolate can be targeted for higher income people as the price will be higher compared to the normal chocolate bar.
If competitors start to sell healthier products it will affect upon my business which will mean Galaxo will need to produce similar products in order to attract more customers.
Peoples taste towards the product may change which may mean they might prefer to eat competitor’s product.
Technology technology changes everyday as Galaxo will be produced in a factory through machinery. The business will at some point will need to introduce new technology once the old machinery is worn out or becomes out-of-date. This means new machinery needs to be bought this will also mean the employees may need to be re-trained due to the new technology being introduced. Through this change it may also mean that the wage rate of employees may need to be changed to reflect the different types of work and levels of responsibility required.
Moreover, increase in methods of advertising which could be used to promote Galaxo and perhaps make them cheaper to use to promote.
Financial plan
For this business I will be investing in £35,000 and taking a loan out for 55,000.
During the process of my business planning I also need to take into consideration the start up and running costs that will incur. Running costs are costs that have to be paid through out the year whether the company is making money or not these costs are fixed.
Were as the start up costs are costs that are essential to a business because without them the business can be started. The table below shows my businesses start up and running costs.
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My sales will increase by 25% after 5 months of running.
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The maximum capacity is 36,000 units.
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All together there’s 8 employees one of them is the manager, 3 full-time employees will receive a salary of £23,400 per year the 2 part-time employees will receive a salary of £15,000 per year were as the manager will receive £16,000 per year. The 2 delivery men will receive a salary of £27,200 per year.
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In the first 2 months I will advertise every week using the medium billboard, which will cost me £400 in one month as it costs £100 for one week. However I will then reduce the amount to advertise.
Ratios
2008
Profitability Ratio’s
Gross Margin= 92,800\260,000*100=36%
Gross Profit Mark-up= 92,800\260,000*100= 180.17%
Net Margin= 22,000\260,000*100=8%
ROCE= 22,000\112,000*100=20%
Overheads in Relation to Turnover= 70,800\260,000*100= 27%
Liquidity Ratio’s
Current Ratio= 61,000\33,000= 1.84:1
Acid Test Ratio= 61,000-35,000=26,000\33,000= 0.78:1
Efficiency
Asset Turnover= 260,000\84,000= 3.09 times
Activity Ratio
Debtor’s Collection Period= 26,000\260,000*365= 37 days
Creditor’s Collection Period= 25,530\167,200*365= 58 days
2009
Profitability Ratio’s
Gross Margin= 111,360\312,000*100= 36%
Gross Profit Mark-up= 111,360\200,640*100= 56%
Net Margin= 40,480\312,000*100= 13%
ROCE= 40,480\112,000*100= 36%
Overheads in Relation to Turnover= 70,880\312,000*100= 23%
2010
Profitability Ratio’s
Gross Margin= 133,632\374,400*100= 36%
Gross Profit Mark-up= 133,362\240,768*100= 56%
Net Margin= 47,964\374,400*100= 13%
ROCE= 47,964\112,000*100= 43%
Overheads in Relation to Turnover= 85,668\374,400*100= 23%
Cash flow Forecast
Shown above is my cash flow forecast for the year, this has been done for the first year of trading 2008. By looking at the forecast you can see that there are 3 main inflows the loan which is 55,000 the capital which is 35,000 and the predicted sales is 17,000. The total inflows for the first month came to be the highest as in the first month I was to receive the loan and bring in my capital therefore; my total inflows came to be 107,000. This figure did not exceed the outflows which was beneficial for my business, however from October my business began to suffer from loss therefore to recover from this I have decided to borrow and overdraft limit of 7,470. which will help me to recover from this consequently the following years will not bring out negative figures as the business will start to run more smoothly over time.
The Trial Balance
The table above is my trial balance for the year showing all the inflows and outflows that are required within the business.
The Profit and Loss Statement
Showing above is the profit and loss statement for the 3 years, from 2008 to 2010. By looking at the profit and loss statement you can see that the whole three years my business is making profit. In 2008 it starts of with low profit 22,000 compared to the following years in 2009 making a profit of 40,480 and in 2010 making a profit of 47,964. The first years figures have come from the trial balance were as for the following years the sales has been predicted to go up by 20% and the expenses to go up by 10%. The 10% increase in the expenses figure still allows the profit and loss to produce profit this shows that my business is at a good start overall.
The Balance Sheet
The balance sheet above is showing all the fixed and current assets that have been acquired within the business including the liabilities. By looking at the balance sheet my business has bought two fixed assets which are machinery and van, the machinery is what will be used within the factory to produce chocolate. Were as the van has been purchased to deliver Galaxo to all the shops from the factory. I have two current assets which are my debtors and the stock I will have, the short-term liabilities that I have are my creditors and the bank overdraft that I require at the first year of my trading.
The balance sheet has been shown balanced this tells us that everything has been assorted and the business is ready to take place.
The Manufacturing Account
The manufacturing account has been produced as my business is a manufacturing business therefore to find out my purchases the manufacturing account had to be produced in order to use the production cost as the purchases within the profit and loss. Once the manufacturing account had been completed the production cost came to be 167,200 which was then transferred to the profit and loss statement as purchases.
All the costs of direct and indirect was taken from the trial balance, under the direct costs their was only one direct cost which was factory wages that will be paid to all the workers working within the factory. The two delivery men’s wages are not included in this as they are not going to be working in the factory therefore their wages have been included in the profit and loss as expenses.
In the indirect cost their occurred to be three different costs which were factory rent, light and heat that will be used within the factory and the depreciation of machinery.
The light and heat within the manufacturing account is included 2\3 of the total were as the rest 1\3 has been included within the profit and loss account.