Q6. What is the next car you buy likely to be?
Q7. Would you prefer to buy a car on a small inner city garage, or a large garage in a more rural area?
Q8. If you had a thoroughly enjoyable and easy experience buying a car from a garage would you consider buying your next car there?
Q9. How old would you expect a used car to be when spending the amount specified in q2?
Q10. How many miles would you expect the car to have driven when spending the amount specified in q2?
Q11. Favourite colour car
Analysis of Questionnaire
The questionnaire has helped to establish the aim of the business. It has given a good indication of what type of product the business should sell, and the strategies and methods to do so. It has shown that most potential customers will change their car every 2 years; this will be a big factor as it means that there will always be demand for the cars that the garages sell. It also shows that almost 3 out of 4 people are interested in a new car showroom in Canterbury; this establishes the market that the business will attempt to sell to.
The questionnaire also sows the best way for the business to promote its products as the sampled survey shows that interest free credit is the most attractive promotion, by offering interest free credit the business is also able to use psychological pricing, as instead of pricing the product at £9000, it will be “As low as £150 per month”. This makes the purchase more attractive to the customers and may convince them to spend more money on the car as it is spread over a longer period.
The questionnaire has also shown that customers are attracted to a range of different cars, so instead of focusing on one type or brand of car, the business will now diversify; this allows the business to sell to a much larger market, and therefore, increase the profits
It has also given an indication of the type of second hand cars that the showroom will sell; this allows the business to more effectively target the product.
The questionnaires that have been completed offer a spread of the population, in Canterbury there are around 42,000 people. In the southeast in the 2003 census, there was, on average, 1.1 cars per household. This means that there are around 4,200 cars in the Canterbury area, consisting of just local residents. If each car is replaced every 2 years then there is demand for approximately 100 cars per month. This is a conservative number though, because, as the questionnaire shows, 1/3 of the customers will change their cars at least once a year. So if the company aims for a 5% share of the sales by the end of year one, then this is a turnover of approximately £600,000.
Marketing
Product
Almost all of the customers were interested in receiving good customer service when buying a car, and doing so would influence whether or not the customer would return. If the garage were to provide a friendly and helpful atmosphere it would be very likely that it would retain its customers. Since the customers will buy a car fairly regularly. This would give the garage a unique selling point over local rival garages.
The garage will supply a range of different cars, used and new, but the main product will be the Family hatchback/estate (such as Ford Focus, Vauxhall Astras and Peugeot 206s). This is because it is a more continuous market than other markets, this is essential when creating a business as it creates a stable limited income with little risk. To the middle age family market, the family hatchback is the type of car that will suit the market, as they are spacious and economical which are important factors when buying a family car.
Price
The First two questions of my questionnaire are concerned with how often the customer will buy a car, and how much they will spend. This is an important part of the research as it is establishing the customer base has effective demand. If there was not enough effective demand the business is not viable. The questionnaires that were distributed gave the impression that most buyers will change their car every 1-3 years, spending between £5000-£9999; this gives a solid customer base. The price of the cars will be between £5000 and £9999, depending on the specific car and what extras it has. This is a very competitive price for the market and will help attract customers. The two main pricing strategies, the first will be Product line Pricing. As the garage will be selling cars of different values, by setting price steps for each level, and including a variation for differences in equipment. It will allow customers to identify the different products in their price range and easily choose which they want to buy. The second strategy will be optional product pricing, where the customer can spend more to receive extras such as satellite navigation, alloy wheels, air conditioning, and other extras.
Promotion
Due to the competitive nature of the car selling market, and large variety of substitute goods, the advertising and promotions I use may have a considerable effect on demand for my products. My advertising will be aimed at firstly making consumers aware of the business and products, and then creating a unique selling point to create a purchase intention. My unique selling point will be a high level of customer service and after care. This is because it scored highly on the questionnaire as the main reason for buying a car from a specific garage and return to that garage. This will require local marketing as it is a local business using:
- Direct Mail- allowing customers to sign up to receive information about new products and services available
- Web Page – a company web page including details on all the current products and promotion. The website address will be listed on all other types of advertisement
- Advertisement Boards- Setting up informative information advertising boards nearby to the garage
- Reviews – allowing journalists for local car newspapers to come to the garage and experience the buying experience and products.
- Radio – radio advertisements on local stations
- Word of Mouth – customers will share their experience with other potential customers, by ensuring they have a good experience, it ensures that a strong word of mouth following has formed
Place
The garage will have a fairly simple route of distribution; it will take cars from sellers and part exchanges, and also new cars directly from the manufacturers. There will be multiple channels as the cars are being bought from different car manufacturers, and individuals. Our cars will also be available to buy on the internet, this is a cheaper option for the company, and more convenient for the customer. We will offer delivery to the buyers’ house, charging enough money to cover the costs incurred from driving to the buyers’ house. The garage will be situated outside of the main city centre of Canterbury, this is because the land is much cheaper, and, as it is within walking distance of the city centre and will be passed when driving into Canterbury, will still have the same accessibility to customers.
Finance Section
Fixed Costs (per month)
Variable Costs (per Unit)
Selling Price: £9000
Analysis of Breakeven chart
And Cash flow forecast
Cash flow forecast.
The cash flow forecast shows that by the end of the first year the business will be approximately at a point where it is breaking even, in the months after this it will begin to make a profit. As the main aim of a first year business is to break even, this is an extremely good outcome. The reason why there is such a large loan at the beginning of the year is to cover the stock and start up costs. The business will then use the closing balance at the end of each month to buy next months stock. This gives the business a great amount of flexibility on its stock levels, but it will rely on a high level of sustained level of stock turnover, if it is too high or low, it means that the business will have to adjust the level of stock held.
One of the main criticisms of the cash flow forecast is that it does not show the interest earned on the balance held at the end of each month, as it is a high amount, the interest will probably aid the company to break even sooner.
Break Even Chart
The break even point for the business in its first year will be 12 units per month, or 144 per year. This is partly due to the aggressive pricing scheme that the company is using, as the mark-up between the variable cost per unit & fixed cost is only 12.5%. This is because of the high levels of replacement goods & other showrooms, although this strategy makes it much harder to break even, the amount that can be gained in prestige and business reputation will be invaluable for the company in the future, as the questionnaire revealed people are more likely to buy from a showroom they have visited or hear about before.
Personnel Section
Staff
I will be employing 3 Full time staff who will be working 39 hours per week. As the garage will only be open Monday-Saturday. The staff’s job description will be “To organise and oversee the car sales of “Local Motors””. This means that the staff will be in charge of the sales of the company’s cars, they will be expected to provide high levels of customer services to the buyers and ensure that all relevant paperwork such as DVLA registration and sales forms are filed after a sale. They will also be in charge of maintaining the appearance of the cars. Cars that need repairs or MOTs and servicing will be sent to an externally owned garage. I will only need 3 staff to begin with as it is a highly competitive market I will only be expecting a small proportion of the car sales, by having only 3 staff it enables the company to serve the customers that we get to begin with, without wasting money by employing unused staff.
Organisation Chart
Span of Control
Managing Director 1:3
Pay
My staff will be paid a low monthly wage, of £1050, with senior salesmen on £1200, with a small commission bonus, a piece rate scheme. This will be better than simply paying the employees a basic wage, or a rate based just on how many cars that they sell, because it motivates the salesman to have high volume of sales, whilst not having the drawback that if something unexpected happens, i.e. if there was a problem with the delivery of cars to the showroom and staff were unable to sell cars for a month they would not get paid, with the system I will use, this will not happen. Staff I will employ at equal levels will be paid equal amounts to prevent colleague conflict due to uneven salaries, as the company expands I will need to add new staff. These will come in as trainees and will use hands on learning to develop the skills required, and will appear in the organisational chart under the car salesman that is training them.
Motivation
Motivation will be an important part of my business, as the employees will need to be motivated enough to provide the high level of customer service that the company aims to offer. My Commission based pay rate will provide motivation to sell a high volume of cars, but I will also offer optional customer service reviews to buyers to review the salesmen; this will give an impartial view to how well they are performing. The salesman at the end of the month with the best record of customer services will receive a small bonus, this ensure that the salesmen do not compromise on the quality of their work. This is known as job enrichment.
As the business will be small and only employ a small number of staff to begin with, there will need to be an emphasis on team building, as a conflict between workers will disrupt the entire business. By organising weekend team building classes and adventures I will ensure that the group of staff will work hard for each other making the workplace an easier and more relaxed place to work as this will help the staff perform.
By maintaining a small level of staff it also ensure maximum staff feedback over any issues and concerns, to ensure that the staff are always happy as their concerns are dealt with straight away, instead of feeling like they are faceless workers in a large machine they feel like an important part of the business.
Analysis of Personnel
As the business will only have 4 full time staff, it means that each member of staff can be made to feel valuable and an important part of the team, this “feel good factor” will be invaluable in establishing the business to new customers. There are other business already established in the area and by creating a friendly atmosphere between customers and staff it will ensure that the customers will spread word of mouth advertising and also return to the business. This means that the staff will have to be extremely motivated to help the customer, but ultimately to sell as many cars as possible this is enforced with the piece rate scheme that it employed, it ensure that each salesman maximises possible sales and although the majority of the motivational and pay factors will be based on McGregor’s Theory Y, that for staff, work is as natural as play and rest, and will seek to work as hard as they can, as long as the job is fulfilling, which is taken into account when using team building exercises, and a small span of control to spread the businesses responsibility across the workers, the theory X assumption that staff will only work for money and not job satisfaction, which is used in the piece rate scheme is used to ensure that workers stay motivated by covering all possible outcomes (although there is limits to the Theory X management style as when the staff are treated as unmotivated, they will begin to act unmotivated)
Evaluation
The key findings that I have discovered in setting up this business plan is that when a business is set up the business must create an environment that the customer wants, as there is such a high number of competitors and substitute goods that the business must create a USP. This gives customers a valid reason to come to this business over any other; in this case, the customers have requested a more friendly service. The business has been adapted to meet this requirement. There is also a tailored pricing strategy of price penetration, although the business does not need to set its prices low compared to other competitors, it will help give the business a greater amount of sales to begin with, these sales carry the hidden advantages of word of mouth advertising, this is important as many people trust the recommendations received by their friends so in theory sales will exponentially grow. The main factor the business will be faced with is motivating the staff; this will be an issue not because the business will have such a large number of employees, but because there are so few. It means that each member of staff will expect more time to be spent motivating them. The Theory Y management style that is used creates a feel good factor within the staff as they are treated as hard working, well motivated people. When staff are treated as such, they begin to act in this way.
I believe that the business will succeed, this is because it has an in- demand Unique selling point, not just for individual products but for the business as a whole, which will be an invaluable advantage in setting up the market share. The company will most likely break even, or make a minimal profit during the first year. But the business reputation that can be developed will allow the business to expand in years 2 and 3.
There are several reasons why this business will not succeed. In the first year this will most likely be due to competition adapting to this businesses USP, although this will be extremely difficult due to the large number of their staff, but as this business begins to expand, it may encounter the same problem and be unable to motivate its staff in the same way, with workers feeling less important and less important as new staff join. In the following years the business will have needed to build up a significant enough market share to compete against the established business, as the business USP will likely fade as it expands, or the cost of ensuring that staff are motivated to provide an excellent level of customer service over a good or adequate level will likely exceed the income gained from doing so.
One paragraph on underlying themes in competition, economy, and reasearch
