Frozen - business plan for an ice-cream shop.

3. SWOT analysis

(Conducted by authors)

3. Business strategy

1. Competitive strategy

 Focus on cost leadership

The ice-cream store is subject to compete on the basis of having a lowest price. Thus, it does anything to minimize it operating cost like just investing in basic equipment, making use of yogurt ingredient efficiency and effectiveness, etc. Besides, a large number of products this shop purchase each day makes it have a bargaining power with supplier to reduce input cost. Therefore, this allows the shop to sell its items at low prices and to profit off thin margins at a high volume.

2. Functional strategy

1. Market research

• Target market

The target customers for the Frozen Shop are teenagers and college-aged young people around the University of Commerce area. The current research of residents of this University region show that most of the resident are under the age of 30 and the proportion of this group will stabilize due to new students enter to this University each year.

• Customer analysis

This shop has targeted two customer groups which are Teenagers and College-aged young people.  Their demographic characteristics are the following:

Table 3.1: Target customers

(Conducted by authors)

For both these groups, this shop must become their place to hang out, have funs or enjoy a joke especially in the evening time. It also is a place for them to pass the time in the late afternoon or early evening traffic.  

• Competitor analysis

According to recent research, there are many cafés shopsor tea shop around the University of Commerce however this area still has no ice-cream shop. Therefore, if Frozen is opened, it only has indirect competitors. Furthermore, the target customers of the Frozen Shop and the café ones are also different. The former mainly aims to the lower class which is the students in dormitory, living isolate from family and having limit finance meanwhile the latter generally target at the middle and higher class. Besides, ice-cream is also a takeaway product which is not only consumed in shop but also be carried away. Thus it can take advantage of large number of people who go jogging or hang out in evening that the others cannot.

2. Marketing strategy

• Promotion

To attract customers to Frozen, firstly, in the opening day, the method of “buy 4 get 1” is applied to increase its brand name awareness as well as to prove quality of the shop’s products and services to them. Besides, Sales Promotion is applied by weekly offering discount or providing financial incentive in specific day. To be more detail, in this chosen day, the store’s products can be purchased at lower price (VND5000 instead of VND6000). This information will be presented in billboard to catch the buyers’ attention and also be delivered to them by word of mouth publicity.

Overall, the main objectives of these promotion activities are to deliver to customers a message of low-price ice-cream shop and build up its image of a place for students.

• Pricing

In case of pricing, firstly, Frozen chooses price leadership strategy by offering customers with low-price product. Besides, a penetration pricing strategy is also used by which the price of product increases gradually but still be acceptable. By applying these strategies, the ice-cream store can take many advantages like increasing sales volume, creating a barrier for potential new entrance and support to the promotion by encouraging word-of-mouth recommendation due to its attractive price. Furthermore, as stated in promotion part, a sales discount is also offered in specific day of week to encourage sale volume.

• Product diversity

Apart from the original simple ice-cream, the shop is planned to offer specialized one which is made from dairy-free and gluten-free products, as a lot of customers now prefer, of require a dairy-free and gluten-free diet. Customers are becoming more healthy and conscious.

Frozen Shop will be offering tempting treats in a market where people increasingly care about their health and the quality of their food. This study only applies to top quality ice cream, made from top quality ingredients and this is what this shop will provide. “Tempting treats” that can also be part of a long-term healthy diet. This idea will be an important part of Frozen Shop marketing. Shop will offer customer delicious, wholesome food in a pleasant environment.

4. Capital budget

1. Financial objectives

Our general goal is to increase sales in the University of Commerce area in order to gain an average profit of VND16.5 million per month. Besides, the ultimate objective is to totally dominate the ice cream market in this region.

2. Capital contribution

This plan requires at least VND 36,620,000 to start which is totally contributed by group members. Each of them is responsible for specific proportion which plays a role as base to distribute profit gained by operating activities.

Table 3.2: Capital contribution

                                (Conducted by authors)

3. Start-up cost

To start doing business, there are many expenses that must be covered, including decorations for shop, advertising asset like billboard, flyer and equipment such as ice-cream making machine, fans, plastic chair and cabinet with bar. To be more detail, they are listed as follow:

Table 3.3: Start- up cost

(Conducted by authors)

Besides, the equipment also has limited lifespan. They are depreciated as follow:

Table 3.4: Depreciation rate

(Conducted by authors)

Basing on the information stated above, the balance sheet at the beginning of operating time is made:

Table 3.5: Balance sheet

                                (Conducted by authors)

4. Breakeven analysis

To run this Frozen, there are many expenses that must be incurred during operating time. These expenses include both variable cost and fixed cost which are presented as follow:

1. Monthly fixed cost

Table 3.6: Monthly fixed cost

                        (Conducted by authors)

2. Monthly variable cost

Table 3.7: Variable cost per unit

                (Conducted by authors)

The manufacturing cost of ice-cream with cone is calculated as a sum of Cone, Ice-cream powder and Water while producing cost of each ice-cream in cup is counted as total cost of Ice-cream powder, Water, Spoon, Cup and Ice-cream decorations

Table 3.8: Monthly variable cost

(Conducted by authors)

5. Profit & Loss forecast

Assume that the store makes average sales of 60 ice-creams with cone and 70 ice-creams in cup per day. Therefore, the estimated monthly sales and expense is presented as table follow

Table 3.9: Estimated sales

                                (Conducted by authors)

Base on Table 3.6 and Table 3.9 which present total fix cost and estimated sales and variable expense, the income statement is calculated and presented in Table 3.10:

Table 3.10: Income statement

                                (Conducted by authors)

Base on the estimated income statement and proportion contributed by owners in table 3.1, the personal financial gaining is presented as follow:

Table 3.11: Profit distribution

                        (Conducted by authors)

The breakeven point is calculated by dividing net operating income by percent total contribution margin. Applying this formulate for the result in Table 3.9, the breakeven point equal to:

Breakeven point =16,565,175: 82% =VND 11,628,870.87

Therefore, the Frozen meets the breakeven point when it collected VND 11,628,870.87 from sales, in which, VND 3,949,427.84 is gained from selling Ice-cream with cone, and the rest is made from Ice-cream in cup sales. In other word, whenever 659 units of Ice-cream with cone and 768 Ice-cream in cup units are completely sold, the shop meets the breakeven point. With the subjected quantity selling of 60 Ice-cream with cone and 70 Ice-cream in cup per day, it is likely that the revenue will fully cover expense within 11 days and from the 12th day, each unit ice cream sold will contribute to the profit of shop. These figures are clearly illustrated in table 3.10.

Table 3.12: Verification of BEP

(Conducted by authors

6. Statement of cash flow

The proper discount rate for the project is 10%

Table 3.13: Statement of cash flow for first 5 month

(Conducted by authors)

As the NPV of this project in the first five months is over 25million VND, much greater than 0, this project is possible to do.

7. Bonus for investors

At the end of the financial year, each owner will receive their year-end bonus, based on the percentage of their ownership to the business as follow:

Table 3.14: Bonus for investors

(Conducted by authors)

5. Conclusion

To summary, as can see clearly from the report, start up this business does not require much capital and employees’ skill but brings to us a giant profit. To be more detailed, the capital contributed by five group members is around just over VND40 million, this amount of money is not too high so that we can run the business easily and the project need roughly VND36 million to start up among this. Assume that the store can sell 60 ice-creams with cone and 70 ice-creams in cup per day, the revenue will fully cover expense within 11 days. And if the business running smoothly, the shop is able to gain a huge profit of VND16.5 million monthly. Moreover, after research and analysis the market, the environment, customer as well as the financial analysis, we can see that this is a potential business project and there are many opportunities to develop in near future.