B-Plan for Entrepreneurship and SMEs

Question: Discuss about the Report for B-Plan for Entrepreneurship and SMEs. Answer: Company Overview The business plan has been developed on the basis of the business operations of a US-based shoe store business name The Shoebox. Modern business innovation model, technological efficiency and demand of fashionable shoes in the US market have provided a significant opportunity to the shoe business retail store. In the below section, the mission statement, vision statement and business core values of the organization has been identified. Mission Statement The primary agenda of the business of The Shoebox store is to deliver superior quality products and unmatched retail services to their target demographics. Also, the retail store aims to investigate some latest trends to drive the industry. Moreover, for the better services and products diversification, The Shoebox has identified the most eligible business entities. Vision Statement Through the identification of current competitive challenges in the retail shoe industry in the US market, brand recognition is one of the most evident things. Additionally, by providing latest, fashionable and trendy products at an affordable price tag, the organization has to enter its name among the best retailers in the US shoe industry (Seelye and Mack, 2015). Business Core Values Through the identification of latest trends in the US retail shoe industry, The Shoebox has determined to include inclusiveness, design elegance and unmatched retail services to the target demographics profile. Ideally, the retail store wants to investigate the consumer's touch points through efficient communication and marketing channels (Hartley and Ingilby, 2007). Understandably, adequate market research and e-commerce business development have been included within the core values to enhance the brand identity in the retail industry. Objectives The SMART objectives of The Shoebox have been presented as follows. Specific: The typical objective of the retail business of The Shoebox is to improve the revenue figure by month-on-month basis. Clearly, the income margin has to be increased by 5% on yearly basis to say the least. Measurable: In terms of business growth, the number of the target demographics profile must be increased creating networking channels. Meanwhile, each month two significant corporate clients must be included in the business model to increase the networking channel. Achievable/ Attainable: The skills and knowledge must be improved on a regular basis so that the sales executives can contribute to the sales figure in a considerable way. Further, technological efficiency and e-commerce growth must be achieved within the first six months (Anzengruber, 2015). Relevant: The marketing and advertisements of the retail store must be engaged to the appropriate goal. Moreover, the realistic deadline must be set to complete the social networking promotion and retail store promotion within the first couple of quarters. Time-bound: By considering the robust development of the retail shoe industry in the US market, smart deadlines must be set for strategic development, marketing and e-commerce development. Probably, one year time will be crucial to complete the entire management. Products The Shoebox will offer premium quality leather shoes to the target customers as the primary product of the retail store. Quality materials with a manageable price will be the key selling point to the retail store (Rossi, 2008). Moreover, the store will categorize the products in diversified segments such as classic shoes, formal shoes, athletic shoes, fashionable shoes and leather accessories both for men and women. Also, the retail store will focus on providing shoes of well-renowned world class brands such as Gucci, Nike, Reebok, Adidas, Puma and many more. The e-commerce website will be elegantly designed and maintained so that customers can check out latest available shoes and leather accessories of their most preferable brands (Fulmer and Goodwin, 2008). Customers In order to improve the business standards and sales, identification of significant customer segment will be crucial for a new brand. Through the notification of modern trends and style icons of young as well as office goers in the US market, the retail store has got a large collection of the verity of brands for people age group between 16 and 70. Each of the shoes will deliver something different as per the requirement of the target demographics. Also, children shoe section has been positioned for additional benefits (Arkebauer and Miller, 2009). Particularly, for ladies customers, leather handbags, fashionable leather cases and other latest designer products have been displayed to catch the eye of the target demographics. Industry and market analysis Industry The analysis of the factors in the industry that may influence the new business has been presented using the PESTLE analysis herein below: Political Factors: The political instability in the US market may create problem for the company. The new business must considering the changing legislations such as tax rates and licensing needs before starting the business (Swann, 2016). Economic Factors: The USA is the most developed economy with high per capita income of the people (Kochan, 2016). The income level of the people supports the growth of business in the US market. Social Factors: Currently, the USA has a mixed cultural population that demands trendy footwear (Wardell, 2009). Furthermore, the people of the USA are regular user of internet that provides the company with opportunity to grow its business using digital marketing tactics. Technological Factors: The Shoe industry in the USA has all sorts of supportive technology that can be helpful for the company to grow its business (Wardell, 2009). Legal Factors: In terms of legal factor, the business needs to get registered under the US Company Act to develop a website. Furthermore, the company needs to meet all legal obligations related to selling leather shoes in the US market (Swann, 2016). Environmental Factors: It is important to note that the people of the US have got more concerned about the environment. Hence, it is important to consider the environmental obligations that are required to be followed for a retail shoe store (Kochan, 2016). Customer It can be seen that the US market has a good customer profile using sports and fashionable shoes. In order to improve the business standards and sales, identification of significant customer segment will be crucial for a new brand. The company will target customers from age between 16 and 70 because of its variety of products. Each of the shoes will deliver something different as per the requirement of the target demographics (Arkebauer and Miller, 2009). Particularly, for ladies customers the company has different range of products that include leather handbags, fashionable leather cases and other latest designer products. Competition Shoebox needs to face a high level of competition in the market because of existence of large number of rivals in the market. There are a huge number of well reputed brands in the market operating for a long period of time (Jamali, Lund-Thomsen and Jeppesen, 2015). Along with that, the new trend of online stores makes it difficult for the company to establish its new shoe store business. Furthermore, the store is located at a core market area that has many well reputed companies that will provide Shoebox with a high level of competition. Internal Business Strengths and Weaknesses An analysis of internal business strengths and weaknesses has been described herein for further discussion point of view. Strengths Latest Marketing Resources: The recent marketing ideas and developed marketing platforms available to The Shoebox store have given effective strengths to the business model. The digital marketing concepts and e-commerce marketing have also contributed to sales. Brand Partners: The retail store has engaged with significant brands in the US market such as Adidas, Nike, and Puma so that the brand image of The Shoebox will be highlighted at the industry level (Handley and Benton, 2009). Location of business: The location of the retail store of The Shoebox is another significant plus point for business perspective. The Shoebox store has been located around the posh market area where a maximum number of shoppers visit on a regular basis. Weaknesses Management inefficiency: Management inefficiency has somewhat contributed to the lack of revenue generation. Understandably, the role of the management has been a weak link to the business scenario of The Shoebox (Papatheodorou, 2016). Market competitors: Other retail shoe stores in the US market such as Clarks Store, Skechers, ALDO, and ECCO Stores have provided significant market competition to the business of The Shoebox. Therefore, stern market competitiveness is a weakness to the business. Dependency on sales of footwear: Moreover, the revenue and profitability of The Shoebox have massively dependent on the sales of the footwear and shoe products. Hence, such dependency of sales of products has been a weakness of the business structure. Business Differentiation Shoebox will focus on business differentiation using a unique organizational structure. The company will have a store manager who will work under the two partners. Furthermore, the company will employ experienced online marketers and on-store sales executives (Johnson, Webber and Thomas, 2007). The business will be differentiated using digital marketing tactics and unique products made out of premium quality leather. Shoebox will hire designer who will design unique shoes for the company (Faler, 2011). Along with that, the company will also sell other popular branded shoes in the store at cheaper price as compared to other competitors to different its brand. The company will take customized orders for special customers to differentiate its brand in the market. Competitive Advantages The primary competitive strategy of the company is to provide the shoes at a relatively lower price to gain good hold over the market. Along with that, The Shoebox will use digital marketing strategy by developing a website to attract customers through online platform (Enos and Kaysen, 2007). The website will act as a virtual store for the company that will increase its market reach. Along with that, the differentiation of the product and customized orders will act as a competitive advantage for the organization (Faler, 2011). The location of the shoe store at a core market area will also act as a competitive advantage for the company. Marketing Strategy Target Market Strategy Through the identification of massive target market of the US, the operating cost of the business of The Shoebox is quite affordable. On the other hand, the growing retail shoe industry and the e-commerce platform have given corporate sustainability to the business structure of The Shoebox (Padoan and Arzeni, 2010). By identifying the mission and vision of the business, The Shoebox has perfectly applied the available market resources to get the maximum response from the target demographics. Moreover, the premium product quality and the affordable price tag can be identified as the key points to attain a significant competitive edge over the market rivals. Marketing Mix Product: The Shoebox store has identified sustainable and trendy shoe products suitable for the target demographics profile. The organization has established the retail store and e-commerce website to sell footwear, shoes and leather accessories of premium quality. Also, the products of renowned world class brands such as Nike, Puma, and Gucci have influenced the brand image of The Shoebox (McMahon, 2014). Price: Through significant market research, The Shoebox has identified the most suitable product pricing standards in the competitive US market. Meanwhile, for regular shoes, the store has priced US$40 to US$56. On the other hand, the fashionable and premium quality brand products have been offered to the customers at a higher range such as US$65 to US$80. Also, a special discount of 5% to 10% has been applied in the case of online shopping. Promotion and advertising: In promotion and publicity, The Shoebox has utilized Google AdWords, Social media advertising, transportation advertising and electronic advertisements to catch the eye of the target demographics (Day, 2007). Also, the e-commerce website has played a significant role in product promotion through significant draws and store events. Also, some of the traditional marketing concepts have been used to spread Word-of-mouth. Placement: In product distribution and placement, The Shoebox has directly purchased the products from the manufacturers so that the retail business will get a significant boost. Such direct sales technique can deliver significant profitability on sales. Moreover, direct purchasing strategy can ensure that products will be offered to the target demographics at the most reasonable price tag (Whitney and Israel, 2008). Sales Strategy (monthly forecast for two years) The target sales figures for the new business have been given herein below to present the sales strategy of the company. It has been planned that the company will target to increase the sales by 25 percent after every quarter of the year (Tresca, 2013). Furthermore, it is estimated that the direct cost for buying the products would be 50% of the sales value. In other words, the company will keep a margin of 50% to sale the products in the market. SALES FORECAST 1st Year Months Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Revenue Footwear $40,000 $40,000 $40,000 $50,000 $50,000 $50,000 $62,500 $62,500 $62,500 $78,125 $78,125 $78,125 $691,875 Accessories $10,000 $10,000 $10,000 $12,500 $12,500 $12,500 $15,625 $15,625 $15,625 $19,531 $19,531 $19,531 $172,969 TOTAL SALES $50,000 $50,000 $50,000 $62,500 $62,500 $62,500 $78,125 $78,125 $78,125 $97,656 $97,656 $97,656 $864,844 Direct Cost Footwear $20,000 $20,000 $20,000 $25,000 $25,000 $25,000 $31,250 $31,250 $31,250 $39,063 $39,063 $39,063 $345,938 Accessories $5,000 $5,000 $5,000 $6,250 $6,250 $6,250 $7,813 $7,813 $7,813 $9,766 $9,766 $9,766 $86,484 Total Direct Cost $25,000 $25,000 $25,000 $31,250 $31,250 $31,250 $39,063 $39,063 $39,063 $48,828 $48,828 $48,828 $432,422 SALES FORECAST 2nd Year Months Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Revenue Footwear $97,656 $97,656 $97,656 $122,070 $122,070 $122,070 $152,588 $152,588 $152,588 $190,735 $190,735 $190,735 $1,689,148 Accessories $24,414 $24,414 $24,414 $30,518 $30,518 $30,518 $38,147 $38,147 $38,147 $47,684 $47,684 $47,684 $422,287 TOTAL SALES $122,070 $122,070 $122,070 $152,588 $152,588 $152,588 $190,735 $190,735 $190,735 $238,419 $238,419 $238,419 $2,111,435 Direct Cost Footwear $48,828 $48,828 $48,828 $61,035 $61,035 $61,035 $76,294 $76,294 $76,294 $95,367 $95,367 $95,367 $844,574 Accessories $12,207 $12,207 $12,207 $15,259 $15,259 $15,259 $19,073 $19,073 $19,073 $23,842 $23,842 $23,842 $211,143 Total Direct Cost $61,035 $61,035 $61,035 $76,294 $76,294 $76,294 $95,367 $95,367 $95,367 $119,209 $119,209 $119,209 $1,055,717 Operation Strategy In the operation business model, The Shoebox must apply unification model to identify the market standards and best practices in the US retail industry. Thus, identifying the target demographics, management moves, human resources, suppliers, distributors and marketers, the best business structure can be produced to get a sustainable advantage. The retail store must utilize efficient technology, decorations and interior designing and skilled subordinates to represent the business image to the target demographic profile. Also, the operations strategy must evaluate the terms related to purchasing the products from the manufacturers (Buliga, 2014). The direct purchasing system must be controlled in a systematic way so that the cost of inventory can be reduced to a certain margin. Evidently, the e-commerce must have been managed in a tactical way to improve the sales at the online premises. Critically, the marketing section must be illustrated at the highest standards so that the brand recognition will be enhanced in the target market. Moreover, the financial resources and accounting management for both the online and retail business must be maintained orderly to enroll purchasing, inventory, operating costs and other adjacent costs (West, 2008). In this way, a sustainable position in the market can be achieved through instrumental operations strategy. Management In order to construct the best management structure, marketing manager, sales manager, inventory manager and accounting manager must be hired to control the activities of the marketing, sales, inventory and financial sections. All of the four managers must be liable to report to the CEO of the organization. In this way, significant control can be delivered in every aspect of the business. Also, the managers must overview the performance of the executives to identify if any improvements or encouragement will be needed for better productivity (Zupancic and Mllner, 2008). Explicit knowledge and influential attitudes of the managers and organizational subordinates can implement the best possible practices effective for maximum return. Moreover, as the stores profitability and sales revenue are largely dependent on the sales of footwear products, sales executives must be hired in a professional way to select the best in the business. Along with that, efficient training and performance management system must be introduced within the organizational framework to increase the sales and revenue figures. Meanwhile, the role of internal employees and external associates in the business environment must be identified to increase the sustainability of the US retail market. Viably, significant partnerships with shoe manufacturing brands and corporate attachment will be effective for further business growth. Start Up capital The start-up funding has been presented below for better understanding. It can be seen that the company needs $200,000 to begin the shoe store business (Luximon and Luximon, 2009). Out of the $200,000, start up expenses would amount to $30,000 and start-up assets will be of $170,000. The two partners of the firm will invest $50,000 each. The rest of $100,000 will be arranged by taking a loan of $50,000 from bank at a rate of interest of 10% p.a. and an interest free loan from family members of $50,000. Start-up Funding Start-up Expenses $30,000 Start-up Assets $170,000 FUNDING REQUIRED $200,000 Assets Non-cash Assets $20,000 Cash Requirements $100,000 Inventory $50,000 Cash Balance TOTAL ASSETS $180,000 Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities $50,000 Other Current Liabilities (interest-free) $50,000 TOTAL LIABILITIES $100,000 Capital Owner $100,000 TOTAL PLANNED INVESTMENT $100,000 Loss at Start-up ($30,000) TOTAL CAPITAL $70,000 TOTAL CAPITAL AND LIABILITIES $170,000 Total Funding $200,000 Profit and loss forecast The project profit and loss account has been presented that shows the estimated revenues and earnings of the company for the next two years: PROJECTED PROFIT AND LOSS Particulars 2017 2018 Sales $864,844 $2,111,435 Direct Cost of Sales $432,422 $1,055,718 Other $0 $0 TOTAL COST OF SALES $432,422 $1,055,718 Gross Margin $432,422 $1,055,718 Gross Margin % 50.00% 50.00% Expenses Administrative expenses Salary $75,000 $150,000 Depreciation $2,000 $2,000 Insurance $5,000 $15,000 Loan Interest Paid on bank finance $5,000 $5,000 Payment of loan taken from relative $5,000 $5,000 Rent, Phone and Internet $12,000 $24,000 Payroll Taxes $11,250 $22,500 Other $2,718 $10,000 Total Administrative Expenses $117,968 $233,500 Sales and Marketing Website $20,000 $10,000 Google AdWords $5,000 $10,000 Social Media Marketing $10,000 $20,000 Newsletter and Mobile Advertising $10,000 $20,000 PR Events $10,000 $20,000 Total sales and marketing $55,000 $80,000 Total Operating Expenses $172,968 $313,500 Profit Before Interest and Taxes $259,454 $742,218 Taxes Incurred $38,918 $111,333 Net Profit $220,536 $630,885 Net Profit/Sales 25.50% 29.88% It can be seen from the above table that the new shoe store business will earn a net profit of 25.5 percent in the first year and 30 percent in the next year, which is a good figure to proceed with the investment plan. Break Even Point The formula given below is used to calculate the breakeven point: Break-even Unit = Fixed Cost / (Average Unit price Average Variable Unit Cost) Assumptions: Fixed Cost = $100,000 Average Unit Price = $150 Average Variable Unit Cost = $105 Therefore, Break-Even point = $100,000 / ($150 - $105) = 2222 units Hence, it can be seen from the above analysis that the company needs to sell around 2222 units of all products to reach the level of break-even points (Hyvnen, 2014). In terms of sales revenue, the break-even point would be $333,330. Hence, the company must earn $333,330 of revenue in the first year to continue with the new business. It is estimated that the company will reach the break-even point by the end of 3rd month with the estimated sales projection. Cash Flow Management The projected Cash flow statement for the new business has been presented herein below: PROJECTED CASH FLOW Particulars 2017 2018 Cash in Hand $100,000 $359,454 Cash from Operations Cash Sales $864,844 $2,111,435 TOTAL CASH FROM OPERATIONS $864,844 $2,111,435 Expenses Direct Materials $432,422 $1,055,718 Administrative expenses Salary $75,000 $150,000 Depreciation $2,000 $2,000 Insurance $5,000 $15,000 Rent, Phone and Internet $12,000 $24,000 Payroll Taxes $11,250 $22,500 Other $2,718 $10,000 Total Administrative Expenses $107,968 $223,500 Sales and Marketing Website $20,000 $10,000 Google AdWords $5,000 $10,000 Social Media Marketing $10,000 $20,000 Newsletter and Phone Calls $10,000 $20,000 PR Events $10,000 $20,000 Total sales and marketing $55,000 $80,000 TOTAL SPENT ON OPERATIONS $162,968 $303,500 Additional Cash Spent Other Liabilities Principal Repayment $5,000 $5,000 Long-term Liabilities Principal Repayment $5,000 $5,000 TOTAL CASH SPENT $605,390 $1,369,218 Net Cash Flow $259,454 $742,218 Cash Balance $359,454 $1,101,672 References Anzengruber, J. 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