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Question:

Topic: Create own Business Plan on any product or service they wish.

Task:

An Entrepreneurial Venture - groups are to develop an entrepreneurial product or service that could be commercialised. The group is to assume it is seeking funding of $100,000.00 to add to the existing funds of $100,000.00 (which you saved or were loaned) and include a financial plan for the use of these funds for the first financial year. The product, service or process should be original and producible (i.e. no science fiction).

The primary target market should be local, although secondary markets may be reached via the internet. Pricing, distribution and promotion strategies should reflect this.

 

Answer:

Background 

AAB company is planned to establish as a small café supplier. The company will be specialized in dessert retailing and customizing services. AAB company will be having its own store in Sydney. In the beginning, the company will focus on other food supplying and branding services. It will also form dessert production and released a gelato store. The company will also start another service- beverage after the gradual promotions of the several desserts. In order to conduct this project, the company will cooperate with noted wineries and started wine export and import business. AAB has even planned to get a franchise of Gelatissimo and will consider idea and culture of Gelato by making use of the whole milk and low-calorie material in order to offer fat-free joy. The branding and training services of AAB will be efficient and influential in Sydney. The company will even promote food in the world. The product category of the company will comprise coffee, wine, honey, dessert, and cakes.

Mission

The mission of AAB food is to be the leading consumer products company. The company focuses on providing healthy options which can be enjoyed by the families and friends together. AAB is the provider of the wide range of delicious beverages and baked product.

The company believes in offering elegant service and an unforgettable experience to meet expectations in every single visit. AAB ensures the highest quality product and the best value for money (Zhou, et al. 2017).

Product offering

AAB will offer products in four categories such as coffee, wine, honey, dessert, and cakes. The coffee series of the company will comprise espresso, flat white, cafe latte, cappuccino, café mocha, babycino, macchiato, and long black. Most of the hot series are going to be Italian coffee. In order to undertake the demand for popular taste, the company is going to take the joy of finest Italian coffee and freshly baked desserts. AAB will provide fresh, tasty, healthy and premium grade coffee in Australia. The service provided by the company aims to entertain thousands of the customers, mainly families. On the other side, AAB will provide wine in each variety from red wines to white wines and sweet wines to sparkling wines. Each variety of wine will have its unique feature. The Australian honey enjoys a global reputation. It will have regime effects and health care. The honey provided by AAB will be natural health complementary. Add on, AAB will offer a great variety of the cakes comprising Tiramisu, cake, cookie, cupcake and fondant cakes. The company will also design cakes for special occasions (Zhang, et al. 2016).

Other than these items, now AAB has decided to add Italian food in its product category. It will be in an addition to the existing food products of the company and it is quite popular among the young people and kids. This segment will cover pizza, pasta, arancini, lasagne, prosciutto, and ribollita. The pizzas and pasta will be made available in various options. The company is even planning to make available these options in the instant mix.  So, that these products can be made available overseas.

 

Market analysis 

Industry analysis

The industry analysis of AAB is possible with the five forces:

The threat of new entrants: The barriers to entry in this industry are low. The factors contributed are the cost of entry, the uniqueness of the product and low exit barrier. The economies of scale are favorable but not required for the success of the industry. Hence, small businesses can enter into the industry with the relatively small amount of the capital. The elements contributing to the new company’s success is the leader’s ability to acquire sufficient distribution channels to cover operating cost and capability to construct brand recognition and constancy. The distribution channels usually comprise retail outlets like supermarkets, grocery stores. These can be more easily acquired when the company has an established brand. The competition identified is high and risk to the establishing brand image is also high. The foreign brands are considered a threat for the company (Fehér and Németh, 2017).

The threat from the bargaining power of customers: The bargaining power of the customers is relatively high. There are huge buyers and the switching cost is low. The buyers have an appropriate role in much of the industry’s profit as a large number of small businesses are competing to find outlets for the products. Hence, the buyers are capable of commanding low prices along with the volume discounts. The suppliers’ product is not unique as the buyers can manufacture the product (Sufer, Bozok, and Demir, 2016).

The threat from the bargaining power of the suppliers: AAB has good control of the logistics which is inbound and outbound. The threat from the bargaining power of the suppliers is relatively moderate. AAB has two types of suppliers such as local and international. The company is required to focus on detaining the suppliers by allowances and incentives (Chakrabarti-Bell, et. al. 2017).  The suppliers do not have much-negotiating power as the market is well developed because of the commoditized nature of the products. The company is affected by the variation in the prices of the raw materials. The changes can be due to the universal supply and demand elements rather than the supplier’s negotiating power.

The threat from substitute: There are various substitutes exist for the products of the company. The threat of substitutes is moderate. There are viable alternatives like breakfast cereals, potatoes, and rice which can be sued by the individuals instead of the baked goods wanted by them at home. The bakeries rely on the price and convenience in order to keep individuals switching to the substitute that they need at home. The increase in consumer awareness is also the reason that the threat of substitutes is faced by the company (Ferguson, Souza, and Toktay, 2016). Due to increase in preservatives and sweetness, consumers are willing to substitute the products of the company with the homemade products.

The threat from competitive rivalry: AAB faces a strong threat from the competitive rivalry as there are higher numbers of firms in Australia operating in the same segment. The firms are having higher aggressiveness. There are low switching costs. The companies compete on the basis of price, quality, differentiation, and relationships with the key suppliers (Baker, 2016).

Competition 

AAB will have direct competition from Bakers Maison. The baked products of the Bakers Maison are the blend of specialty. The products category of the company like fully baked, par-baked, ready to bake and ready to prove are appealing enough for the customers. The market share of the AAB can got adversely affected due to the aggressive competition from the competitors in terms of pricing and promotions strategy (Ryan, 2016). However, AAB will deal with the competitors by offering product differentiation. The company will offer value-added products and focus on the differentiation strategy which makes it different from the competitors. For example in the case of honey, the company will focus on the unique taste and positive dietary functions. Due to the treatment effects and health care, the honey of the company will enjoy great fame and reputation internationally (Boyd, Royer and Goto, 2019).

In the case of price mix, the company will have increased prices of its dairy products. It will result in increased revenue of the company by 3%. The company can increase its prices as it will not able to recuperate the input cost from the wholesale prices it can use to charge (Litvinova, Morozova and Yatsechko, 2015).

 

Primary target market 

The primary target market of the company is going to be local. It should be measurable and sufficient enough to generate regular profits. It should even justify the investments of the company. On the basis of demographics, young customers prefer to order pastries whereas families prefer to have bread and rolls (Nammakuna, Barringer and Ratanatriwong, 2016). The orders for cakes for birthdays are mainly generated from the high-income households. AAB will also undertake the lifestyle segmentation which comprises consumer attitude and preferences. The company will undertake the preference of the people like gluten-free diet, high fiber bread and rolls. People prefer to have cupcakes or crullers as comfort food during the periods of uncertainty and distress. The customers who are searching for the precise items are willing to pay the finest price. It could signify higher profits for the company (Babin and Zikmund, 2015).

The geographic segmentation of the company will comprise the region, climate and inhabitants density. A small bakery in the suburban community will serve just the local residents. The population estimates of the census and information can estimate the potential customers and plan operations accordingly. The company even targets another market with the reach of the internet. The company will take online orders and part-time delivery people will be hired (McDonald and Wilson, 2016). The company can even supply custom cakes and other products to the locations outer the ordinal geographic area.

Marketing 

AAB will grow its business over the years. The company is going to rely on its people to create delicious baked goods. The talent team of the company will be an ingredient in the success.

Product 

AAB will be leading food retailer and local delicacy expert. The signature products of the AAB will be coffee, wine, honey, desserts, and cakes. There will be wide options of the offerings of the company. AAB has even decided to expand its business from dessert retailing to the customizing services. The company will even provide assistance in the dessert making and coffee barista. The company will involve in healthy food making and produces natural honey (Gagiu, et al. 2016). It even proudly produce and sell wine from South Australia. Other than the wine and honey products, AAB will source and export natural snacks. The company will be capable of attaining specialty in exporting food and beverages. The company has further decided to expand its product category by adding Italian food. The Italian food will be made available in options like pizza, pasta, arancini, lasagne, prosciutto and ribollita (Horstmann, et al. 2019).

Pricing

The pricing of the company will comprise a percentage of the operating expenses along with the costs of the supplies to produce the goods. The selling price also needs to comprise some profit. These are the variables used in deciding the amount of the products. This determines how many operating expenses and profits need to covered in the prices (Festa, et al. 2016). AAB will increase the prices once the products become popular in the local market. The prices are adjusted accordingly.

Distribution

AAB will have various distribution channels to work for the products and services. The customers will be capable of purchasing products from store or order online. The customers could order in person. The customers could pick up the desserts in person and take home (Moskoff and Gayle, 2016). The other distribution channel to order products will be by phone. The customers could pick up the products in person and take the products home. The customers could order on the website of the company and avail the products (Resnick, et al. 2016).

Promotion

The company will make use of marketing communications for the target customers. AAB will provide new information in order to persuade customers to purchase products. The promotion mix of the company will comprise advertising, sales promotions, public relations, and direct marketing. The advertisements are the most noticeable among the target market. The print media and online media will be important sources of the advertisements. Add on, the public relation activities will promote the business through the brand strengthening (De Mooij, 2018).

Financial plan 

AAB is having $100000 existing funds. The company will require more funds in order to add a new product category which is Italian food. So, the company will take a loan of $100000 in order to launch the range of Italian food. The start-up expenses of the company will be as follows:

Income sources

Sell of food items

 

 

Sell of beverages

 

Employees (total number)

30 employees

 

 

(Salary of each employee is $ 300.)

 

Projected investment (equipment and material)

$ 200000

 

Depreciation allowed for

Machinery and equipment @ 10% (SLM)

 

start-up Expenses calculations

 

 

 

Furniture & Fixtures

 $         25,000

 

Equipment

 $         30,000

 

Packaging

 $           8,000

 

Installation of Fixtures & Equipment

 $           5,000

 

Starting Inventory

 $         16,000

 

 Professional Fees

 $         10,000

 

License and Permits

 $           8,000

 

Advertising and Promotion

 $         10,000

 

Consulting

 $         12,000

 

 

 $      1,24,000

 
AAB can easily avail the loan from any recognized bank of Australia due to the good business plan. The loan taken by AAB of $100000 will be paid off in the ten years. 8.5% interest will be paid annually.

 


AAB is assuming to reach on BEP (Breakeven point) within one year. It will take one year to cover all the expenses made by the company on the product launch. The company is assuming around $44000 profit in the second year.

Profit & Loss Statement

 

 

 

 

Month

Dec 19

Dec 20

Dec 21

Income

 

 

 

 

 

Total Sales

50,000

1,50,000

1,80,000

 

Less Total Disc/Comm

5,000

15,000

18,000

 

Total Net Income

45,000

1,35,000

1,62,000

 

Less Total Cost of Gooods Sold

15,750

47,250

56,700

 

Gross Profit

29,250

87,750

1,05,300

 

Expenses

 

 

 

 

General & Administrative

3245

3465

3465

 

Marketing & Promotional

1650

2310

2448.6

 

Operating Expenses

6105

7018

8246.865

 

Motor Vehicle Expenses

1281.5

1281.5

1281.5

 

Website Expenses

544.5

544.5

544.5

 

Total Employment Expenses

1815

2631.75

3376.656

 

Occupancy Costs

5995

7026.25

8444.219

Total Expenses

20,636

24,277

27,807

Yearly Net Profit / (Loss) before tax

 

8,614

63,473

77,493

Less: Tax expenses

 

2,584

19,042

23,248

Total Year to Date Net Profit / (Loss)

6,030

44,431

54,245

 
 

Critical risk 

Some risks are considered to be unknown are not unknown. The types of risks to be faced by the company are:

Physical risk: The physical risks include risk to the employees, building, and assets. Some common physical risks which can be faced by AAB are water damage, fires, and theft.  The physical damage can put consequence in repair or output costs. It can also cause to the legal costs if found liable.

Strategic risk: The decisions made by the company will be designed to lead closer to the business objectives. The strategic risk can be due to the poor execution, lack of resource or changes occurring in the business environment. Such risks can result in loss of profit, missed deadlines, poor cash flow or low sales.

Compliance risk: AAB will be governed by some form of legislation and regulation. The chances of failing to obey these regulations parallel to compliance risk. It can even lead to fines, suit, and goodwill damage.

Human risk: The employees of the company can also form a risk for the business in a number of ways. The behavior of the employees can create risk inside and outside of the workplace. The company is required to protect itself from the risks such as fraud or embezzlement.

Technology risk: The technology can be the major cause behind some common risks faced in the business. Such risks can be faced in the company due to the hardware and software failure, mail ware or cyber-attacks. Such risks cause loss of time along with the loss of data.

 

References 

Babin, B.J. and Zikmund, W.G., 2015. Exploring marketing research. Cengage Learning.

Baker, M.J., 2016. What is marketing?. In The Marketing Book(pp. 25-42). Routledge.

Boyd, B., Royer, S. and Goto, T., 2019. Competitive advantage in long-lived family firms: Implications of market characteristics and strategically relevant knowledge. In The Palgrave handbook of heterogeneity among family firms (pp. 961-1000). Palgrave Macmillan, Cham.

Chakrabarti-Bell, S., Patel, M.J., Ng, J. and Hawkins, W.E., 2017. On the use of low protein flours and ‘smart’sheeting lines for making bakery products. Journal of Food Engineering, 209, pp.36-44.

De Mooij, M., 2018. Global marketing and advertising: Understanding cultural paradoxes. SAGE Publications Limited.

Fehér, I. and Németh, N., 2017. Analysis of the Situation and Competitiveness of Hungarian Pasta Industry (based on Porter’s model). Volume of Management, Enterprise and Benchmarking in the 21st century IV, pp.55-65.

Ferguson, M., Souza, G.C. and Toktay, L.B., 2016. Examples of Existing Protable Practices in Product Take-Back and Recovery. In Closed-Loop Supply Chains (pp. 162-177). Auerbach Publications.

Festa, G., Cuomo, M.T., Metallo, G. and Festa, A., 2016. The (r) evolution of wine marketing mix: From the 4Ps to the 4Es. Journal of Business Research, 69(5), pp.1550-1555.

Gagiu, V., Doja, L., Mateescu, E., Smeu, I., Cucu, M.E., Oprea, O., Iorga, E. and Belc, N., 2016. Contamination with deoxynivalenol in the milling-bakery industry under the influence of climatic conditions from Romania. J. Hyg. Eng. Des, 16, pp.38-44.

Horstmann, S.W., Atzler, J.J., Heitmann, M., Zannini, E. and Arendt, E.K., 2019. Impact of different S. cerevisiae yeast strains on gluten-free dough and bread quality parameters. European Food Research and Technology, 245(1), pp.213-223.

Litvinova, T., Morozova, I. and Yatsechko, S., 2015. Experiential Marketing as a Tool of Improvement of Competitiveness of Enterprises in the Market of Bread and Bakery Products. Mediterranean Journal of Social Sciences, 6(3 S6), p.11.

McDonald, M. and Wilson, H., 2016. Marketing Plans: How to prepare them, how to profit from them. John Wiley & Sons.

Moskoff, W.V. and Gayle, C., 2016. Jewish Bakers in Late Nineteenth-Century Great Britain and Sunday Baking Restrictions. Shofar, 35(1), pp.51-67.

Nammakuna, N., Barringer, S.A. and Ratanatriwong, P., 2016. The effects of protein isolates and hydrocolloids complexes on dough rheology, physicochemical properties and qualities of gluten?free crackers. Food science & nutrition, 4(2), pp.143-155.

Resnick, S.M., Cheng, R., Simpson, M. and Lourenço, F., 2016. Marketing in SMEs: a “4Ps” self-branding model. International Journal of Entrepreneurial Behavior & Research, 22(1), pp.155-174.

Ryan, D., 2016. Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers.

Subramaiam, S., Quoquab, F. and Mohammad, J., 2017. The journey of Blitz: challenges lie in running the family business. Emerald Emerging Markets Case Studies, 7(4), pp.1-18.

Sufer, Ö., Bozok, F. and Demir, H., 2016. Usage of edible mushrooms in various food products. Turkish Journal of Agriculture-Food Science and Technology, 4(3), pp.144-149.

Zhang, H., Zhou, C.F., Pedersen, L.T. and Luo, L.L., 2016. Understanding Craftsman’s Creativity in a Framework of Person, Process, Product and Press (4Ps). In Internationale Conference on Humanities and Social Science (pp. 908-913). Bokförlaget Atlantis.

Zhou, N., Schifferdecker, A.J., Gamero, A., Compagno, C., Boekhout, T., Piškur, J. and Knecht, W., 2017. Kazachstania gamospora and Wickerhamomyces subpelliculosus: Two alternative baker’s yeasts in the modern bakery. International journal of food microbiology, 250, pp.45-58.

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