8.1Start-Up Expenses
Office supplies: - The Company would purchase computers, furniture, phone system, internet etc. which would cost around CAD$ 5000.
Warehouse rent & deposit: - Rent for the storage warehouses and deposit. The rent would amount to around CAD $3500 and the deposit would be the one month rent additional.
Insurance: - The Company will also bear insurance expenses at the start up. The insurance will cover the warehouse and the goods the insurance which would amount to CAD$ 1000.
Website development: - The Company would hire professionals to develop its website and promote the company virtually. The expenses would incur around CAD$ 6000.
Advertising: - As the company is new in the market it will have to advertise heavily to promote its products and services. The advertising expenses would be around CAD$ 1000. Apart from the normal advertising, the company would conduct events at community centres to create awareness about the product. The company would also organise a promotional show in all the areas which would help it to interact and promote its product among retailers, local vendors etc. The overall cost for these events would approximately go up to CAD$ 10000.
Legal expenses: - The Company for its registration and other legal formalities would hire the services of lawyer which would sum up to CAD$ 700.
Other Costs: - The Company would hold current assets in the form of cash, inventory, account receivables etc. These are used for day to day expenses and operations. The total amount in the form of assets would be around CAD$ 472,800. The inventory would be of CAD$ 400,000.
8.2Fixed Cost & Variable Cost: -
The fixed cost would be around CAD$ 20000 which would include machinery cost, administrative expenses, marketing expenses, insurance expenses etc.
The variable cost would be around CAD$30000 which would include wages, packaging etc.
The company has a target for sales which is 80% of the total inventory which comes up to CAD$ 320,000.
8.3Optimal price to be charged
The optimal price charged by the company would be comparatively lower as compared to the competitors.
The prices of the food products would depend on competitor’s prices and demand for the products. The new variety of products would be charged with a lower profit margin initially and later it would fluctuate depending on the demand for same.
Heat to eat products CAD$2 - CAD$3 Per product
Basmati Rice CAD$ 10- CAD$ 13
Coconut hair oil CAD$ 2- CAD$4
Bakery products CAD$ 2- CAD$4
Spices CAD$3- CAD$5
Sweets & Desserts (Indian) CAD$ 4 - CAD$ 8
Canned foods (lentils, beans) CAD$ 4- CAD$ 6
As the herbal products market is untapped we will adopt a moderate pricing strategy neither high nor low along with a minimal profit margin.
8.4 Price Charged by Competitors
Following table reflects the products Traded by the competitors and their prices:-
Heat to eat products CAD$3-CAD$4 Per product
Basmati Rice CAD$ 13- CAD$ 15
Coconut hair oil CAD$ 3- CAD$5
Bakery products CAD$ 3- CAD$5
Spices CAD$3- CAD$6
Sweets & Desserts (Indian) CAD$ 7- CAD$ 10
Canned foods (lentils, beans) CAD$ 6- CAD$8
In Canada, as per our market research we didn’t find any significant competitors dealing in herbal products. There are only a few dealing in couple of herbal products. Unlike them we will deal in entire range of herbal products.
As this market is untapped we will adopt a moderate pricing strategy neither high nor low.
8.5 Factors taken into consideration while charging price:
• Cost-plus pricing: We will fix the price of our product by adding a minimum profit margin to the actual cost incurred by us in importing the product in Canada. In order to determine the actual cost we will have to consider various costs like indirect cost, direct cost and fixed cost.
• Perceived value to the customer: As we are adding uniqueness to the product line by offering quality and herbal products which do not exist in the market, the perceived value will be higher to the customers. Hence, they may be willing to pay higher for the extra value which they will get from our products.
• Penetration pricing: This pricing technique is the low-cost approach, where you can set your prices lower than the competitor’s for attracting more and more customers. This would have various problems like you have to squeeze your profits, and in some cases there may be business shutdowns or collaborations with others.
• Reputation: Prices are to be charged by keeping in mind the reputation of the products and the brands we are dealing. So, the prices will differ depending on the brands we will deal in.
We will differentiate ourselves from our competitors with respect to:
• Cost: Compared to other players in the market we will be offering our products at low prices. Since we are targeting the immigrants in Canada who rarely gets time to cook food, our aim is to offer quality and nutritious foods at affordable prices. Thus, we will keep our profit margin low.
• Quality Service: As the competitors are over-charging for low quality products, there is a lot of dissatisfaction among customers in the market. Our objective is to provide quality goods at reasonable rates. Moreover, if we bring some extra value to our products customers will be willing to pay a premium price for it.
8.6 Price sensitivity of the market segment:
The market of today is booming all over the world which results in an increased competition. We can easily find substitutes of a product in the market which leads to confusion among the consumers. We have two different market segments:
- Ready-To-Eat (RTE) MTR Products
- Herbal Products of IMC Company
- Our Ready-to Eat MTR products are characterized by high concentration, large volume of sale, good profit margin and introduction of new products. These factors have made this food industry a differentiated product industry in which the price competition is cooperative. Price is a very important factor when it comes to food selection. The choice of consumers while selecting the RTE foods depends on the following reasons:
• Price of RTE food in comparison to cost of eating outside.
• Cost of convenience in RTE food v/s Efforts needed in cooking food.
• Product
• Brand Value of the Company
• Type of packaging in terms of Hygiene
• Country of origin
• Validity of the product
• Variety offered as compare to other brands
So, we can say that our MTR products are not price sensitive but they are rather sensitive towards introducing different products. - Our Herbal products of IMC Company are characterized by quality, price of a product, uniqueness, market branding and profit margin. Herbal industry is growing at a very fast rate due to the increase in awareness between people about the benefits of using it. The main aim of IMC is to provide effective herbal products without compromising its natural flavour at an affordable cost. Due to the massive competition in the herbal industry and the availability of wide range of substitutes in the market, this industry has a limited profit margin. They are keener in increasing the sales volume. So, herbal industry is very wide that they cannot stretch themselves in terms of price-cost ratio.
8.7 Opportunity to sell at different prices in each market segment- so enhancing profits?
No, in our opinion answer to question 6 does not make us believe that our products can be sold at different prices in each market segment but we will definitely look to sell our product at different price depending on the degree of competition in the market.
Setting a suitable price is one of the principal task of marketing and it should be done through systematic pricing policies and strategies so that our company can reap maximum profit.(Pricing policy and strategy, n.d)
In our business plan of ready to eat and herbal products if we will sell our products to wholesale grocery stores like Walmart, Food Basics etc. then we have to offer our products at a much competitive price as we will be facing a tough competition from the existing players of the market. Also these stores have a huge variety and the number of people visiting these stores are very high so if we will be able to beat our competitors in these stores, then we can compete with the best. Price would be at a much higher at the stores that will sell only our products or any exclusive outlet of our products. Therefore, we focus on Competition based and Demand based pricing strategies.
Secondly, we have to make a detailed study about the purchasing power of population living in different geographical area. Segment with higher class people will be able to spend more. For instance, we will sell our herbal and ready to eat products at a higher price in downtown of Toronto whereas for a city like Scarborough we will keep a modest price as middle class population and large immigrant’s population stay in this city. Also, there are certain good herbal products already in the market ,so we can’t sell same products at higher prices hence we look for Competition based pricing for them and for the products that we newly launch in the market, value based pricing would be the most appropriate strategy in this case.(Pricing Strategy, n.d)
9.Advertising& Promotion
9.1)Leaflet -describing our product and services.
9.2) Press release announcing business, list of media and approximate cost associated
FOR IMMEDIATE RELEASE Students Union
786 Progress Ave, Scarborough, ON, L6Y 9M8
Office: (647) 234-1313
Fax: (647) 316-5876
[email protected]
Quality Foods Inc. all set to enter the market
International youth look forward to become the dealers of high standard Asian food stuff
By ABC
February 8, 2017
Scarborough, ON – International Business Management students studying at Centennial College, today announced that they will be commencing operations their company with effect from March 3, 2015. Company officials disclosed their plans to become the wholesale distributors of quality Asian ready-to-eat foods, herbal products and other items.
The executives of the company are confident that their business will earn appreciation from their customers. The company’s big line of products catering to the needs of the immigrants and Asian community are expected to discover a good market in Ontario and other areas.
Quality Foods Inc. aims to benefit those segment of the society who don’t have the time to cook meals. As a solution, the company will bring in Canada cheap and nutritious food items from Asian places, mainly India and neighbouring areas. Due to their specialization in quality and cost, the officials of the company are expecting to receive correspondences from many retailers and grocery stores.
Contact
To learn more about the company, please contact
SP
Executive, Quality Foods Inc.
786 Progress Ave., Scarborough, ON
Office: (647) 234-1313
Fax: (647) 316-5876
[email protected]
List of the media to whom we will send the release
The release of the company will be sent to the following list of media so that our business gets a good degree of media coverage:
• Target list of journalists/editors: After making the release, the next key step will be to find the list of best editors to whom we can send the press release for distribution or printing in newspapers or magazines. We will contact with the journalists connected with the famous newsprints, such as Toronto Star, Toronto Sun, Star week, CBC Toronto or the Globe and Mail.
• E-mails: The press release of the new enterprise will also be sent to the email addresses of the key customers in the industry. As stated earlier, our primary clients are the retail food outlets or the grocery stores. So, we will seek their email addresses to send them our press release.
• PR distribution agencies: With the goal to reach out as many people as possible, we will also use the services of famous PR distribution agencies, such as Market wired, CNW who have alliances with Canadian Press Wire Network and access to hundreds of newspapers, radio, TV and websites across Canada.
Cost of Press Release
The company would send the release to one of the newspapers, plus one PR distribution agency. Apart from it we would email the press release to a number of key clients, whose addresses will be retrieved from primary research. The overall cost for the press release will be:
Price for sending the release to newspaper for issuing it- CAD $300
Price for hiring the services of PR distribution agency – CAD $300
As mentioned, sending the press release through emails to our clients would not cost us anything.
9.3)Advertising& Promotional Plan
Expectations from advertising and promotion along with customer response.
As we know that high targeted communication yields better results, so we will consider the use of various media. The main expectation from the advertising and promotion plan is to raise awareness among the customers. With the use of promotional tools, we aim to create a brand image, and we look forward to target our audience efficiently. The most important thing is we would like the audience to contact us by telephone or emails. Thus, our advertising and promotion will be concentrated to achieve the following objectives:
Inform: Through the advertisement we want to generate awareness for our brand and products. The independent brand image will be a competitive advantage in the industry.
Persuade: We want our clients to contact us after receiving information about the company and its business.
Remind: We expect to create long term interest and enthusiasm for our products. We want to develop a good, clear philosophy and make people know that we deal in quality products. Our main goal will be to inform the customers that we care for the society by specializing in low cost and healthy food stuff. In other words, we want to build credibility.
Use of Media
We will consider the use of different media as each media has its own benefit or advantage over the other. Following are the list of media which we will make use of:
Direct mails or traditional printed letter: It is a form of advertising in which we will send marketing messages directly to a list of customers or prospects. In other words, we will address directly to the members of a target market by acquiring their mailing list. We will focus more on this media as it is fast, reliable, and we can expect replies from the clients in a short span of time.
Internet advertising: As in trend nowadays, we will use Internet for transmitting our promotional messages to our customers. We will either advertise our business on social media, or we will opt display advertising. The company will also develop a website of its own to promote and communicate it products and services to the customers.
Posters, billboards and signs: Being eye catching, we will like to advertise our company by the use of this media as well. To create awareness, we will put the company’s posters or use display billboards at one or two busy places in Scarborough.
TV and Radio: TV and radio have always remained effective to convey business related messages. We will especially focus on radio to highlight our brand name among the prospective customers. As Asian people like to hear radio a lot, this media will get us maximum coverage.
Press Release: Besides, we will also frame press release containing essential information about the business, and send it to the famous newspapers or PR distribution agencies for printing.
Leaflets or Brochures: As it is a cost effective and widely used media for advertising new businesses, we will print attractive and colourful brochures with a good amount of business related information and distribute it to the target list of customers comprising of retailers and grocery stores in Ontario
Importance of the plan
It is very important for the business for the promotion and advertising to be a success as these events will help the company to build a relation with retailers and wholesalers. It will also help the company to explain its services and products list and the main objective and the reason for entering in this market with new products.
It will help us in creating awareness about our products and services among the target market and how it is different from others. It will also provide us a platform to introduce new variety of products which have not been sold in the market earlier. The participants in the promotional event would be introduced the specialty of the products and future prospects along with target market.
It will also help the company to make the retailers and wholesalers realize about differences in our services and competitors services.
It is important for the company to make this work as this will create initial impression about the company in the market which will help in capturing the market. The promotional event and advertising will help the company to represent itself as a brand for value and quality products.
Monitoring the results of advertising
It is vital to measure and analyses the results of the advertisement to make sure whether there is a good return on the advertisement investment and the goals of the advertisement are met. Besides, we can improve our future advertisement campaigns after analysing the performance of the current campaigns. If the company witnesses an increase in the number of enquiries, whether by phone, mail or website, then we can advocate that our advertising is successful. But, it should be kept in mind that advertisement takes time to generate results.
There are numerous ways through which we can assess which form of advertising works the best. They are as under:
Whenever customers will contact us we can ask them how they found our business.
We will prefer to use a separate phone number for the advertisements on different media so that we can track and analyse the response of each advertisement.
Once we launch a new advertisement campaign the enquiries we will receive from the clients will enable us to check the effectiveness of the media. In case of a positive response, we will maximize the use of that specific media for our future advertisements.
Overall if we receive a good number of positive enquiries from our first advertisement campaign, then we can say that our advertisement goal of creating awareness about the new brand has been successful
Cost of the plan
Various cost are to be considered while developing promotional events such as printing, postage, brochure design, rent for the place etc.
As the company will be organizing a common event for promoting its product and services it should not keep an expensive promotion budget but it should not be too less. The overall cost of this promotional event would be approximately between CAD $5000 - CAD $8000. This would cover all the expenses such as printed invitations, venue rent, advertising and broadcasting cost, sample products, refreshments for guest, radio promotion. Also a team for handling the event would be hired apart from the employees of the company to organize it smoothly.
- Place and distribution
10.1)Size and type of premises is required for our venture.
There should be one office in the warehouse where we can keep the record of each incoming and outgoing transactions and moreover we can maintain our inventory in that office. Our main office will be located in the area where most of the Asian communities live as we are bringing Asian products into the market. As, this country is the land of immigrants and most of the immigrants are students and working people which almost belongs to Asian countries. The warehouse should be located in that area where we can easily access the highways for effective distribution of the products. The place where the warehouse is located should be less costly as we are just starting a new company and the investment is less. Public transport should be easily accessible in the area where the warehouse is located. We should have a check for health and safety risk assessment for the workplace.
If u are renting the place first step is to check that the proposed rent is according to the market level and the rent should include following conditions.
• Parking space.
• Rent to be paid quarterly or monthly.
• Building insurance
• Repairs
• Spacious
We should check the repairing responsibility in case of renting the warehouse as the cost involved is repairing the building is sometime very high so make sure that you look for the possible replacement of fixtures and fittings while signing the lease deed.
10.2) Describing the Location
The location of the premises would be such that it would be located not far from the clients which will make it easier and quicker delivery of goods. Also the rent of the premises should not be too high. The condition would also matter as the goods might be damaged or lost due to fire in case of bad condition of premises. The location should have ample space for operations and equipment. The location should be near to the target market. The amount of inventory handled by the business should be able to fit in the location selected. The traffic pattern in the location area should also be considered as it can affect the services of the Business. The location should be analysed in terms of safety and connectivity the area the business operates in.Several other factors such as communication services in the area, electrical systems and power issues should also considered as it affects the operations of the company.
The location of our company would be present in the Greater Toronto Area (GTA) as it will convenient for the company to cover up all the parts of the city from this location. The exact location would be selected on various factors described above.
10.3) Advantages of this type of premises:
This kind of premises will be very helpful for our venture as the warehouse is equipped with heating and cooling facilities so this is an advantage as people can work there comfortably and our products are maintained. There are some more advantage for the retailers and wholesalers as, our warehouse is located near to highways so the delivery of good will be effective. The best advantage is the cost of warehouse as it is cheaper as compared to the down town. If we are renting the warehouse in the starting of the business than it saves a lot of cost and we can invest more into the business. If the warehouse is spacious than we can store more amount of goods as it will provide backup for the time when sale of Asian products is more into the market. The parking space in the premises is also an advantage and it’s good for our customer’s point of view. If the repairs are made in the starting of the lease then it will prove to be a good deal as, we are not worried about the safety of work place.
10.4) Freehold:
This kind of premises will be very helpful for our venture as the warehouse is equipped with heating and cooling facilities so this is an advantage as people can work there comfortably and our products are maintained. There are some more advantage for the retailers and wholesalers as, our warehouse is located near to highways so the delivery of good will be effective. The best advantage is the cost of warehouse as it is cheaper as compared to the down town. If we are renting the warehouse in the starting of the business than it saves a lot of cost and we can invest more into the business.
If the warehouse is spacious than we can store more amount of goods as it will provide backup for the time when sale of Asian products is more into the market. The parking space in the premises is also an advantage and it’s good for our customer’s point of view. If the repairs are made in the starting of the lease then it will prove to be a good deal as, we are not worried about the safety of work place.
10.5) Leasehold:
Leasehold property is a temporary ownership of a property or land in which a tenant or lessee holds rights of real property by agreeing on certain terms and conditions as decided between the tenant and landlord or lessor. There are certain types of lease agreement depending upon the property such as residence, commercial and agricultural. Our company will look for a commercial property. A commercial property lease is an agreement between a landlord and a business tenant. This contract will help us to use the premises for our business by signing a contract for a specified period of time upon paying an agreed amount as rental to the landlord. Some of the points we must keep in mind while investigating a commercial property:
a) We must negotiate before signing the deal as we cannot agree to all the terms immediately.
b) We must read the lease carefully firstly and then discuss it with our professionals such as lawyers, lease consultant or accountant before going further.
c) We must make sure to make any changes in writing not verbally.
Period of Lease: We are looking to occupy the premises on a renewable period of time. We will lease for 11 months with a clause which will include a renewable option.
Rent Payment: Rent payment depends upon the size of the space leasing. The term of the payment of rent is decided by the mutual understanding of both the parties on monthly or quarterly basis. There are certain types of commercial lease calculations such as percentage rent lease, gross rent lease, net lease, net-net lease and triple net lease (net-net-net).
Renew: In the era of globalization, it is very important to take time in order to settle down in the market. We need space for keeping our products which on demand will be delivered to the specified location. We will look for a property to lease which has an option to renew after the end of tenure of the agreement.
10.6) Insurance and Premium.
The Company’s assets which can be insured includes:
Inventory
Warehouse premises
Office
Delivery Vehicle
Employees[including team members/partners].
Inventory
The cost of inventory which we will be holding is 400,000 CAD and our sales target is 80% of the inventory which is 320,000 CAD.
Insuring the whole stock of inventory will not be feasible for our company. Also our product's Shelf life is of around 1 to 1.5 years so the expiration of our product is not a problem. This automatically reduces the risk of product wastage.
Our products are also not dangerous and inflammable which is another advantage for us. As mentioned above our sales target is 320,000 CAD which is 80% of the total inventory, so we will be insuring 50% of our inventory to be on the safer side as we have targeted to sell most of our stock by the end of every month.
So the value of insured goods will be 200,000 CAD. We will pay premium of around 0.5 % monthly which is 1000 CAD$.
Warehouse
We will rent the warehouse and the rent which we will pay is 3500 CAD$ a month including utilities. The premium which we will pay for the warehouse will be 100 CAD$ a month as per our product specifications and cost of inventory.
Office
We will rent a small office with very few employees as our team will manage and do everything on our own. We will rent an office for 1500 CAD$ a month and will pay a premium of approximately 50 CAD$ monthly just to secure our office furniture and appliances.
Delivery Van
We will buy a delivery van for not more than 4000 CAD$ and the insurance cost will be approximately 400 CAD$. It is higher than normal car because it is a commercial vehicle and may possess valuable goods.
Employees
All of our business partners/ team members and employees will insure ourselves for health insurance and we will also bear the cost of insurance for the delivery van's driver.
We are 6 business partners/ team members and a basic health insurance plan for 1 year would cost us approximately 700 CAD$/person. And we will hire 3 more employees so the cost would be approximately {9 person X 700 CAD$} = 5600 CAD$ a year + Drivers insurance which would be around 150 CAD$ a month i.e. 2100 a year
5600 CAD$+ 2100 CAD$=7700$
10.7) Adequacy of these plans for future needs:
The warehouse we will rent will accommodate all our inventory at the present time but in the future when our company will grow and we will expand our operations and business we will need a big space or even more warehouses at different locations for the smooth transportation and flow of products.
Same goes with our office premises. As our company will grow and expand we will hire more employees and then definitely we will have to rent a bigger office to accommodate all our staff for adequate work space.
10.8)If you have not found your premises yet, what plans do u have to find them?
As our business deals with products which is used in household hence, if the premises are not yet finalized then we should plan some locations which will attract lot of people who come for buy household products. The most important aspect in business is location. For example: If you sell the best quality of vegetables in fish market it won’t fetch you any sale and you will end up facing losses.(Spaeder, 2004)
A business plan has two specific purposes for its start, first is to raise an additional capital so that a profit could be achieved for further re-investment or diversification and, secondly provide a detail of how to succeed in thebusiness. For these two specific purposes we need answer to two most important questions which are “Why here?” and “How can we succeed here?”(Khera Communications, 2006)
First question need to answer the following points-
- Factors which have attracted to this location for the business.
- How we have figured out the location out of other options.
- Demographic analysis of consumers in the city.
- Traffic patterns
- Competition in the area from other competitors.(Khera Communications, 2006)
Plan to find the Premises - Challenges which we will face to find the target consumers and how we could build trust on them so that we can get consumer loyalty.
- A factor which will differentiate us from all the competitors in the market.
- Formation of a proper marketing plan according to the demographics.
- Learn from the competitors from time to time that the thing which they are doing right to be successful in the business.(Khera Communications, 2006)
Lastly, location is the prime location from where we have to operate our business. We also need to go through the legal complications, if any of them are there for our type of business. We also need to check that if we want to take any permissions from the government or any authority. For example: As our business is involves food, we need to approve with the food department of Canadian food quality department and we should be able to assure them of proper location of the premise so that the material us kept in proper environment needed for the product.
10.9) Channels of distribution used in your business
Channels of distribution is the path from which goods need to travel from the vendor to customer and vice versa it is for the payments which need to be reached to ultimate vendor from the consumer. A distribution channel can be short as I am a producer of a product and I sell it to consumer directly or it may involve lot of intermediaries such as wholesalers, distributors, agents and retailers.(Businessdictionary.com, N.D.)
As our business is of ready to eat meals and herbal products and we are just kicking off a start, we will try to sell and promote the products to consumer directly in our store. But for providing our products at competitive stores such as Food Basics, No Frills etc. we need to have a word with the responsible authority or we have to be in contact with the distributors who supply products to these stores so that these stores can sell these products. Use of distributor is to promote our products easily as he already has built a trust over these suppliers of products as it’s his daily job to provide these stores with new and effective products.
Secondly, we can also look further to use websites like amazon to sell our products which can effectively prove to be an important channel of distribution. Online channel can save lot of time in promotion of our brand and making the people know about our brand of ready to eat products and herbal products. Also we can mention the detail and advantages of our products which can be accessed by millions of consumers. One online customer satisfied can loop in lot of consumers within very short time.
As we need to invest very carefully in starting this new venture we will prefer these two channels in the beginning and being successful in sometime can further attract the other expensive channels of distribution such as exclusive promotions, door to door selling of product etc.
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