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CHAPTER TWO
2.0 THE MARKETING PLAN
In order to have a workable or realistic market plan, the proprietor intends to
conduct a market research.
Methods to be used Questionnaire. A questionnaire with questions related to the
plan will be prepared and shall be distributed to the present and prospective
customers. The expected information is that these customers can disclose
problems that confront them and areas of dissatisfaction that can be addressed.
The information to be obtained may also reveal whether new products can be
offered.
Environment. The business will try to understand the environment it will be
operating in because this will help to discern the threats and opportunities
associated with the area of business.
The external threats are:-
Political and legal changes such as new regulations
Economic factors such as interest, exchange rates and consume confidence
Social factors such as changing attitudes and life styles and the ageing
population
Technological factors such as new materials and growing use of the internet
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(d) Highly Employed
Married- Those married may be promising customers because they are settled and
mindful having profitable investment like building houses.
Permanently employed- These can be relied upon because they have a permanent
job and therefore have job security. In case of buying on credit the possibility of
them paying their debts is high.
Highly educated- These are people who are holding executive position in their
organization and receive good remunerations.
Self employed These are people who are self employed and can be relied upon as
they can buy product and make cash payment.
The potential customers can be described as:
i) people who need or want the product
ii) people who are able to buy the product
iii) people who are willing to buy the product
The meaningful buyer group shall be divided into two groups
a) Those ranging the age of 25 years to 35 years
b) Those ranging the age of 35 years and above.
Those 25 to 35 years of age groups are potential customer who have completed
their college education and have been either employed or are self employed and are
in need of the product for painting their newly built houses.
Those 35 years group and above are the potential customers who are either
employed or self employment and are in need of the product for painting their
existing house or their newly built house. They can be married or not married so
long as they are able and willing to buy the product.
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According to a survey that was conducted by the proprietor, the customer look for
the original product, high quality, type of package and durability of the product.
In view of this information, the business will sell original product, which is of high
quality and durable in nature. Although some customer may be buying during the
day, most are predicated to be buying in the morning hours and in the evening on
their way home after leaving their places of work.
However, it is expected that high volume of sales will be realized at end of the
month when the customers who are employed have received their remunerations
and those in self employment when they receive money from their debtors.
Since the business will be new and small in size, the mode of payment of the
product by the customers will be restricted to cash payment.
The other mode of credit and reward of cash discounts may be introduced as and
when the business growth to the level that it is able to meet both direct and indirect
cost comfortably.
2.1.2 MARKET SIZE
The market is already established and some business have already taken up their
number of customers.
The market is mainly dominated by certain business which are the potential
competitors of the business.
According to the survey carried out by the proprietor of the proposed business, the
potential competitors in the industry would each take a share of customers as
analysed below:
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Kamiti Hard ware Store__________ 15,000
Banana Hill Hardware Store____ 10,000
Ruaka harware Store ______ 25,000
Ebenezer Enterprise ______ 20,000
Utungi Harware (proposed Business) ______ 30,000
Total Customers 100,000
Percentage _______________Customers
Kamiti Harware______________ 15,000x100= 15%100,000
Banana Hill Hardware_________ 10,000x100= 10%100,000
Ruaka Harware______________ 25,000x100= 25%100,000
Ebenezer Hardware___________ 20,000x100= 20%100,000
Utungi Hardware ____________ 30,000x100= 30%100,000
Proposed sales of Units of paint per Month
Business (proposed) Utungi Hardware
Sizes in Litres Cost Number of Units Total Sales Per Month
Sh sold per month Per month Ksh
Litre 200 1000 1000x200 = 200,000
1 litre 400 1000 1000x400 = 400,000
4litre 1,200 400 400x1,200 =480,000
20 litre 3,000 200 200x3,000 = 600,000
Total Sales per month Kshs 1,680,000
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KEY
(i) Estimated total No unit of paint tobe sold each month ________ 2,600
(ii) Estimated total sales per month Ksh_______1,680,000
COMPETITORS AND THE TARGET NUMBER OFCUSTOMERS
COMPETITORS TARGET CUSTOMETS PERCENTAGEI Kamiti Hardware Store 15,000 15%II Banana Hill Hardware Store 10,000 10%III Ruaka, hardware store 25,000 25%IV Ebenezer Enterprise 20,000 20%V Utugi Hardware (proposed Business) 30,000 30%
Total Target Customers 100%
Table 2.1.2
The number of people/customers who would need the business product will be
30,000 (30%) when the business will be in operation. It will be expected to sell
Units(No) of the product (paint) 2,600 per month.
The business is expected to perform effectively and would therefore be making
estimated sales of Ksh 1,680,000 per month.
2.2 THE COMPETITION
2.2.1 POTENTIAL COMPETITORS
The potential competitors in the Industry are;-
i) Kamiti Hardware Store
ii) Banana Hill Hardware store
iii) Ruaka Hardware Store
iv) Ebenezer Enterprise
These competitors conduct/operator their business from the premises which are
slightly interior from the main Road Nairobi Banana Limuru Road as
opposed to the proposed business which will occupy the premises which is just
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near the main road and adjacent to the bus stop where matatu pick and drop
passengers.
Advantages due to the location of the business are;
The nearness to the main road
The customer will easily locate the business
Many customer will stop and buy as they can have access to window display
of product
Volume of sales will increase due to number of customers who buys theproduct
Number of potential customer will increase.
SIZES OF COMPETITORS
The sizes of the potential competitor range from small, medium and large and have
been assessed by the value of the Assets, annual sales volume and number ofemployees. The table below illustrate the sizes.
THE SIZE OF POTENTIAL COMPETITORS IN RELATION TO THE
PROPOSED BUSINESS.
PROPOSED
UTUGI
HARDWARE
KAMITI
HARDWARE
BANANA
HILL
HARDWARE
RUAKA
HARDWARE
EBEBEZER
ENTERPRISE
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KSHS
ASETS
700,000
TO
900,000
300,000
To
500,000
400,000
To
600,000
500,000
To
700,000
600,000
To
800,000Sales
Volume
90,000
To200,000
50,000
To150,000
60,000
To170,000
70,000
To180,000
80,000
To190,000
Number of
Employees
1- 5 2 4 2 5 5 8 8 - 10
SIZES OF FIRMS IN THE INDUSTRY
KEY
Small size Medium size Large size
Assets - Ksh 300,000 to 500,000 500,000 to 700,000 700,000 to 900,000
Sales &
Volume Ksh 50,000 to 150,000 70,000 to 180,000 90,000 to 200,000
No. of Employees 1-5 5 8 8 - 10
Advantages of the small size (sole proprietorship) of business are as follows:-
a) A sole proprietor keep all the profit
b) It is simple to start
c) It takes a short time to make decision like expansions
d) A sole proprietor makes his own decision concerning the business. He does
not have to consult others before making decision
Disadvantages
a) A sole proprietor meets all the losses
b) A sole proprietor pays tax alone
c) A sole proprietor contribute the start up capital alone
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As the proprietor is aware of these disadvantages it will be appropriate to avoid
losses and make good profit which will be added to the capital for the business to
run profitably.
2.2.2. Comparison of proposed product/service with those of potential
competitors
The proposed business will be selling paints. The manufacturer makes paints and
classify them into various grades in term of quality. The grades are first, second,
third and fourth quality.
In view of the above the business will sell first quality paints which is original,
durable and manufactured by crown paint a leading company know for their
classical product. The survey which was conducted by the proprietor revealed that
most of present competitors obtain their paints from Jua kali manufacturers whose
products are of poor quality and fake. However, for comparison with the potential
competitors, the proposed business will sell original and high quality paints which
can be rated as below.
TABLE 2.2
PROPOSED
BUSINESS
PROPOSED
UTUGI
HARDWARE
KAMITI
HARDWARE
BANANA
HILL
HARDWARE
RUAKA
HARDWARE
EBERNEZER
ENTERPRISES
PERFORMANCE 3 2 2 3 3
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QUALITY 4 1 2 2 1AFTER SALES
SERVICE
3 1 3 3 2
TOTAL SCORE 10 4 7 8 6
The above is the proposed product in relation to the potential competitors product.
KEY
1 Very Low2 - Low3 Moderate
4 High
5 - Very High
The competitive advantage of the product of proposed business over those of
potential competitors are:
a) Highly quality product
b) It is original in nature
c) The package is excellent and executive
d) The paint is durable
This comparison can be evidenced by the ratings given in the table No. 2.2 in the
following order.
Performance - Moderate - 3Quality - High - 4
Reputation after - Moderate - 3
Sales service
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Total score 10
2.2.3 The overall strength and weakness of potential competitors
Understanding the competitors is the key to understanding how to best compete in
the market place. It can help develop strategy and enhance the efficiency of
marketing plans. The proprietor would assess the overall strength and weakness of
his potential competitors by drawing a competitive analysis.
The analysis would include the following areas:
Assessing their strength and weakness
Evaluating their activity in the market eg pricing, promotion
Review their product range
Establishing their level and quality of distribution
Understanding their objectives and strategiesCompetitors analysis should aim to understand the competitors business and pre-
empt their plans in order to build competitive advantage.
Strengths and weakness are critical factors to the effectiveness and success of a
business. Most often these are internal to the business and are elements that a
business can control. Examples of strength would include high brand awareness,
good reputation for quality, good service levels, high margins or unique product
positioning. Weakness would include unsatisfactory product delivery, poor
relationship between price and quality, lack of unique selling point, low investment
in marketing.
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However, promoting strengths can be an effective strategy for growth and can lead
to improved competitive advantage. Equally, redressing a weakness puts the
business in a strengther position to capitalize on the effect of its marketing
activities.
In order to have advantage over the potential competitors it is good to consider the
benefits in terms of the following
Customer
Knowledge Technology
Management
Distribution of channels
CUSTOMER
The proprietor has known that consumers need to be motivated to buy the product
and customer will dictate the success or failure of the product.
The employees must therefore make sure that the customers needs are truly
satisfied and leave customers with feeling that they would enjoying coming back.
TECHNOLOGY
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The business will not lag behind in introducing the technological use of service
like internet. As failure to enter the era will make business not compete effectively
in the existing technologies.
LOCATION
The business location is promising because it is situated along Nairobi Banana
Limuru Road. Along the road there is a bus stage where matatus pick and drop
passengers. With this activities in place customers have easy access to the
business premises. This is a good advantage over the potential competitors whose
business premises are in the interior of town.
MANAGEMENT
The management which consists of the proprietor assistant manager and the
accountant posses knowledge and skills of running the business.
The management is expected to ensure proper utilization of the resources
available that is staff/human resources, materials (product) and finance.
Identifying opportunities and threats is the responsibility of the management . It is
expected to do a forecast of these external factor as they can easily adversely affect
the achievement of the business goals both short and long term.
DISTRIBUTION CHANNELS
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The potential business will start small. As a result the potential customer will be
expected to purchase the product directly from the business enterprise during the
early few months of doing business.
ASSESSEMENT OF THE OVERALL STRENGTH AND WEAKNESS OF
THE POTENTIAL COMPETITORS
TABLE 2.3
UTUGI
HARDWARE
COMPETITOR 1 COMPETITOR 2 COMPETITOR 3 COMPETITOR 4
Benefits tocustomers
4 3 3 2 2
Technology 3 2 2 1 1Location 4 3 2 2 1Management 3 2 1 2 1Distribution
channels
3 1 2 1 2
Totals 17 11 10 8 7
KEY
1 - Very low2 - Low
3 - Moderate4 - High5 - Very high
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As shown above each area of comparison has been allocated on a scale from 1
very low 2 low 3 - moderate 4 high and 5 very high.
Considering the competitors overall strength and weakness, the following are
ways in what it will be easy to compete with them.
1) by selling original paints
2) by selling product or paints of high quality
3) by selling at reasonable prices
4) by introducing customer care
2.3 PRICING STRATEGY
While fixing the selling prices of the product the proprietor will have to consider
that the money received from sales must do three things:-
1) To cover the direct costs or the cost of prices of all the goods including
transport expenses
2) To cover indirect cost or the cost of running the hardware shop
3) To provide reasonable profit.
Before any entrepreneur or a trader fix the selling price one must have to add a
little amount to the prices of the goods they buy before they sell to the customer.
This little money which is added to the cost of goods is called a mark up in order to
make up a profit. This means that a business needs a trade margin which is stated
as a percentage of the selling price. In order to get the percentage on the selling
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price, the trader must make assumptions on the expected sales and cost for the
year.
PRICE STRATEGY
How to calculate the selling price of the product
Example. A 4 litre container of paint bought from the wholesaler at Ksh 1000 will
be sold at Ksh 1110 so as to get a profit of Ksh 110.
The profit is arrived by adding mark up to the price of the paint bought at 11%
percent as shown below
Wholesale price Item bought
One paint
Percentage
11% Markup
On cost price
Selling price
Ksh
1000
One (4litre) Paint 11% Ksh
1110Table 2.3
Cost price Ksh 1000x11 =110
100
Add
Cost price Ksh 1000
Mark up price 110
Selling price 1110
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In addition to the mark up, the price to be fixed must be compared with that
offered by the competitors. A well calculated observation must be done so a to fix
a selling price of the product at the same level or slightly level of the competitors.
This is because it can be disastrous if one fix price below or above that of the
competitor as the customer can be attempted to buy where the price is low. The
prices which the proprietor proposes to fix are valuable because they will be
reasonable compared to those of the competitors which are exorbitantly high.
The entrepreneur has plans of introducing discount policy as way of encouraging
customer to pay their debts on time specified or agreed.
The discount will be granted at the rate of 2% percent to those who are able to pay
their debts at date specified when they were buying the product.
2.4 SALES TACTICS
The proprietor decides to use direct method of selling the products.
The sales force of the business shall be engaged to do the selling since ability and
motivation leads to good performance, the proprietors as the manager will ensure
that sales people are properly motivated and sales incentives provided where
possible. In sales, one of the most common ways to manage motivation is to use
incentives.
As a small business, the following sales incentive systems may be introduced in
order to effectively boost the sales.
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a) Recognition
Taking the time to recognize a leading performer with a plaque, cake or special
lunch. This will not require much in terms of expenses.
b) Work place perks
This method is free. It involves giving top performers the right to work from
home, one day a week and regular time off for child care or any other kind of work
place perks. Although this work place flexibility cost nothing it can be very
valuable to employees.
It can also motivate sales people to look up to the proprietor trusting them.
2.5 Advertising and promotion strategies
2.5.1 Advertising strategies
An advertising strategy is a campaign developed to communicate ideas about
products and services to potential customers in the hope of convincing them to buy
those products. This strategy when built in a rational and intelligent manner will
reflect other business considerations (overall budget, brand recognition effect and
objectives) (public image enhancement, market share growth) as well. As a
business one of the major goals of advertising is to generate awareness of the
business and its products.
Advertising can rather be costly especially for a small business and one need
direct advertising ideas that work well and dont come with high prices.
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Advertising strategy can be as simple as word of mouth and as varied as in print,
by radio and through television. Before one advertise, whatever the medium, it is
good to know the target market so as to direct the advertising efforts in the right
directions.
Advertising in the local newspaper is good because they offer box ads and
advertising inserts. Some newspapers will offer special advertising and even give
discounts for agreeing to list the advertisement as per terms.
Advertising. There are various types of advertising such as; Newspapers, direct
mail, billboards bus boards, broadcast advertising on radio and T.V
Material Collateral One might choose to distribute materials such as brochures,
newletters and posters.
As a result the proprietor shall use the following method of advertising.
Advertising Strategy and the cost
Methods frequency Cost per month Total cost
Radio 2 TimesSh1000x2
Sh2000
T.V 2 times 1,500 3000Newspaper 4 times 500x4 2000
Total cost per Month 7,000
Table 2.5.1
The products which is paint will be selling in plastic containers litres, 1 litres, 4
litres an 20 litres.
- see the appendix (A) for the image of the product
However, the effectiveness of the advertisement will be measured by the high
volume of sales and increase of the number of customers coming to buy the
product.
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2.5.2 PROMOTION STRATEGIES
Promotion is primarily aimed at creating awareness of the product to the potential
customers. It should praise the product in order to attract many buyers.
Promotion does not only help boost sales but helps a business to draw new
customers while at the same time retaining old ones.
The promotion can be done through exhibitions, free product sample free
introductory services and public relation activities.
There is rapid growth in sales promotion in the recent past. Organizations are
using part of its budget on sales promotion and to attract new customers who
would buy the products. Utugi Hardware (potential business) intends to use parts
of its budget on sales promotion. It will adopt trade shows of promotion to attract
new customers who would buy the products.
The business is to use competitions method of promotion to sale the product.
The promotional activities to be used are:
Methods frequency Cost per Month Total cost
Bill Boards 1
Sh.
200x1
Sh.
200
Posters 1 2000x1 2000Sales Personnel 1 300x1 3000
Total cost per month 5,200
Table 2.5.2
2.6 Distribution Strategy
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2.6.1 Channels of Distribution
The business sells product and during its early days of operating, the customers
will be coming to buy direct from the business.
As the business grow and develop and even introduce a new product the plans put
in place are that, it will be hiring pick up to deliver hardware product to the
contractors who buys product in large quantity.
The cost of transport will depend with the owner of the vehicle and the distance
where to take the product.
However, in normal practice, the transporters who are doing this business charge
roughly Ksh 500 per trip when the place where the product (goods) shall be taken
is not outside Ruaka trading centre.
The charges to the areas surrounding Ruaka Trading Centre where the business is
situated will be charging Ksh 1000 per trip. Since majority of the potential
customers will not need transport, having to buy the product directly from the shop
and quantity not being large the business does not expect to spend much in
transport distribution. The expected times/period per month which the proprietor
would hire a pick up deliver goods to the contractors may be five times per month
ie. 5xKsh1000 =5,000 per month.
2.6.2 DISTRIBUTION PROBLEMS ANDPOSSIBLE SOLUTION
Since the distribution of the product (paint) will be restricted to those who may buy
large quantities of the product especially the contractors the initial specific
distribution will be to hire transport of pickups and lorry respectively.
The expected problems to be faced will be using transporters who are not reliable.
The existing business owners complain of hiring transporters who delay delivery of
goods to the customers.
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In business, the entire entrepreneurs complain of dishonest employees who sell
goods and collude with customers to defraud the business.
UNRELIABLE TRANSPORTERS This problem can be solved by getting a
specific transporter who can always be used to do the delivery of goods to the
customers.
DISHONEST EMPLOYEES The employees can be trained on how they can
develop self discipline and hence reduce such misconduct.