1. Vision, Mission, Objectives, Values and Strategies
1.1 Vision:
No First Ltd aims to lead the Vietnam market and then in the near future will be South East Asian market for plastic molded products.
1.2 Mission:
The mission of No First Ltd, a Vietnam-based limited company specializing in manufacturing top-quality plastic molded products, is to satisfy its most demanding customers with premium products, reasonable price and excellent customer services; as well as providing occupations and training for regional people of South East Asia, creating social welfare, increasing the wealth of not only the countries in the region but also in the world.
1.3 Objectives:
- No First aims to gain continuous satisfaction and support from its present clients and creating potential customers by carefully studying their needs, wants and demands on a regular basis.
- No First aims to increase sales volumes by 5% and make a boost to revenue by 10% after each quarter of running, solidifying the brand name and growing larger market share of plastic molded products in the region.
- No First aims to recruit, train and educate regional people, reducing unemployment rate in the region, creating good relationships with the authorities and governments concerned.
- No First aims to be the model for plastic molded product manufacturing companies in the region with its best customer services, top-notched product quality and wise human resources policies.
1.4 Values:
- We care
- We improve
- We satisfy
- We bring about changes
1.5 Statement of Corporate Strategy/ Business Strategy/ Departmental Strategy:
Being a new comer in the commercial plastic industry of the region, however, with careful research of various factors determining the success of the business as well as having an experienced and shrewd board of directors, No First is confident to state its long term running strategy as differentiation. With two penetrating products in mind: plastic molded helmets and tables – ordinary goods which are seemingly difficult to apply differentiation strategy, No First attempts to bring about change in the viewpoints of the targeted customers. Noticing the rise of income, living standards and buying power of the people in the region of South East Asia, No First tries its best to persuade customers to choose the company’s products, with premium quality, uniquely designed features to enhance the comfort and convenience of product users while requiring them to pay only a little extra amount of money. The price will be raised upward for a straight line of the first four quarters in accordance with the defined strategy.
The mission statement of No First, as written above, involves creating customer values as well as values for the society through offering job opportunities for people in the region. Four clearly stated objectives have been set up in order to implement the mission, achieving the expected vision of the company. Choosing the strategy of differentiation, but not cost leadership strategy, No First does not plan to minimize production cost by purchasing low priced raw materials and then produce low quality products, as do by many other competitors (but we still minimize the unessential production costs such as warehouse cost). The method in which No First attempts to implement its business is by manufacturing premium quality plastic molded products, which are both fashionably designed, durable and , most importantly, ergonomic and safe for the customers. Cost of raw materials, R&D and production will therefore increase. However, by creating jobs for local people, No First believes it will gain favor, support and help from not only the people (including employees themselves) but also the concerned authorities and governments, especially when dealing with publicity or public relations activities. Another point to make is that, through advertisements and the media, No First believes to be able to influence people’s perceptions of the products, that by just adding a little extra amount of money to the payment, customers can have access to better quality, stylishness, durability and safety, which in fact no money can buy. With such strategies and tactics, No First expects to enlarge its market share gradually but firmly, providing its customers much more value than just the actual products.
The departmental strategy comprises of two main sub strategies, which are related to marketing and manufacturing. Marketing strategy deals mainly with trends of the market, customers’ needs, wants and demands for the products and a number of other external factors. It includes customer services, customer relations management, collecting and analyzing information about the market and appropriate methods for promotion such as advertising and public relations. Manufacturing strategy, on the other hand, is concerned with applying control and management to the production procedure in the most effective way. It involves warehouse management, supplier relationship management, human resources management etc. since all these factors can directly affect the productivity of the whole firm as well as the production cost.
Products Description
Product 1
Helmet is the useful implement for head protection. In Vietnam, since the decree promulgation of the government in December of 2007, wearing helmets has become mandatory to every motorcyclist, which also implies the ever great demand of this product. Helmets are ordered to diminish to the maximum of head injuries caused by smashes. Besides this basic function, helmet does not only help forming law-obedient citizens but is also part of fashionable costumes. Parties used to be cautious in hat purchases to ensure its aestheticism and similarly they would expect the same from the new head-gear. Grasping the biased perception of consumers about an old-style cumbersome helmet, No First has to commit in producing a new line of helmet, of which quality, designs and price are well guaranteed and corresponsive.
o Starting price: $64
o Raw material: Polycarbonate outer shell and the impact-absorbing liner underneath made of polystyrene are chosen to ensure the safety and durability. These materials are designed to disperse energy from the hit, cushion the shock that affects the head.
o Design: The helmet has the design in combination of tradition and innovation. Four basic components are the outer shell, the impact-absorbing liner, an comforting padding that is removable for washing and the retention system in form of chin trap. There are ventilations in form of vents on outer shell to ensure the airiness and coolness. The unique features are the foldable peak and rainproof cover on the top. The peak is layer-arranged and its length is pleased to the customers by pulling it forward and backward. The rainproof cover of which usage is to prevent the entrance of raindrops into the inner is hidden under the zipped brim. A variety of diversified and fashionable designs are offered to satisfy large range of tastes and preferences.
o Quality criteria:
- Guaranteed for quality, durability and functionality of protection.
- Moderate size, light and easy to handle.
- Comfortable and airy for whom wearing it.
- Fashionable and trendy designs and colors.
Product 2
The tables offered are associated type of dining, playing and learning for small children. The target market is kindergartens, playgrounds and households having small children.
a. Starting price: $47
b. Raw materials: Mainly thermoplastic, the legs are made of stainless steel to ensure the lightness and durability; spray paint that is used on the top surface for the purpose of easy cleaning.
c. Design: Colorful tables coming in a variety of shapes and sizes are the focus and orientation. The legs are designed to be tubular and for small children are the end-users of this product, its table edges are all bent and covered by resilient buffer to maximize the safety and avoid injuries from accidental hits for the children. The protecting function is also manifested by the seat belts equipped for each seat. Another special feature is the sinking bowl in the middle of the table, which has a moveable sliding lid above and functions as a toy container. The features of flexibility and convenience are highly appreciated. Firstly, the plastic seats are removable so that it can be cleaned and changed frequently. Next, this product has educating orientation, which is seen at its decorating designs sorted by themes such as animals, numbers, foods, etc. The table’s top and bottom is half separated so that customers can change the preferred top’s theme at anytime. The top theme sets are available for sale separately.
d. Quality criteria:
- Safe guarantee for children.
- Highly convenient. The table is light, easily portable and does not occupy so much room space.
- Multi-functional. A table can be used for meals, playing/learning.
- Affordable with appropriate price.
2.
3. Marketing analysis
3.1 Industry analysis:
The market for plastic molded products, in the region of South East Asia in general and Vietnam in specific, is not a new one and has been in a state of stability ever since. However, the market segmentation for customers who require quality, uniqueness and style has not yet been satisfied. With the strong growth of the regional economies and strong influence of international cultures through globalization and international exchange, people in such countries are now able to enjoy a lifestyle not inferior to those in developed countries. Bearing in mind that the living standards, in relation with buying power, of the people in the region have now been raised to a much higher level, No First has decided to take advantage of this situation to penetrate the market in its own way.
3.1.1 Helmet
a. Current market
Since the majority of the population of countries such as Vietnam, Laos and Cambodia travel using motorbikes, and with the law of these countries stating that wearing helmets is mandatory, the products are selling well. The targeted customers are people living in cities in South East Asian countries, especially in Vietnam.
b. Trend
In the future, when people’s living standards are higher, part of the population might switch to using cars, while another part might upgrade from using bicycles to motorbikes. Therefore, the size of the market should not fluctuate too much. Also, since each person is supposed to own one helmet, the Marketing department will try to promote the essence of the product.
3.1.2 Table
a. Current market
The product aims at small children in a modern society, combining dining, playing and studying functions in just one single unit. Kindergartens, schools and individual households have shown great interest in this type of three-in-one table.
b. Trend
The more developed the society is, the more care people pay for the balanced development of children. Therefore, demand for such a well-designed product is forecasted to keep increasing in the future. It should also be taken into consideration that the designs and functions of the table, consequently, should be improved and renovated frequently.
3.2 Competitor analysis
There are a total of 10 companies, including No First, that produce the same two types of product, making the market structure an oligopoly. Each company has its own strategy and his own competitive advantage, however, the working capital is comparatively of the same amount. For competition in the market, it is essential for No First to collect and analyze information from its rivals, including:
- Competitor product pricing
- Competitor sales reports
- Competitor promotion network
- Competitor brand image
3.3 SWOT analysis
3.3.1 Strengths
- Highly qualified, experienced, shrewd board of directors
- Skilled and loyal employees due to wise human resources policies
- Excellent customer services
- High quality, durable and fashionably designed products
- Good R&D and deep insight into the behavior of the South East Asian people
- Support from the people and the authorities and governments
3.3.2 Weaknesses
- High production cost
- High pricing
- High R&D cost
- Brand image is not yet strong since the company is new
3.3.3 Opportunities
- Market share can be quickly expanded thanks to excellence of product and customer service quality
- Growing economies in the region allow people to purchase high quality goods with a higher price
3.3.4 Threats
- Newcomers in the market who might have a great amount of working capital
- High price might prevent customers to purchase the products at first, which can lead to problems of finance and liquidity in the early operating quarters.
3.4 Marketing mix
3.4.1 Product
3.4.1.1 Helmet:
a. Design: The helmet has the design in combination of tradition and innovation. Four basic components are the outer shell, the impact-absorbing liner, an comforting padding that is removable for washing and the retention system in form of chin trap. There are ventilations in form of vents on outer shell to ensure the airiness and coolness. The unique features are the foldable peak and rainproof cover on the top. The peak is layer-arranged and its length is pleased to the customers by pulling it forward and backward. The rainproof cover of which usage is to prevent the entrance of raindrops into the inner is hidden under the zipped brim. A variety of diversified and fashionable designs are offered to satisfy large range of tastes and preferences.
b. Quality criteria:
- Guaranteed for quality, durability and functionality of protection.
- Moderate size, light and easy to handle.
- Comfortable and airy for whom wearing it.
- Fashionable and trendy designs and colors.
3.4.1.2 Table:
a. Design: Colorful tables coming in a variety of shapes and sizes are the focus and orientation. The legs are designed to be tubular and for small children are the end-users of this product, its table edges are all bent and covered by resilient buffer to maximize the safety and avoid injuries from accidental hits for the children. The protecting function is also manifested by the seat belts equipped for each seat. Another special feature is the sinking bowl in the middle of the table, which has a moveable sliding lid above and functions as a toy container. The features of flexibility and convenience are highly appreciated. Firstly, the plastic seats are removable so that it can be cleaned and changed frequently. Next, this product has educating orientation, which is seen at its decorating designs sorted by themes such as animals, numbers, foods, etc. The table’s top and bottom is half separated so that customers can change the preferred top’s theme at anytime. The top theme sets are available for sale separately.
b. Quality criteria:
- Safe guarantee for children.
- Highly convenient. The table is light, easily portable and does not occupy so much room space.
- Multi-functional. A table can be used for meals, playing/learning.
- Affordable with appropriate price.
3.4.2 Price:
It is due to the reason that we use the differentiation strategy so we plan to keep our products’ price at a normal level with the market (in order to make some profits because of the high cost of production). We predict that customers will be attracted with a superior product, which is sold at a reasonable price, so we can gain some market share with this strategy.
We plan to increase the price of our product about 3% -9% for each quarter. It is because of the reason that we plan to focus on the product 2 (table but also improve the quality of product 1(helmet)) so we will try to increase the price of the product 2 more than product 1, from quarter 3.
The market for table in Vietnam is now very great and less of competitiveness than helmet and we hope that we can make some profits with this strategy. Besides that, in quarter 4 we will have a great increase in the helmet price due to an improved in the quality of product 1 and a forecast of great demand in the market.
Unit Prices Quarter 1 Quarter 2 Quarter 3 Quarter 4
Helmet 66 68 71 74
Table 50 53 58 60
3.4.3 Promotion
- Advertising and the media
- Discount 2% for buying more than 10 units/ per sale and 5% for buying more than 100 units/ per sale
3.4.4 Place
- No First shops and showrooms
- Supermarkets
- Shopping centers
- Wholesalers
- Online shops
4. Marketing plan:
1. General plan for marketing for the first four quarter:
- Price for the first four quarter:
It is due to the reason that we use the differentiation strategy so we plan to keep our products’ price at a normal level with the market (in order to make some profits because of the high cost of production). We predict that customers will be attracted with a superior product, which is sold at a reasonable price, so we can gain some market share with this strategy.
We plan to increase the price of our product about 3% -9% for each quarter. It is because of the reason that we plan to focus on the product 2 (table but also improve the quality of product 1(helmet)) so we will try to increase the price of the product 2 more than product 1, from quarter 2. The market for table in Vietnam is now very great and less of competitiveness than helmet and we hope that we can make some profits with this strategy. Besides that, in quarter 4 we will have a great increase in the helmet price due to an improved in the quality of product 1 and a forecast of great demand in the market.
Unit Prices Quarter 1 Quarter 2 Quarter 3 Quarter 4
Helmet 66 68 71 74
Table 50 53 58 60
- Advertising for the first four quarters:
In order to make the advertising for our products effectively and cost least of resources, we will spend more money on Newspaper and magazine advertising. It is because of the reason that the number of customers who spend time to read newspapers and magazines advertising is greater than the ones who watch TVs’ advertising. Customers tend to skip the advertising on TV and focus on the program that they like to watch such as movie or music programs.
Marketing Decision Quarter 1 Quarter 2 Quarter 3 Quarter 4
TV advertising
Helmet 4 4 4 4
Table 5 5 5 5
Newspaper advertising
Helmet 10 12 14 17
Table 10 14 18 21
Magazine advertising
Helmet 9 9 9 9
Table 7 7 8 8
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Advertising P1 P2 Total P1 P2 Total P1 P2 Total P1 P2 Total
TV 20000 25000 45000 20000 25000 45000 20000 25000 45000 20000 25000 45000
Newspaper 10000 10000 20000 12000 14000 26000 14000 18000 32000 17000 21000 38000
Magazine 27000 21000 48000 27000 21000 48000 27000 24000 51000 27000 24000 51000
Marketing Research Decision:
It is very important to a company to know information about its competitors. That is the reason why we plan to spend some budget in the marketing research. However, due to the reason that the price for marketing research is very high so we will not research on everything but some which is considered as vital information with us such as “Price”, “Quality”, “Unit sold” and “Market demand”.
2. Sales forecast for the first four quarters:
- Based on the industry analysis, we can see a trend in the increase of demand in both two products (helmet and table). Despite the fact that some countries in South East Asia are having problems with their economic situation such as Vietnam but many analysts believe in a optimistic trend in the economic growth of Vietnam and the South East Asia as well.
- Even No first is a new brand name in the market of helmet and table producers but we believe in the quality of products will attract the customers and help us in penetrating in the market.
Unit sales Quarter 1 Quarter 2 Quarter 3 Quarter 4
Helmet 6070 6230 6341 6801
Table 5712 6288 6818 7182
5. Production Plan
Production Goals
The company determines to have considerable investments for both 2 products. As we decide to apply the differentiation strategy, our products are developed and focused on improving quality and unique features in order to create salience and relative competitiveness. The product’s quality is aimed to reach the top 1 in the market. Simultaneously, we attempt to minimize unessential production costs such as cost of warehouse, worker hiring, etc so that the profit is obtained to the maximum.
This goal can be accomplished by increasing the productivity of workers.
Production Strategy and Production KPI
Improving product’s quality implies that it is essential to invest on the quality of raw materials, production line and workers as well. For we determine table is the core product, we will have more investment for it than the product 1, helmet.
Workers’ quality is also a determinant to the accomplishment of production plan, which is represented as the worker productivity. Such factors as skills and psychology like motivation, loyalty, etc. do affect on their productivity. Hence, the company determines to invest considerably in the human resource development through training programs and application of welfare, promotion and salary policies.
Title of KPI: Product’s quality
Defined: It refers to the nature of a product represented by its unique features to create differentiation and its ability to meet customer’s expectations.
Measured: Based on the financial balances and the product prices, we can determine the appropriate spending on quality. Since increase in this account might cause the raise in selling price, if our sales are noticed to keep putting up and profits are guaranteed, we know our investments has been reasonable and going the right way. The spending on quality is reflected in the production decision section every quarter.
Target: After first 4 quarters, increased by 2.5 to 3.5 times in total.
Title of KPI: Worker productivity
Defined: The manufacturing ability of each worker indicated by the amount of units he himself can produce per quarter. The value is not fixed but changeable whether upward or downward depending on the volume of investment in human resource development.
Measured: The value is shown as unit and represented clearly on the labor report every quarter. The shift in productivity is seen through the change in amount of units produced over quarters by the same number of workers without incurring any overtime charge.
Target: Increased by 1.6 to 2% each quarter so that one worker is able to produce more units within the same period of time.
Production Forecasts
The section shows planned operations of the production system in the first four quarters in terms of raw materials, units produced, products quality and human resource development.
Raw materials
The process of raw material purchase involves correlative considerations of market demands, inventory, worker productivity and plant capacity. The market research done by the marketing department provides the sales forecast, based on which the amount of raw material units are determined to be ordered for the next quarter.
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Helmet 5500 6500 7000 7,000
Table 5400 6600 7000 7000
As shown in the table above, we plan to increase purchase of raw materials every quarter since the records of the Marketing department have stated the raising demand. Purchasing decisions rely on demands also is to avoid sales loss for producing too little or incurrence of inventory related costs such as warehouse for supply exceeds demand. Furthermore, we need to ensure the raw materials volume to produce is within worker productivity and plant capacity; otherwise the company will be incurred overtime charge. The purchase cost ultimately should be approved by the finance department to ensure the company’s budget affords.
Units produced
Every company aims to increase the profit through the sales raise of product units. However, to determine the appropriate units to produce, managers should concern a number of other issues. Similar to raw materials consideration, those are accounts that have associated costs with units produced such as worker productivity, plant capacity, sales forecast, inventory and warehouse costs.
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Unit Produced
Helmet 6400 6200 6500 7000
Table 6,000 6,000 6900 7200
Sales forecast
Helmet 6070 6230 6341 6801
Table 5712 6288 6818 7182
Inventory
Helmet 330 0 159 199
Table 288 0 82 18
Warehouse Costs
Helmet 825 0 397.5 497.5
Table 432 0 123 29.07
As seen from the table, after provided the statistics of market demand and sales forecast from the Marketing department, we set that the units produced is determined to err for ± 300 units. The set difference helps minimizing the sale loss as well as closing inventory in case the forecast and actuality are much uneven. It is shown that in quarter 0, the closing inventory was relatively high with 330 units for product 1 and 288 units for product 2. The stock results in the warehouse cost of totally $1257 incurred in the quarter 1. Learning from this experience, in quarter 2 we plan to produce less than the units forecast for an inconsiderable amount. It is believed not to affect to the company’s reputation to the customers, neither lose so much sales. In the 3rd and 4th quarter, we intend to manufacture more than our forecast but still ensure that the closing inventory units are little and the incurred warehouse cost is low.
Products quality
The products are developed according to the differentiation strategy therefore to trend of continuously improving quality. The domination in quality is expected to make our products outstanding and distinguishable, create uniqueness in comparison with comparable offerings from other competitors. Hence, investment should be increased higher by quarter, in other words, that of the previous quarter is more than the following one. After 4 quarters, the spending on quality for product 1 and 2 is forecast to increase from $3.80 to $8.00 and $5.00 to $9.00 per unit, respectively.
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Helmet 3.80 5.50 7.00 8.00
Table 5.00 6.70 7.80 9.00
We plan to focus on the product 2, plastic table, so the spending for its quality is easily seen more than for that of product 1. The volume of investment do not change by random but have to base on the product price. Considering the interrelation between the product price and spending on its quality leads to the reasonable change in both of them, also means it is acceptable and does not lose support from customers; sales and profits are guaranteed and assist in covering the investments.
Human resource development
There is always a risk of losing workers without prior notice (Anderson et al, 2003). Hence, advance planning for workers hiring is necessary so that the production system is ready for any contingency occurred. We plan to hire seven workers for the first quarter, six workers for the second and continue the same to the following two. There are attempts not to have any worker fired or laid-off through out the year.
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Hiring Workers 7 6 6 6
Fire 0 0 0 0
Layoff 0 0 0 0
Human Resource Development 15,000 15,000 16,000 16,000
We need a proper number of workers available so that we can produce the volume of products set. Otherwise, lack in human resource leads to serious problems for the company’s operation such as loss in goodwill, reputation and sales. We also plan to invest in Human Resource Development via training programs and employee policies $15,000 for the first two quarters and remain the level at $16,000 for the later two. The investments are expected to improve the worker productivity in the next quarter.
6. Financial Plan:
The financial plan is very important to a business because without a detailed financial plan, managers cannot estimate how much money they do have to spend on operational activities of the company such as marketing or production. Therefore, in order to make a good financing plan, the financial managers need to have a broad view over the company’s situation, especially the long-term plan and short-term plan (budget) to determine the financial needs of the company. The financial manager will have to work directly with the balance sheet, income statement and cash flow reports.
Financial Decision:
Obviously that the more money a company has in its budget, the better that company’s situation is. However, as Nofirst is a young company in the market, so we know that we do not have the sufficient money to maintain all the operational activities. Thus, we will try to solve our problems of budget shortage by borrowing money from the short-term loans. The loans will be used for some marketing and production activities such as advertising and buying raw materials. We also plan to expand our production capacity so we will buy some more plans for the company. With this decision, we plan to make some mortgages because it will not be suitable to use the short-term loans for long-term investment. We will try to reduce the amount of payments (or decrease the amount of loans) but still try to keep our cash in a safety level. That table will show the statistic of financial decisions for the first four quarter.
Financial Decision Quarter 1 Quarter 2 Quarter 3 Quarter 4
Short–term loan $330000 $270000 $260000 $90000
Short-term loan requested $311007 $239355 $238277 $70153
Mortgage $0 $0 $45000 $0
Income statement
The income statement can easily show the managers how much profit the company earned for each quarter and then based on this information, they can make some appropriate decisions to improve the company situation. In our case, Nofirst uses the differentiation strategy and we aim at promoting our second product (table) but we also improve the quality of our first product (helmet) because our company still has a big market share for helmet product. We plan to increase the quality of the product 2 (table) as well as increase its price. By that strategy, we could increase our sales but still attract the customers through the unique of our product on the market.
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Net sales product 1 400,620 423,640 450,211 503,274
Net sales product 2 285,600 333,264 395,444 430,920
Total net sales 686,220 756,904 845,655 934,194
Manufacturing COGS 514,153 540,177 601,640 652,364
Gross profit 172,067 216,728 244,015 281,830
Selling and administration 125,000 131,000 140,000 145,760
Finished goods warehouse cost 0 1,257 0 1,441
Operating profit 47,067 84,471 104,015 134,629
Net interest 13,150 13,425 11,700 11,588
Income Taxes payable 16,958 35,523 46,158 61,521
Net Income 16,958 35,523 46,158 61,521
We try to increase our sales in both two products but the main aim of us is still the product 2 (table). As you can see in the table, from quarter 1 to quarter 4, we plan to increase our sales of table from 285,600 to 430,920 (increase by 50.8 %). With the gross profit increase gradually after each quarter, we will try to maintain the level of income as high as possible. In order to do so, we will attempt to keep the warehouse cost at the minimum level and try to increase the total net sales more than the cost to produce goods. As the result, there is a positive trend in the net income of Nofirst from quarter 1 to quarter 4.
Cash flow statement
The cash flow statement can show the managers information about the movement of cash during a quarter. Based on the information they get from that report, managers can decide what they should do to make the company become better.
With Nofirst, it is due to the reason that we apply the differentiation strategy so the cash payment in each quarter (especially quarter 1) is in the high level. However, with this strategy, we can capture more market share for our products and it means that we can receipt more money with this strategy. For example, from quarter 1 to quarter 4, the cash receipts of Nofirst has increased by 33.64% (from $703835 to $940648) and the cash payments is around 1 million dollar. It shows a good trend for the company-financing situation.
Cash Flow Statement
Quarter 1 Quarter 2 Quarter 3 Quarter 4
CASH RECEIPTS
Cash on hand 48,875 18,993 30,665 50,723
Collection of A/R 654,960 721,562 802,280 889,925
Mortgage 0 0 45,000 0
Sale of plant 0 0 0 0
Investment withdrawal 0 0 0 0
TOTAL CASH RECEIPTS 703,835 740,555 876,945 940,648
CASH PAYMENTS
RM purchas + Inv. Cost 135,300 106,100 130,600 126,594
Labor and Overhead 342,300 298,500 347,199 308,760
Product Quality 54,320 72,650 96,200 100,500
Total warehouse costs 0 1,257 0 1,441
Selling $ Administrative 125,000 131,000 140,000 145,760
Net Short Term Interest 7,750 8,250 6,750 5,850
Short term loan Payment 310,000 330,000 270,000 260,000
Mortgage Interest 5,400 5,175 4,950 5,738
Mortgage Retirement 10,000 10,000 10,000 10,000
Income Taxes Paid 24,772 16,958 35,523 46,158
ST Investment Deposit 0 0 0 0
Purchase Plant Capacity 0 0 45,000 0
TOTAL CASH PAYMENTS 1,014,842 979,890 1,086,222 1,010,801
NET CASH FLOW -311,007 -239,335 -209,277 -70,153
ST LOAN GRANTED 330,000 270,000 260,000 90,000
NET CASH BALANCE 18,993 30,665 50,723 19,847
Financial ratios analysis
In order to get this usefulness information, the financial manager needs to have the capable to calculate: ROA (Return on total assets), ROE (return on owners’ equity), Gross profit margin, average inventory turn over period and the current ratio, etc.
Return on total assets (ROA): it measures how efficiency the assets of the company are used to generate profits (Introduction of Accounting, 2000, p129). It can show the net profit generated by the business and the assets owned by the business.
ROA= Net profit before interest and taxation x100%
total assets
Return on owners’ equity (ROE): measures how much the firm has earned on the funds invested by shareholders. It also shows how efficiency the business has used the resources provided by the owner to generate profit (Introduction of Accounting, 2000, p129).
ROE= Net profit after taxation and preference dividend (if any) x100%
Ordinary share capital plus reseves
Gross profit margin: measures the profitability in buying (or producing) and selling goods before other expenses are taken into account as COGS represents a major expense for retailing and manufacturing businesses.
Gross profit margin: (Gross profit/Sales)*100%
Inventory turnover period: measures the average period for which inventory is being held (Introduction of Accounting, 2000, p129).
Inventory turnover period: (Average inventory held/Cost of sales)*365
Current ratio: measures the liquidity position of the business by showing how many times current assets is able to cover current liabilities.
Current
ratio Current assets
Current liabilities
Interest Cover ratio: measures the amount of profit available to cover interest expenses.
ICR= Net profit before interest and taxation x100%
Interest expenses
Financial ratios analysis
Quarter 1 Quarter 2 Quarter 3 Quarter 4
ROA 1.95% 4.17% 11.2% 14.24%
ROE 5.82% 10.87% 12.57% 11.2%
Current ratio 1.17 1.35 1.65 3.46
According to the table, we can see there is a good trend in the financial situation of Nofirst. The ROA and ROE ratios increase gradually from 2 to 3% per quarter (especially in quarter 3 with the ROA by 7.03% and quarter 2 with ROE by 5.05%). It means that the company are using its asset in an efficiency way that it can generate a lot of profit. The current ratio also shows a good sign when the current assets is always more than the current liabilities, especially in quarter 4 when the current assets cover current liabilities by 3.46 times. It means Nofirst company is having enough abilities to pay for its current obligation.
Balance sheet
The balance sheet can provide the managers with an overview about the financial situation of the company at some point. All this information is very valuable with the managers because they can use this to make the short-term decisions as well as the long-term ones.
Balance Sheet
Quarter 1 Quarter 2 Quarter 3 Quarter 4
ASSETS
Current assets
Cash 18,993 30,665 50,723 19,847
Account receivable 343,110 378,452 422,828 467,097
Investments 0 0 0 0
Raw material 19,600 3,600 3,600 9,600
Finished Goods 26,947 0 28,378 27,789
Total Current Assets 408,650 412,717 505,529 524,333
Long-Term Assets
Plant and Equipment 499,500 499,500 544,500 544,500
Less Acc. Depreciation 39,960 59,940 101,700 123,480
Total long-term Assets 459,540 439,560 442,800 421,020
TOTAL ASSETS
868,190 852,277 928,329 945,353
LIABILITIES AND OWNER EQUITY
Current Liabilities:
Short-term Loans payable 330,000 270,000 260,000 90,000
Taxes payable 16,958 35,523 46,158 61,521
Total Current Liabilities 346,958 305,523 306,158 151,521
Long-term Liabilities
Mortgages Payable 230000 220000 255000 245000
Total Liabilities 576,958 525,523 561,158 396,521
Owners Equity 291,231 326,754 367,171 548,832
TOTAL LIABILITIES & OWNER EQUITY 868,190 852,277 928,329 945,353
Break-even analysis
The break-even analysis report is very important to managers because they need that information in order to see the break-even level of each product is how many. Based on this information, we can see if a product is profitable or not and how many units we have to sell in order to make profit. For example, we can see the product 1 (helmet) is much more profitable than the table. Somehow, the in quarter 1 and quarter 2 the product 2 (table) is not making any profit and even is a loss. But because as we plan to bring the product as the key product for our company so in quarter 3 and 4 the situation has changed. The break-even sales is decreased gradually and by quarter 4 the break-even sales is decreased by 47.29% (from 12736 to 6712). This is a positive trend for the company.
Break-even analysis
Quarter 1 Quarter 2 Quarter 3 Quarter 4
P1 P2 P1 P2 P1 P2 P1 P2
Selling Price 66 50 68 53 71 58 74 60
Variable Cost 42.71 44.63 41.98 44.25 44.86 46.52 45.73 47.63
Fixed Cost 69,757 68,393 71,684.5 72,740.5 73,108 78,592 74,322 83026
Break-even Sales 2995 12736 2755 8313 2797 6846 2629 6712
Break-even Revenue 197,679 636,806 187,337 440,600 198,572 397,068 194,547 402,713
7. Company plan
No First is one of Vietnamese plastic manufacturers, providing quality helmets and tables. The company's products are aimed for the highest level of quality and design in combination of traditional values and innovation.
Company past performances
Before the quarter 0, a plant with the production capacity of 11,000 units was purchased at the price of $499,500. A long-term mortgage of $240,000 was obtained to afford this payment. The company hired 45 workers and had the purchase of raw materials for product 1 and product 2 of 6,500 units and 5,500 units respectively.
During the quarter 0, there were only 41 available workers. The productivity of each worker for product 1 is 250 units and 300 units for product 2. In order to improve the productivity, the company decided to have an investment of $10,000 in Human Resource Development. The total labor costs were $182,000. It ordered 7,000 units of raw materials for product 1 and those of product 2 were 6,500 units. The spending on quality of each unit was $2.5 for the former and $1.5 for the latter. In sum, total cost of production in this quarter was $430,530 and total selling & administrative cost was $138,000. The net income was $24,773 while the net cash flow was negatively $ 261,125. In order to retain the net cash balance of $48,875, the company incurred a short-term payable of $310,000.
Organizational structure chart
The structure is hierarchically organized with three major departments that are marketing department, production department and financial department. Being in the lead in each department is the manager in charge of making decisions regarding the operation and performances of the firm. The departments have the same level and are all under the control of the general CEO.
No First Organizational Structure Chart
In detail, each manager has own particular tasks and responsibilities. The marketing managers are in charge of marketing research, through which he can determine the market demand, determine the product’s price and forecast sales for the following quarter. The task is also included consideration of investments for advertisings such as TV, newspapers and magazines. Popularizing the products are a major responsibility of Marketing department. After each quarter, Sales and Administrative report is shown.
Production manager’s roles are to manage and control the producing activities and operations. She cares about plant capacity, raw material purchases, and human resources managements such as workers hiring, worker productivity and development, etc. The managers also decide the spending on improving quality of the product. After each quarter, such reports as Inventory, Labor and Cost of production are required.
Finance manager takes control of the company’s financial performance and position. He deals with long-term and short-term budgeting and works directly with the balance sheet, income statement and cash flow reports.
However, the managers do not work separately. The system operates under a close coordination between these three referred departments. Based on the market research conducted by Marketing department, the Production manager could have a grasp of demand, determine how many units to produce and therefore compute the amount of raw materials to order. The act is performed only if the Finance department approves the volume of needed investment. It is how all the operations connect to each other as a causal chain. The system does not always run smoothly as besides agreement, conflicts also do exist and therefore require managers to discuss and arrange with each other before each making decision. Agreements help maximizing the effectiveness and efficiency of the firm’s performance. Information is exchanged via discussions and quarter reports. The subsystems could not work properly if they lack of thorough information and the whole perspective.
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