At the present time, plastic becomes a popular material in industry. To adapt new change and catch the opportunity, our company produces 2 types of plastic, they are helmet and table. We unify to set a goal to have position in top 4 companies about the profit.
To achieve the goal, we set up a precise plan which includes the detail of 2 products: how fashionable it is and suitable price for consumers. Analysis the environment and market: describe the current market; estimate the present position of company. And also bring out 3 specific plan of marketing, production and financial: determine goal, strategy and making some forecast in the near future.
Human Safety Care believes that we exist to provide good quality and fashionable products to customers. Besides we think much of customer’s health and environmental issue. Our products are not completely pestilent. Finally, Human Safety Care believes that we will bring all these benefit to customers with low cost.
- Hold the biggest market share in plastic industry
- Invade and expand to European market
- Increase the unit sale and profits after each quarter
- Improve the quality of products
- Gain the “Golden Star Award” which is the award for best products.
- Become the best good will plastic company to consumers.
Management role and Responsibility:
Productions Manager: Ms. Trang Phuong Lien
- Control production progression
- Make decision on purchasing and storing inventory, buying plant capacity
- Decide the amount of investing money on product quality and human resources development
- Manage labours (hiring, laying off, firing employees)
- Improve productivity
Marketing Manager: Ms. Luu Thi Vinh An
- Decide what type of advertising, price, and placement is the most suitable and effective to promote company’s product
- Implement advertising campaigns and projects.
- Identify and research and analyse the market and customer’s demand
- Build up and keep good relationships with customers to retain the brand loyalty
- Make accurate sales forecast.
Finance Manager: Mr. Nguyen Viet Hai
- Manage company budget to support Production and Marketing manager to decide how much they should invest in their activities
- Decide when and how much the company should make short term, long term loans, mortgage and short term investment deposits or withdraw short term investment money
- Make reports on income statement, balance sheet, cash flow to inform the profits or lost to the company, so other department will be able to make new strategies to develop or solve the failure.
Product 1_Plastic table
We designed table that can be flexible used in office and at home, or school.
Design: table’s surface is made up by thick plastic which has different design. For example office table will have the wood colour, studying table for children will be decorated with animated pictures or flowers and the surface will be covered with a glossy plastic, so the user can easily clean dirt such as pen, colour pen’s marks, food, oil. the legs are made from steel, so it can bear the weight well. The table also have drawings to contain papers, document, and other small stuffs.
Materials: iron, PET
Current Price: 62$
Hard, good-looking, Convenience (Space to keep documents, easier to clean and move in comparison with wood and metal tables)
Design: depend on the likes, age and gender, our helmets design will differ. Outside Helmet cover for children will have animated pictures, helmet for teenager and young people will be decorated with pictures that can show up their personality such as flowers, devils, angel pictures, or they can be covered by diverse materials such as silk, leather. For older people, the design will be simpler with not colourful decorating and colours. Secondly, there is a soft but thick cover inside the helmets to protect user’s head. Moreover, along 2 sides of the helmets there are small holes to make the user head not too hot.
Materials: silk, leather, PET
Current price: 45$
Diverse design, colour and types
Comfortable to wear even continuously wearing for a few hours
Target market and market segmentation
Our products have many types with different sizes, colours and designs that can satisfy the hobby and requirement of all age of customers. For example, table for office, for students to study, helmets for children, teenagers, adults. Therefore, all age range is our target customers. Also, although we perceive that focus on high income customer is really profitable for us, we still set our product price at a reasonable level, so it could be affordable for low and medium class customers.
. We have to 3 main segments which are:
Children (3-14 year old)
Teenagers young adults ( 15-29 year old)
Middle aged and old people ( over 30 year old )
Environment Analysis and Market Analysis
a. Threat of entrants:
At present, Vietnamese people are too familiar with using helmet. If at the beginning, people complained and felt unpleasant with wearing helmet, now they accept it and try to decorate their own helmets. Because of this demand, a number of companies have been established. Their main customers are the youth, therefore these manufactories focus on product design rather than quality of product (Helmet market, 2007). In short, it could be said that our company jumps to helmet market too late. With the same target as us, some manufactories have built their own branch name already. In addition, Chinese products with low quality, but fashionable design, and very cheap price are attractive amount of customers (The number of helmet selling is increasing rapidly, 2007) . Thus it is easy to see we will meet plenty of competitions.
b. Power of Buyers:
As it was mentioned before, when we manufacture, we not only focus on 3 level of customers: the first one is children, the second is teenager and the last level is middle age. With children market, it could be said that the power of buyers is quite high. The reason is that at present, the new law is not applied for children who are under 14 years old, so there are not much manufactories which provide children helmet, except some famous branch new such as Protect and Honda. Consequently, this could be a good chance for our company. About 2 markets left, the power of buyers is not high and we also have to compete with many companies. Hence we will focus much more on these markets than the first one.
c. Power of Suppliers
Vietnamese plastic market is a confusion one, even we can find lots of suppliers but not many of them have brand name. Therefore it could be said that the power of suppliers is not too high. We will salvage this element to reduce the cost of manufacture.
d. Threat of Substitutes
It could be said that helmet does not have any substitute at this time. Furthermore the new laws has just been applied so it is said that the number of helmet will continue to increase. However the barrier of to entry to very low, therefore even there is no substitute, the more firms in markets, the more competitors we have to face.
e. Competitive Rivalry
It could be easy to see, in any part of our strategy, we have to face our competitors. In other words, we consider our competitors as the most difficult problem. About Chinese and other companies, we could not take the price and design to compete with them. The reason is that they has established for a long time, so the price of product is very low. However we still believe that we can compete with them because our product is only cheap, fashionable but also good quality. We will note this elements to make strategy to take consumer's attention .
Product: Plastic table
a. Threat of entrants
Vietnamese consumer still remember that some manufactories used to use medical rubbish to produce plastic goods. For that reason, now consumers are very careful when they choose plastic products. This could be a major problem for our company when we want to bring our products to customers. Thus we have to confirm our products not harm to consumer's healthy.
b. Power of Buyers:
As we said, we will focus on children and the youth's demand, and it is easy to see there are not much large manufactories in this market. Therefore the power of buyer is pretty high.
c. Power of Suppliers
In fact, when we buy raw material to produce helmet, we can use it to manufacture plastic table, too. Therefore as we mention before, in this case power of suppliers is not too high.
d. Threat of Substitutes
Even our products has fashionable design and good quality, lots of customers prefer steel table than plastic one, especially senior people. For that reason, we focus much on children, teenagers, and young people rather than senior people.
e. Competitive Rivalry
Although plastic table are overwhelm in market, but most of them are very simple. In contrast, our products focus on both quality, price and design, so it could be said that we do not have much competitors in this market.
Since the plastic products become popular and favourable to large scale of consumers, many companies flock into this potential industry. This has pushed the competition higher and higher. Thus, collecting competitive company’s information is really important and advantageous. It helps our firm in planning the future strategies and learn from rival’s succeeds and avoid their failure and mistakes.
The biggest rival to the local plastics industry is imported product from China with attractive price and diverse modes. Therefore, their products are more favourable to low and medium income consumers. This has caused a great challenge for us to compete
we acknowledge the weakness of Chinese products are often unqualified; they often buy the wasted and used materials then recycle to drive the cost down and sell with low price. Hence, their products are not safe for people health. Most of them are imported illegally and banned by the Government. In this case, our firm will try to select and buy reliable materials for better quality and improve our product design as well. We will try to minimise our cost through improvement of capacity. We will buy modern machinery and train the employees to increase the productivity, so we can set a lower price.
Our company is a young company that has just been established. As a result, the barrier entry is very high to us. There are many big and well known companies in plastic product manufacturing fields such as Dong A, Sai Gon, Dong Tam Company that have entered the market many years ago. In addition, most company’s goal is to produce high quality products at a reasonable price to attract more customers. This leads to the increase in the substitutes and wide ranged of product choice.
We will put more effort on R & D in order to create innovative products to make our products different and more outstanding than other products with special and unique features. Also, we will advertise our products more on TV and magazine rather than on newspaper. It is due to our products are well designed and colourful, so advertising on TV and magazine will reflect the characters of our product better. Also, nowadays the number of people access to the internet is getting greater, so Internet is a good tool for the company to expand our market share. That is the reason why our company is planing to make up a website which includes information about company product, services, operation… Thus, the customer will get know more about the company
- Medium price with high quality, consumers can own good products but don’t have to spend a lot of money
- Fashionable helmet and variety in type of table can satisfy most of the demand.
- Insurance for 6 months to 2 years, base on the value of product
- Good training environment for employees => ensure the quality
- Don’t have much information about competitors, for example: forms of their product, the prices of them
- Don’t have much experience in business because our company has just established
- Produce new brand of helmet and table lead to time consuming to get the belief from customers
- Joining WTO => enlarge the market
- Because of new law – force citizens to wear helmet => more people have to buy helmet => increase income
- With fashionable design and variety of type, our product attract every kind of people
- Have so many competitors in helmet and table area
- The tax of helmet and table can be high, lead to lower profit
- Depend on material suppliers, if it’s interrupted, company can’t produce helmet and table, can’t satisfy customers => lose goodwill
expand the market share of table by 3% and helmets by 2% after 1 year
increase product loyalty by 10% after 3 years
Minimise the sale forecasting mistake least than 1000 units every quarter
Invest in advertising on TV, newspaper and magazine efficiently .
Porter’s Generic Competitive Strategies
Our company mission statement is provision of good quality product with a affordable price. Thus, we will lower our price than the average current price of other firms to attract customers but still assurance the return revenue enough for us to cover costs, loans and to get net profit after eliminating expenses.
Unit price($) Quarter 1 Quarter 2 Quarter 3 Quarter 4
Table 62 62 63 63
Helmets 45 45 46 46
We acknowledge that our company is has just established and we have to invest much money on advertising and promotional activities. However, we still try to consider carefully the most effective ways to make consumers aware of our products and also reduce the cost of adverting as much as possible
Our products are table and helmet with fashionable designs and special features. Advertising on TV may be a good way to bring our brand to buyers. Nevertheless, it will take a big amount of money to describe sufficiently all the good features of our products. Thus we will measure this issue before carry out the decision how much we should spend.
Minutes Ads Quarter 1 Quarter 2 Quarter 3 Quarter 4
Product 1- table- 3 2 2 3
Cost 15000 10000 10000 15000
Product 2-helmets 3 2 2 3
Cost 15000 10000 10000 15000
We will select Magazine advertising as the best way to express our products. We will advertise our products on most popular trading magazines such as” tiep thi gia dinh”, “ tiep thi tieu dung”,” phu nu viet nam”. The reasons are magazine ads is much cheaper than TV ads. Secondly, readers will have more time to observe products in comparison with TV ads that just appear and last on the screen few minutes. Thirdly, the readers often have the habit to read one magazine many times and share with others. Thus, this will raise a greater awareness of our brand name between readers and they may buy our products. Newspaper advertising
Ads Page Quarter 1 Quarter 2 Quarter 3 Quarter 4
Product 1- table 5 4 4 5
Cost 15000 12000 12000 15000
Product 2-Helmet 4 3 4 4
Cost 12000 9000 12000 12000
Newspaper Advertising is also a good way for advertising because most of Vietnamese people like to read newspaper everyday. Also, this form of Advertising does not cost as much as TV advertising. Thus we will do more newspaper Advertising. However, we will order the newspaper to arrange our company’s piece of Advertising on the coloured pages to best reflect the beautiful design of our product and make it outstanding compare with other advertising articles
Ads collum Quarter 1 Quarter 2 Quarter 3 Quarter 4
Product1-Table 10 12 15 16
Cost 10000 9000 9000 11000
Product 2-Helmet 11 12 14 16
Cost 11000 10000 10000 12000
Other promotional activities:
In special days we will organise events to promote our products to customers. For example, in Valentine day we will sell couple helmets and offer free helmets decorating. Or in women day we will discount for female customers. In addition, we will do charity such as sponsor helmets and tables for poor children. Through these activities, we can bring the good image of our company to public, and gain more attention form people. This will help us to increase our sales
Knowing and understanding what customers desire, potential demand of market and competitor’s operation is vital to the company in planning strategies. Hence, we will do marketing research to obtain information on these issues. We will do some survey to get know how customer’s satisfaction with our product, what approach of ads make them aware of our product what they expect us to change. We can buy reports about our competitor’s information. Base on these information we can know how much they set their price, product quality and advertising spending. Therefore we will be able to adjust the current market and decide a competitive and more attractive price. Most important report is future sale potential because it offer our business a more accurate forecast and we can decide how much the average demanding and we have produce to reach the demand and gain profits.
However, it will cost the company a huge amount of money to buy all reports in a quarter. Thus, we will only buy reports when necessary. Mostly we will spend our budget on price, and future sales potential reports. On average, we will pay about 20000$ per quarter.
Market research Quarter 1 Quarter 2 Quarter 3 Quarter 4
Price 5000 5000 5000 5000
Units sold 4750
Sale potential 10000 10000 10000 10000
Total costs 15000 15000 19750 15000
Sale forecasting has a direct influence on the success of a business. If the marketer predict more than the demand, there will be an amount of unsold goods. This will cost the company money for storing them. In addition if the products are kept in the warehouse too long, they may be no longer fashionable and not favourable. As a result, the company get loss. The second case is if the number of sale forecast is lower than actual demand. There will be a shortage in providing goods and we can’t get profit as much as we can. Therefore, sale forecasting is a really difficult task to marketers. In order to carry out a accurate sale prediction, we have to regard determining factors such as : future sale potential, price, price change, Advertising(TV ads, newspaper Ads, Magazine Ads), and spending on product quality, competitors strategies
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Product1_table 8645 8760 8850 8940
Product2-Helmet 8424 8570 8650 8790
1. Production Objectives
Minimize cost of manufacture, so that when the products come to consumers, they can buy with the low cost
Keep raw material and inventory enough to manufacture and sale
The COGS is estimated about $55 for plastic table and about $40for product helmet
Maintain labor efficiency about 220 units for plastic table and 200 units for helmet
2. Production Strategy
a) Inventories and Raw Material
Our mission is very clear, we want to manufacture the products which are low cost, good quality and the most important thing is that our products are not harm to consumers' healthy and environmental issue. For that reason, we consider that raw material is a vital element. Like others companies, we will cooperate with suppliers and try to build and maintain a good relationship. Senior and big companies will be the best choice for our company.
Even when we have a good relationship with our suppliers, in some cases, we might receive only 75% raw material which we order already. Thus, we decide to order 20% more than what we actually use for manufacture. Besides, we plan to keep a numbers of raw materials in warehouse in case we need to produce more or at next quarter we lack raw materials. However, it is essential to note that that numbers of raw materials will not be produce until it is necessary. The reason is that the cost for keeping inventory in warehouse are double the cost for keeping raw materials.
b) Product quality
c) Our products have low cost, however it does not mean, the quality of our product does not meet requirement of consumers. Our target is that customers not only satisfy with our products' price but they also please with our products' quality, then they will continue to use our products. As the reason, we decide to invest amount of money to quality of product. This amount of money is not too much because it will increase the price of product, but it is not too little, either. Firstly, we will spend $3 for the quality of product 2 per unit and about $2 for product 1. After 2 quarter, we will invest more for the quality of product. The specific numbers are shown in "Product Forecast" part .
d) Human Resources
We consider our human resources like a precious asset because they contribute most in our company. For that reason, we will use rewards and bonus to encourage and maintain the relationship between company and employees. Besides, we also spend amount of money to develop our human resources, specifically to increase labors' skill.
The second thing is that, we plan to expand our operation after each quarter, so the number of labors at the beginning we have will be not enough. Thus, we plan to hire amount of labors. However it takes us 1 quarter to train new employees, so at quarter 1 we will manufacture just enough our plant capacity. At later quarters, even we spread out our operation, we still have enough labors.
e) Plant Capacity
As we have just stated, we plan do not buy plant capacity, nevertheless in case we do not have enough labor, we will buy plant capacity. In fact with any company, there are 2 choices to select, the first one is buying plant capacity and the second is working overtime. However, we realize that we should buy plant capacity rather than using overtime. The reason is that we try to provide lowest cost products rather than the best quality products. Thus when we buy plant capacity, we will save cost for overtime which is charged at double normal rates.
f) Cost of production
As it was mentioned before, we will try to get the COGS is no more than $55 for product plastic table and $40 for product helmet, and to achieve this target, we need to do all things we plan. They consist of keeping raw materials on warehouse only, do not spend to much money in producing, buying plant capacity in stead of using overtime.
3. Production Forecast
a. Inventory and Raw material
Quarter 1 2 3 4
Use in production table 8424 8570 8650 8790
Ending balance 1680 1710 1730 1760
Use in production helmet 8645 8760 8850 8940
Ending balance 1730 1750 1770 1780
b. Product quality
Quarter 1 2 3 4
Plastic table $3 $3 $3.5 $3.5
Helmet $2 $2 $2.5 $2.5
c. Human resources
Quarter 1 2 3 4
Labor efficiency (Plastic table) 220 225 225 230
Labor efficiency (Helmet) 200 210 215 215
Developing Human Resources 11,000 10,000 10,500 10,500
d. Cost of production:
Quarter 1 2 3 4
Plastic table 52.5 51 50.5 50
Helmet 40 39.5 39.5 39
- Have net income at least $15,000 at the first quarter, and keep increasing about 10% next quarters.
- Keep the ROA about 5-10% and ROE about 10-15%
- Maintain the Current Ratio of Liquidity from 1.5:1 (min) to 2:1 (max)
- Rank 4th to 1st among 9 companies in the net income
- Reduce mortgage loans to avoid extra interest occur
Financial Strategy and Financial KPI:
To achieve those goals above, our group decided to follow the Financial KPI
- This is the profit that company gains at the end of each quarter
- Calculated by the difference between total revenue and total expense. More amount of net income shows how good company is. If it’s too low, company has to reflect at what they’ve done to give out solution to improve their situation.
- Show how many times current assets over current liabilities
- Calculated by (Current Asset / Current Liability), a ratio of 1.5:1 is considered a minimum. If the ratio is 1:1 means they don’t have cash to continue their business, if the ratio is 3:1 means they have too much cash and those cash become useless. The best ratio of liquidity is 2:1
Return on Asset:
- Show how effective of using assets to gain profit
- Calculated by (Profit before interest and tax / Total assets)*100%. With the same amount of assets, which company has more profit, they are better than others. For this ratio, higher is better.
Short-term loan & Invest coverage ratio:
- Short-term loan is the money company borrows from bank, short-term means they have to refund in 1 year period. Invest coverage ratio is the comparison of profit before interest and tax, and the interest expense.
- Short-term loan is a solution of company to find the money to invest into their business, lower figure is better, it’s safer. For Invest coverage ratio, the higher is better because they have a lot of profit but expense not much in tax.
- The amount of product units or cost that need to produce to balance the profit, gain the amount of money or assets which company invested
- Calculated by (Total fixed cost / Contribution margin). Lower is better, that means company don’t have to produce so much unit to balance their lost, when get through the Breakeven point, they’re beginning to gain profit.
We concentrate on product 1, put much thought and develop on that so it becomes more effective than product 2. With product 2, we’ve just bring it out to the market and it’s still in exploring process. As a result, product 1 is easier than product 2 to reach the breakeven.
Product 1 Product 2
Selling Price $62 $45
Variable Cost $38 $36
Fixed Cost $34.000 $33.000
Breakeven Units 1417 3667
Breakeven sales $87.833 $165.000
Projected Profit and loss
At the first quarter, we focus on the marketing, spend a lot of money on that, to publicize our product to customers, which leads to low amount in net sale and high marketing cost, so we don’t receive much on net income. Next quarter, with the influence from magazine and newspaper from the previous quarter, net sale increase sharply while manufacturing cost increase slightly, that leads to a big change in net income. In the future, we can predict that net income will continue to increase with a high speed.
Income Statement Quarter 1 Quarter 2
Net Sales Product 1 $295,182 $403,000
Net Sales Product 2 $261,000 $261,000
Net Sales $556,182 $664,000
Manufacturing COGS $448,260 $518,510
Gross Profit $107,922 $145,490
Selling and Administration $104,000 $89,000
Finished Goods Warehouse Cost $0 $4,348
Operating Profit $3,922 $52,142
Net Interest $13,150 $21,939
Income Taxes Payable $0 $15,102
Net Income -$9,228 $15,102
Projected Cash Flow
At the beginning, net cash flow is not good, it’s minus $335,280 but future will be better because we will attract more customers to increase the cash flow from operating activities, and also reduce the cash flow from investing activities.
CASH RECEIPTS CASH PAYMENTS
Cash On Hand $48,875 Purchase Raw Materials $135,300
Collection of A/R $589,941 Labor & Overhead $345,200
Mortgage $0 Product Quality $31,675
Sale of Plant $0 Total Warehouse Cost $0
ST Investment $0 Selling & Administrative $104,000
Short-Term Interest $7,750
Total Cash Receipts $638,816 Short Term Loan $310,000
Mortgage Interest $5,400
Mortgage Retirement $10,000
NET CASH FLOW -$335,280 Income Taxes Paid $24,772
ST LOAN GRANTED $0 Investment Deposit $0
EMERGENCY LOAN $335,280 Investment Deposit $0
NET CASH BALANCE $0 Purchase Plant $0
TOTAL CASH PAYMENTS $974,097
Projected Balance Sheet
Balance sheet shows the asset, liability and equity of company at a point of time. We plan to reduce the short-term liabilities, and expand the long term liability, so we have money to invest in our purpose.
Current Assets Current Liabilities
Cash On Hand $0 Short-Term Payable $335,280
Accounts Receivable $278,091 Taxes Payable $0
Investments $0 Total Curr. Liabilities $335,280
Raw Materials $21,200
Finished Goods $71,494 Long-Term Liabilities
Total Current Assets $830,325 Mortgages Payable $230,000
Long Term Assets Total Liabilities $565,280
Plant & Equipment $499,500 Owners Equity $265,045
Less Acc. Depreciation $39,960
Long Term Assets $459,540 TOTAL LIABILITIES &
Owners Equity $830,325
TOTAL ASSETS $830,325
Business Ratios (Selected Ratios)
- Return on assets = 0.5% show that our company is not good enough at using asset to earn profit. To increase the ROA, we have to increase the net income, and the solution was brought in the Profit and Lose forecast
- Overall, the business ratio of company is not reach the standard of economy. However, by learning through experience such as reduce unnecessary advertising; borrow long term money to invest in important plan, our company going to reach higher level.
Our company’s strategy is low cost, we sell the qualified products with reasonable prices. However, we still ensure our revenue and profitability. In order to implement this strategy our department have to prepare plans carefully and cooperate together tightly. We believe that if we continue with this strategy our company will be successful in the future and we can achieve our listed above objectives