Garments & Textile - Business Plan - Academic Assignment - Top Grade Papers

7/31/2019 Garments & Textile - Business Plan - Academic Assignment - Top Grade Papers

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Business

Plan

United Retail House

Company

GRBSOL Ltd.;Authors Name

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Table of Contents

EXECUTIVE SUMMARY .................................................................................................................................. 2

THE OPPORTUNITY ........................................................................................................................................ 4

THE COMPANY AND ITS SERVICES AND STRATEGY ...................................................................................... 6

Company: .................................................................................................................................................. 6

SWOT Analysis: ......................................................................................................................................... 6

Services of United House Retail Company: ............................................................................................... 8

Strategy: .................................................................................................................................................... 8

MARKETING STRATEGY ................................................................................................................................. 9

Product: ..................................................................................................................................................... 9

Pricing: .................................................................................................................................................... 10

Promotion: .............................................................................................................................................. 11

Placement: .............................................................................................................................................. 11

Customers: .............................................................................................................................................. 12

Company: ................................................................................................................................................ 12

Competition: ........................................................................................................................................... 12

Collaborators:.......................................................................................................................................... 13

Context: ................................................................................................................................................... 14

OPERATING PLAN ........................................................................................................................................ 15

FINANCIALS ................................................................................................................................................. 16

Ratio Analysis: ......................................................................................................................................... 19





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Companys pro-forma statements show accounting profit in first five years which assures that

this plan is favorable.





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THE OPPORTUNITY

People belonging to the highest rung of the income level have a lot of money to spend but very

little time to waste. These people consider time to be money, i.e. they would be willing to spend

some money if that act of theirs can save them from doing additional work. In a nutshell, they

want to buy convenience.

It was decades ago when lives were simpler; economic activity wasnt much complex;

international trade was limited. But with the passage of time, the pace of globalization increased

and economic activity became more complex. Human lives were also affected by these socio-

economic changes. Human lives got busierpeople had less time and more business to take care

of. Saudis are no exception to this rule. The lives of Saudi residents are pretty busy and time is of

the essence for them.

People saw the opportunity back in the days to design custom services for those who have

money so that in return for premium prices, they can get whatever they want conveniently. This

fact presents us with an opportunity to fulfill all the major needs of Saudis at one place. If all the

needs of Saudis can be fulfilled at one place, it will save their time as they wouldnt have to go

to various places to buy various items. In addition to it, it would also save them the hassle of

going from one place to another. In simple words, a place where Saudis can fulfill all their major

needs will bring convenience to them.

Poverty of Time: The desire for personal fulfillment, the daily job commute, and the tendency

of some people to have second jobs contribute to many consumers feeling time-pressured.

Market analysts expect direct marketers to do well based on the poverty-of-time life-style.

Component Lifestyles: In the past, shoppers were typecast, based on demographics and

lifestyles. Now, it is recognized that shopping is less predictable and more individualistic. It is

more situation-based. Providing one-stop solution to the customers by having all the needed

products at one retail outlet supports the situation-based shopping. People go for shopping for

one thing but when they see many others being placed in front of the, they make instantdecisions based on the situation which increases the average spend per customer, thus adding to

the profitability of the store operations.

United Retail House Company will provide the Saudis with the opportunity to fulfill all their

needs at one place. In other words, United Retail House Company would be a one-stop shop.

The products and services that United Retail House Company would offer include:





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New European brandsthe fashion market Candy shopsspecialized stores Italian village; outlet villagespecialized shopping centers Restaurants & Coffee shopsfood & drinks Entertainments Franchising





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THE COMPANY AND ITS SERVICES AND STRATEGY

Company:

United Retail House Company is a Saudi-based partnership. It was founded in June 2010 with

the objective of fulfilling all major needs of the elite class of Saudi Arab. The partners (founding

members) are relatives aiming to capitalize the opportunity available in the Saudi market. The

company analysis is performed below using SWOT Analysis:

SWOT Analysis:

The components of SWOT Analysis are the following:

Strength:

Unique Selling Proposition (One Stop Shop)The USP of our company is that it will meet and exceed the demands of quality products

at affordable prices by the Saudi Arabian customers. Our company will serve Kingdoms

ladies, gentleman and children at the same place. Thus we can say that United Retail

House Company is not attempting to serve individual customers only; rather it is aiming

to serve families as well. Individuals as well as families would be able to fulfill their

demands at United Retail House Company ataffordable prices compared to competitors.

The major difference between us and existing players, our USP, would be that we will

offer our products and services at affordable prices so that our customers pockets are not

overburdened.

Services Tailored yet StandardizedThe services provided by United Retail House Companyare perfectly tailored to the

needs of the target audience, but at the same time the services are completely

standardized. Customers will be able to buy branded items under one shed.

Reasonable PricesEven though we are doing value-based pricing and are targeting the, but still our prices

are quite reasonable compared to our competition and given the quality, magnitude and

the wide range of the services provided by the company.

Effectiveness and Efficiency





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Given the nature of the services and the environment in which these services are to be

provided, efficiency and effectiveness are the key elements for the companys success.

Customers would come to United Retail House Company to shop conveniently. If we are

not able to serve their needs effectively and efficiently, it would result in hassle for them

and it exactly what we are trying to avoid. Therefore effectiveness and efficiency would

be our key priority and strength. This would be done by proper planning and

implementation for the store operations.

Higher Profit MarginAs our target audience belongs to the upper class and we are doing value-based pricing,

so we would be able to earn a high profit margin from our services.

A Complete Package OfferedAll the major needs of Saudi Arabian customers would be fulfilled at United House

Retailing Company. Thus we would like to state that we would offer a complete

shopping package to our customers.

Weaknesses:

Inexperienced Management TeamOur biggest weakness lies in the fact that we are a bunch of relatives without any real

experience of running such a business.

Opportunity: Growing Market Potential

This is an untapped market with a huge potential for growth, so we can really establish

ourselves in this market and thus in the longer run can benefit from the expected growth

of this market.

Threats:

New Entrants resulting into Increased CompetitionDue to extremely low barriers to entry and the expected high growth of the market size,

we expect a large number of new entrants within two to four years of the starting of our

business. But we intend to cement our place and establish a name for our company by

then, plus we believe in being innovative in whatever service we provide. So this will

enable us to stay ahead of our potential competitors at all times.





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Services of United House Retail Company:

The services that United House Retail Company will provide to its customers are as follow:

New European brandsthe fashion market Candy shopsspecialized stores Italian village; outlet villagespecialized shopping centers Restaurants & Coffee shopsfood & drinks Entertainments Franchising

Strategy:

United House Retail Companys strategy will be to target the elite class of Saudi Arabia i.e.

United House Retail Company will be thefocusers1. We will be competing on quality and

convenience i.e. the quality of our services and convenience to avail of our services will give us

an advantage. Thus, United House Retail Companyscompetitive advantage will be Quality,

Convenience and Affordability.

In addition to it, we will charge our customers according to the value we create for them. The

pricing approach will be value-basedwhich will result in higher-profit margins. The details of

pricing will be discussed in the marketing plan.

1Focusers carve out a market niche and compete by providing a product or service customers can get in no other

way --- Human Resource Management by Gary Dessler, 10th

edition, Page number 81.





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MARKETING STRATEGY

Product:

The products of United Retail House Company are:

New European brandsthe fashion marketo New Zealand AucklandHeritage Fine Clothingo BiBAo TOMMY HILFIGERo Jacques Britto Arqueonautas Worldwide S.A.o

Jean Paul GAULTIERo Camel Activeo Karl Lagerfeldo Strellson

Candy shopsspecialized stores Italian village; outlet villagespecialized shopping centers Restaurants & Coffee shopsfood & drinks Entertainments Franchising

United Retail House Company will fulfill various needs of customers. It will provide customers

with the ability to shop and dine at the same place. Initially United Retail House Company will

succeed in the Ladies and Gentlemens fashion segments and then it will step into other selected

areas. It has been said earlier that United Retail House Company will provide the individuals as

well as families with the opportunity to fulfill all their major needs at one place. The candy shops

are aimed at kids and parents wouldnt have to go anyplace else to buy their kids candies.

Similarly, people can also drop by entertainment and franchising facilities to avail of the offered

services.

The need for this service has emerged due to several reasons. Firstly, a change in the thinking of

people (who fall in middle and higher income class) has been observed. People are less averse to

new and strange ideas; the success of Sheesha is an example of this phenomenon. Secondly,





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the lives of people have become very busy and they are always running out of time. People are

looking for convenient solutions to their problems. Thirdly, the structure of family has

undergone a transition i.e. nuclear families2 are pervasive as opposed to extended

families3(traditional joint family system). Thus, immediate family members are not available to

take the responsibility4and one stop shop in such a situation would really facilitate people. And

lastly, the need to bargain with different individuals is eliminated which also results in less fuss.

Pricing:

The target market of United Retail House Company is the people who fall in Socio-Economic

Class A & B; these people are willing to pay for quality service. Thus, the pricing will be

Value-based. United Retail House Company will charge its customers according to the value it

is creating for them.

The factor that motivated us in doing value based pricing was the fact that people belonging to

these areas have enough money but not much time to waste. Moreover people belonging to elite

class do not want any hassle; rather they are constantly looking for convenience. The law of

diminishing marginal utility dictates that when people get enough of something, its marginal

utility declines for people. This law applies to money as well. The value of money is less for

those who have it and they spend it to buy convenience. Catering these facts United Retail House

Company is committed to provide convenient services at one stop shop. In a nutshell, peoplewould highly value these services which would give us an opportunity to market these people

with prices according to the perceived-value that these people would put on those. Moreover in

the future run, we would be minimizing the difference between potential and perceived value of

these services with the help of certain awareness programs and one to one marketing.

2A husband and wife and one or more children constitute a nuclear family---Consumer Behavior by Leon G.

Schiffman and Leslie Lazar Kanuk, 9th


3The nuclear family, together with at least one grandparent living within the household, is called an extended

family--- Consumer Behavior by Leon G. Schiffman and Leslie Lazar Kanuk, 9th


4Perhaps its better to say that the association among family members has weakened over the years as the trend

of nuclear family continues to grow and people have become busier as compared to their forefathers.





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Promotion:

United Retail House Company will use a combination of various promotion strategies. One of

them will be One on One (O-O-O) promotion strategy. In O-O-O strategy we will distribute

pamphlets to people shopping at various places. The areas selected for the distribution of

pamphlets will be the one where our target market dwells such as ABC, XYZ, PQR, etc. This

strategy will help us in reaching our target market with the advantage of timely advertisement.

The hassle and opportunity cost of shopping at different places will be fresh in minds of people;

thus, creating awareness in minds of people at that time will have a lasting effect.

The other promotion strategy will be to air commercials on televisions. We will study the

viewership of various programs on different TV channels and select the time slot accordingly so

that we are able to reach the right target market at the right time depending on the time slots.

Another promotion strategy will be the use ofreference.Its based on common sense. Suppose a

customer comes to shop at United Retail House Company and is satisfied with his/her

experienced of shopping. He/she will then discuss it with people in his/her entourage and they

are likely to give United Retail House Company a chance. So the key here would be to serve our

customers excellently so that they recommend us to others.

The use ofmail will also be done to promote our company. We will mail our potential customers

brochures regarding our services and how to reach us. The brochures will be details in all aspect

i.e. the services that we will be offering, how we can be of help to them, how can the fuss can be

avoided and time can be saved, etc. Catalogues can also be mailed to the potential customers to

inform them about the store offerings. There can also be memberships for the shoppers at the

store who will be more motivated because of special promotional campaigns designed for the

members such as discounts, lucky draws, etc.

Placement:

The placement of our services will be direct; there will be no intermediary between our customer

and us. The customers will contact us directly.





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Customers:

Our customers are people of Saudi Arab, who fall in the SEC A&B, who have money to spend

but not time to waste. These people are identified as dwelling in the posh areas of Saudi Arab;

the names of the areas are as under:

ABC DEF GHI JKL LMN OPQ

Besides, our customers will be educated. Hence, they will have a thorough understanding of not

only the process but also the reasons behind our presence. Thus, the acceptability of our services

will be greater because of the understanding of our customers and their wants to buy

convenience. The customers will also be socially active and busy in their lives; therefore, they

will be short of time and may not have enough time to spend on shopping at various places. This

will also result in increased probability of someone availing of our services.

Company:

As aforesaid, the company is a Saudi-based partnership providing the elite class of Saudi Arab

with all their major needs at one place.

Competition:

Currently our competitors include:

Fawaz Al Hokair Savola Group Alshaya

Fawaz Al Hokair is in business for over 20 years and its businesses include the following:

Arabian Centers Fashion Retail





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Food & Entertainment Real Estate

Savola Group is in business since 1979 and its businesses include the following:

Savola Plastic Retail Sector Investment Sector Real Estate Sector

Alshaya was founded in 1890 and its businesses include the following:

Fashion & Accessories Footwear Health & Beauty Food Optics Pharmacy Sports Fashion Office Supplies Home Furnishing

But there are no impediments to entry in particular. Thus, we expect a lot of people entering into

the market by imitating the services that we are offering. We will build our name and trust in the

minds of people and these will in-turn help us in competing against the new entrants. By

providing superior service and quality products through our store, we will establish a long-term

relationship with the customers which will in turn enhance the brand equity for our store. We

will also be focusing on building customer loyalty to minimize customer switching when

competitors enter later on.

Collaborators:

The collaborators in this case will actually be the suppliers for different products, and other

businesses renting store space for setting up their services such as restaurants or other outlets. A





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strong and healthy partnership will be maintained with these collaborators by continuous

monitoring of the settlements done with them.

Context:

The concept of one-stop convenience store will be new to the Saudis which might result in some

hesitation by the customers. It will require some change in the shopping habits of the customers

but will also be offering them convenience at the same time which will be the basic attractive

feature for the store. Hence, the factor of reluctance is likely to be major contextual factor. We

intend to overcome this factor of reluctance by building trust and confidence with the passage of

time and assuring that the company is providing quality products at affordable prices.

Considering the economic variables and the change in customer demographics, the poverty of

time constraint will be very much fulfilled by strong emphasis on the convenience factor. Thus

the economic, social and demographic variables will prove favorable for the store operations.





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OPERATING PLAN

The vision of United Retail House Company is:

Offer a better price value relationship than other providers in each line each and every time

and offer our customers with a more exiting shopping experience.

Based on the above vision, the following mission statement has been defined:

To establish a business in Saudi Arabia that can meet and exceed the dynamic needs and

changes of current and future times of the region.

In order to achieve the above mission, the following guiding principles will be kept in mind:

The company will succeed through valuing its human capital in the service equationso that each and everyones contribution whether customer, stakeholders or our

peopleis valued in turn. To serve customers properly as one would wish to be served, and so create a relaxed,

facilitative environment; to treat all fairly.

To respect uphold and affirm the values and ideals of the Kingdom of Saudi Arabia. To reward our stakeholders fairly.





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To improve our offer to customers continuously in a commitment to excellence in allthat we do.

FINANCIALS

No business can survive if it is not financially feasible. It does not matter how creative or novel

the idea is, if the business fails to earn financial returns, it cannot survive. The financial

statement of MF Trading shows that it is earning profits from the first year. The Profit & Loss

account is based on the following assumptions:

MF Trading will operate at 40% potential in Year 1, followed by 65% in Year 2 and100% in Year 3

Cost of goods sold is estimated to be 40% of sales The growth rate in first year5 would be 15% followed by 20% henceforth The inflation rate for stock is assumed to be 5% p.a. The inflation rate for rent is assumed to be 10% p.a. The wages of staff would increase at an inflation rate of 10% p.a. The management expenses, administrative expenses, retail design expenses and

marketing expenses all increase at an inflation rate of 10% p.a.

5It refers to fourth year, first year after MF Trading has achieved 100% operating capacity.





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The upfront investment year 1 is spread across 5 years20% p.a.

In addition to the above assumptions, cost figures are given below:

Cost Item Monthly Cost (in 000)

Retail Staff 160

General Management Expenses 100

Administrative Expenses 50

Finance Expenses 50

Operating Expenses 50

Office Rent 20

Retail Design 15

The above monthly figures are multiplied by 12 to reach to annual costs.





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The sales for the first year are 20,000,000 which is equal to 40% operating capacity; itimplies that (20,000,000/0.4) = 50,000,000 is 100% capacity which MF Trading will

achieve in year 3; year 2s sales equal 32,500,000 (50,000,000*0.65)

The rental expense is a onetime expense The upfront investment equals key money paid in year one and shop fitting costs =

12,000 + 2,000 = 14,000

Year 2011 2012 2013 2014 2015

Operating Capacity 40% 65% 100% 100% 100%

In '000 In '000 In '000 In '000 In '000

Sales 20,000.00 32,500.00 50,000.00 60,375.00 76,072.50

Cost 8,000.00 13,000.00 20,000.00 24,150.00 30,429.00

Gross Profit 12,000.00 19,500.00 30,000.00 36,225.00 45,643.50

SGA Expenses

Wages 1,920.00 2,112.00 2,323.20 2,555.52 2,811.07

Rent Expense 240.00 264.00 290.40 319.44 351.38

Management 1,200.00 1,320.00 1,452.00 1,597.20 1,756.92

Administrative Expenses 600.00 660.00 726.00 798.60 878.46

Accounting 600.00 660.00 726.00 798.60 878.46

Operating Expenses 600.00 660.00 726.00 798.60 878.46

Retail Design 180.00 198.00 217.80 239.58 263.54

Marketing Expenses 2,500.00 2,750.00 3,025.00 3,327.50 3,660.25

Rental 4,000.00 0.00 0.00 0.00 0.00





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Portion of upfront cost 2,800.00 2,800.00 2,800.00 2,800.00 2,800.00

Total SGA Expenses 14,640.00 11,424.00 12,286.40 13,235.04 14,278.54

Net Profit -2,640.00 8,076.00 17,713.60 22,989.96 31,364.96

Below is a trend line showing movement of Net Profit graphically:

Ratio Analysis:

Below are some ratios showing profitability of MF Trading:





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2011 2012 2013 2014 2015 Average

Gross Profit Margin 60.00% 60.00% 60.00% 60.00% 60.00% 60.00%

Net Profit Margin -13.20% 24.85% 35.43% 38.08% 41.23% 25.28%

ROE -7.44% 22.75% 49.90% 64.76% 88.35% 43.66%

The gross profit margin is constant at 60% because cost of goods sold is assumed to be

constant at 40%. The net profit margin is increasing over the years and a five year average is

25.28%, which is fairly high. The ROE6(return on equity) is also increasing over the years and

a five year average is 43.66%, which is also fairly high.

6ROE is calculated using an investment of 35,500,000.



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Garments & Textile - Business Plan - Academic Assignment - Top Grade Papers