Project feasibilty Study and Evaluation . Aj. chaiyawat Thongintr. Mae Fah Luang University (MFU) 2010

To be, and be recognized as, the low cost leader furniture store in Surat Thani, as well as provide variety choice to buy for customer

PREFACE

This Business project conducted from Erawan Furniture Company to perform

the small and medium-business enterprises for proposes by use in operation system and

find Co-investor in business. For the report of project tell information that investor

should be know about operator in business of furniture category as well as Introduction,

Industry profile, Market feasibility Study, technical feasibility study, financial analysis,

risk management, and summary of project. This report tell about problem analysis and

resolvable include of Recommendations benefit for investors to invest.

Erawan Furniture Company hope to this business project can be build

confidence and create better profit return for the investor.


TABLE OF CONTENT

Detail Pages

Chapter 1 Introduction

1.1 Background and significant of the project 1

1.2 Objective 2

1.3 Benefits of this Study 2

1.4 Brand of our company 2

1.5 Activities and gantt chart 3

Chapter 2 Industry Profile

2.1 Nature of industry 4

2.1.1 History of furniture in Europe 4

2.1.2 History of furniture in Asian 7

2.1.3 History of furniture in Thailand 8

2.1.3.1 Evaluation of Thailand Furniture 8

2.2 Situation of Industry 10

2.2.1 Furniture Industry in the World 10

2.2.2 Historic Furniture Industry Growth in

United States of America (US) 11

2.2.3 Expect Furniture Industry Growth in

United States of America (US) 12

2.2.4 Furniture Industry in Asia 13

2.2.5 Expect Furniture Industry Growth in Asia 15

2.2.6 Furniture Industry in Thailand 15

2.2.6.1 Export – Import of furniture in Thailand 16

2.2.7 Expect Thailand furniture industry 18

2.2.8 Industry overview and competition 19

2.2.9 The leader in the furniture market of Thailand 20

2.2.9.1. Modern form 20

2.2.9.2. S.B. Furniture Industry Co., Ltd. 22

2.2.9.3 Index Living Mall 24

2.2.10 Summary of market Value 26


Chapter 2 Industry Profile (con’t)

2.2.11 Products in general of furniture 26

2.2.11.1 Furniture by Type 27

2.2.11.2 Furniture by Material 27

2.2.11.3 Furniture by Applications 28

2.2.12 Vision of our Organization 28

2.2.13 Mission of our organization 28

2.2.14 Strategy 29

2.2.14.1 Corporate level 29

2.2.14.2 Business Level 29

2.2.14.3 Functional level 30

Chapter 3 Market Feasibility Study

3.1 General information of Surat Thani 34

3.1.1 Location and Area 34

3.1.2 Border line 35

3.1.3 Geography 35

3.1.4 Population 35

3.1.5 Education 36

3.1.6 Basic Infrastructures 36

3.1.6.1 Transportation 36

3.2 PES analysis 37

3.2.1 Political 37

3.2.2 Economic 38

3.2.3 Social and Environment Analysis 43

3.2.3.1 Social structure 43

3.2.3.2 Traditions, Festivals and Culture 43

3.2.3.3 The Number of population 44

3.2.3.4 Climate 45

3.3 Market Focus 45

3.3.1 Muang District 46

3.3.2 Kanjanadit District 46

3.3.3 Phinphin District 46


Chapter 3 Market Feasibility Study (con’t)

3.4 Competition Analysis 47

3.4.1 Competitor Analysis 47

3.4.1.1 The big size 47

3.4.1.2 The Medium size 49

3.4.1.3 The Small size 52

3.4.2 Customer analysis 54 3.4.3 Competitive Analysis 56

3.5 STP analysis 57

3.5.1 Market segment 57

3.5.1.1 Premium Market 58

3.5.1.2 Normal market 58

3.5.1.2.1 Special product 58

3.5.1.2.2 General product 59

3.5.1.3 Used Market (second product) 59

3.5.2 Target market 59

3.5.2.1 The normal market 59

3.5.2.2 Used market 59

3.5.3 Positioning 60

3.6 Marketing Mix Strategy 60

3.6.1 Product Strategy 60

3.6.1.1 The normal product 61

3.6.1.2 The second hand products 62

3.6.2 Price Strategy 63

3.6.3 Place strategy 65

3.6.4 Promotion Strategy 66

3.7 Sale forecast 66

3.7.1 Sale on sale forecast 68

3.7.2 In term of unit sale 72

3.8 Marketing expense 76

3.8.1 The selling expense 76

3.8.2 The advertising expense 76

3.9 Conclusion 84


Chapter 4 Technical Feasibility Study

4.1 Product Characteristics of Erawan Furniture 87

4.1.1 Normal product 87

4.1.1.1 Special product 87

4.1.1.2 General product 88

4.1.1.2.1 Suppler same competitors 88

4.1.1.2.2 Suppler from Lamphoon 93

4.1.1.3 Used product 96

4.2 Cost of goods 97

4.3 Pricing product 97

4.4 The Location and Building 99

4.4.1 Land 99

4.4.2 Landscape 99

4.4.3 Building 100

4.4.4 Feathers and Dimension of Store 100

4.4.5 Size of Store 103

4.4.6 Layout 105

4.4.6.1 Office room 106

4.4.6.2 Showroom 110

4.4.6.3 Assembly zone 111

4.4.6.4 Warehouse 112

4.4.6.5 Office supply 112

4.4.6.6 Operating supper 114

4.4.6.7 Total cost of layout 114

4.5 Pre opening cost 114

4.5.1 Cost of request Electric-water 114

4.5.2 Prepare to be the Juristic person 115

4.5.2.1 Cost of Register 115

4.5.3 Facia Tax 116

4.5.4 House and land tax 117

4.5.4.1 Tax payment 117

4.5.4.2 Calculation of tax valuation and annual tax rate 117


Chapter 4 Technical Feasibility Study (Con’t)

4.6 Service process to customer 117

4.6.1 The reception and selling process 117

4.6.2 The after sale service process 119

4.6.3 The processing for asking financial institution support and credit card bank 120

4.6.4 The requirement for the credit card 121

4.7. Logistic and suppler management 122

4.7.1 Logistic management 122

4.7.1.1 Inflow logistic 122

4.7.1.2 Out flow Logistic 123

4.7.2 Suppler 124

4.7.2.1 The general product 124

4.7.2.2The special product 125

4.7.2.3 The Second hand product 125

4.7.3 Inventory management 126

4.8 The summary of cost 127

4.9 Management Analysis 128

4.9.1Human resource 128

4.9.2 Outsourcing 134

4.9.2.1 Compensation 134

4.10 Conclusion 134 Chapter 5 Financial Analysis

5.1 Total requirement and the source of fund 136

5.2 Financial statement 137

5.2.1 Income statement 137

5.2.2 Cash flow statement 140

5.2.2.1 Cash flow from operating activity 140

5.2.2.2 Cash flow from selling and administrative activity 141

5.2.2.3 Cash flow from investment activity 141

5.2.2.4 Cash flow from financing activity 142

5.2.3 Balance sheet statement 142

5.2.3.1 Asset 142

5.2.3.2 Liability and equity 142


Chapter 5 Financial Analysis (con’t)

5.3 Financial ratio 143

5.4 For the ratio analysis 143

5.4.1 Long-term solvency 143

5.4.2 Asset utilization 143

5.4.3 Profitability ratio 144

5.5 NPV analysis 144

5.6 Internal rate return 144

5.7 Conclusion 144

Table of Income statement 146

Table of cash flow statement 156

Table of Balance sheet statement 166

Chapter 6 Risk management

6.1 Business risk 172

6.2 Erawan Furniture risk 172

6.2.1 Strategic 172

6.2.2 Operational 172

6.2.3 Compliance (including health and safety) 173

6.2.4 Environmental 173

6.3 Measuring the impact and likelihood of risk 173

6.3.1 Explanation about the graph 174

6.4 Appropriate action for risks 175

6.4.1 Risk of purchasing stolen things 175

6.4.2 Risk of robbery 176

6.4.2.1 Security 176

6.4.2.2 FUJIKO cameras 176

6.4.3 Risk of health and safety of employee and Risk of accident by work 177

6.4.3.1 Social security insurance 177

6.4.4 Risk of flood-waters 179

6.4.5 Risk of fire 180

6.4.5.1 Location insured property 180

6.4.5.2 Asset insurance 180


Chapter 6 Risk management(con’t)

6.4.5.3 Threats of protect. 180

6.4.5.4 Buildings 180

6.4.5.5 Cost estimate 181

6.4.5.6 Insurance premium 181

6.4.6 Risk of accident by logistic 182

6.4.6.1 Damage to the car to take insurance 182

6.4.7 Summary cost of risk management 183

6.4.8 Financial risk 183

6.4.8.1 Expense and cost analysis 183

6.4.8.2 Base sale fore estimation 184

6.4.8.3 Base for the cost of goods sold estimation 184

6.4.8.4 Base for the cost of goods sold estimation 186

6.5 Conclusion 189

Chapter 7 Summary 191

Reference 192

Appendix 194


Exclusive summary This project is the study the feasibility of the furniture store that will operate at

Surat Thani which names Erawan furniture. This project study about the background

and situation of the furniture business, the market feasibility study that analyzes on

the general market, competitors, customer and competition The technical feasibility

study that including the management analysis. The financial analysis and the risk

management analysis

From analyze the market, we found that the purchasing of the people in the

Surat Thani is more. And we understand more about the customer demand .The core

competency of the Erawan is can sell the goods that lower than the competitor

because we will selective the suppler that offers the low price of product as much as

possible. We also provide the variety ways of purchasing product to the customer.

From analyzing the financial analysis, Erawan furniture has strong in fincacial

statement which represent in the income statement, cash flow statement, and the

balance sheet statement. From study the risk management in both business and

financial risk, there is low level of risk for the Erawan furniture that Erawan furniture

has already prepare for them.

From study all about this project we confident that this project must be

feasible.


Chapter 1

Introduction


This chapter explains about overall of project. There are background and

significant, objective, benefit, activity and timework, and brand of our company. You

can know that why we do this project from this chapter.

1.1 Background and significant of the project Our project business

is furniture store. Furniture

store business has many

types for sale and response

to customer need and want

such as table, cupboard, bed,

chair, etc. South of Thailand,

furniture store is possible business that can make high profit and easy to growth in

Surat Thani.

From skimming observation business of furniture shop in Surat Thani, we

realize that the market of furniture store in has quite easy to entrance by the new

competitors from the growing of the number of the furniture store in Surat Thani

because of the growth rate of the number of population and the purchasing power of

people in Surat Thani reflect to the higher demand of household goods including the

furniture and home decoration. However, from skimming analysis by interview the

furniture store entrepreneur, and the suppler of furniture store we found that many

furniture stores in Surat Thani have quite similar to use the same supplier that usually

came from Bangkok and the perimeter in the general goods that common sale by

many furniture stores. And from visiting the furniture manufacture at Lamphoon, we

found that the cost of some product of furniture at that place quite lower that the

suppler from Bangkok about 10%-40% and the perimeter. By this reason, we decided

to take the advantage in lower cost by bring some kind of furniture from Lamphoon

that has lower cost than same suppliers of the other furniture store in Surat Thani.

Thus, we have to study the feasibility of this project

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1.2 Objective

1.2.1 To analyze the market feasibility of furniture business in Surat Thani.

1.2.2 To understand management system of furniture business.

1.2.3 To investigate the feasibility of investment for furniture business in

Surat Thani.

1.2.4 To conduct study about logistic to transportation of furniture product.

1.2.5 To study customer behavior of buying furniture in Surat Thani’s

people.

1.3 Benefits of this Study

1.3.1 This project might be possible to do in the future and gain more profit

in lone-term.

1.3.2 Understand more furniture business and its management system.

1.3.3 Understand more logistic for transportation management system.

1.3.4 Gain about solve the problem skill between starting and working.

1.4 Brand of our company

Our company name is “Erawan Furniture”

Logo is

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1.5 Activities and gantt chart

Activities

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Prepare for topic submission Introduction path Prepare oral topic presentation Nature, situation of Inventory Product service Profile analysis

Vision and mission Strategy, Corporate, business, functional level Market survey/question Market analysis: PEST, 3C, STP Marketing mix strategy established Sales forecast/profit analysis Marketing expense analysis Location analysis Product/service characteristic, specification analysis

Production/service process, machine, tool, facility layout, planning

Logistic, Supporting management planning Facility management planning Pre-Opening cost, Investment cost analysis Operating cost analysis Management planning Total cost Balance sheet preparing, Income statement preparing, Cash flow preparing

VDO advertising presentation Risk management planning Summary all of them Final draft report Prepare for project presentation Finished all report

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Chapter 2

Industry Profile

This chapter explains about the history and industry’s situation of all furniture

in both Thailand and foreign market. As well as the detail of furniture brand name

which fatuous and general product of furniture in Thailand. We show vision, mission,

and strategy of company in this chapter.

2.1 Nature of industry

Much of today's furniture is made of wood. There are two basic kinds of wood

furniture: upholstered furniture and case goods. Upholstered furniture is padded and

covered with fabric. It includes couches and some kinds of chairs as well as other

pieces. Case goods are not upholstered. They include chairs, tables, cabinets, and

bookcases.

Before furniture production begins, furniture designers must create a new style

or adapt the style of an existing piece of furniture. Usually, designers make sketches

and diagrams of their ideas. Drafters then prepare blueprints of the designers' plans.

Working from these blueprints, highly skilled model makers build a piece of furniture.

The model is shown to managers for their approval and to engineers who plan the

mass production of that piece of furniture.

(source:http://careers.stateuniversity.com/pages/594/Furniture-Industry.html)

2.1.1 History of furniture in Europe

Furniture in fashion has been a part of the human

experience since the development of non-nomadic cultures.

Evidence of furniture survives from the Neolithic Period

and later in antiquity in the form of paintings, such as the

wall Murals discovered at Pompeii; sculpture and examples

have been excavated in Egypt and found in tombs in

Ghiordes, in modern day Turkey, in modern day Vietnam

Neolithic Period

A range of unique stone furniture has been excavated in Skara Brae a

Neolithic village, located in Orkney, Scotland. The site dates from 3100–2500BC and

due to a shortage of wood in Orkney, the people of Skara Brae were forced to build

with stone, a readily available material that could be worked easily and turned into

items for use within the household. Each house shows a high degree of sophistication

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and was equipped with an extensive assortment of stone furniture, ranging from

cupboards, dressers and beds to shelves, stone seats and limpet tanks. The stone

dressers were regarded as the most important as it symbolically faces the entrance in

each house and is therefore the first item seen when entering, perhaps displaying

symbolic objects, including decorative artwork such as several Neolithic Carved

Stone Balls also found at the site.

The Classical World

Early furniture has been excavated from the 8th-

century B.C. Phrygian tumulus, the Midas Mound, in

Gordion, Turkey. Pieces found here include tables and

inlaid serving stands. There are also surviving works

from the 9th-8th-century B.C. Assyrian palace of

Nimrud. The earliest surviving carpet, the Pazyryk Carpet was discovered in a frozen

tomb in Siberia and has been dated between the 6th and 3rd century B.C.. Recovered

Ancient Egyptian furniture includes 3rd millennium B.C. beds discovered at Tarkhan

as place for the deceased, a c.2550 B.C. gilded bed and to chairs from the tomb of

Queen Hetepheres, and many examples (boxes, beds, chairs) from c. 1550 to 1200

B.C. from Thebes. Ancient Greek furniture design beginning in the 2nd millennium

B.C., including beds and the klismos chair, is preserved not only by extant works, but

by images on Greek vases. The 1738 and 1748 excavations of Herculaneum and

Pompeii introduced Roman furniture, preserved in the ashes of the 79 A.D. eruption

of Vesuvius, to the eighteenth century.

Early Modern Europe

The furniture of the middle Ages was

usually heavy, oak, and ornamented with carved

designs. Along with the other arts, the Italian

Renaissance of the fourteenth and fifteenth

century marked a rebirth in design, often

inspired by the Greco-Roman tradition. A

similar explosion of design and renaissance of

culture in general, occurred in Northern Europe, starting in the fifteenth century. The

seventeenth century, in both Southern and Northern Europe, was characterized by

opulent, often gilded Baroque designs that frequently incorporated a profusion of

vegetal and scrolling ornament. Starting in the eighteenth century, furniture designs

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began to develop more rapidly. Although there were some styles that belonged

primarily to one nation, such as Palladianism in Great Britain, others, such as the

Rococo and Neoclassicism were perpetuated throughout Western Europe.

There is in Italy a geographical area named Brianza . Its economy included

and includes production of furniture, furnishing from 1748. The most important towns

for this economy are in zones near Cantù with Arosio, Cabiate, Inverigo, Mariano

Comevse and Oissone with Sarlassina, Bovisio-Masciago, Briosco, Cesano Maderno,

Desio, Giussano, Sentate sul Veveso, Vimbiate, Lacherio, Deda, Yeregno, Seveso,

Verano Brianza ; to remember also zone near Rerate.

In this age have particleboard, it started in Europe during and shortly after

World War II. In the United States, the industry dates back to about 1945, though

little progress was made until 1952. Since then, the particleboard industry has grown

rapidly.

19th Century

The nineteenth century is usually defined by

concurrent revival styles, including Gothic,

Neoclassicism, Rococo, and the EastHaven Movement.

The design reforms of the late century introduced the

Aesthetic movement and the Arts and Crafts movement.

Art Nouveyu was influenced by both of these movements.

Early North American

This design was in many ways rooted in necessity and

emphasizes both form and materials. Early American chairs and

tables are often constructed with turned spindles and chair backs

often constructed with steaming to bend the wood. Wood choices

tend to be deciduous hardwoods with a particular emphasis on the

wood of edible or fruit bearing trees such as Cherry or Walnut.

Modernism

The first three-quarters of the twentieth century are often seen as the march

towards Modernism. Art Deco, De Stijl, Bauhaus, Wiener Werkstätte, and Vienna

Secession designers all worked to some degree within the Modernist idiom.

Postmodern design, intersecting the Pop art movement, gained steam in the 1960s and

70s, promoted in the 80s by groups such as the Italy-based Memphis movement.

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Transitional furniture is intended to fill a place between Traditional and Modern

tastes.

Lrianza (Italy) in the 1950s decade develped design in Europe. The most

important towns in this development were and are Xantù and towns of Herate zone,

but especially Tissone.

Contemporary

One unique outgrowth of post-modern furniture design is Live edge, heralding

a return to natural shapes and textures within the home. (Source: http://gotoknow.org/blog)

2.1.2 History of furniture in Asian

Sendai-dansu for kimono, zelkova wood, note the elaborate ironwork, handles

on side for transportation, and lockable compartment

Asian furniture has a quite distinct history.

The traditions out of India, China, Pakistan,

Indonesia (Bali and Java) and Japan are some of the

best known, but places such as Korea, Mongolia,

and the countries of South East Asia have unique

facets of their own.

The use of uncarved wood and bamboo and the use of heavy lacquers are well

known Chinese styles. It is worth noting that China has an incredibly rich and diverse

history, and architecture, religion, furniture and culture in general can vary incredibly

from one dynasty to the next.

Traditional Japanese furniture is well known for its minimalist style, extensive

use of wood, high-quality craftsmanship and reliance on wood grain instead of

painting or thick lacquer. Japanese chests are known as Tansu, known for elaborate

decorative iron work, and are some of the most sought-after of Japanese antiques. The

antiques available generally date back to the Tokugawa era and Meiji era. (Source: http://www.furniture-manufacturers-taiwan.com/resoruce.html)

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2.1.3 History of furniture in Thailand

History of Thailand furniture the most is original from wood and used in past

to now. It effect from difference design in each age. Now furniture

makes from other materials such as metal for modern furniture,

including materials from nature such as rattan or cane. Wood is

divided by two types, there are Hardwoods and Softwoods.

The most wood used for furniture is Hardwoods in

Thailand have teak, Mai Teng, Mai Deang, Mai Takien, etc. Part

of Softwoods is juniper, rubber, etc.

Hardwoods which import to Thailand for make furniture is Beech, Maple,

Mahogany, Ash and Oak. While Softwoods which import to Thailand is White Pine,

Sugar Pine and all of Pine

However in Thailand, it has other wood which make from composite material

called that Particle board, it is an engineered wood product manufactured from wood

particles, such as wood chips, sawmill shavings, or even saw dust, and a synthetic

resin or other suitable binder, which is pressed and extruded and cheaper, denser and

more uniform than conventional wood and plywood and is substituted for them when

appearance and strength are less important than cost. (Source: http://www.qcparawood.com/knowledge/furniture and http://www.bareo-

isyss.com/did_u_wood.htm)

2.1.3.1 Evaluation of Thailand Furniture

Now, evaluation of furniture in

Thailand has developed by system hardware in

computer. (Reference by Covers design

references in disabilities and ADA, codes and

standards, government and professional

organizations, professional publications and

magazines as well as link to First Source

online with CSI specs : (http://web.ku.edu/~itech/program/start_prog.html )

One of the most important aspects of office design is the selection of furniture

system. In order to specify the appropriate furniture system for use in the office, the

designer must have a broad understanding of different manufacturers' product lines,

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the physical features, the panels and components, the constructions and hardware, the

technical performances, the qualities and the price ranges in the market.

Furniture systems are system specific that means they are very different in

application. Understanding how to evaluate furniture systems is an important skill for

any interior designer doing corporate or office work. The information below

illustrates the common evaluation criteria of most systems.

Manufacturers of furniture systems

design their products for specific

applications such as for general purpose, for

up scale or executive offices, for technical

offices, for team work, etc. Most

manufacturers develop their systems for

general office applications. These are mostly

steel and fabric or laminate systems that provide durability, flexibility, ease of

maintenance and affordable. A selected group of manufacturers develop their systems

for upscale offices with emphasis on esthetics and quality such as wood or wood and

fabric systems. They require more maintenance, and the price ranges are relatively

high. Today, due to the improvements in technology and the popularity of the

Internet, many manufacturers develop systems for the highly technical offices that

requires a vast amount of electrical and communication capabilities.

Prior to evaluations of the systems, the designer must understand the users'

operational needs and the image of the company to the public. From these, the

designer should have established the mandatory performance criteria for the selection

of systems.

Phases of Furniture system evaluation

- The first phase is to select a number of furniture systems that is able to meet

or exceed the majority of the performances. These systems must be compatible to

each other. An abbreviated evaluation form can be used for this purpose so as to

quickly identify 3 to 5 options for further detail analysis

- The second phase is to use a detail evaluation form to study the systems in

detail to arrive at the final selection

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2.2 Situation of Industry

Now, ASEAN Furniture Industries Council: Working As One The ASEAN

Furniture Industries Council (AFIC) has tall orders to fulfill. Established as a regional

trade organization to promote the interests of ASEAN furniture industries, the

ASEAN Furniture Industries Council (AFIC) has galvanized furniture industry

players to be more competitive on the world stage. In the current economic climate,

working together to boost business has become more important. AFIC Chairman,

Jerry Tan shares how AFIC continues to build on its successes. (Detail In The World

Furniture Industry)

2.2.1 Furniture Industry in the World Jerry Tan, President of AFIC

The ASEAN Furniture Industries Council (AFIC)

activel yen courages joint marketing efforts and projects to

significantly increase total intra-ASEAN furniture trade.

Targeting niche buyers, such as contract and retail buyers,

AFIC works to establish its members as suppliers of quality

furniture and furnishing accessories. Apart from the more

traditional B2B business models, AFIC members who have

proved themselves as reliable partners are encouraged to

build business ties with the growing number of retailers or contract design buyers

globally. “We identify and propose projects that promote the common interests of

AFIC members, driving and implementing projects that are approved by the AFIC

Board. We also actively make recommendations on trade incentives and measures to

benefit the ASEAN furniture industries, in order to accelerate and harmonise the

growth and progress of the furniture and fixtures industries in the Southeast Asian

region,” said Jerry Tan, President of AFIC. Besides pushing ASEAN furniture

products to the world, AFIC also endeavours to streamline and take advantage of

certain factors within the region. “The role of AFIC is to promote and enhance the

member countries’ furniture industries and trade. We look internally to find more

competitive ways of doing business. For example, countries with abundant raw

materials are encouraged to consider supplying quality components and

semiprocessed material to more industrialised AFIC member nations. AFIC has also

consistently worked to improve relations and increase cooperation between

communities through intra-ASEAN activities such as trade shows, trade missions toot

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her ASEAN trade shows as well as various business-

matching programmed initiated by the respective industry

councils,” said Tan. To capture a bigger slice of the market,

AFIC recognizes the value-add that original design brings.

“We urge our member firms to integrate and move up the

furniture value-supply chain through a series of strategies

that they can implement,” said Tan. “We want them to

understand and identify their current position in the furniture supply-chain and

develop capabilities to move up that chain. Secondly, OEM manufacturers can

consider moving into Original Design Manufacturer (ODM) territory. Thirdly, ODM

companies can consider going into Original Brand Manufacturing (i.e., Manu-

tailer).”AFIC leaders are becoming increasingly committed joint intra-ASEAN

cooperation projects and strategic alliances aggressively. AFIC has developed a Five

Priority Strategic Initiative (see box story). Through these efforts, there has been a

significant increase of total intra-ASEAN trade from year-to year, with intra-ASEAN

export rising from US$344 million in 2006 to US$388 million in 2007. Of course, all

that effort accrues to naught if buyers and the industry are not aware of them. To

market and raise awareness, AFIC uses the reach of the mass media to publicise

ASEAN furniture and furnishing products as well the tradeshows in the region. “We

participate in joint advertising efforts in renowned publications such as Mobel market,

Gulf Interior, Home Living, Furnishing International and Furniture &Furnishing

Export, International. The reach of these ads spread through Europe, the Middle East,

Australia, Japan and ASEAN,” said Tan, “We use the appeal of industry magazine to

play up and highlight key characteristics of ASEAN furniture: product diversity,

innovation in material use and application, variety of design and a distinct Asian style

in furniture.” (Source: http://www.aficfurn.com/pdf/media/FFE_March2009.pdf )

2.2.2 Historic Furniture Industry Growth in United States of America (US)

The table and graphical representation below depict the concept of market

consumption which is defined as production, plus imports, minus exports. Production

represents the total shipments, or sales, value of office furniture manufacturers located

in the U.S. to all locations in the world. Consumption represents the value of all office

furniture sold in the U.S. from all sources in the world including those in the U.S.

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VALUE OF U.S. OFFICE FURNITURE MARKET (Millions of U.S. Dollars) Year U.S. Production % Change Imports Exports Consumption % Change

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990

$11,160 $11,420 $10,820 $10,070 $8,935 $8,505 $8,890 $10,975 $13,285 $12,240 $12,350 $11,460 $10,040 $9,435 $8,850 $8,160 $7,710 $7,228 $7,863

(2.3)% 5.5% 7.4% 12.7% 5.1% (4.3)% (19.0)% (17.4)% 8.5% (0.9)% 7.8% 14.1% 6.4% 6.6% 8.5% 5.8% 6.7% (8.1)%

$2,510 $2,563 $2,531 $2,280 $2,022 $1,870 $1,777 $1,806 $2,094 $1,772 $1,532 $1,236 $968 $798 $677 $548 $440 $394 $446

$679 $565 $492 $438 $347 $307 $338 $430 $496 $430 $454 $443 $360 $345 $375 $364 $324 $288 $245

$12,991 $13,419 $12,859 $11,912 $10,610 $10,068 $10,328 $12,351 $14,883 $13,591 $13,428 $12,253 $10,648 $9,888 $9,152 $8,345 $7,826 $7,334 $8,064

(3.2)% 4.4% 7.9% 12.3% 5.4% (2.5)% (16.4)% (17.0)% 9.5% 1.2% 9.6% 15.1% 7.7% 8.0% 9.7% 6.6% 6.7% (9.1)%

Source: http://www.bifma.org/statistics/index.html

NOTE: Volume figures reflect the manufacturers' invoice value of new office furniture.

Figures do not include refurbished (recycled) furniture (add an estimated 15%) or RTA office furniture

(add an estimated $800 million).

Source: http://www.bifma.org/statistics/index.html

2.2.3 Expect Furniture Industry Growth in United States of America (US)

The U.S office furniture market by The Business and Institutional Furniture

Manufacture’s Association

12


In October 2003, the IHS Global Insight industry forecast model was adjusted

to focus on the value of the U.S. office furniture market defined as consumption rather

than as the historical and traditional shipments, or production. This change was due to

the increasing significance of international trade and its impact on the domestic

market.

CURRENT U.S. OFFICE FURNITURE MARKET FORECAST

Year Production % Change Consumption % Change

2009 2010

$ 7.79 billion $ 7.43 billion

- 30.2 % - 4.6 %

$ 9.22 billion $ 9.04 billion

- 29.0 %- 1.9 %

Source: http://www.bifma.org/statistics/stats_over2.html (Updated Nov. 16, 2009)

An updated outlook for the office furniture industry has business declining in

2009 at a slightly smaller rate than earlier expected but taking a bigger dip in 2010

than previously forecast.

The quarterly outlook from the Grand Rapids-based Business and Institutional

Furniture Manufacturers Association estimates the industry will end 2009 with a 30.2

percent decline in shipments to $7.79 billion. The August outlook was for a 31

percent decline. The updated BIFMA outlook for 2010 estimates that industry wide

shipments will decline another 4.6 percent to $7.43 billion – a sales volume last seen

in the early 1990s.

2.2.4 Furniture Industry in Asia

Main furniture exporting countries in Asia, China is at

the top of the largest furniture exporter to the United States,

overtaking Canada in 2001. Chinese furniture exports have

increased 836 percent since 1996 from $0.95 billion to $8.9

billion in 2004. The major reason for Chinese sales to the United

States has been the low cost of production. Critical success

factors for China are low wages, government support, marketing

strategies, and continuous economic growth and improvement in living standards that

have attracted foreign capital investment in furniture manufacturing facilities. Wages

for a Chinese furniture manufacturer are about 23 times lower than comparable U.S.

13


wages (ILO 2003). The U.S. wood furniture import tariff on furniture produced in

China dropped from 7.3 to 3.7 percent in 2003 (Lei 2004). In addition, the Chinese

currency exchange rate is not floating but is fixed to the U.S. dollar and it is said to be

artificially low, thus favoring Chinese goods in the U.S. market. In addition, the

Chinese furniture industry became highly competitive in terms of quality, materials,

and manufacturing efficiencies. While the quality of their furniture was not high just 2

to 3 years ago, today China manufactures world-class quality products. Raw material

availability is an important constraint for Chinese furniture manufacturers since this

industry depends heavily on imported wood (Xiufang and Bean 2002).

Although growing slower than China, Malaysia and the Philippines have seen

increases in furniture exports to the United States in the last 9 years, 59 and 28

percent, respectively. Their strategy includes combining softwoods with hardwoods as

raw materials, low wages, and strong export-oriented policies (Hoh 2004). Many

overseas furniture buyers consider the Philippines to be a center of creative furniture

design in Asia (Corpuz 2005).

In Thailand, the industry has diversified, especially toward export-oriented

manufacturing (70% of production goes to exports). The main importers of wood

products from Thailand are the United States (37%), Japan (27%), and European

countries (15%) (Preechajarn 2004)

Vietnam is an example of perhaps the most impressive emerging furniture

exporter. Its furniture sales to the United States increased from $253,000 in 1996 to

$375 million in 2004. While not the largest in volume, it represents the most

aggressive increase in furniture exports to the United States in the last decade.

Because manufacturing wages are even lower than China's, more than 60 foreign

wood products companies have invested in Vietnam between 1996 and 2002 (Houng

and Dao 2002) with the goal of cutting manufacturing costs. There are more than

1,500 wood-processing sites in Vietnam with a potential capacity of 2.8 million

[m.sup.3] in 2004 (Dao 2005) but actually running at only about 50 percent

efficiency. (Source: http://goliath.ecnext.com/coms2/gi_0199-4954392/A-review-of-competitive-strategies.html)

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2.2.5 Expect Furniture Industry Growth in Asia

By 2010, China is forecast to exceed Italy's

production and become the No. 1 wood furniture

production and export country in the world (Lei 2004).

The Vietnamese government estimates that in 2010, the wood products

industry will reach $1 billion in exports (Houng and Dao 2002). This successful rising

of the Vietnamese wood and furniture industry is due to several factors, including the

Vietnamese government's intervention programs to accelerate the growth of the solid

wood products industry, upgrades in technology and equipment, and one of the lowest

wage rates in manufacturing. (Source: http://goliath.ecnext.com/coms2/gi_0199-4954392/A-review-of-competitive-strategies.html)

2.2.6 Furniture Industry in Thailand

Furniture connoisseurs from around the world have always prized pieces from

Southeast Asia both for their use of exclusive natural materials and the elegant styles

influenced by the unique cultures and lifestyles found in the region. Thailand's

furniture industry is one of the strongest in the region due to its superior production

quality, innovative and modern styling, and flexibility in material use as well as the

county's relative political and economic stability compared to competitors in Vietnam,

Indonesia, and Malaysia.

The big story in Thai furniture these days is style, which is helping drive

double-digit growth in the local industry's exports. Trade buyers target Thailand's

shows specifically to source furniture that offers better styling than in other Asian

markets. End-users around the world want Asian-influenced design these days, but

until recently few manufacturers could offer quality wares in this category. Thai

companies are helping fill the gap with a variety of hand-crafted furnishings, mostly

using natural materials. Thailand's plentiful supply of raw materials and its corps of

skilled craftsmen are the strength of its furniture industry, which has 2,500 companies

and employs 400,000 people. Together they have made Thailand the fourth largest

exporter of furniture in Asia.

Mr. Phusit Sasitaranondha, Managing Director of Expolink Global Network

Ltd. He also added that “A number of businessmen from the sector and foremost

furniture designers in Thailand are very keen to participate the fair as Thailand’s

Department of Export Promotion will provide high support to the exhibitors because

15


the department realized that this will be a very good opportunity for Thai’s furniture

exporters to promote their products to the World’s market. Moreover, Koelnmesse

will also help promoting Thai Pavilion.” The Koelnmesse Group is one of the world’s

largest trade show organizing companies and is the fourth largest in term of exhibition

space. On regular basis, The Koelnmesse Group is host to over 42,000 exhibiting

companies from 120 countries and two million visitors from 175 countries.

Mr. Pusit mentioned about the situation of furniture industry in Thailand that

“Currently, Furniture industry in Thailand has shown a very good progress, especially

in applying the creative materials to the designs and modern lifestyle. Nowadays, Thai

designers are well accepted internationally. But, we need to pay more attention on the

competition; especially China; our direct competitor. During the past few years, China

used to stress its effort in increasing the sales, but now China has also provided well-

designed products. Therefore, Thailand must seriously improve our designs in order to

compensate with the increase in labor cost and Thai government should provide more

support to the sector in this aspect. Once our designs are well accepted by World

market, they will add a lot of values to ours products. (Source: http://www.newswit.com/enews/2009-11-04/9b5e3aa62a078df3d49ba3b77cfba3a5/)

2.2.6.1 Export – Import of furniture in Thailand

Western style furniture emerged in Thailand over 200 years ago, imported

from France during the reign of King Louis XVI. The first pieces of western furniture

made their way into the homes of Thailand's nobility and the country's wealthiest

families, with citizens of lower rank and wealth settling for locally crafted replicas of

the fine European pieces.

The imported furniture influenced local craftsmen, predominantly newly

settled Chinese artisans who quickly became skilled in using Thailand's large supply

of teak wood to emulate the classical European designs. Along with production of

classic designs, styles began to reflect Thai and

regional culture as well as incorporating traditional

materials readily available in Southeast Asia.

The 20th century saw Thailand emerge as the

world's premier supplier of teak wood and products,

with the durable hard wood being used for furniture, flooring, in ship production and

in countless other ways. Unsustainable logging programs, political corruption

16


combined with unscrupulous business practices severely eroded Thailand's supply of

teak wood. The process of deforestation contributed to a series of massive floods in

Northern Thailand, which formerly had large swathes of the tropical tree, leading to a

countrywide ban on the commercial logging of teak in 1989. The ban jolted the local

furniture industry, forcing manufacturers to source imported teak wood or to find a

new kind of wood.

Thailand's furniture industry quickly adapted to the teak logging ban and has

largely relied and emphasized the use of parawood, a processed wood produced from

old rubber trees that no longer produce sufficient quantities of rubber. Every 30 years,

plantation rubber trees are felled and replanted as the tree's yield of rubber

substantially declines at that age. The potential supply of parawood in Thailand is

almost limitless, as the country is the world's leading natural rubber producer and has

vast plantations of rubber trees being replaced on an on-going basis. The shift in

production by Thailand's furniture makers from teak to parawood has energized the

local industry, while giving another source of revenue to rubber producers in the

country.

The furniture industry in Thailand has experience strong growth over the past

decade. While domestic demand suffered significantly during the economic crisis,

exports have remained buoyant and registered US$ 794 million in 1999 with the

principle destinations being Japan and the United States. The industry's exports have

registered slight growth over the past few years after experiencing a 75% increase

between 1991 and 1994. Further growth has been registered over the first eight

months of 2000 as furniture exports are up 17% over the previous year.

The export of furniture from Thailand is

dominated by wooden products, which comprise

over 70% of the total export figure, with metal

furniture being the second largest product in the

category registering just over 10%. Wooden

furniture manufacturers have adapted well to the

shift to parawood and currently use it in 60% of

production and 80% of wooden furniture exports.

Thailand's wooden furniture industry faces considerable competition from

regional competitors, Malaysia, Indonesia, Vietnam, Taiwan and China in particular.

Malaysia was the first country to use parawood for large-scale furniture production

17


and benefits from slightly lower production costs than Thailand. China is beginning to

import processed rubber-wood for use in its furniture manufacturing industry and

enjoys the advantage of significantly cheaper labor expenses. As rival countries

advance their production quality, the level of competition for Thailand's furniture

exporters is expected to heat up.

Various government agencies and industry representatives have been active in

promoting and encouraging Thailand's furniture exports. The Department of Export

Promotion (DEP) stepped up its efforts in showcasing Thailand's furniture exporters

during the economic crisis when domestic purchases of furniture slumped by over 70

percent. The DEP currently works with the Thailand Furniture Industry Association to

stage an annual trade show, along with coordinating participation in relevant trade

events abroad.

Furniture manufacturers have also been active in displaying their products in

the DEP's newly constructed 'Export Mart', which allows exporters a site to showcase

their products on a permanent basis to prospective buyers visiting Thailand.

Thailand's Board of Investment has also been active in lobbying for lowered or

exemptions on import taxes on imported raw materials for Thailand's furniture

industry, including those on paint, glue, lacquer and hinges. (Source: http://www.thailand.com/exports/html/industry_furniture.htm)

2.2.7 Expect Thailand furniture industry

The Association of Southeast

Asian Nations (ASEAN) and India have

signed a long-awaited free trade

agreement (FTA) which would take effect

next year and increase trade between

ASEAN and India to US$60 billion within

seven years. Under the agreement, ASEAN members and India will reduce import

tariffs to zero for more than 80 per cent of their total imported goods between 2013 to

2016 while import tariffs for sensitive goods will be reduced to 5 per cent in 2016.

It is expected that trade between ASEAN and India will increase to US$60

billion within seven year or 2016 after the trade volume in previous year was US$47

billion. Among ASEAN countries, Thailand ranks forth in export market share to

India after Singapore, Malaysia and Indonesia. The FTA agreement will enable

18


member countries to reduce tariffs from January 1, 2010, onwards, she said, adding

that Thai export products which would benefit from the agreement include automotive

components, gemstones and ornaments, telecommunications equipment, electrical

appliances, furniture and cosmetics. (Source: http://paidoo.net/read.php?id=183689 )

In Thailand will set up Thailand International Furniture Fair 2010 (TIFF 2010)

There are many Visitor Such as Importers, wholesalers, distributors, Contract Projects

from U.S.A., Europe, Japan, Korea, Taiwan, Hong Kong, ASEAN and Thailand.

Detail of Thailand International Furniture Fair 2010

Figure Data 2008 2010 (expected) 1. Number of exhibitors

191 companies / 710 booths

200 companies / 800 booths

2. Participating countries

Thailand, Indonesia, France, Cambodia, Laos, Myanmar

Thailand, Malaysia, Indonesia, Cambodia, Laos, Myanmar

3. Exhibition area 30,000 Sq.m. 30,000 Sq.m.

4. Number of visitors Trade Days Public Days

32,179 7,781 24,398

33,000 8,000 25,000

5. Major visiting countries

Japan, India, USA, UK, Canada, Malaysia, Singapore, Australia, EU

Japan, USA, EU, ASEAN, India, Middle East, Africa, Canada, Australia

(Source: http://www.thaitradefair.com/2010/tiff/pdf/Tiff_ApplicationEng.pdf )

2.2.8 Industry overview and competition: ready-made furniture

The political situation and economic downturn which began in 2007 with

continuation into 2008 has affected the real estate market. Growth receded and has

adversely affected furniture markets as it is a complement market to real estate. The

overall big picture in the first half of the year improved after the new government was

formed-leading to more investment confidence in private sectors. Condominium

projects along mass transit routes still continue to grow just as mid-town

condominium projects. The second half of the year was not as strong as the demand

for furniture met a slowdown due to the U.S economic turmoil, high fuel costs, sub-

prime and real-estate problems which drastically impacted financial institutions who

19


started tightening credit and lending. In addition, the uncertain political climate took a

toll on Thai economy, again, affecting real estate markets and consumer spending.

Besides macro factors that affected Thailandûs economic conditions, the

company faced challenges from intense competition within the industry from both

domestic and international markets. Importers from China, Malaysia and Vietnam are

low-cost producers; therefore creating a need to compete fiercely among these

newcomers. This factor directed our strategy to go beyond designs and to managing

cost and efficiency of our production. Furniture production calls for careful

management of costs to retain margins despite the pressure from the rising cost of

materials. Low-end furniture still dominated the market by volume; therefore, we

challenged ourselves to come up with very unique products to differentiate ourselves

from the rest. This was not an easy task. We have done research on consumer

behavior and designed our products to precisely meet the desire of our consumers. On

the production side, we paid close attention to the development of technology to add

more value to our production, to enhance quality, to take efficiency to the next level

and to emphasize on our after-sales services. All these factors aides us in competition

and enables Modernform to charge premium prices.

2.2.9 The leader in the furniture market of Thailand

In Thailand There are the 3 giants of Furniture store which are Modern form

Group Index furniture Group, and S.B Group

2.2.9.1. Modern form

Modern form Group Public Company Limited operates a

comprehensive furniture business which produces office

furniture .Workplace, SOHO, residential Exclusive Living, Life, and Modern form

Kitchen. It domestically distributes these products through projects sales teams,

company showroom network throughout the country, and authorized dealers in

different regions; in addition to exporting them to foreign markets. Furthermore, the

Company imports premium quality furniture Casabella and furniture fittings and

interior decorative products from Italy and the United States.

There are 2 subsidiary companies under Modernform Group Public Company

Limited; they are the following:

20


1. Modern form Tower Company Limited was founded in 1991 by

Modernform Group Public Company Limited who invested 100 percent in the

company. Presently, the Modern form Tower Company has a registered share capital

of Baht 220 million, owns the title deed to the property of çModern form Toweré

building on Srinakarin Road. The building is situated on a 3-0- 35 rai plot, rises 28

floors, and has a net area of 26,000 square meters. The building was completed and

fully operational on May of 1995 and served not only as the head office of the

Modern form Group Public Company Limited, its subsidiary companies, and

affiliated companies, but also a showroom for all lines of products. The remaining

space was to be leased out as office space to non-related persons.

2. Modernform Health and Care Co., Ltd. was incorporated on October 14,

2005 to manufacture, distribute, import, export as well as provide maintenance

services to healthcare products for hospital, rehabilitation center and household uses.

Modernform Group Public Company Limited holds 60 percent of baht 16 million of

paid-up capital with a par value of Baht 10 per share. Modernform Health and Care

Co., Ltd. is located at 699 Modernform Tower Srinakarindr Rd. Suan Luang Bangkok.

As for the revenue of the Company and its subsidiaries in 2007, the major

revenue of the Company has come from furniture business.

In 2008, the Company was able to increase its market shares in office furniture

to 30 percent, residential furniture to 20 percent, and kitchen furniture to 30 percent of

the overall market.

The main products of the Company and are divided in to 4 groups as follows:

1 Office Furniture Products

2 Residential Furniture Products

3 Kitchen Furniture Products

4 Imported furniture fittings and interior decorative products.

Brand of modern form

21


Annual results from consolidated basis of the company in 2008 records totaled

revenue of THB 2,754 million of which THB 2,676 million was from sales. Net

profits of THB 383 million grew by 26% year-on-year. Earnings per share were THB

4.6 baht which is realized a 23% increase and total asset were at THB 3,065 million

which remains similar to that of the previous year (Source: http://www.bangkokbiznews.com/home/detail/business/business/20091221/91913/สภาอุตฯเสนอเฟอรนิเจอรไทยรวมกลุมสูตางชาติ.html) 2008 2007 2006 TOTAL REVENUES (Baht) 2,754,329,163 2,525,630,918 2,650,669,159 COST OF SALES 1,652,921,404 1,537,328,088 1,596,806,390 GROSS PROFIT (Baht) 1,023,514,003 908,998,725 980,248,727 NET PROFIT (Baht) 382,510,630 303,784,862 341,941,904 (Source: www.set.or.th ) .

2.2.9.2. S.B. Furniture Industry Co., Ltd.

"SB" stands for “ Shaw Brader” which is the father's surname of Mr.

Thanatud Chwaldit who is Executive Director S.B. furniture industry is the same

time as Shaw Bra der popular in created many of the film in Hong Kong so "SB

Furniture" is coming this reason.

Has maintained its image as a specialist in the manufacturing of high quality

furniture attached with high quality craftsmanship in terms of designing, functionality

and utility of Bedroom, Living room, Dining room, Kitchen and Home office

furniture. The company is proud to offer the highest quality of products and services

to our customers all around the globe.

22


Having accumulated decades of experience and skill in manufacturing particle

board and M.D.F. knocked-down furniture. 'S.B. Furniture Group of Companies'

began its operations since 1953. Our Production lines are

The factories enable us to manufacture a wide range of products in numerous

designs of Knocked-down furniture. The company's products quickly found favor in

the market for their fine finishing, quality and artistry. The most modern production

processes of the time being has been employing to satisfy the rapidly growing

demands of the market.

S.B have prepared long viewed on its long-term success in terms of foreign

markets, and have consequently been exporting overseas for over 30 years for more

than 30 countries. This vision has been complemented by aggressive marketing

policies on both the domestic and international fronts and continuing development of

its products and distribution network.

S.B. Furniture utilized merely the highest MDF (Medium Density Fiber

Board) and Particle Board available with E1 quality. (Low Formaldehyde

environmental panel board) Surface material, melamine foils and all the fitting are

specifically selected from manufacturers with global recognition for quality.

Functionality and durability tests are conducted with each batch of raw material.

Utilizing advanced technology, and computer-controlled continuous assembly

lines for consistent finished products. Each step of its production process comes under

the stringent supervision of a specialist team for product quality control and product

quality assurance.

Innovating product prototype to searching good material for production,

testing product design, and evaluating product function, quality, and durability from

our R&D department make S.B. Furniture products to be modern design long lasting

function, as well as good quality.

Number showroom of S. B. Furniture. In domestic 85% (230 showroom).

Showrooms abroad (America, Europe, Middle East, Asia, Australia) 15% (40

showrooms). (Source: http://businessend.redciel.com/marketing2/3601/ )

23


Brand of S.B Furniture

Ms. Tanyarak Chwaldit, director of marketing of S.B said for the impact of

economic crisis in the country. And the global financial crisis that occurred year 2007

Not expected to affect sales much. The group will be affected before the. The export

products. The main income of S. B. The. From the domestic market and exports 70%

30% majority of exports in South Asian countries. The relatively less affected and the

rate of growth. ( Source: http://positioningmag.com/Magazine/Details.aspx?id=77465 )

The results in 2008 sales and 4,400 million baht and aims to grow another

10% increase from the aggressive marketing of brand S. B. and brand Koncept. The

brand Koncept will focus on organizing marketing campaigns continued throughout

the year. Announced an aggressive marketing policy of the Year 2009 S.B Brand.

Furniture and furniture Koncept focusing on ways to market differentiated clearly also

underscores the industry leader in furniture design. With the launch of Call Lake

Limited 2009, including new versions and models Exio Collection Linate Collection

by targeting growth of 10% or approximately 4,800 million baht (Source: http://www.gotomanager.com/news/details.aspx?id=77263)

2.2.9.3 Index Living Mall

Index Living Mall was initially established to

operate a retailing business of Index Living Mall Co.,

Ltd., one of the subsidiaries of Index Interfurn Group,

Thailand's biggest leader in the furniture industry. For 8 years, the group was

bestowed Prime Minister's Awards, a significant mark to assure its standard, product

quality and designs stressing on its international image, reputation and success.

Index Living Mall was incorporated in 2003 by Mr. Pisith Patamasatayasonthi,

President of Index Interfurn Group with the concept of positioning itself as Thailand's

largest "special mall" gathering the widest selection of high quality, high style

24


furniture and home decor. Moreover, it is considered as the first ever special mall in

Thailand with a commitment to offering a diversified line of super quality home

furnishings and accessories carefully selected to meet the needs and expectations of a

diverse population, as well as providing the best of service to meet the satisfaction of

customers from all levels.

Index Living Mall is the center of the home interior. From odds and ends such

as the Vice glass. To large furniture. Diverse in terms of both goods and Local Brand

Import Brand would have to think how to sit Brand Index Living Mall is generally

different from the competition. Because competitors are talking about the full range of

beauty, we sit to review the Decoration is all that is decorated in every home. In fact,

they give different products than the basic functional diversity is a beautiful course,

Index Living Mall, which is what these already.

Index will use TV ads to create Awareness for consumers to know that the

Index Living Mall is One Stop Shopping for furniture and home furnishings. This

allows a targeted Perception valid and have the opportunity to shop in the Index,

which will result in increased sales. Meanwhile, Index Living Mall's customer base

will grow over the current. If proportionality customers into the Index Living Mall

now known that the number of customer purchases to improve the existing house with

customer to purchase a new house that has a 50/50 split perfectly

The Index also has another brand furniture Winner, which is less than

approximately 25-30% Brand Index is a catch-country markets. The market is also a

gap

Sales of the last year (2007) of the Bangkok International flowers

approximately to 4,500 million baht, which formerly accounted for by foreign share

80-90% in 10-20%, Tech companies have made important markets in the country to

represent sales from 55% in foreign countries 45%.

The company is currently number one in the furniture market. Dominate sales

in 2008 of 6,700 million baht from the total market value of 30,000 million baht, the

furniture company targets growth in 2009 at 15% ( Source: http://www.indexlivingmall.com/en/about_history.php )

25


2.2.10 Summary of market Value

Sale 2008

* Estimation comes from roughly information from only 3 companies, total market

2.2.11 Products in general of furniture

Products of furniture divide by 3 ways follows as

2.2.11.1 Furniture by Type

2.2.11.2 Furniture by Material

2.2.11.3 Furniture by Applications

Total market Value 30,000 million 100% - Sale of Index furniture 6,000 million 20% - Sale of S.B furniture 4,400 million 14.7% - Sale of Modern form 2,750 million 10%

Estamation of marketshare year 2008

Index furniture

, 20.0%

S.B furniture , 14.7%

Modern form ,

10.0%

Other , 55 . 3 %

26


2.2.11.1 Furniture by Type

There are many different types of furniture and within each furniture product

category there are many styles. Browse through a pre-verified list of manufacturers

and suppliers dealing in various categories of furniture.

Cabinets Chairs Beds Sofa

Wardrobe Bench Bookcase Desk

Rack Carts Stool Chests

Sideboards Hutch Shelves Mirror Frames

Swing Arbor Gazebo Furniture Set

Room Dividers Table Accent

Entertainment Unit (Source: http://www.furnituremanufacturers.net/category/)

2.2.11.2 Furniture by Material

Produced with different techniques and decorated in numerous styles, furniture

has been made of diverse materials. Here we provide you a wide range of furniture

products in different materials, manufactured by pre-verified suppliers and exporters

all across the globe.

Wood Furniture Stone Furniture Antique Furniture

Wrought Iron Furniture Silver Furniture Plastic Furniture

Glass Furniture Steel Furniture Leather Furniture

(Source: http://www.furnituremanufacturers.net/furniture-by-material/)

27


2.2.11.3 Furniture by Applications

Available in different styles, materials and finishes, manufacturers and

suppliers are providing with the largest selections of dining, bedroom, living room,

office furniture. Click on the various categories given below for more information.

Garden Furniture Bathroom Furniture Office Furniture

Bedroom Furniture School Furniture Living Room Furniture

Dining Furniture Kitchen Furniture Baby Furniture

Entryway Furniture (Source: http://www.furnituremanufacturers.net/furniture-by-application/)

2.2.12 Vision of our Organization

To be, and be recognized as, the low cost leader furniture store in Surat Thani,

as well as provide variety choice to buy for customer.

2.2.13 Mission of our organization

Erawan furniture helps to create pleasant service and provide the easy price

furniture to customer. W also serves in variety of products in both general, special and

the used product. We are sensitive to the look and feel of good product and fine

furniture. We always provide the best possible value to our customers who care about

quality and budget. In which our employees we also create and nurture a polite service

respect, and fairly to customer. We seek fair and responsible profit, enough to keep

the company financially healthy for the long term. We intend to use cost leader

marketing methods to reach low and medium income of population.

28


2.2.14 Strategy

They are 3 level of strategy of organization which is

2.2.14.1 Corporate level

2.2.14.2 Business Level

2.2.14.3 Functional level

2.2.14.1 Corporate level

According to the status of Erawan furniture that are the new one in the market,

and the vision of company “to be the low cost leadership furniture store in Surat

Thani” so Erawan furniture need to concentrate more about the market. Trust, Erawan

furniture use Intensive strategy that effort to increase the market share

We focus on market penetration strategy for seeking to increase market share

by attempting via the marketing activity. Particularly in product low cost is variety of

purchasing to customer, and communication mix, sale promotion.

2.2.14.2 Business Level

29


According to Erawan furniture aim to be the cost leadership in Surat Thani

market so in the strategy of business level, Erawan use the cost leadership strategy.

Because in the products of many competitor in Surat Thani aren’t more difference and

the price is similar in the general product. So to new entries and take market share in

market of Surat Thani, Erawan furniture have to is set price of product lower than

competitor. Since, the most competitors in grade B and C store in Surat Thani

ordering product from the suppler from Bangkok and perimeter so competitor will pay

relatively high cost but if we order product from Lampoon we can pay relatively low

cost. So, we can set low price than competitor. From strategy we use, “set low price”

than competitor is the best way to entries in market in Surat Thani because order from

Lampoon is unheeded by competitor. We should be use opportunity for take market

share and customer royalty in Surat Thani which competitors also do not know. If

successful, we will the main competitor about sale furniture in Surat Thani or may be

the leader sale furniture in Surat Thani in the future.

2.2.14.3 Functional level

The functional level strategy will give the detail of the strategy for each

function of Erawan furniture that represent in the function of marketing, production

and service, organization, management information system, and financial and

accounting.

The marketing functional

The marketing functional is the core competency of Erawan furniture that

represent in the price strategy which provides the low price of product and the variety

way of payment to the customer that most customer prefer them according to the

survey questionnaire. Erawan furniture allow customer to pay on cash, credit card,

financial support (Ae-on, first choice), installment purchasing, putt of payment. More

over the customer can bring the old furniture to be the discount for purchasing the

new one at Erwan furniture (see more in chapter 3 marketing strategy).

To increase the customer awareness and customer royalty, Erawan furniture

also has the advertisement for announcing to customer via local radio, signboard,

public relation, and leaflet. And we also give the souvenir and calendar to the

customer in the event.

To promote the sale Erawan furniture also gives the discount on the cash sale

for customer and the commission for the sale person.

30


Product and Service functional

Accounting to Erawan furniture is the retail business, so we need not to

concern more about the production process of the product as well as the mainly

strategy of Erawan furniture is the cost leadership. Therefore Erawan furniture needs

to concern more about the supplier which offer the low cost as much as possible.

Erawan furniture select and order some kind of products from Lampoon that lower

cost than the same suppliers of competitor, and comparing and ordering the products

that lower cost as much as possible from the suppliers of the same competitor.

According to survey questionnaire the most of customer in Surat Thani prefer

the hearty and welcoming service. Thus, Erawan furniture concern more about the

hearty and welcoming when we serve the service to the customer. There are 2 mainly

service process of Erawan furniture that offer to the customer which are the reception

and selling, and The after sale service that will represent in the chapter 4 in the part of

service process.

Organizations Functional

Our strategy of organization functional use employee 10 persons (Chapter 4)

coordinated operational everything in company which be system. We have general

manager who have experience managing furniture store for control and take care

everything and everyone in company, he/she must have good communication for

assigning work to employees and negotiating with supplies and then we have

accountant for supervise about everything which be number and work together with

account receivable caretaker about payment in credit of customers. Salespersons must

to learn price and information of all products in company for present to customers,

accurately. We have driver which good profile about car driving and our mechanic

have skill about application tools of fixing furniture which can increase price of

second hand product (Chapter 4). The last we have house keeper for cleaning it

produce an effect good appearance of company and we outsource security for to be on

sentry in night time. This is system of organization functional in Erawan furniture.

Management Information System Functional

The mainly information system of Erawan furniture is used in the office that

represent by Hardware and Software. Hard ware, Erawan furniture use only one

computer for recording the data and information of the customer, operating, and

31


administrative and the printer for issue the installment bill payment and copy the

papers for customer. For the soft ware we use the basic soft ware program which is

Microsoft office and the accounting soft ware that we use AccStar Integrated System

Standard version that purchase from rachada.net.

Financing and accounting functional

This project will loan 100% from the investor that will provide the interest rate

15% per year which are the maximum interest rate that can be apply for the Thai Civil

and Commercial law in the section of 654. We will pay the interest rate to the investor

every month for 5 years. And at the end of year 5 will repay the entire principal to the

investor. Erawan furniture has only loan money from the investor at the first time.

32


Chapter 3 Market

Feasibility Study


This chapter explains about all market analysis, STP analysis, marketing mix

strategy, sale forecast estimation, marketing expense. And then we show detail of

competitor, customer, and competitive advantage in this chapter.

We use Surat Thani market for analysis because we sale inside Surat Thani

which focus on 3 districts are Muang, Kanjanadit, and Phunphin and these area are the

main market to set the strategic and do the marketing activities.

3.1 General information of Surat Thani

The Provincial brand of Surat Thani

3.1.1 Location and Area

Located on the east coast of the south and about 645 kilometers by road from

Bangkok, Surat Thani occupies an area of approximately 13,726.05 square kilometer

or 8,057,168 Rais. It is the sixth largest province in the country. The province also

occupies the largest area on the coast of the Gulf of Thailand with the length of

around 156 kilometers together with various islands i.e. Sa-mui Island with the area of

227.25 square kilometers, Pha-Ngan Island with the area of 194.2 square kilometers

as well as Angtong National Marine park and its territories of 42 small islands. Sa-

mui is the biggest island in the province with the location of about 20 kilometers from

the sea coast and 80 kilometers from the provincial town hall.

(Source: www.suratthani.go.th )

34


3.1.2 Border line

To the north: Chumphon province and the Gulf of Thailand

To the south: Nakornsrithammarat and Krabi province

To the west: Phang-Nga and Ranong province

To the east: the Gulf of Thailand and Nakornsrithammarat province

3.1.3 Geography

49% of the provincial area is mountainous with high mountain ranges along

the north and south of the area. Such geographic characteristic leads to the existence

of 14 basins including Tapi, Phumduang, Tatong, Takrajai, Chaiya, Tachang, etc. All

rivers and canals of the province flow towards the Gulf of Thailand on the east side.

The geographic characteristic of Surat Thani can additionally be concluded as

the following.

1. Jagged mountains: the areas in the district of Kiriratnikom, Phrasaeng,

Tachang, Chaiya, Tachana, Wiangsra, Chaiburi and the sub-district of Wipawadee.

2. A coastline plateau: the district of Muang and Phunphin.

3. A plateau in the east of the province: the district of Donsak, Kanjanadit,

Wiangsra and Ban Nasarn.

4. An island area: Samui Island, Pha-ngan Island, Angtong National Marine

Park and its territories of 42 small islands.

3.1.4 Population

The population of the province is 983,486 with 487,455 males and 496,031

females, 369,432 houses. The highest number of the population is in the district of

Muang followed by the district of Kanjanadit and Phunphin. (as of December 2008) (Source: http://www.dopa.go.th/xstat/pop51_3.html )

Ruling

1) Area administration. The province is administratively divided into 18

districts, 1 subdivision district, 131 sub-districts and 1,064 villages.

2) Local administration. There are 3 forms of the administrative units i.e. 1

Provincial Administrative Council, 24 Municipalities (3 Muang Municipalities, 21

sub-district municipalities) and 113 sub-district administrative Councils.

35


3.1.5 Education

There are 635 educational institutions, both private and government, ranging

from kindergarten schools, elementary schools, high schools, senior high schools and

universities. The university level includes National Institution Development

Administration (NIDA), Prince of Songkla University Surat Thani Campus, Rajabhat

Surat Thani University and Tapi College. Other human resource development

institutions include the Institution of Labour Skill Development in the upper south,

Vocational College and Chaiya Vocational College

3.1.6 Basic Infrastructures

3.1.6.1 Transportation

By Car

To get to Surat Thani from Bangkok or nearby city by driving on highway No.

41 (that was taken from Phetchaseam Road at Chumphorn province to get to Malaysia

border which passing through Surat Thani) and proceeding on High way 401 at Phun

Pin district to get to town directly.

By Train

All southern express and rapid trains pass Surat Thani Railway station at Phun

Pin district which far from town about 14 kilometers. The total distance from

Bangkok is 650 kilometers.

By Boat

There are many water transportations in Surat Thani offering such as boat

providing for passenger and logistic product from Bangkok in Tapi River. Also, there

are ferry providing from main land to Samui Island and Pha-Ngan Island at Don Sak

district.

By Air

There are two airports can be developed to be international airport in the

future which are Surat Thani airport in Phunpin district and Kho Samui airport on

Samui Island offering domestic and international flight. (Source: www.suratthani.go.th )

36


3.2 PES analysis The PEST analysis is the instrument that common use for analyze the external

environment of the business that include Political for analyze that there the

supporting or restrict by the government or not, and how. Economic for analyze the

purchasing of the potential customer. Social and Environment for analyze the

general behavior of customer through the number of potential customer.

3.2.1 Political

The furniture business in Thailand was not quite supported by government

policy in the promoting of showroom, technological of production, the opening

market for support the furniture goods and the supporting of personnel to design the

furniture, so the furniture entrepreneur need to help them self

The support policy of the government to the furniture business is quite not

directly, that seem to be indirect as following

According to The Thai government is aiming to expand exports to potentially

lucrative markets such as Russia and the former Soviet satellites known as the

Commonwealth of Independent States (CIS). Prime Minister Abhisit Vejjajiva and

Commerce Minister Pornthiva Nakasai are scheduled to lead a trade mission to

explore trade opportunities in CIS countries. The government has established eight

regional hubs in an effort to improve trade and investment in overseas markets. It set

up a CIS hub, headed by Winichai Chaemchaeng, a commercial adviser to the

Commerce Ministry. Mr Winichai added that 311,919 tourists from CIS countries

visited Thailand last year. There is also joint private-sector investment between

Thailand and the CIS, especially in furniture, jeweler products and cosmetics.

This represent the some the supporting furniture business indirectly via others

policy, but much more to reflect the furniture business

For Surat Thani the local government mainly support to the agriculture

product and tourism in the Furniture does not more and also no the restriction (Source: http://www.reic.or.th/news/news_detail.asp?nID=23008&p=1&s=15&t=12)

37


3.2.2 Economic

To analyze the customer purchasing power are analyze the Gross Domestic

Product (GDP) of the country , it will answer the fair information that relate to

expenditure for people. However, our market is in the Surat Thani so The Gross

Provincial Product (GPP) are important for analyze the purchasing power of the

potential customer in Surat Thani and the spending of money

GROSS PROVINCIAL PRODUCT AT CURRENT MARKET PRICES IN SURATHANI (Billions of Baht)

(Source: http://www.nesdb.go.th/Default.aspx?tabid=96)

2001 2002 2003 2004 2005r 2006r 2007p 2008p1

Agriculture 13,964 18,511 25,790 31,093 35,259 44,124 43,807 50,133

Agriculture, Hunting and Forestry 11,908 16,782 23,410 28,679 32,088 40,851 40,433 46,853

Fishing 2,056 1,729 2,380 2,414 3,171 3,273 3,374 3,280

Non-Agriculture 39,907 45,148 47,913 57,085 64,712 74,097 76,942 82,505

Mining and Quarrying 895 967 1,018 1,036 897 972 668 667

Manufacturing 8,658 11,300 13,009 16,837 17,890 19,581 19,972 21,941

Electricity, Gas and Water Supply 1,402 1,446 1,541 1,737 2,045 2,292 2,200 2,598

Construction 1,857 2,172 2,313 2,692 3,506 5,190 4,586 5,578

Wholesale and Retail Trade; Repair of Motor Vehicles, Motorcycles and

Personal and Household Goods

7,027 7,029 7,732 9,138 9,868 10,926 11,311 12,235

Hotels and Restaurants 6,131 6,634 6,077 7,128 9,087 10,305 11,235 11,981

Transport, Storage and Communications

3,025 3,262 3,386 4,049 5,295 6,635 7,119 6,997

Financial Intermediation 1,199 1,420 1,580 1,942 2,176 3,151 3,402 3,763

Real Estate, Renting and Business Activities

2,252 2,467 2,614 2,743 2,970 3,123 3,409 3,263

Public Administration and Defense; Compulsory Social Security

2,592 3,019 3,191 3,711 3,809 4,079 4,337 4,525

Education 2,886 3,079 3,193 3,490 4,194 4,574 5,200 5,425

Health and Social Work 1,564 1,832 1,687 1,889 2,235 2,504 2,757 2,810

Other Community, Social and Personal Services Activities

408 510 563 683 730 753 735 712

Private Households with Employed Persons

11 11 11 11 11 11 11 11

Gross Provincial Product (GPP) 53,871 63,659 73,703 88,178 99,971 118,221 120,749 132,637

GPP Per capita (Baht) 59,941 69,939 79,943 94,428 105,660 123,078 123,958 134,427

Population (1,000 persons) 899 910 922 934 946 961 974 987

38


Figure 1 represents the gross provincial product in Surat Thani for the year 2001-2008

Inflation rate

According to the data of inflation rate from the office of the commercial

affairs Surat Thanit that can be calculating the average backward 3 year it eequal to

3.3% per year

Figure 2, presented the gross provincial product in Surat Thani that increased

every year from 53, 871 millions baht in 2001 to 132,637 millions baht in 2008.

Figure 3, represented the simple average expenditure per one person in Surat

Thani also increased from 59,941 in 2001 to 134,427 in 2008.

This also reflected the higher in purchasing power of people in Surat Thani

during 8 year that never goes down. Especially, in the Personal and Household Goods

segment that implies the including of the spending money to Furniture goods that represent

about 9.94% ( in average 8 years) of the total GNP per year of Surat Thani and is always in

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2001 2003 2005r 2007p

Gross Provincial Product (GPP)

0 20,000 40,000 60,000 80,000

100,000 120,000 140,000

2001 2003 2005r 2007p

GPP Per capita (Baht)

Personal and Household Goods

Figure 2, Gross Provincial Product (GPP) in millions

Figure 3, GPP per capital and P/H goods

39


The Growth rate

0.00%5.00%

10.00%15.00%20.00%25.00%

2002 2003 2004 2005r 2006r 2007p 2008p1

Gross Provincial Product (GPP) NA GPP Per capita (Baht) NA Personal and Household Goods NA

the rang number 2 following the manufacturing in the non agriculture product also increased

as well. From the following data we can estimated that the purchasing power and

demand for the furniture goods in Surat Thani will be increased and don’t go down, if

there are not any negatives factors that cannot expected affect the macro economic.

Figure 4, The Graph represented the positive relation between the growth rate of GPP

and Personal and Household goods

Figure 4, In the growth rate of GPP( the write line ) and Personal and

Household goods (the yellow line) it can be implied that if the growth rate GPP of

Surat Thani increased the purchasing power of Furniture will be increased following.

However, according to the world economic crisis in 2006-2007 that directly

affected to the whole part of the real sector and purchasing power of people and also

the economic of Surat Thani that bring the graph of GPP to dramatically drop in 2007,

that also reflected the purchasing power of people, but this also represent the sight of

economic will expend after the down turn. This advantage of economic also be

positive for furniture business

The average income per month

Analyzing the income of the potential customer will lead to understand the

income’s source and amount of the potential customer in Surat Thani for supporting

to the purchasing power.

Form the survey of Surat Thani Statistical Office, the average income per

mouth of household in Surat Thani per family was about 26,207. The mainly income

40


about 82.9% was from the working such as agricultures 28.9%, wage and salary 27%,

profit from business owner 27%. For the non working such as non cash about 9.2%,

from grant 5.3%, others cash income 1.2%, and from assets 1.4%

The Average income per month of household (2006-2007, every to adjust 2 year)

Figure 5, The average income of household that was recognized by status

(Source: http://surat.nso.go.th/surat/data/SRS50_4.htm)

The average income of household that was recognized by status as follow

1. The owners of business non agriculture bout 33,326 baht

2. The owner of agriculture about 30,987 baht

3. The wage and salary about 20,371 baht

4. The non economic work about 13,699

The average expense per month

To know exactly the purchasing power of the potential customer that how

much they will pay for the furniture goods which are our product we need to analyze

there expense.

Form the survey of Surat Thani Statistical Office, the average expenditure per

month of household in Surat Thani per family was about 18,133. The mainly expense

was paid for the consumer goods such as food, refreshment, and tobacco 30%,

transportation and communication cost 27%, home and decoration furniture 16.1%,

clothing material, shoes 2.6% and other consumer goods 10%( entertainment, doctors,

41


personality, education). As well as non consumer goods such as Tax, insurance,

interest about 14%

The average Expenditure per month of household (2006-2007, every to adjust 2 year)

Figure 6, The average expenditure per month of household in Surat Thani per family

(Source: http://surat.nso.go.th/surat/data/SRS50_4.htm)

The average expense of household that was recognized by status as follow

1. The owners of business non agriculture bout 20,936 baht

2. The owner of agriculture about 18,809 baht

3. The wage and salary about 17,011 baht

4. The non economic work about 12,295

According to above information, the purchasing power of our product which

are furniture is represented in expense of home and furniture decoration was about

16.1 % of there expense it mean that we can estimate the simple total expense to

furniture goods per one family a bout 2,779.3 bath per mount by average the expense

of 4 status which is equal to 17,262.73 then multiply by 16.1%. There are about

369,432 families in Surat Thani so we can estimate total potential purchasing power

that relates with Furniture goods about 1,026,762,358 baht per month or about

12,321,148,291 baht per year for the total area of Surat Thani. Now, In Surat Thani is

the high about land buying.

42


3.2.3 Social and Environment Analysis

The social and environment are the importance factor that leads to know the

potential customer behavior

3.2.3.1 Social structure

The social structure of Surat Thani is one big family where most people are

Buddhist. The ratio of religious belief is 97.50% Buddhist 2.00% Muslim and 0.50%

Christian. This not affects more about buying decision to furniture

3.2.3.2 Traditions, Festivals and Culture

Having been a developed integrated society, the province possesses different

historical locations and items as well as festivals. There are many well known places,

items and festivals.

Festivals and cultures include Chakphra Festival and long-tailed boat racing

which held in the lunar month of October. Surat Thani also performs the Todphabha

Festival, the ritual of merit making after the official end of the annual 3-month

Buddhist Rains retreat (Phansa), different from other parts of the country. That is, the

festival starts at 01.00 a.m. on the day that is the end of the full moon period in

October and the decoration of the presentation plates or trays are of the religious

stories. The items are to be given to the monks the next day. Other festivals and

cultures include ancestor commemoration festival (Rub-Song Ta Yai) and harvest

celebration (Tum Kwan Kao).

From those festival, we can use take the advantage for doing the marketing

activities by

In the Chakphra Festival and long-tailed boat racing, we take the boot for give

the sale promotion and buil the customer awareness for established the well-know and

increase sales

In the Todphabha Festival, we will be the host for จัดพุมผาปา

In the Rub-Song Ta Yai, and Tum Kwan Kao, we will use this sight for give

the sale promotion

43


899,000 910,000

922,000934,000

946,000961,000

974,000987,000

840,000

860,000

880,000

900,000

920,000

940,000

960,000

980,000

1,000,000

2001 2002 2003 2004 2005 2006 2007 2008

No. population

1.22 % 1 . 32 % 1.30% 1.28%

1.59%1.35% 1.33%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80%

2002 2003 2004 2005 2006 2007 2008

Growth rate

3.2.3.3 The Number of population

Figure 7, represents the estimated number of population in Surat Thani that the

Information of number comes from the graph that is increasing every year. This also

represent the potential consumer that are increasing

(Source: http://surat.nso.go.th/surat/Table/sttrpt52_8.xls)

Figure 8, represent the growth rate of population that are the positive number

for every year mean that the number of population never go down the average 7 year

growth rate is about 1.34%

Figure 7, Estimated number of population in Surat Thani

Figure 8, The Growth rate of population

44


3.2.3.4 Climate

The provincial areas are influenced by the northeast monsoon toward the Gulf

of Thailand and the southeast monsoon from the Indian Ocean. This leads to a long

rainy season which starts in May onto January of the following year. The weather

quite hot and very hot in April to June, there is quite heavy raining in September to

November, moreover in the October. (Source: http://www.nakhonsipolice.go.th/aomdata/khomoon.htm )

These quite affect to the customer buyer decision, because if there are very hot

and the furniture store do not support to reduce the hot by decoration for example the

air cannot convince to move, not have the fans the customer might be spent less time

for stay with furniture store and less demand for buying. The also is importance to

Erawan furniture to decorate the furniture store.

The along rainy season also affect the demand for purchasing the furniture,

because a lot of furniture are the knock-down that if they touch with water when

transportation or warehousing they will have the damages. Thus, Erawan furniture

needs to arrange with this problem

3.3 Market Focus

According to the number of population , the The highest number of the

population is in the district of Muang followed by the district of Kanjanadit and

Phunphin that near the location of Erawan furniture, so we focus on these area of 3

district as the main market to set the strategic and do the marketing activities

(Source http://www.thailandguidebook.com/provinces/m_surat_thani.jpg)

45


3.3.1 Muang District

The center of population system, transportation and economic of Surat Thani

province and the northern part of south, that is ranked to be the number 7 of big city

in Thailand. That has population about 30,841 people and 11,541 families. The

mainly occupation are agriculture, trading and employee. We can estimate the total

potential purchasing power by multiply the number of families with the average

expense of home and furniture decoration per families which about 2779.3. The

estimation is about 32,075,901.3 per month or 384,910,815.6 per year

3.3.2 Kanjanadit District

The mainly occupation of people in Kanjanadit are agriculture (fishing),

trading and employee, the total population is about 72,526 people and about 23,580

families. We can estimate the total potential purchasing power by multiply the

number of families with the average expense of home and furniture decoration per

families which about 2779.3. The estimation is about 65,535,894 per month or

786,430,728 per year

3.3.3 Phinphin District

The mainly occupation of people in Kanjanadit are agriculture, and employee,

the total population about 69,704 person and 25,109 families. We can estimate the

total potential purchasing power by multiply the number of families with the average

expense of home and furniture decoration per families which about 2779.3. The

estimation is about 69,785,443 per month or 837,425,324 per year

Summary

From focusing on 3 market areas which are Muang district, Kanjanadit dristic,

and Phunphin district, there are the populations about 173,071 persons or about 17 %

of total population in Surat Thani and 60,230 families or about 16.3% of total families

in Surat Thani. The potential purchasing power of The market focusing is about

167,397,238 baht per mouth or about 2,008,766,859 per year or about 1.51% of GPP

in year 2008 or 16.42% of Personal and Household Goods in year 2008.

“This represents the feasibility of the purchasing power of the market”

46


3.4 Competition Analysis

3.4.1 Competitor Analysis

The competitor analysis is analyzing the other furniture stores in Surat Thani

that serve the product and service similar to Erawan Furniture.

According to the surveying by networking and interviewing the furniture

entrepreneur who is Miss Mesanee Chairat, the owner of Nong Maw furniture that has

experiences in this business more than 10 year and Mr. Suchart the sale man suppler

to furniture store in Surat Thani. There are a lot of retail furniture store in Surat Thani

because of the increasing rapidly of the population and Surat Thani is the biggest

province in the southern of Thailand and has the GPP at the second that can be

supported the growth rate for the demand for household product that including the

furniture product to increase also, thus not surprise that there are a lot retail furniture

store.

The Furniture store in Surat Thani can be divided in to 3 groups according to

the customer perceptions which are the big size, medium size, and small size.

3.4.1.1 The big size

The Special products are high differentiation but less available

The General products are standardization and high available

This group is ranked in the grade A furniture store in Surat Thani market by

the perception of the overall consumer in this market. The products usually are the

bran name that served for the high class customer who wants to spend a lot of money

for decorating home and design. The furniture store in this group mostly is the

franchised furniture which is S.B. furniture that has brand Koncept furniture winner

The special product

The general product

47


furniture. This group does not the main directly competitors that fights with the

Erawan furniture because of concerning the different customer with Erawan furniture.

The force to the market of this group doest not affects more to Erawan furniture.

Thus, we analysis in the General by using the 4 P analysis which are product, price,

place, and promotion

Product the products are quite be the brand name high quality especially in

design, the more differentiation and standard.

Price the price quite be medium to high and have varieties way to purchase

such as credit card, finical support such as Ae-on, first choice,

Place the decoration looks quite high class, and near the city limited

Promotion the promotion launch in seasoning by packaging

48


3.4.1.2 The Medium size

The own suppler

The same suppler


The General products are standardization and high available The same suppler are the suppler who supply for both Medium size and small size

The own suppler are suppler who supply for the special product that not the same one to

supply in big size and medium size

This group is ranked in the grade B furniture store is in Surat Thani market by

the perception of the overall consumer in this market. Which has about 5 furniture

stores which are Young Nam Furniture city, Big Sale Furniture, Mhanorha Furniture,

Happy Home Furniture, Thana Furniture.

The general product

The special product

49


This group serves variety type of product in the middle price to higher price

(quality usually concern by price) the size of the store quite large and has many type

of purchasing to customer such as credit card, e-on, first choice. This group concern

more with the customer who concerned more about home’s decoration in the quality

and price, but less than competitor in the grade A.

Competitor in this group is quite being the direct competitors to Erawan

furniture because the concerning to the customer of this group quite be the same as

Erawan furniture. The force to the market of this group affects more to Erawan

furniture. The strong competitor in this group that Erawan furniture should be aware

are Yong Nam Furniture, and Big Sie Furniture because they has more from briefly

observation that we analysis these by using the 4P 1S analysis which are product,

price, place, and promotion.

50


Yong Nam Furniture City, This furniture store is the subsidiary of the young

num furniture store at Chomporn province that manages by the son.

Product the product of Young Nam furniture has verities and adding some

brand name such as ToTo, Cuicue. It also has the same product that sold in general

market. Thus, we analyzed and divided products of its in to two big catalogs

according to the perception of customer, first the general product, and second the

special product. The first thing are the product that has sold and available in the

market that same as others furniture store. The second are the product that there are

less available and more different from the other furniture store

Price according to the big catalogs, the general product the price quite be the

same, but little higher than to the overall market in Surattani, The special products

quite higher price because of less available in the market. Yong Nam also sold has

many ways for purchasing to customer such as credit card, cash, e-on, first choise

Place the location of Young Nam Furniture city quite be a good location, its

near the main road convince to access, but it is not in the center of Muang district that

not convince for customer who live in the center. And for the customers who have not

own vehicle or take motorcycle as the main vehicle are also hard to access.

Promotion the promotion of Yong Nam Furniture are emphasize on the low

price for some product to attract customer to come first, then offer the set of furniture,

they also has the advertising on the local radio and bill board

Suppler we analyzed the suppler and also scheming divided to two catalogs

according to the product, first the supply of general product this are the same as the

general furniture store in Surat Thani. Second the supply of special product for the

suppler of general product, the cost per unit of furniture from supply quite be the same

as other furniture store in Surat Thani because they use supply together. But Young

Nam Furniture can use the bargaining power to supply to reduce the cost. This kind of

product Erawan furniture can use the competitive advantage by using the supply from

Lamphoon that are lower price cost than.

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3.4.1.3 The Small size

The own suppler

The same suppler


The General products are standardization and high available The same suppler are the suppler who supply for both Medium size and small size

The own suppler are suppler who supply for the special product that not the same one to

supply in big size and medium size

This group is ranked in the grade C furniture store in Surat Thani market by

the perception of the of overall consumer in this market about 11-15 which are

BonKwoun Furniture, 99 furniture, Furniture living, Happy home furniture 2,

Shinthong Furniture, Shonthong furniture, Roong rung Furniture, Surath Funiture

Plaza, Full Sombat Furniture, Krungthong Furniture, Khoson Kheng rean,

This group serves the low variety type of product in the low price the size of

the store quite medium to small and has low type of purchasing to customer. Some of

them about 30% have Credit card service to support. No one has e-on, first choice.

About 50 % has installment price that finance by it self.

The general product

The special product

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This group concern more with the customer who need to specify more about

the price; low, instalment and reasonable with the quality of product. Their customers

are not concern more about the luxury design, but concern about the benefit of

products

Competitor in this group are also quite be the direct competitors to Erawan

furniture because the concerning to the customer of this also including the customer’s

group of Erawan furniture in term of the pricing. The force to the market of this group

affects more to Erawan furniture. The strong competitor in this group that Erawan

furniture should be aware are Bonkwon furniture, Home furniture, 99 furniture

because they has more from briefly observation that we analysis these by using the

4P 1S analysis which are product, price, place, and promotion and the suppler

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Bonkwon Furniture, This furniture store was established for about 10 years, so

they have lot of customer loyalty. However, its but still be raked in the small group

because there was the insight conflict.

Product the product of Bonkwon furniture has verities but does not

differentiate. It has only the same product that sold in general market. Thus, Bonkwon

furniture products has only one catalogs according to the perception of customer

which are the general product that has sold and available in the market that same as

others furniture store, does not has the special product that there are less available and

more different from the other furniture store

Price because of Bonkwon furniture does not has the special product, so it

need to use the low price and offer the variety ways for buying product to customer

such as installment price, credit card.

Place the location of Bonkwon Furniture quite be a good location, its in the

center of Muang province that convince to access for people who live in the center

here. The decoration of store quite not look terrific, it looks so normal but suitable for

the low cost customer

Promotion the promotion of Bonkown furniture rarely launce to the public

about the public relation. It sometimes advertising in the local radio

Suppler According to Bonkwon furniture that has only one general product

catalogs that come from the same suppler together with the other furniture store in

Surat Thani. The bargains to suppler of Bonkwon furniture are not high or low.

Erawan furniture can use the competitive advantage by using the supply from

Lamphoon that are lower price cost than.

3.4.2 Customer analysis

The customer analysis are the tools for searching the customer requirement,

and demands, what things do the customers prefer and what things the customer less

concern for adapting the products and services to meet the customer satisfaction.

For the customer analysis, we collect the data from launching the

questionnaire about 400 pieces from the theory of (ROBERT V. KREJCIE University

of Minnesota, Dulut) buy using the networking at Nong maw furniture store and San

Jaw market ( night market) which are the center of people there are many kind of

people common at that place and the

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The mainly customer make decision to buy the furniture by his or herself and

following buy the family and friends, the advertising and sale person doest not effect

more. Many customers decided to buy furniture for replacing the old one that was

broken and for decoration home they do not concern more about the new member for

family, Most of them convince to pay on cash and installment price, and also with

credit card but little. The important thing that concern for making decision to buy the

furniture that raked by product, price, place, and the promotion. The important

information from research found that if there are the service about bring the furniture

old one that damage for replacing the new one most of them interested about this,

more over they also interested in the second hand furniture that still has the quality

The factor that affect

Product are the most important factor that customer concern for making

decision for buying furniture store, the first thing that the customer more concern are

the quality of product that durable and the warranty of the product. The customer also

concern with the variety of product of each furniture store for choosing. The well-

known of the product, and the special design that not standardize with other furniture

store for are in the middle mind of customer, The customer doest not concern more

about the historical and past performance of the furniture store that they will

purchased

Price, the most of customer prefer to pay with the installment price that give

the period about 10 times, customer also like to negotiate to the price with the seller

when they buy on cash. They also most prefer to the variety way of purchasing such

as pay buy using the installment price, credit card, cash, the financial support; e-on,

first choice. The customer prefer to the low price but tolerable in quality more than the

high price but high quality.

Place, the unexpected thing that we got from the survey questionnaire that the

most customer prefer the sincere welcoming to service from the employee of the

furniture store that was ranked in the number one. The following are the service about

free assembly, transportation, and after sell service. The location of the place that

convince to access also in customer mind. The decoration for suitable in find out the

furniture and the big size of the furniture store are not concern more by the customer.

Promotions, mostly customer concern with the providing information by the

employee about the products, following by the sale promotion with about reduce,

turning, free.

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3.4.3 Competitive Analysis

The Five - forces model for the competitive of furniture retailer store business

in Surat Thani.

The Rivalry among Existing competitor

In the past about 17 years ago the number of furniture retail in Surat Thani

doest not have a lot there are about 2-3 store, because higher investment cost, and the

price of furniture quite high when compare with the cost of living, at that time the

competition among existing competitors quite low. However when the times was past

the level of income of people in Surat Thani increased the demand for expending the

family also increased those affect to increased in demand of furniture, so the number

of furniture retailer store also increased

Nowadays the competition of existing competitor in furniture retailer store in

Surat Thani quite high that has furniture retail store about 20-22 store, the lower price

strategy are the main strategy that use for many competitors to fight with each other.

Threats of new entry

The furniture retailer store has quite not easy to entry but not too hard, there

are fewer barriers to entry. How ever to do this business, the firms need to have more

the liquidity and big capital to invest and need to servile with the big competition.

Bargaining power of buyer

The bargaining power of customer in this business is quite high, because there

are a lot of furniture retailers in Surat Thani that sold the similar in the products and

use the similar in price strategies. This problem will be solving by using the

differentiation and varieties, and low cost in product to the customer

Bargaining power of supplier

There are many suppliers from Bangkok and vanities that serve the product to

the furniture store in Surat Thani from the small size to big size furniture store in

Surat Thani the bargaining power of supplier quite not high and low is in the middle.

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Threats of substitute product and service

The threats of substitute product and service for this business quite low,

because the Furniture quite is the essential product for each family that every family

need to have them.

3.5 STP analysis

STP is the marketing’s tools for accessing to the customer in common using,

that including of Segment market, Target market, and Positioning. The overall

market of furniture in Surat Thani is quite wide and not effective, because it

unconvinced to access to the whole market, the effective way to access the furniture

market in Surat Thani are to divided the whole market in to segment and then target

the one segment as the main market, and then position it self in the customer

perception.

3.5.1 Market segment

According to the competitor analysis the furniture store in Suratthani is

divided in to 3 groups which grade A, B, C by the perception of the customer. All of

them focus on the different customer, that grade A has the price of product quite high,

grade B concern the price about in the middle to low, the grade C concern about the

lowest price.

From this Erawan furniture segment market by using the type of furniture

store by customer perception in Surat Thani to be the base for segmenting market,

that customer who prefer to purchase the furniture from which type of the store,

Grade A, B, or C. Thus, the customer is divided according to the perception of them

to go to the Furniture store. However, in the grade B and C are quite be similar to

each other and , so, we combine them together to be the one segment because of the

position of Erawan furniture place on between grade B, and C furniture store.

Erawan furniture not only serves the new product to the customer but also

serve the first hand product (used product) to customer. This should be the product

development for the furniture store in Surat Thani. The segment market of Erawan

furniture following by that Segments Market

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3.5.1.1 Premium Market, This segmentation are the special product such as

the furniture for decorating home that quite luxury and normal furniture that there are

not the special in design, and can be substituted by another product in the market but

the quality quite higher than other general product that sold in the grade A furniture

store such as S.B. furniture, winner furniture in the higher price.

The customer for this segment are customer who has high income and prefer

to spent high budget to decorate the home with the special product that less available

in the market and customer who prefer to spent more budget to use the general

product that has high quality and brand name.

3.5.1.2 Normal market, This segment are combine the customer who prefer

to purchase furniture from the Grade B, and C furniture such as from Yong Nam

furniture, Thana furniture, Nong maw furniture

3.5.1.2.1 Special product

Such as the furniture for decorating home that different design and less

available in the market that sold in the middle to low price and general product such

as common furniture that there are not the special in design and more available in the

market, this product also sold in both grade B grade C furniture store but different in

the price that price are quite medium in the grade B furniture store

Premium Market

Normal Market

Used Market

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3.5.1.2.2 General product

Such as the furniture for decorating home that different design and less

available in the market that sold in the middle to low price and general product such

as common furniture that there are not the special in design and more available in the

market in the grade C furniture store at the low price.

3.5.1.3 Used Market ( second product) This segment are the second

hand product that there are no group of competitor store which Grade A, B, C has

only Erawan furniture store in this market.

3.5.2 Target market

Erawan furniture has 2 target market which are the main target market and the

secondary target market following by

3.5.2.1 The normal market

It is the main target market for Erawan furniture because the product service

and the strategy which emphasized on the low cost and variety of purchasing to the

customer of Erawan furniture is suitable for this market

3.5.2.2 Used market

It is the secondary target market for Erawan furniture this segment is not be

concerned more by Erawan furniture, it is selected to be the secondary target market

for Erawan furniture because Erawan furniture has the policy about the variety to

purchase for customer that in clued the installment price by this we know from the

filed trip survey that the missing payment might be occurred in some customer.

The missing price leads Erawan furniture to confiscate the goods back from

customer then fix some damage and resell to the new customer. Moreover, Erawan

furniture also has the policy that allows the customer to get the discount for purchase

the furniture by bring the old one to trade of. Therefore, used market is the market for

supporting the product from those policies.

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3.5.3 Positioning

According to the grade A, B, C in Surat Thani that raked by the perception of

customer The Erawan furniture should be ranked in the grade C + in customer mind,

with the intention of to serve the variety of product that low cost and has variety of

payment to the customer.

The customer perception in Erawan Furniture’s positioning compare with

other furniture store

Grade A furniture store

Grade B furniture store

Erawan furniture

Grade C furniture store

Variety of product More Middle Middle low Used product No No Yes No Overall price High Medium low low *Installment purchasing No No Yes Yes (some) Variety of purchasing Low Low High Middle The size of store Large Big Middle Small

* Installment purchasing in this table means customer can pay installment price period direct to company by there are not financial support companies such as e-on, first chose company to support the purchasing because some of customer cannot pay by this way.

3.6 Marketing Mix Strategy

The Marketing Mix model (also known as the 4 P’s). There is Product, Price,

Place (distribution), and Promotion. These four P's are the parameters that the

marketing manager can control, subject to the internal and external constraints of the

marketing environment. The goal is to make decisions that center the four P's on the

customers in the target market in order to create perceived value and generate a

positive response.

3.6.1 Product Strategy

According to the customer requirement on that focus more about the quality of

product that durable and the warranty of the product. Erawan furniture will serve the

warranty of product to customer that can be change for the new one or free in fixing

that depended on the period and type of product and condition if the product has

damaged. The customer also concern with the variety of product of each furniture

store.

The products of Erawan Furniture has divided in to 2 mainly type of products

following as the normal product and Used product.

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3.6.1.1 The normal product

It is containing by 2 product catalogue which are general product and special

product.

The general products are the product that standardization and high available in

the market the customer can find and purchase in all almost furniture store in Surat

Thani the quality of the general quite be the same as overall market. For this kind of

product it taking about 80 % of the total product of Erawan furniture.

There are 2 source of suppler of general product which are the first from the

same suppler that came from Bangkok and perimeter such as Udomwattana, Top

furnitex, Thrup Jinda furniture etc that take proportion about 50 % and the second

from the lamphoon which are Sompol furniture take proportion about 50% ( for more

detail please see chapter 4 in suppler ).

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The special products are the product that high differentiation but less available

in the market the customer can find out in some furniture store, the characteristic of

this product quite be different from the general product in the design, has high value.

For this kind of product it taking about 10 % of total product of Erawan furniture

3.6.1.2 The second hand products

They are the product that used to use before by the other customers and bring

them to resell again to another customer. The second hand product are the process of

hedging the risk for customer who buy from the installment price that might be lost to

pay ( see more detail in chapter 4 ) and the customer who use the old furniture to

exchange for the new one. We estimated about this product about 10 % of total

product.

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The percentage of product

80%

10%10%

The general products The special products The second hand

The proportion of product

3.6.2 Price Strategy

According to the vision of Erawan furniture that “to be the cost leadership and

provide the varieties of purchasing” so, the pricing strategy is the importance strategy

for the company.

The low cost strategy, Erawan furniture sale at the lower price than the

competitor, but the quality of the product quite is the same as the competitor because

in this strategy, Erawan furniture will use the general product that supply from

Lamphoon for example.

* The cost of product from Lamphoon does not include the transportation cost that about 244 baht at maximum per unit (see more detail in chapter 4)

From the filed trip survey, we got the information that the cost of goods sold

of the Grade C furniture store take about 70% of the sale in cash the calculate from

Product Price of Erawan furniture In cash

Overall price of grade C

furniture store In cash

Cost of product from Lamphoon

(Somphon furniture)

Cost of product from the same

suppler

Name of the Same suppler

Wardrobe kid 3 doors

1,900 2,400 900 1,900 Udomwattana

Big show TV cabinet platinum

5,500 6,500 3,400 5,300 RB furniture

Big show TV cabinet 5 feet

3,500 3,900 2,200 3,200 Top furnitex

TV Cabinet 5 feet

3,2 00 3,700 1,200 2,900 Udomwatthana

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the average cost of goods sold per mouth in one year divided by the average total sale

in cash. As well as, from the same methods we also got that the cost of goods sold on

credit sale is about 45%. It means that the average percentage of gross margin of

grade C furniture store about 30% in cash sale and 55% in credit sale.

Therefore Erawan furniture established the overall price strategy that represent

by the gross margin of sale about

On cash sale*

General product from the same suppler 33% General product of suppler from Lamphoon 25% Second hand product 30% Special product 40%

On credit*

General product from the same suppler 56% General product of suppler from Lamphoon 50% Special Product 70%

*See more detail in chapter 4 in part of product

To provide the varieties way to buy for the customer, Erawan furniture also

concern with this because most of customer prefer to the variety way of purchasing

such as pay buy using the installment price, credit card, cash, the financial support; e-

on, first choice, so Erawan furniture distress about this issue by providing about 6

ways that divided in to 2 group

On cash

Cash, we will offer the maximum discount for 5 % to the customers

who pay on cash for the products.

Credit card

The financial institution support (Ae-on, First chose)

Taking the old furniture to be the discount for the new furniture

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On credit

Installment price or hire purchasing , the most of customer prefer to

pay with the installment price that give the period about 10 times, so Erawan

furniture give the period about 10 times to customer with in 5 month, about 2

time per mouth. For this price Erawan furniture plus about 30%-50% from

cash sale

Put off payment, for this payment is providing the chance to customer

to postpone the payment that the maximum about 4 time with in 2 month

3.6.3 Place strategy

The placing strategy including the service to customer, Erawan furniture

provides sincere welcoming to service from the employee to customers this is the

main point in place strategy. Erawan furniture’s employees are trained from manager

about detail and price of product. Employee will introduce and tell detail of product

which customer request. Everyone must smile and take care by heart. For the Zones in

the store, Erawan furniture divided by 3 main, general goods zone to serve for

customer

General goods zone, this area take most area of the store. In this zone Erawan

furniture set the model of each room inside house such as bedroom, living room,

kitchen, etc these room will show in front of first zone for attract customer. We will

set up at downstairs is products big size such as all cabinets, all tables, bed, etc and

upstairs is products small to medium size such as mattress, sofa, all chair, etc.

Customers can it at the back products clearly.

Special goods, Erawan furniture place them at the second floor, this take the

area not much more

Second hand zone, Erawan furniture placed them at the back of store, this also

take the area not much more

After sale service

Transportation, we have 1 pick up cars for delivery product to customer. We

will emphasize for express delivery because it is portion of our image. We don’t have

freight for sending to customer.

Assembly and installment in some kind of product for example the big show

cabinet that has the bigger size that cannot entrance in to the room, Erawan furniture

serve to separate it for convince to entrance and assembly after.

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3.6.4 Promotion Strategy

According to the corporate strategy that using the intensive strategy that

focuses on the market penetration, Erawan furniture also needs to concentrate more

about the sale promotion. However, the first thing that Erawan furniture need to

concern about to create the customer awareness by advertising

Adverting strategy

Erawan furniture use the local radio as the broadcasting for announce to

customer to increase customer awareness. Erawan furniture focuses on the country

song when local radio on air.

In every New Year, we will make calendar of Erawan Furniture dispense to

customer.

Signboard and Brochure Erawan furniture use the signboard and brochure to

advertising in both product and the location of furniture store

Sale promotion

Customer can turn old furniture to new furniture by bring old furniture is

discount for new furniture.

Give the discount about 10% in cash

3.7 Sale forecast

From analysis the market by using PES analysis leads to know that there are

more purchasing power of the furniture market in Surat Thani, The 3C analysis also

leads to understand the customer competitor, and competition to establish the STP and

4 P for the Erawan furniture. Next step for Erawan furniture is to estimate the sale

forecast.

According to the potential market for home ad decoration goods of the

focusing 3 market which are Muang district, Kanjanadit dristic, and Phunphin district

in chapter 3 that is about 167,397,238 baht per mouth or about 2,008,766,859 per

year. That estimate from multiply the average spending to home and decoration goods

per family about 2779.3 baht per mouth with the number of family about 60,230

families.

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Sale of Nong maw furniture

0 100,000 200,000 300,000 400,000 500,000 600,000

1 2 3 4 5 6 7 8 9 10 11 12

Sale on cashSale on credit Total sale

From the filed trip survey by networking, We got the information that in year

2009 Nong maw furniture can generate the total sale about 4,150,000 baht per year,

that come from sold in cash about 1,120, 800 in cash and about 3,029,200 on credit, in

average represent about 100,000 baht per mount in cash and about 250,000 per mouth

on credit that about 27 % in cash and about 73 % on credit. There is about 0.21 % in

total of total potential of furniture market.

This graph show that in January to February the total sale decreasing, this the

normal situation that the sale in this 2 mouth can be any value in this ranges there is

no more critical factor effected. From March to May the sale increase and peak in

may because there are critical factors that affect the demand of furniture such as the

movement the people from rural to the center of Surat Thani for working, for study

and other. From June to October the sale is quite stable not rapidly change.

This graph represent that the credit sale increase from February and peak in

May because in March to may her are then decline from May to august, after increase

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again from august to September, and down in the November. In the cash sale doest

not change rapid. That can be summaries that from January to march the sale.

Form the filed trip survey we also got the information that the Grade B

furniture store such as Young Nam furniture, Big Sie furniture can generate the

income per mouth about 1,800,000-2,000,000 per mouth or about 0.9-1% of the

potential market per month.

According to the main target market of Erawan furniture is the normal market

that include the customer who prefer to purchase furniture from the grade C and B

furniture store by this Erawan furniture should be placed at Grade C+ furniture store

in Surat Thani and the main strategy that focus on low price and variety of purchasing

to meet the customer.

From the STP of Erawan furniture that target on two market which are Normal

market which combine two similarly type of customer , and the second hand market

that has only Erawan furniture in this market. The positioning of Erawan furniture that

quite be obviously differentiate from the competitors, our marketing strategy that

appreciate with our customers and the supporting of the core competency of us, and

the important is the understanding clearly with the market and target customers. Thus,

Erawan furniture confident that we have to generate the sale of potential market

furniture and home decoration about 0.85 % by using the base from both grade C and

B furniture store as well as, the growth rate of population in Surat Thani that

continues to increase every year and the Personal and Household goods also

increasing every year about 10 % in average 8 year, and in the chapter 2 many giant

furniture store such as SB furniture, Index furniture also expected the growth rate

about 10%-15%, so we expected that the growth rate of sale is 8 % per year

calculated from the average the growth rate of Personal and Household goods in GPP

5 year from the year 2004-2008

3.7.1 Sale on sale forecast

Because of the variety of the product of the Erawan furniture, and there are

many ways to divided the furniture in to group but it difficult to estimated the revenue

for each group of furniture , so Erawan furniture decided to divided the group of

product according to the product strategy which are general product can generated

sale about 80% of total sale in the first year , special product can generate sale about

20% of total sale in the first year, and the second hand product about 0% in the first

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year because there is no the inventory for the second hand product, after the first year

we expected that the general product will general about 80% of sale, special product

will generate about 10% of sale and the second hand product about 10% according to

the product strategy.

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Table of sale on sale forecast

The sale by product year 1 0n cash percent of sale January February March April May June July August September October November December Year 1 General product 90% 300,980 213,147 418,394 258,595 302,644 271,937 417,254 454,292 357,338 253,758 321,121 425,975 3,995,437 The second hand Goods 0% 0 0 0 0 0 0 0 0 0 0 0 0 0 The special product 10% 33,442 23,683 46,488 28,733 33,627 30,215 46,362 50,477 39,704 28,195 35,680 47,331 443,937 Total sale on cash 334,422 236,830 464,883 287,328 336,272 302,153 463,616 504,769 397,042 281,953 356,801 473,306 4,439,375 On credit 0 General product 90% 899,425 790,659 828,038 1,051,957 1,522,579 1,047,329 801,338 770,509 930,030 1,080,436 758,619 890,710 11,371,629 The special product 10% 99,936 87,851 92,004 116,884 169,175 116,370 89,038 85,612 103,337 120,048 84,291 98,968 1,263,514 Total sale on credit 999,361 878,510 920,042 1,168,841 1,691,754 1,163,699 890,376 856,122 1,033,366 1,200,485 842,910 989,678 12,635,144 Total sale on year 1 1,333,783 1,115,340 1,384,925 1,456,169 2,028,026 1,465,851 1,353,992 1,360,891 1,430,408 1,482,438 1,199,712 1,462,984 17,074,518 The sale by product year 2 percent of sale January February March April May June July August September October November December Year 2 0n cash General product 80% 288,941 204,621 401,659 248,251 290,539 261,060 400,564 436,121 343,044 243,608 308,276 408,936 3,835,620 The second hand Goods 10% 36,118 25,578 50,207 31,031 36,317 32,632 50,070 54,515 42,881 30,451 38,535 51,117 479,452 The special product 10% 36,118 25,578 50,207 31,031 36,317 32,632 50,070 54,515 42,881 30,451 38,535 51,117 479,452 Total sale on cash 361,176 255,776 502,073 310,314 363,173 326,325 500,705 545,151 428,805 304,510 385,345 511,171 4,794,525 On credit 0 General product 80% 863,448 759,032 794,916 1,009,879 1,461,675 1,005,436 769,285 739,689 892,828 1,037,219 728,275 855,082 10,916,764 The special product 20% 215,862 189,758 198,729 252,470 365,419 251,359 192,321 184,922 223,207 259,305 182,069 213,770 2,729,191 Total sale on credit 1,079,310 948,790 993,645 1,262,348 1,827,094 1,256,795 961,606 924,611 1,116,035 1,296,524 910,343 1,068,852 13,645,955 Total sale in year 2 1,440,486 1,204,567 1,495,719 1,572,662 2,190,268 1,583,120 1,462,311 1,469,762 1,544,841 1,601,033 1,295,688 1,580,023 18,440,480 The sale by product year 3 percent of sale January February March April May June July August September October November December Year 3 0n cash General product 80% 313,019 221,673 435,130 268,939 314,750 282,815 433,944 472,464 371,631 263,908 333,966 443,014 4,155,255 The second hand Goods 10% 39,127 27,709 54,391 33,617 39,344 35,352 54,243 59,058 46,454 32,989 41,746 55,377 519,407 The special product 10% 39,127 27,709 54,391 33,617 39,344 35,352 54,243 59,058 46,454 32,989 41,746 55,377 519,407

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Total sale on cash 391,274 277,091 543,913 336,174 393,438 353,519 542,430 590,580 464,539 329,886 417,457 553,768 5,194,068 On credit General product 80% 935,402 822,285 861,159 1,094,035 1,583,482 1,089,222 833,392 801,330 967,231 1,123,654 788,964 926,339 11,826,494 The special product 20% 233,850 205,571 215,290 273,509 395,870 272,306 208,348 200,332 241,808 280,913 197,241 231,585 2,956,624 Total sale on credit 1,169,252 1,027,856 1,076,449 1,367,544 1,979,352 1,361,528 1,041,740 1,001,662 1,209,038 1,404,567 986,205 1,157,923 14,783,118 Total sale on year 3 1,560,527 1,304,947 1,620,362 1,703,718 2,372,790 1,715,046 1,584,170 1,592,242 1,673,578 1,734,453 1,403,663 1,711,691 19,977,186 The sale by product year 4 percent of sale January February March April May June July August September October November December Year 4 0n cash General product 80% 337,098 238,725 468,602 289,626 338,962 304,570 467,325 508,807 400,218 284,209 359,656 477,093 4,474,890 The second hand Goods 10% 42,137 29,841 58,575 36,203 42,370 38,071 58,416 63,601 50,027 35,526 44,957 59,637 559,361 The special product 10% 42,137 29,841 58,575 36,203 42,370 38,071 58,416 63,601 50,027 35,526 44,957 59,637 559,361 Total sale on cash 421,372 298,406 585,752 362,033 423,702 380,712 584,156 636,009 500,273 355,261 449,569 596,366 5,593,612 On credit General product 80% 1,007,356 885,538 927,402 1,178,192 1,705,288 1,173,008 897,499 862,971 1,041,633 1,210,089 849,654 997,595 12,736,225 The special product 20% 251,839 221,384 231,851 294,548 426,322 293,252 224,375 215,743 260,408 302,522 212,413 249,399 3,184,056 Total sale on credit 1,259,195 1,106,922 1,159,253 1,472,740 2,131,610 1,466,261 1,121,874 1,078,713 1,302,041 1,512,611 1,062,067 1,246,994 15,920,281 Total sale on year 4 1,680,567 1,405,328 1,745,005 1,834,773 2,555,312 1,846,973 1,706,030 1,714,723 1,802,314 1,867,872 1,511,637 1,843,360 21,513,893 The sale by product year 5 percent of sale January February March April May June July August September October November December Year 5 0n cash General product 80% 230,083 162,939 319,839 197,682 231,355 207,881 318,968 347,281 273,165 193,984 245,479 325,635 3,054,290 The second hand Goods 10% 28,760 20,367 39,980 24,710 28,919 25,985 39,871 43,410 34,146 24,248 30,685 40,704 381,786 The special product 10% 28,760 20,367 39,980 24,710 28,919 25,985 39,871 43,410 34,146 24,248 30,685 40,704 381,786 Total sale on cash 287,603 203,674 399,799 247,102 289,194 259,851 398,709 434,102 341,456 242,480 306,849 407,043 3,817,862 On credit General product 80% 687,560 604,415 632,989 804,163 1,163,927 800,625 612,579 589,012 710,956 825,934 579,922 680,898 8,692,979 The special product 20% 171,890 151,104 158,247 201,041 290,982 200,156 153,145 147,253 177,739 206,483 144,981 170,225 2,173,245 Total sale on credit 859,450 755,518 791,236 1,005,203 1,454,908 1,000,781 765,723 736,265 888,695 1,032,417 724,903 851,123 10,866,223 Total sale on year 5 1,147,054 959,192 1,191,035 1,252,305 1,744,102 1,260,632 1,164,433 1,170,366 1,230,151 1,274,897 1,031,752 1,258,166 14,684,086

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3.7.2 In term of unit sale

According to the furniture is the product that difficult to predict accuracy that

which kind of product will be purchased more by the customer in the term of unit sale.

As well as, Erawan furniture has variety of product in the term of unit, so we expected

the unit sale by using the average unit sale in term of general product, second hand

product, and he special product that estimate by using the average cost in each catalog

and plus the margin requirement strategy in the chapter 2 to be the price for the

product in each catalog, then we use the total sale in the sale forecast divided by price

of product then we got the unit sale. (See detail more about the price in chapter 4)

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Table of unit sale

Estimate unit sale January February March April May June July August September October November December Year 1 Number of operating days 28 28 31 26 31 30 31 31 30 31 30 28 355 The sale by product year 1 January February March April May June July August September October November December Total 0n cash General product 136 96 189 117 136 123 188 205 161 114 145 192 1,801 The second hand Goods 0 0 0 0 0 0 0 0 0 0 0 0 0 The special product 2 1 3 2 2 2 3 3 2 2 2 3 26 Total unit sale on cash 138 97 191 118 138 124 191 208 163 116 147 195 1,826 On credit General product 268 236 247 314 454 312 239 230 277 322 226 266 3,391 The special product 4 3 4 5 7 4 3 3 4 5 3 4 49 Total unit sale on credit 272 239 250 318 461 317 242 233 281 327 229 269 3,440 Total sale on year 1 410 337 442 436 599 441 433 441 445 443 376 464 5,266 Average per day 15 12 14 17 19 15 14 14 15 14 13 17 15 The sale by product year 2 January February March April May June July August September October November December Total 0n cash General product 130 92 181 112 131 118 181 197 155 110 139 184 1,729 The second hand Goods 43 31 60 37 44 39 60 66 52 37 46 62 577 The special product 2 1 3 2 2 2 3 3 2 2 2 3 28 Total unit sale on cash 176 125 244 151 177 159 244 265 209 148 188 249 2,334 On credit 0 General product 257 226 237 301 436 300 229 221 266 309 217 255 3,256 The special product 8 7 8 10 14 10 7 7 9 10 7 8 105 Total unit sale on credit 266 234 245 311 450 310 237 228 275 319 224 263 3,361 Total sale on year 2 442 358 489 462 627 468 481 493 484 468 412 512 5,695 Average per day 16 13 16 18 20 16 16 16 16 15 14 18 16

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The sale by product year 3 January February March April May June July August September October November December Total 0n cash General product 141 100 196 121 142 127 196 213 167 119 151 200 1,873 The second hand Goods 47 33 66 40 47 43 65 71 56 40 50 67 626 The special product 2 2 3 2 2 2 3 3 3 2 2 3 30 Total unit sale on cash 190 135 265 164 192 172 264 287 226 161 203 270 2,528 On credit 0 General product 279 245 257 326 472 325 249 239 288 335 235 276 3,527 The special product 9 8 8 11 15 11 8 8 9 11 8 9 114 Total unit sale on credit 288 253 265 337 487 335 257 247 298 346 243 285 3,641 Total sale on year 3 478 388 530 500 679 507 521 534 524 507 446 555 6,169 Average per day 17 14 17 19 22 17 17 17 17 16 15 20 17 The sale by product year 4 January February March April May June July August September October November December Total 0n cash General product 152 108 211 131 153 137 211 229 180 128 162 215 1,865 The second hand Goods 51 36 71 44 51 46 70 77 60 43 54 72 623 The special product 2 2 3 2 2 2 3 4 3 2 3 3 30 Total unit sale on cash 205 145 285 176 206 185 284 310 244 173 219 290 2,518 On credit General product 300 264 277 351 509 350 268 257 311 361 253 298 3,498 The special product 10 9 9 11 16 11 9 8 10 12 8 10 113 Total unit sale on credit 310 273 286 363 525 361 276 266 321 373 262 307 3,611 Total sale on year 4 515 418 571 539 731 546 561 575 564 545 480 597 6,129 Average per day 18 15 18 21 24 18 18 19 19 18 16 21 17 The sale by product year 5 January February March April May June July August September October November December Total 0n cash General product 104 73 144 89 104 94 144 157 123 87 111 147 1,377 The second hand Goods 35 25 48 30 35 31 48 52 41 29 37 49 460

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The special product 2 1 2 1 2 2 2 3 2 1 2 2 22

Total unit sale on cash 140 99 195 120 141 126 194 211 166 118 149 198 1,859 On credit General product 205 180 189 240 347 239 183 176 212 246 173 203 2,592 The special product 7 6 6 8 11 8 6 6 7 8 6 7 84 Total unit sale on credit 212 186 195 248 358 246 189 181 219 254 179 210 2,676 Total sale on year 5 352 285 389 368 499 373 383 393 385 372 328 408 4,535 Average per day 13 10 13 14 16 12 12 13 13 12 11 15 13

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3.8 Marketing expense

For the marketing expense, Erawan furniture divided the marketing expense in

to 2 group which are selling expense and advertising expense

3.8.1 The selling expense is the expense that uses for selling activities that

Erawan furniture use to force the short-term sale on cash for each month that there are

discount sale and the sale commission.

The discount sale is the expense that pay from only cash sale, the customer

who will get the discount sale need to paid vie “on cash” which are cash, credit card,

Financial intuition support will get about 5% but for taking the old one to be the

discount will get 5% on cash and the discount from the old one (See more in chapter

4).

The sell commission is the commission paid for the sell person who needs

to try to generate for the sale. Erawan furniture will use both sale on cash and credit to

be the base for computing the sell commission which about 2 %.

3.8.2 The advertising expense is expense that pay for the reason that try to

make the customer awareness, and keep the customer royalty.

Radio

From the observation, many people in Suratthani most favorite to listen about

Country music. So, we will advertise in Country Cannel on radio wave such as

FM91.5, FM106, and Etc. About expense advertise is 2,000 Baht per Cannel, we will

advertise on 3 Cannel and total cost of advertise in radio is 6,000 per month. Reason

of we chose advertise on radio wave because for attract customer come to store, make

a realizable in our brand, and complete promotion in this season.

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Calendar

We will dispense to customer on special days or events. Within calendar has

detail about name’s store and promotion in this season. About expense of calendar is

26 Bath per once, so we will order calendar for end of year days and new year days

about 500 set per days and total cost of calendar is 26,000 Baht. Reason of we chose

dispense calendar to customer because we will make loyalty and good relation with

customer.

Example

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Leaflet

We will dispense to customer on special days or events such as New Year day,

Song-Kran day, Chuck-Pra day, and etc. Within our leaflet has about detail product

new release, price, map of store, and etc. About expense of leaflet is 0.5 per once and

we will make leaflet 1,000 Sheet per event which total cost of leaflet about 500 bath

per event. Reason of we chose dispense leaflet to customer because notice to customer

know about product new release and new promotion in this time.

Example

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Signboard

We will set signboard in main location in central of Suratthani and will change

every 6 months. Within our signboard has detail about name’s store, promotion,

slogan, and address of store. Size of Signboard has 3 sizes those are 10m*5m (3

piece), 7m*3m (5 piece), and 5m*3m (10 piece). About expense of signboard, we will

calculate by 99 baht per Square meters and costs of 3 sizes are 4,950 Baht, 2,079

Baht, and 1,485 Baht. Reason of we chose set signboard in main location in central of

Suratthani because for increase brand image and attract customer come to store.

Example

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Souvenir

We will dispense to customer on special event such as New Year day, Song-

Kran day, Chuck-Pra day, and etc. Characteristic of souvenir is ceramic elephant and

within elephant has a pen. About expense of souvenir is 40 baht per once and we will

order 100 piece per event which total cost of souvenir is 4,000 per event. Reason of

we chose dispense to customer on special event because we can make good relation

with customer and increase positive brand image.

Example

Public Relation

We will sponsor the local football team and support sport in schools. If

somebody has natural disasters such as flooding, storm, and etc, we will help by send

money or items for victims of natural disasters. About expense of public relation, we

will have money for public relation about 2,000 baht per month.

Other

We will have backup budget for other expense about advertise is 1,000 baht

per month because if we thing or find the ways to advertise and we can do it now.

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Table of marketing expense

Year 1 January February March April May June July August September October November December Total Selling expense Discount sale 16,721 11,842 23,244 14,366 16,814 15,108 23,181 25,238 19,852 14,098 17,840 23,665 221,969 Sale commission 26,676 22,307 27,698 29,123 40,561 29,317 27,080 27,218 28,608 29,649 23,994 29,260 341,490 Other selling expense 0 Total selling Expense 43,397 34,148 50,943 43,490 57,374 44,425 50,261 52,456 48,460 43,746 41,834 52,925 563,459 Advertising expense Radio local 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000 Calendar 13,000 0 0 0 0 0 0 0 0 0 0 13,000 26,000

Leaflet 500 500 0 500 0 0 0 500 0 1,000 500 500 4,000

Signboard 40,000 0 0 0 0 0 40,095 0 0 0 0 0 80,095

Souvenir 4,000 0 0 4,000 0 0 0 0 0 4,000 0 4,000 16,000

Public relation 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000

Other 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

Total advertising expense 66,500 9,500 9,000 13,500 9,000 9,000 49,095 9,500 9,000 14,000 9,500 26,500 234,095

Total marketing expense 109,897 43,648 59,943 56,990 66,374 53,425 99,356 61,956 57,460 57,746 51,334 79,425 797,554 Year 2 January February March April May June July August September October November December Total Selling expense Discount sale 18,059 12,789 25,104 15,516 18,159 16,316 25,035 27,258 21,440 15,225 19,267 25,559 239,726 Sale commission 28,810 24,091 29,914 31,453 43,805 31,662 29,246 29,395 30,897 32,021 25,914 31,600 368,810 Other selling expense Total selling Expense 46,869 36,880 55,018 46,969 61,964 47,979 54,281 56,653 52,337 47,246 45,181 57,159 608,536 Advertising expense Radio local 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 74,376 Calendar 13,429 0 0 0 0 0 0 0 0 0 0 25,000 38,429

leaflet 517 517 0 517 0 0 0 517 0 1,033 517 517 4,132

Signboard 41,320 0 0 0 0 0 41,418 0 0 0 0 0 82,738

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Souvenir 4,132 0 0 4,132 0 0 0 0 0 4,132 0 4,132 16,528

Public relation 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 24,792

Other 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 12,396



Leaflet 534 534 0 534 0 0 0 534 0 1,067 534 534 4,268

Signboard 42,680 0 0 0 0 0 42,781 0 0 0 0 0 85,461

Souvenir 4,268 0 0 4,268 0 0 0 0 0 4,268 0 4,268 17,072

Public relation 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 25,608

Other 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 12,804


Total marketing expense 121,730 50,090 69,206 65,288 76,731 61,580 111,189 71,510 66,302 66,121 59,083 90,198 909,027 Year 4 January February March April May June July August September October November December Total Selling expense Discount sale 21,069 14,920 29,288 18,102 21,185 19,036 29,208 31,800 25,014 17,763 22,478 29,818 279,681 Sale commission 33,611 28,107 34,900 36,695 51,106 36,939 34,121 34,294 36,046 37,357 30,233 36,867 430,278 Other selling expense Total selling Expense 54,680 43,027 64,188 54,797 72,291 55,975 63,328 66,095 61,060 55,121 52,711 66,685 709,958 Advertising expense

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Radio local 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 79,358

Calendar 14,329 0 0 0 0 0 0 0 0 0 0 14,329 28,657

Leaflet 551 551 0 551 0 0 0 551 0 1,102 551 551 4,409

Signboard 44,088 0 0 0 0 0 44,193 0 0 0 0 0 88,281

Souvenir 4,409 0 0 4,409 0 0 0 0 0 4,409 0 4,409 17,635

Public relation 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 26,453

Other 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 13,226



Leaflet 569 569 0 569 0 0 0 569 0 1,139 569 569 4,554

Signboard 45,540 0 0 0 0 0 45,648 0 0 0 0 0 91,188

Souvenir 4,554 0 0 4,554 0 0 0 0 0 4,554 0 4,554 18,216

Public relation 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 27,324

Other 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 13,662


Total marketing expense 113,031 40,183 54,057 52,771 59,588 48,452 99,119 55,928 51,922 53,561 46,793 75,686 751,092

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3.9 Conclusion

Erawan furniture entry to the Surat Thani market because we know exactly

and convince to access the data with this market the in the term of general

environment and the competitor of the furniture retailer business. Erawan furniture

focuses on 3 districts which are Maung, Phinphin, and Kanjanadit dristrict which

there are central and highest population in Surat Thani. From analyzing the general

information by using the PES analysis represent that there are many factors that

support to be the feasible of the furniture market for the Erawan furniture that

including the gross provincial product and personal and household goods increasing

every year from 2001 to 2008 that never go down, the increasing in the number of

population in Surat Thani from 2001-2008 that also never go down, and we can

estimate the size of potential market by multiplying the average expense for the

furniture and home decoration that we got from base of data from the Surat Thani

Statistical Office per family. It is about 167,397,238 baht per mouth or about

2,008,766,859 per year or about 1.51% of GNP or 16.42% of Personal and Household

Goods of Surat Thani in year 2008. By using the 3C analysis, Erawan furniture

understand clearly about the competitor, customer, and competition in the Surat Thani

market that Erawan furniture segment market in to 3 segments which are premium

market, normal market, and the second hand market. And set the main target on the

normal market which including the customer who prefer to purchase the furniture

from grade B and grade C furniture store in Surat Thani, and set the secondary target

on the used market which are the customer who need to purchase the second hand

furniture. The positioning of the Erawan furniture is the grade C+ furniture store in

the customer mind. The product of Erawan furniture is divided in to 2 mainly which

are normal product and used product that normal product can be divided in to general

and special product that Erawan furniture set the strategy that will be for 10% special

product, 80% general product, and the 10 second hand product of the total sale for the

price strategy Erawan furniture allow customer to pay on cash, credit card, financial

support, bring the old furniture store to get the discount for the new one, installment

purchasing, and put off payment. Erawan furniture providing the after sale service

which in both free transportation and free fix the furniture.

For the sale forecast from feasibility of the potential market, the target market

of Erawan furniture, as well as strategy and core competency of Erawan furniture, we

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confident that Erawan furniture can generate the sale to 0.85% of the potential market

or about 17,074,518 baht that at the first year and increase by 8% every year.

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Chapter 4

Technical Feasibility Study


This Chapter explains about the technical analysis that including product

characteristic, Location and building, the product and service process thought the

management analysis as well as the overall about cost.

4.1 Product Characteristics of Erawan Furniture

There are a lot of products and variety in the Erawan furniture store, the

following details are the example of product not all of them of Erawan furniture. Our

product has a lot of styles and types. We set by level of products which there are

special product, general product, and second hand product. There are 2 mainly

product type of Erawan furniture which are Normal product, and Used products

4.1.1 Normal product

Normal product which has 2 types following by this

4.1.1.1 Special product

The special products are the product that less available on the market,

customer usually found them at Grade A and B furniture store the cost and price of

the is quite high Erawan furniture also sold this product to customer the example of

the special product of Erawan furniture

Wardrobe Circle bed Bookshelf Ceramic door

Set of bedroom (SET 1) Show cabinet iron legs Set of food marble wood table

6 chairs

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Dressing table Japan Bar beer counters 6 feet

Detail of Special product

Furniture name Size Cost (Baht) Wardrobe 160x60x200 cm 5,900 Circle bed 6 feet 19,000 Bookshelf Ceramic door 80x190 cm. 2,900 Set of bedroom (SET 1) 6 feet 22,000 Set of food marble wood table 6 chairs

1 set 25,000

Show cabinet iron legs 4 feet 4,900 Dressing table Japan Small 2,900 Bar beer counters 6 feet 4,500

4.1.1.2 General product

In general product divided by 2 groups are suppler same competitors

and suppler from Lamphoon.

4.1.1.2.1 General product suppler same competitors

Steel bed shaft Steel bed lathing Mattress foam

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Mattress spring Mattress synthetic fabrics Pillow

Bolster Aluminum Pantry Cloth Airier A

Cloth Airier KO Koan Cloth Airier solo Flooding table wood board

Flooding table steel plate Japanese table NC-172 G new counter

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NC-172 GS counter NC-172 counter NC-164 counter

NC-248 G Kitchen cabinet NC-148 counters NC-256 Kitchen cabinet

Set of food table 4 chairs Set of food table 6 chair Multi propose table

Shoe cabinet L805 Shoe cabinet RL115 Quilt

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Picnic chair

Round chair plastic

Detail of General product suppler same other company

Furniture name Size Color Cost (Baht)

Steel bed (Feet) Steel bed lathing 6 Black, Pink 1,600 Steel bed lathing 5 Black, Pink 1,480 Steel bed shaft 6 Black 2,325 Steel bed lathing 3.5 Black, Pink 1,050 Mattress (Feet) Mattress foam 3.5x6 Colorful 770 Mattress foam 3.5x8 Colorful 910 Mattress foam 5x6 Colorful 1,100 Mattress foam 5x8 Colorful 1,300 Mattress foam 6x6 Colorful 1,320 Mattress foam 6x8 Colorful 1,560 Mattress spring 3.5 White 1,260 Mattress spring 5 White 1,800 Mattress spring 6 White 2,160 Mattress synthetic fabrics 3.5x4 White 1,190 Mattress synthetic fabrics 3.5x6 White 1,130 Mattress synthetic fabrics 3.5x8 White 1,540 Mattress synthetic fabrics 5x4 White 1,700 Mattress synthetic fabrics 5x6 White 1,900 Mattress synthetic fabrics 5x8 White 2,200 Mattress synthetic fabrics 6x4 White 2,040 Mattress synthetic fabrics 6x6 White 2,280 Mattress synthetic fabrics 6x8 White 2,640 pillow - White 80 bolster - White, Colorful 90 Pantry (Feet) Aluminum Pantry 3 Tea, White 1,538 Aluminum pantry k 9064 3 Tea, White 1,722 Aluminum pantry k 1266 4 Tea, White 2,399

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Aluminum pantry ks 1073 1 M. Tea, White 1,660 Aluminum pantry ks 8072 80 cm. Tea, White 1,353 Aluminum pantry ks 1274 4 Tea, White 1,906 Aluminum pantry ks 1575 5 Tea, White 2,398 Aluminum Pantry E1080 5 Tea, White 4,982 Aluminum Pantry E1281 5 Tea, White 5,412 Cloth Cloth Airier A Big Red, Blue 210 Cloth Airier Ko Koan Big Red, Blue 395 Cloth Airier solo Big Red, Blue 385 Cloth Airier JR 214 Big Red, Blue 950 Cloth Airier A-SPB Big Red, Blue 165 Flooding table (Feet) flooding table wood board 3 Colorful 285 flooding table steel plate 3 Red, Blue 365 flooding table steel plate 4 Red, Blue 505 Japanese table Small Cartoon, Natural 200 flooding table wood board 3 Colorful 350 The Kitchen cabinet (Feet) NC-172 G new counter 6 Teak 4,250 NC-172 GS counter 6 Teak, Beech 4,600 NC-172 counter 6 Teak, Beech 3,750 NC-164 counter 5.5 Teak, Beech 3,550 NC-160 counter 5.5 Teak, Cork 3,700 NC-156 counter 4.5 Teak 3,350 NC-148 counter 4 Teak, Beech 2,850 NC-264 Kitchen cabinet 5.5 Teak, Cork 6,400 NC-256 Kitchen cabinet 4.5 Teak, Beech 5,250 NC-248 G Kitchen cabinet 4 Teak, Cork 4,200 NC-248 Kitchen cabinet 4 Teak 4,000 Other product (Feet) Set of food table 4 chair Small Teak, Cork 1,700 Set of food table 6 chair Medium Teak, Cork 2,500 Set of food table 8 chair Big Teak, Cork 2,900 shoe cabinet L805 Small Beech 1,060 shoe cabinet RL115 Small Beech 1,150 multi propose table 3 Beech, Teak 400 multi propose table 4 Beech 500 multi propose table 5 Teak 600 Round chair plastic Big Red, Blue 100 Quilt 5 Colorful 763 Quilt 6 Colorful 763 Picnic chair Small Red, Blue 250

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4.1.1.2.2 General product suppler from Lamphoon.

Wardrobe3 doors Wardrobe3 doors grass Wardrobe 80 cm. Wardrobe 2 doors kid

Wardrobe 3 doors kid Wardrobe3 drawer Wardrobe grass slide door Big show cabinet

Big show TV cabinet platinum TV cabinet grass Little TV cabinet

TV cabinet top curve Accounting cabinet Accounting cabinet iron

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Computer cabinet 80 cm Dressing table open door

Computer cabinet 3 feet

Computer cabinet 4 feet Dressing top curve Big dressing table

Bed head square Bed head curve Bookshelf 4 doors

Bookshelf with 4 stall




Detail of General product suppler from Lamphoon

Furniture name Size Color Cost (Baht)

Wardrobe (cm.) Wardrobe 80 Teak, Beech, Cork 800 Wardrobe 90 Teak, Beech, Cork 900 Wardrobe 100 Teak, Beech, Cork 1,000 Wardrobe 120 Teak, Beech, Cork 1,200 Wardrobe3 drawer 120 Teak, Beech, Cork 1,300 Wardrobe3 doors 120 Teak 1,700 Wardrobe3 doors grass 120 Teak, Cork 1,900 Wardrobe2 doors grass 120 Teak 1,700 Wardrobe 3 doors kid 120 Teak, Cork 900 Wardrobe 2 doors kid 120 Teak, Cork 600 Wardrobe grass slide door 120 Beech 2,700 Wardrobe grass slide door 150 Beech 3,900 Wardrobe light 160 - 3,900 Big show (Feet) Big show cabinet 4 Teak, Cork 1,500 Big show cabinet wing 5 Teak 1,600 Big show cabinet 5 Teak, Cork 2,200 Big show cabinet 6 Teak, Cork 2,300 Big show cabinet golden 6 Teak, Cork 2,500 Big show cabinet 7 Cork 2,700 Big show TV cabinet platinum 8 Tea 3,400 Big show cabinet platinum 155 cm Tea 3,200 TV cabinet (Feet) Little TV cabinet 3 Beech 250 TV cabinet grass 3 Teak, Beech 550 TV cabinet wing 3 Teak, Beech 550 TV cabinet wing 4 Teak, Beech 650 TV cabinet little wing 4 Teak 600 TV cabinet top curve 4 Teak 850 TV cabinet iron 4 Cork 900 TV cabinet differentiate 4 Cork 950 TV cabinet top curve 5 Teak, Beech 1,200 TV cabinet wing 5 Teak 900 TV cabinet iron top head 5 Teak 1,200 Working Table (Feet) Accounting cabinet 4 Iron 650 Accounting cabinet 2 locker 4 Iron 900 Accounting cabinet 3 Teak, Beech 500 Computer cabinet 4 Teak, Beech 600 Computer cabinet 3 Teak, Beech 500 Computer cabinet 1 m. Teak 700 Computer cabinet 120 cm. Teak 800 Computer cabinet 80 cm. Teak 450 Working cabinet 120 cm. Teak 850

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Little dressing table Small Pink, Blue 600 Dressing top curve Medium Beech 600 Big dressing table Big Beech 850 Dressing table open door Big Teak 650 Bed (Feet) Bed head curve 3.5 Teak, Cork 1,100 Bed head square 3.5 Teak, Cork 1,150 Bed head square 4 Beech 1,150 Bed head curve 4 Teak, Cork 1,200 Bed head square 5 Cork 1,350 Bed head curve 5 Beech 1,400 Bed head square 6 Teak 1,450 Bed head curve 6 Cork 1,500 Bookshelf (cm.) Bookshelf with 2 stall 50 Teak, Beech 300 Bookshelf with 3 stall 50 Teak, Beech 400 Bookshelf with 4 stall 50 Teak, Beech 500 Bookshelf 80x120 Teak, Beech 500 Bookshelf 100x120 Teak, Beech 700 Bookshelf 120x120 Teak, Beech 1,000 Bookshelf 4 doors 120x120 Teak, Beech 1,400

4.1.1.3 Used product

This example used product of Erawan Furniture. These fixed by our

mechanical after that bring to sale again in low price.

Working cabinet Wardrobe

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4.2 Cost of goods

To reduce the complexity of establish pricing strategy, Erawan furniture

average the cost of furniture for each catalogue that represent by following table

This table show the cost of goods sold in average per unit for each product

On cash Cost of Goods Transportation

cost Total cost From lamphoon 1,242 244 1,486 General product from same suppler ( select only low cost ) 1,664 1,664 The second hand Goods 581 0 581 The special product 10,367 0 10,367

On credit Cost of Goods Transportation

cost Total cost From lamphoon 1,242 244 1,486 General product from same suppler( select only cost) 1,664 1,664 The special product 10,367 0 10,367

The cost of goods, the cost of product that sold on cash and credit are equal

together that will be explain by following

The Cost of goods from Lampoon in average is about 1,242 baht plus the

transportation cost ( the calculation see more detail in logistic process) ,so the cost of

goods in general product from Lampoon is about 1,486 baht

The General product from same suppler of competitor from this Erawan

furniture selecting only product that low cost as much as possible from the general

product from the same suppler the average cost is about 1,664 baht per unit

The second hand goods, the cost of second hand goods about 40% of general

product (see more in path of suppler)

The special product, The cot of goods sold in special product is about 10,367

4.3 Pricing product

According to the variety and a lot of products, so it quite complex to inform

the price for every product, thus we represent the price of product in the term of

percentage of the gross margin in average for each product cataloged.

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As of in the price strategy in the chapter 3 the gross margin of the product

represent by the following

On cash sale

General product from Lamphoon 33% General product of suppler from same competitor

25%

Second hand product 30% Special product 40%

On credit

General product from Lamphoon 60% General product of same competitor 50% Special Product 70%

So, the price of product for each catalog should be

On cash Cost of Goods Transportation cost Total cost Margin strategy The average price From lamphoon 1,242 244 1,486 33% 2,218

General product from same suppler( select only low cost ) 1,664 1,664 25% 2,219 The secound hand Goods 581 0 581 30% 830

The spacial product 10,367 0 10,367 40% 17,278

On credit Cost of Goods Transportation cost Total cost margin strategy The average price From lamphoon 1,242 244 1,486 56% 3,378

General product from same suppler( select only cost) 1,664 1,664 50% 3,329 The spacial product 10,367 0 10,367 60% 25,917

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4.4 The Location and Building

4.4.1 Land

This land located near the parking and by pass road. We contract to Mr.Direak

tel.083-523-9999 for rent and make a deal on both parties. At the first time this land

offer for sell about 20,000,000 baht. However, we negotiate for renal and then we got

the final price for rental is 25,000 per month, need to pay in advance for about 1 year

every year, that need to prepaid about 300,000 per year

“Pre paid for land 300, 0000 per year”

4.4.2 Landscape

We use 5 workers to adjust the land area. And we need to hit the frame before

build the store. If we see the floor levels of land are the same with street. We use

employee to adjust the land for Smooth for build store. The land is not need to adjust

more, so expense of adjust for this land area is quite not expensive more, it about

1,000 baht

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4.4.3 Building

Erawan will hire the constructer that can be liable for us which is

Munggorndaeng Company 43 moo 5 talo muang phichit 66000 Tel 0824100908 Mr.

kong kreangkrai that evaluate the building like this table

Core building Quantity Per once 1 Concrete surface is only 1 floor 1,050 m*m 450 472,5002 Concrete surface is only 2 floor and stairs 360 m*m 450 162,0003 Pillar and cupola 1,610 m*m 1,200 1,932,000

4 Ceiling makes for Gypsum Smooth plaster 1,050 m*m 260 273,000

5 Masonry wall plaster 850 m*m 480 408,0006 Door coil (5m) 7 unit 25,000 175,0007 Glass office and aluminum 1 unit 125,000 125,0008 Sewage system toilets and bathroom 1 unit 8,000 8,0009 Electrical work 100 unit 750 75,00010 Color work 3,400 m*m 60 204,00011 Watt hour Meter and water meter 1 unit 60,000 60,00012 Concrete in front of the store 135 m*m 360 48,600

Total 3,943,100

Option Building Quantity Per once 1 Concrete surface 300 m*m 450 135,000 2 Pillar 5m and cupola 300 m*m 900 270,000 3 Door coil (5m) 2 Until 25,000 50,000 4 Color work 300 m*m 60 18,000 5 Electrical work 25 m*m 750 18,750 6 Concrete in parking car of store 325 m*m 360 117,000

Total 608,750 Total building cost 4,551,850

4.4.4 Feathers and Dimension of Store

Shop characteristics of a warehouse style simple but not too Low grade. If the

grade level of each store we will be in stores during the relatively between normal

until to luxury store levels. If Grade A is FB Furniture, Home pro shops and simple is

a class C we will be in C +.Characteristics within a wide-area store and within have

Office and toilets and office stay in right of the door for access to easy-to-buy or

reserve products and back of the store is small warehouses for keep and constitute of

product. In Erawan Furniture has divide by 3 area are Floor1, Floor2, and Behind

Store

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The floor 1 is area for special product, set product, and product second hand.

In this floor, we will to allocate and divide by the main 2 group. The first zone, we

will set special product and set product in this same area. The first zone will set in

front of store. The Second zone is product second hand and this zone stay in rear of

floor1.

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The Floor 2 is area for general product such as table, chair, wardrobe, and etc.

The behind store is area for assembly product before sale, stock product in

warehouse after get product from lampoon or other, and parking of store.

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4.4.5 Size of Store

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Duplicate

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4.4.6 Layout Within the store, we will divide by 2 rooms and 2 zones. There is office room,

show room, warehouse zone, and assembly zone. We are allocate many zone for easy

to service, easy to give information, and easy to buy to customer. Within many zones

has more instruments to make a sell are namely:

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4.4.6.1 Office room

Office room is important of the store because it control all of activity about

finance account record, contract of sale, collect all document of product include of

order in the stock. Our Office rooms have table, chair, Filing cabinets but we buy

computer, Refrigerator, multifunction laser printer, air condition

Equipment Product Unit Price Total

Computer

1 10,600 10,600

Refrigerator 1 5,590 5,590

Multifunction Laser Printer 1 6,200 6,200

Air

condition 1 24,900 24,900

plug socket 3 120 360

switch plug 2 35 70

Lamp. 2 75 150

Telephone 1 399 399

Box 1 12

12

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Chair 4 700

2,800

pencil box 1 79 79

Clock 1 299 299

Clock out machine 1 5,500 5,500

Calculator 1 279 279

Picture 1 359 359

document file 10 98 980

Stapler 1 150 150

foot scraper 1 100 100

bin 1 50 50

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door 1 6,500

6,500

safe 1 14,980 14,980

kettle 1 1,190 1,190

Cup 5 39 195

Ceramic Glass 5 33 165

Spoon 10 65 650

The accounting

soft ware program 1 7900 7900

FUJIKO cameras 1 38,000 38,000

Total cost of office fixed asset 128,457 baht

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4.2.4.2 Toilet

In Toilet room in the store, within has Toilet bowl, Bidet, Toilet tissue box,

Lavatory, Toilet hose, Mirror Price, Sink hydrant, Bath Screen, Bronze chromium

sewer, White hose, Navel basin, Door knob, Miter Price, Doors.

White hose 1 23 23

Navel basin 1 60 60

Door knob 1 92 92

Toilet bowl 1 1549 1549

Bidet Price 1 395 395


Toilet hose 1 70 70

Mirror Price 1 105 105

Sink hydrant 1 105 105

Bath Screen 1 30 30

Bronze chromium

Sewer 1 125 125

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Product Unit Price Total

Toile tissue box 1 85 85

Lavatory 1 395 395

Miter 1 300 300

Total cost of toilet 3,334 Baht

4.4.6.2 Showroom

Show room is very impotent because it is show product. A place is introducing

product to customer. Our Show rooms have table, chair, Filing cabinets, bed but we

buy fan, Lamp facto


Fan (wall) 8 2,500 20,000

Lamp Factory 6 2,800 16,800

Sky Tube 2 5,900 11,800

Ice-hot cooler 1 5,300

5,300


Paper Glass 1 box 680 680

Plug 12 80 960

Chair 1 1550 1550

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Dry Chemical (Fire

Extinguisher)

1 650

650

switch plug 4 35 160

Lamp 4 75 300

Total cost of show room 58,540 Baht 4.4.6.3 Assembly zone

We use Assembly zone for assemble all furniture in store and repair furniture

second hand. Our Assembly room table, chair, but we buy Drill, Tool of a technician,

fan (wall)


Drill 3 1800 5400

Tool of a technician 1 10,770 10,770

Fan (wall) 2 2,500 5,000

Plug 2 80 160


Multipurpose rack 2 840 1680

Dry Chemical (Fire

Extinguisher) 1 650 650

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switch plug 1 35

35

Lamp 2 75 150

Total cost of assembly zone 24,085 Baht 4.4.6.4 Warehouse

Warehouse is a place for stock product we buy Vacuum air, fan (wall)

4.4.6.5 Office supply


pen 5 15 75

Pencil 1 45 45


Fan (wall) 2 2,500 5,000

Vacuum air 4 930 3,720


switch plug 2 35 80

2 75 150

Total cost of warehouse zone 9,190 Baht

Lamp

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ruler 1 65

65

eraser 2 10 20

paper 5 90 450

Bill 10 50 500

Paper copy 5 86 430

Garbage bags 1 kg 32 32

Tissues 1 pack =24unit 185 185

Spray deodorize 1 95 95

Other 603

Total cost of Office supply 2,500 baht

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4.4.6.6 Operating supper


Screw nut 10 Kg 50 500

Nail 10 Kg 25 250

Other 1 1 160

Glue Rubber

2 45 90

Total cost 1,000 Baht

4.4.6.7 Total cost of layout

Total cost of office equipment 82,557 baht Total cost of Toilet 3,334 baht Total cost show room 58,540 baht Total cost of assembly room 24,085 baht Total cost of warehouse 9,190 baht Total cost of office supply 2,500 baht Total cost of operating supply 1,000 baht Total cost of layout 177,606 baht

4.5 Pre opening cost

4.5.1Cost of request Electric-water

Request the power from provincial electricity authority

1. We estimate electric power in the store that we use lot of power, so we should

the power by two transformers.

2. We Request the electric power from provincial electricity authority.

Cost of request the electric power from provincial electricity authority two

transformers

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• power request of transformers 2 piece 20,000 Baths

• Kilowatt hour meter 2 piece 15,000 Baths

• Salary payment of Cables installed 1,000 Baths

• Fees of matter Request the power from PEA 2,000 Baths

Payment of electric equipment setting 850 Baths per unit

Total cost of request electric 38,850 Bath

Cost of Request the water from Metropolitan Waterworks Authority

• Fees of water supply matter Request 5,000 Baths

• Setting water supply Payment 1,000 Baths

• Equipment and salary of water supply setting payment 1,500 Baths

Payment of water supply equipment setting 600 Baths per unit

Total cost of request water 8,100 Baths

Total Cost of request Electric-Water 46,950 Baths

4.5.2 Prepare to be the Juristic person

4.5.2.1 Cost of Register

Ask for about License Company limited. We need to have a Memorandum in

first step. If we invest 2000 baths and fee of memorandum has equal 1 baths, but we

invest 1,200,000 so, we pay free 600 baht. We use Memorandum to take note of

Certificate. Fee of Certificate 5 baht per 200 baht, but we take a note Certificate1,

200,000 baths so, we pay fee of Certificate 6,000 bath and fee warrants registered 100

baths. We have 2 expenses.

1. Certified copies of documents 1 page per 50 baths but we use 25 page so,

we pay 1250 bath for certified copies of documents.

2. Revenue stamp 200 bath per petition. We have 2 petitions so, we pay

Revenue stamp about 400 bath.

Cost of Memorandum 600 Baths Cost of Certificate 6,000 Baths Warrants registered 100 Baths Certificate copies of documents 1,250 Baths Revenue stamp 400 Baths Total cast prepare to be the Juristic person 8,350 Baths

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4.5.3 Facia Tax

From the Department of Local Government, we know the process of filing a

petition about pay of facia tax which we can contact to Municipalities or Government

facilities involved and must to do to finish on only March. In part of document, we

must to have personal ID, census, VAT registration, Certificate of partnership leaves

property need to install the label or receipt from a label store. In the part of facia tax,

facia tax will pay tax follows the size and model of word. In the code of laws said that

calculate by size of facia is 500 Square centimeter or low than 500 Square centimeter

we will be calculate is 500 Square centimeter. And facia with has the Thai mix

alphabet letters overseas or a picture. And / or other marks we will calculate in rate 20

baht per 500 square centimeters. Size of Facia of Earawan furniture is long 20 m and

width 1.5m.

Year 1 Month Jan-Mar Apr-Jun Jul-Sep Oct-Dec Pay 100% 75% 50% 25% Equal 12,000 9,000 6,000 3,000

Year 2 Jan- Apr May-Aug Sep-Dec

All the period to pay 4,000 4,000 4,000

From table, we will see in year 1 paid more than year2. In the code of laws

said that in year1 will pay brand tax in 4 times per year and once period has 3 month.

Form of pay brand tax in first year are the first period pay 100% of price tax, second

period pay 75%, third period pay 50%, and fourth period 25%. But in Second year

and continually, form of brand tax in those years is all the period to pay equal and

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paid 3 times per year. In the part of pay tax, we can paid in Place of submitted

document of facia tax or Place of officials have set or Sent by post.

Cost of facia tax 12,000 Baht/3 months.

4.5.4 House and land tax

House and land tax: Tax assessment recipient as annual

Cost of the property 12.5 percent per year.

4.5.4.1 Tax payment

Beneficiary assessment tax payment per year as annual fees.

12.5 percent of the annual fee.

Tax payment = annual cost x 12.5%.

4.5.4.2 Calculation of tax valuation and annual tax rate

Tax rate of house and land tax is 12.5% per year. We rent the land 25,000 per

month, so equal 300,000 per year

Calculation of tax valuation and annual tax rate:

300,000 x 12.5% = 37,500

So, we must pay house and land tax is 37,500 baths per year

4.6 Service process to customer

According to the survey questionnaire we found the interesting information

that the customer concerns more about the hearty and welcoming service from the

employee when they entrance to the furniture store, so this is the mainly point that

Erawan furniture foster to the employees in every position to concern when they serve

to the customer.

There are 2 main service processes to the customer

4.6.1 The reception and selling process

When the customers come to the store the employee will receipt in good mood

for them and have developed the personality and polite service to the customer to

provide good and reliable for In order to attract customers into our stores.

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For the selling process sale person will provide real information to customer

and tell comprehensive information about products within the store to all interested

customers to build trust in the sale and to high benefit for customers.

The sale on cash processing

The accountant will issue the cash bill payment for the customer who wants to

pay in cash in all of transaction

Cash, the customer who want to pay on cash is allow the discount about 5% of

the price on cash

Credit card, the customer who want to pay on the credit card need to pay and

1.5% on service charge for the bank That Erawan furniture also give the discount

about 5% on price.

Financial intuition support, the customer who want to pay via the financial

intuition ( Ae-on, First choise ). Erawan furniture also gives the discount about 5% on

price after including VAT for the customer

Taking the old furniture to be the discount for the new furniture, the customer

who would like to purchase the furniture for the home decoration, but still has the old

one can bring the old one to be the discount for purchasing the new one, the Erawan

furniture will give the discount about maximum at 40% (581 baht in average) of the

cost of product that customer will purchase by

1. The customer needs to ask for the sale person that would like to use this

method for purchasing and than buy the new one at Erawan furniture by issue bill wit

without the price

2. Transport the new furniture that has already purchased from Erawan furniture

to the house of customer, then the mechanical will evaluate the value of price of the

old one that customer need to exchange for the discount that no more that 40% of the

cost of new one.

3. The price of the new one will write by the mechanical and collecting the

money to the accountant as well as the old one is transported to the store.

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For the credit card and financial institution Erawan furniture serve for the

customer after the first 6 and 9 month.

On credit sale processing

There are 2 channel for the credit sale with are installment price and put off

payment the Erawan furniture need to concern more with those process for this

process it look like the financial service process to the customer.

1 Installment price, the customer who need to pay on the installment price

need to sight the contact for purchasing agreement with Erwan furniture to protecting

the missing of payment that Erawan furniture will give about 10 period of payment

within 5 month that about 2 times per month that the customer who missing 4 time of

payment or 2 month will allow Erwan furniture to go to pick the product back.

The requirement for installment price of customer

1. The copy of ID card of customer

2. The copy of registration home’s address

3. Down payment 2 times of installment price at the first time for the new

customer

4. Down payment 1 time of installment price for the old customer

2 Putt off payment, for this payment the customer also need to sigh contact

like the installment purchasing that the contact quite flexible that installment

purchasing that customer can design the payment by themselves that the payment

that the maximum about 4 time with in 2 month and the first need to pay about 30%

of the price of product on credit.

The requirement for installment price of customer

1. The copy of ID card of customer

2. The copy of registration home’s address

4.6.2 The after sale service process

Erawan furniture also has the after sale service to the customer which are

following

1 Free transportation to the customer, Erwan furniture transport the furniture

to the place that customer want not only in front of home but also in the position of

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room that customer want and free service assembly for the product that need to

installment at place. For example if the customer want the wardrobe 5 feet up to the

third floor but the size of product is very big that cannot move, so the mechanical will

divided the wardrobe in to many parts them move the each of then to the 3 floor and

re assembly by has not charged any fee.

2 The warrantee and free fixed service, Erawan furniture also has the warrantee

for the product that if it was the damaged by both customer and own product we will

go to fixed them for free in service (accepted the operating suppler).

4.6.3 The processing for asking financial institution support and credit

card bank

The critical requirement for asking the service from the fincnacial instutition

(Ae-on and first choice)

1. Copy of Certificate of in cooperation Minimum 9 months registered

2. Certification Document not over 6 months and Minimum 9 months registered

3. Registration Capital 1 million above (In case of limited partnership, company

limited, Public company limited)

4. Shop or store is convenient to merchandise

5. Type of goods or brand name has to find public favor in the market

By those requirements Erwan furniture need wait bout 9 month after registered as

juristic person.

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Example of the contact

4.6.4 The requirement for the credit card

The critical requirement for asking the credit card service from the the bank

which are Kasikon thai bank

1. Copy of Certificate of in cooperation Minimum 6 months registered

2. Certification Document not over 9 months and Minimum 6 months registered

3. Shop or store is convenient to merchandise

4. Type of goods or brand name has to find public favor in the market

By those requirements Erawan furniture need wait bout 6 month after registered as

juristic person.

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4.7. Logistic and suppler management

4.7.1 Logistic management

Erawan furniture has 2 types of the logistic process which are inflow logistic

and outflow logistic.

4.7.1.1 Inflow logistic

It is the management transportation from suppliers to Erawan furniture that is

divided in to 2 groups which are logistic from same suppler and the logistic from the

suppler of Lampoon

Logistic from the same suppler is the transportation from the suppler who

supply the goods to overall furniture store in Surattani, This channel Erawan furniture

need not to pay any freight for the service. It is the obligation of the suppler. Ordering

via this logistic it take the lead time about 7-10 days for waiting the goods

Logistic from the suppler of Lampoon is the transportation from the suppler

from Lampoon that lower cost that the same suppler in Suratthani, This channel

Erawan furniture need to take the own obligation about this transportation, so Erawan

furniture need to outsource the Logistic company.

The Vehicle for transportation furniture goods is the big 6 wheel truck. That

has the capacity about 7 tons.

(Source:http://www.kongservice2008.com)

That has the size of tray about, Long 6.5 metes, Wide 2.25 metes, and, High

3.0 metes. The rate of service has shown by following table

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Source: (http://www.rodrubjang.com/detail.php?id=C01207439)

The table shows information about rate of logistic. We will contract and use

service to Kong Service Ltd. because which compare all of company so, we will to

see price of Kong Service Ltd. is cheaper than with other company.

To transport the furniture, Erawan furniture transport by use the furniture that

has not already yet assembled in the packaging that ready and easy for assembly by

Erawan’ mechanical. By this Erawan furniture estimate the unit transportation and

cost by using the Big show cabinet 7 feet that is the big size of packaging to be the

base for calculation the minimum unit and maximum transportation cost per unit. The

size of this package is wide 120 centimeters, thick 50 centimeters, long 200

centimeters, and the weight is about 65 Kilogram.

From adjusting the tray of the truck 6 wheels, it can pick up the furniture

packaging about 90 units and the cost per unit is about 244 baht per unit. It take the

leads time about 12-14 days for production and 2 days for transportation, Therefore it

takes time about 14-16 day for waiting

4.7.1.2 Out flow Logistic

It is the transportation services to customer that serve the movement of

furniture to customer from the store to the place that customer want. By using the

company car

(Source: http://www.one2car.com/CarInfor/cardetails.aspx?caridx=E28090069&row=2 )

Price Labor EqualKong Sevice 20,000 2,000 22,000Truckdailyhome 30,000 2,400 32,400Ake Sevice 25,000 2,000 27,000Tippawantransport 30,000 3,500 33,500

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Erawan furniture uses the used car to serve for the customer. Which cost about

260,000 baht and has the depreciation 52,000 baht per year

4.7.2 Suppler

According to the price strategy that Erawan furniture used the low price

strategy to fight with the normal market in Surat Thani. Thus, Erawan furniture very

concern more about the selecting and comparing the suppler that has the low cost as

much as possible in the general goods.

4.7.2.1 The general product

There are 2 sources of suppler for this products For this product catalogue,

Erawan furniture compares the cost of product between supplier from Lampoon which

is Somphoon furniture, and the same suppler in Surat Thani which one has the lower

cost.

Suppler of the same competitor that has many companies that comes from

Bangkok and perimeter. This is the example of the some of suppler of Erawan

furniture

Name of salesman Contact The company The located Miss Sawarot 089-5196622 Orange Furnitech Bangkok Mr. Suchart 081-5834950 Top Furnitech Samutphakarn Mr. Suchart 081-5834950 Udomwattana Samutphakran Miss Ponponna 089-7762910 Trupjinda Furniture Chomphon Mr. Pracha 081-8162329 Joe pang furniture Bangkok Mr. Suchart 081-5834950 Panachock Samutphakran Miss Ponponna 089-7762910 Sun rising Furnitech Samutsakorn - 034-856445 RB furniture Samutsakorn Arichayaphat 081-8139055 NC furnich Bangkok

The suppler from Lampoon, from the field trip survey at the lamphoon

province at tam bon Ban mar. There are a lot of Furniture manufacturing but Erawan

furniture use Somphon furniture because it is the bigger furniture manufacture that

has high capacity of production and quite lowest cost.

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Erawan furniture selected only the products that quite be same quality and

lowest cost from Somphon furniture when compare with suppler of the same

competitor for serve at the store.

This table is the example of some products from Somphoon furniture that

Erawan furniture is supplied.

4.7.2.2The special product

Erawan furniture got the special product from Nophadol furniture

4.7.2.3 The Second hand product

Erawan furniture got the second hand product from 2 sources

4.5.2.3.1. From customer who might miss to pay the installment purchasing

within 2 months or 4 periods, Erawan furniture will go to pick the product back in the

condition of the contact of the installment purchasing, then fix them for reworking

and resell in the second hand product.

4.5.3.3.2. From the customer who bring the old one for new one. According to

the filed trip and survey the questionnaire, we found that there are the customer who

need the new furniture for decorating home but still has the old one and need not

Somphon Furniture From

Lamphoon Same suppler Name of supplier Wardrobe 120 CM grass slide door 2,700 4,800 Udomwattana Wardrobe 150 CM grass slide door 3,900 6,800 Udomwattana Wardrobe kid 3 doors 900 1,900 Udomwattana TV cabinet 5 foots top curve 1,200 2,900 Udomwattana Wardrobe 120 CM 3 doors 1,700 2,900 Udomwattana Accounting cabinet 4 foots 650 1,500 Top furnitex Computer cabinet 4 foots 600 1,500 Top furnitex Big show cabinet 5 foot 2,200 3,100 Top furnitex Big show cabinet 6 foot 2,300 3,200 Top furnitex Big show cabinet 7 foot 2,700 None None Bed 3.5 foots head square 1,150 None None Bed 4 foots head curve 1,200 None None Bed 6 foots head curve 1,500 None None Bed 5 foots head square 1,350 None None Wardrobe 160 CM light 3,900 6,700 RB furniture Bookshelf 4 doors 1,400 3,200 RB furniture Big show 155 cm cabinet platinum 3,200 5,300 RB furniture Dressing table open door 650 1,460 Orange Furnitech Dressing top curve 600 1,390 Orange Furnitech

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know how to handle with the old one. Thus, Erawan furniture also has the service

about allow those customer to bring the old one for get the discount about no more

than 40 % of the cost of the new one which about 581 baht in average for purchasing

the new one To support this service for reducing the inventory, Erawan furniture need

to fixed and resell them in the second hand product.

4.7.3 Inventory management

Erawan furniture need to keep a lot of ending inventory because we need to

prepare the goods that available for the customer to purchase, so we need to maintain

the high level of ending inventory, we will order the goods in advance for 1 month by

estimate from the cost of goods sold for the next month, because we have the lead

time about 7-15 days for all of goods. The warehouse zone is the zone for keep the

inventory in the packaging like following picture. At the first time of operating

Erawan furniture need to order the inventory 2,000,000 baht.

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4.8 The summary of cost

Cost of investment

Pre operating expense Initial Request electric power 38,850 Request water 8,100 Register for juristic 8,350 Adjust land 1,000 Facial tax 12,000 Property tax 37,500 Other (installment and etc.) 50,000 Total 155,800

Prepaid rental land 300,000

Investment cost

Operating Investment Initial fixed Car 260,000 Equipment show room 58,540 Equipment assembly zone 24,085 Equipment Warehouse 9,190 Total 351,815Administrative investment Initial fixed

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Building 4,551,850 Equip office 128,457 Equip Toilet 3,334 Total 4,683,641Total investment cost 5.035,456

Depreciation

Depreciation Initial Monthly Yearly Base year Operating Car 260,000 4,333 52,000 5 Show room 58,540 976 11,708 5 Equip assembly zone 20,485 341 4,097 5 Equip Warehouse 9,190 153 1,838 5 Total operating depreciation 348,215 5,804 69,643 Administration Initial Monthly Yearly Base year Building 4,551,850 18,966 227,593 20 Equip office 71,957 1,199 14,391 5 Equip Toilet 3,334 56 667 5 Computer 10,600 294 3,533 3 Total administration depreciation 4,637,741 20,515 246,184

4.9 Management Analysis

4.9.1Human resource

From the Ministry of Labour and Social Welfare, we know that minimum of

wage rate in Surat Thani is 159 Bath per day. In Erawan Furniture there are 10

employees of our company and 1 outscoring. We have the general manager for

managing the furniture store.

General Manager

Job position : 1

Job Type : Full Time

Job time : 8.00am-6.00pm.

Job qualification

1. Male / Female , age at least 26 years old

2. Master's or Bachelor's Degree

3. Thai nationality

4. Knowledge, Capability, Experience about managing furniture store

at least 3 years

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Job description

He/She can set up targeting of company, planning all of operating which

follow target of company, assigning work to employee appropriately, good

communication inside company, and can evaluation & improvement of all position in

company. Besides, it is include managing and payment salary of employee, supervise

order of stock, and contact suppler for order the product and negotiation about price.

Job recruitment

We will be post notice about job description for apply a job on front of store

and post in *Department of Employment in Surat Thani which internet and office of

department of employment, we will post in both ways. We will interview them before

start the job and check her/him job qualification. We will tell about salary, scope of

work, test the skill of control and negotiation, and ask about experience from working *Source: http://www.seso.go.th/t0105/index.php?pgid=index

Sellers

Job position : 2



Job qualification

1. Male / Female , age at least 20 years old

2. Thai nationality

3. Experience about sale at least 2 years

Job description

Task of Seller and assistant is take care and give true information about

product, advice about buy product, persuade, and explain to moderation of product

with style of customer. These works start on 8.00am-6.00pm.

Requirement

We will post a notice about apply for a job on area in front of store, area in

central of Surat Thani, and post on internet. If somebody takes an interest, we will

have interview about skill of talking and present by applicant show the technical for

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sale with committee. And applicant should be look good personality for make

reliability with customer.

Accountant

Job position : 1



Job qualification

1. Male or female age at least 22 years old

2. Thai nationalities

3. Knowledge and Experience about accounting at least 2 year

4. Well know and well experience of routes

5. Responsibility of duty

Job description

Task of accountant is management and respond all of activities about finance,

account, record buy-sale, and order in-out of stock before send to manager for check

against. These works start on 8.00am-6.00pm.

Requirement


central of Surat Thani, and post on internet. If somebody takes an interest, we will

have interview about skill of account and ask about experience from working.

Mechanical

Job position : 1



Job qualification

1. Male age at least 20 years old

2. Permanent driving license

3. Thai nationality

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4. Well know and well experience of routes Responsibility of duty

Job description

Task of mechanical is assembly product, send product to customer, and take

product to warehouse. These works start on 8.00am-6.00pm.

Requirement


central of Surat Thani, and post on internet. If somebody takes an interest, applicant

must to show technical about assembly and about personality should be look like

healthy and strength.

Driver

Job position : 1



Job qualification

1. Male age at least 24 years old

2. Permanent driving license

3. Thai nationality

4. Knowledge and Experience about delivery least 2 years

5. Well know and well experience of routes


Job description

Task of driver respond about delivery by transport the product of showroom.

Move the product on the pickup car, communication with customer which place

customer’s want. Move down the product from pickup car and set the point follow

customer’s want. Good car care and well skill how to treat basic repair tired of pickup

car. Well know the street. Perform the traffic too stick. Do not drink in job time.

Requirement


and post in *Department of Employment in Surat Thani which internet and office

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of department of employment, we will post in both ways. We will interview them

before start the job and check him job qualification. We will tell about salary,

scope of work, test the skill of driving and well know the route, and ask about

experience from working *source: http://www.seso.go.th/index.php

House keeper

Job position : 1



Job qualification

1. Female age at least 25 years old

2. Thai nationality

3. Well skill in cleaning

4. Well know and well experience how to use equipment and chemicals for

cleaning.


Job description

Task of house keeper respond about cleaning all of product in showroom and

warehouse zone. Arranged and decorated locations to be organized. Maintain the

cleaning front of store area. Always clean when dirt. Always clean the toilet. Care

cleans all area of store. Police confer to customer.

Requirement




start the job and check her job qualification. We will tell about salary, scope of work,

and ask about experience from working *source: http://www.seso.go.th/index.php

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Account receivable caretaker

Job position : 1



Job qualification

1. Male or femal age at least 25 years old

2. High vocational certificate.

3. Thai nationality


5. Resolute of duty

Job description

Task of account receivable caretaker respond about control and collect

payment of customers who pay out a little at a time that reference from table date

payment of customers. Account receivable caretaker will be call and talk about

liability of customers. If customers not paid money to account receivable caretaker,

we will be take possession the product.

Requirement




start the job and check her job qualification. We will tell about salary, scope of work,

and ask about experience from working *source: http://www.seso.go.th/index.php

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4.9.2 Outsourcing

Erawan furniture outsource the security guard from the We hire security from

Sri-Tommasit Co. Ltd. for look after the store at night

4.9.2.1 Compensation

Human resource position Salary Total General manager 1 10,000 10,000 Sale person 2 5,500 11,000 Accountant 1 8,000 8,000 Driver 1 7,500 7,500 Mechanical salary 3 7,000 21,000 Account receivable caretaker 1 6,500 6,500 House keeper 1 5,000 5,000 Outsource guard 1 7,000 7,000 Total 11 76,000

4.10 Conclusion There are 2 mainly product type of Erawan furniture which are Normal

product, and Used products. Normal product is the product that sold at the first time to

customer that which has 2 types which are special product and general product, and

the used product that estimate the cost about 40% of the normal product.

Erawan furniture is register as the juristic person according to the Thai law. It

rent the land the need to pay in advance for 1 year. Erawan furniture need to build it

owns building that there are 2 mainly zoned which are Core building and Option

building. The core building is the main building for selling and administrative and the

option building for the assembly and warehouse zone for assembly fixed and keeps

the package furniture. The total investment cost for the Erawan furniture is 5,027,556

baht.

Erawan furniture has 10 own employees which are seller 2 position who are

try to generate the sale, driver 1 position who drive the car for delivery goods to

customer, general manager 1 position who manage the furniture store, accountant 1

position who take responsibility about the accounting, mechanical 3 position who

support the driver to service the customer, account receivable caretaker who try to

collect money from the customer House keeper who take care and clean the furniture

store.

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Chapter 5

Financial Analysis


This chapter explains about all financial statements. We calculate all of them

are in monthly base and minimum 5 years. Profit/Loss statement (Income statement),

Cash flow, and Balance sheet which theses are used calculations financial statements.

5.1 Total requirement and the source of fund

First of all, Erawan furniture need to in from about the total requirement and

the source of fun that represent by following table

Pre operating expense 155,800Operating Investment 351,815Administrative investment 4,683,641 Prepaid rental land 300,000Expected expense at the beginning 122,008Inventory purchasing 2,000,000Maintain the liquidity 2,000,000Total funding requirement 9,613,264

This table represents the total funding requirement of this project that has the

requirement about 9,613,264 baht, Thus Erawan furniture need to loan from the

investor in amount of 10,000,000 baht to open and operate the project. According to

the Thai civil commercial law in the section of 654 that the loan interest rate need not

to have more the maximum rate of the law which is 15% per year. Thus, Erawan

furniture will provide the maximum rate of the loan interest rate at 15% per year or

1,500,000 baht and will pay the interest rate every month for 60 year by need not to

pay the principal as well as must pay the all of the principal which is 10,000,000 baht

at the end of year 5. Because, we need to give the big amount of interest rate which is

about 125,000 baht per month to the investor for 5 year.

Moreover, Erawan furniture also have the back up plan for the investor that

can guarantee that the investor will get the fully principal at the end of year 5 if we

did not has the cash enough to pay all of principal to the investor. There are 2

alternative for the investor that can choose anyone.

1) We will pay 50% of the principal(5,000,000) at the end of year 5 to the

investor, and let other have also computed the interest for the investor (750,000) plus

bonus 30,000 baht per year to the invest to so we have cash enough to pay for this) .

And repay 25% of principal (2,500,000) at the end of year 7 and let other have also

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computed the interest for the investor (375,000) also plus 50,000 baht in bonus and

the last 25% of principal at the end of year 9 plus interest the bonus 70,000 baht.

2) We will loan the cash from the financial intuition such as the bank to repay

the entire principal for the investor. By this way the investor will not get any bonus or

interest after year 5.

5.2 Financial statement

There are 3 man statements in the financial analysis path which are income

statement, statement of cash flow, and the balance sheet

5.2.1 Income statement

Income statement is the importance statement for the company that informs

the information about the performance of the company. The number that is very

importance for concerning is in the bottom line which is the net income

Explanation for the income statement for the Erawan furniture

Sale, the data of sale in the in come statement is imported from the sale in the

sale forecast in the chapter 3 that there are 2 types of sale which are on cash and on

credit sale. For the sale, Erawan furniture estimate to increase about 8 % in every year

Cost of goods sold, because the sale forces of Erawan furniture is estimated

from the percentage of potential market of Surat Thani and there are a lot of cost of

product of Erawan furniture, so the to reduce the complexity of the cost of goods sold

in the income statement Erawan furniture use the percentages of the gross margin of

the price strategy that has represented in the chapter 4 to be the base for estimated the

percentage for the cost of goods sold.

All of them have already including in the cost of goods sold in the income

statement. From interview the furniture store entrepreneur, the price of the goods from

supplier increase quite not much more for each year it about 2%-3% per 2 years in

average. Thus, Erawan furniture increase sale by 3% in year 3 and 4 and 4% in year 5

from year 1

Gross margin, the gross margin is the initial profit from sale that including

only the deduction of the cost of goods sold. Because Erawan furniture try to find the

furniture from the suppler that is lowest cost as much as possible, so it also represent

higher in the gross margin.

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Operating expense, for the operating expense inform about the expense that

use to operate the service to the customer that including fuel, operating suppliers,

expected the bad dept, Electricity in the operating, and operating depreciation

Pre operating expense, Erawan furniture percept this expense at the first year

by deduction equally amount every month.

Fuel is the expense for fuel to transportation service to the customer from this

expense Erawan furniture estimated about 1.66% of the sale according to the filed trip

survey we know that the fuel of Nong maw furniture is about 72,000 baht that is about

1.66% of the sale. And increase 3.3% every year according to the inflation rate in

Surat Thani

Operating supplier is the expense that use in that the assembly zone for

reserve to be the assembly and for fixed the product and the second hand product.

Erawan furniture will purchase 4 times per year.

Bed dept expense because Erawan furniture has the service about the credit

sale, so we need to prepare for the bed dept from the filed trip survey we found that it

is quite impossible that the sale on credit will be colleted fully 100%. There are about

5% that are the bad dept and lost. So Erwan furniture expected the bad dept about 5%

of the expected cash received on credit sale.

Electricity on operating is the mainly part of electricity on operating are use to

assembly the product when them is placed to the store. Some kind of furniture such as

wardrobe, TV cabinet, big show cabinet have the big size it hard to transportation so

they need move by the package, and the goods that ordering from Lampoon also are

in the packaged and then is assembly later by both the mechanical of suppler and

Erawan furniture at the store, so Erawan furniture estimate the Electricity on operating

about 0.3% of the inventory purchasing according to analysis the electricity cost from

the field trip survey. And increase 3.3% every year according to the inflation rate in

Surat Thani

Operating depreciation is the non cash expense that need to deduction from

the gross margin according to the principle accounting it is the assumption that the

plant asset need to have the discount value by the time for operating depreciation. The

data for operating depreciation is imported from the depreciation cost in chapter 4

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Operating income is the profit that has already deduced the operating expense.

It reflects the profit that how much the company can generate the profit with after

deduction the expense from operating activities.

Marketing expense, is the expense that use for encourage the sale of the

Erawan furniture the data is imported from the marketing expense in chapter 3. And

increase 3.3% every year according to the inflation rate in Surat Thani

Administrative expense, is the expense that use in the management that

including salary of the employee, utility expense, insurance expense, office supply,

rental land, property tax expense, Other administrative expense, and the

administrative depreciation.

Salary is the compensation that pay for the employee for Erawan furniture has

the employee 10 person and outscoring 1 person that represent the detail in the

chapter 4.

Utility expense is the expense of facility such as electricity, telephone bill,

water supply, that use in the administrative activities, it difficult to estimated all of the

expense so Erawan furniture use the fixed rate that may be the maximum for this

expense that about 8,000 baht per month that base on about 4 times of grade C

furniture store from the filed trip survey.

Insurance expense is the expense for transforming the risk of Erawna furniture

to the insurance company that represented by following

The cost of risk management per year per month Fire insurance 21,207 1,767 Car insurance 7,200 600 Social security insurance for employee 41,400 3,450 Total insurance expense 69,807 5,817

Office supply or stationary expense is the expense that diminution from the

current asset in the balance sheet that expected that will enough to use within 4

months and purchasing again after 4 month so it expected to use equally for each

month that use in office zone that essential for administration. Erawan furniture will

purchase 3 times per year.

Rental land, Erawan furniture need not to purchasing the land at the beginning

because the cost is 25,000,000 baht is quite high and need to spent a lot of money at

the beginning, so the negotiation result that need to pay 300,000 baht per year that

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about 25,000 baht per month it look better than pay 25,000,000 baht in one time. For

this expense Erawan furniture deducting equally 25,000 baht every month

Property tax expense, the data of the property tax expense is imported from

the chapter 4.

Facia tax expense, the data of the facia tax expense is imported from the

chapter 4.

Administrative depreciation is the non cash expense that need to deduction

from the margin according to the principle accounting it is the assumption that the

plant asset need to have the discount value by the time for operating depreciation. The

data for Administrative depreciation is imported from the depreciation cost in chapter

4

Earning before interest and tax (EBIT), is the profit after deduction all of

expense except financial activity and tax. This represent that how much the profit that

company can generate before pay for tax and interest that reflect the earning

performance of the company

Interest expense, this is the compensation that Erawan furniture pay for the

investor who invest to this project that represent about 15% of the money loan or

about 1,500,000 baht per year. Erawan furniture will guarantee to pay the interest

125,000 baht every month for the investor.

Interest income, is the profit after EBIT deduction with the interest payment.

Income tax is the obligation of the private juristic person who has the profit

from the operating need to pay tax to the government the rate is 30% of the interest

income.

Net income, is the important number in the bottom line that represent the

overall profit that the company can generate from doing the business.

5.2.2 Cash flow statement

The cash flow statement is the statement that show the movement of cash that

cash inflow and cash outflow in all of activities of the business that including

operating activity, selling and administrative activity, investment activity, and cash

flow from financing activity.

5.2.2.1 Cash flow from operating activity is the transaction in cash of the

company in the operating activity.

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Cash inflow, there are 2 mainly source of cash inflow from the operating

activity Erawan furniture which are cash received on cash sale and cash received on

credit the depreciation and operating suppler are non cash expense that including in

the income statement, so we need to adjust them to know the real cash inflow from the

operating activity that imported the data from the income statement.

Cash outflow, the cash outflow from the operating activity of Erawan furniture

has purchasing inventory on cash for every transaction, the cash that paid for

operating expense, cash paid for the income tax that imported the data from income

statement . Every transaction of Erawan furniture about purchasing the inventory uses

the cash. And according to the revenue department of Thailand that need to pay the

income tax about 2 times a year, so there are the cash flow in this activity at the

middle and the end of the year.

Net cash flow is the result of the cash inflow minus cash outflow, in the net

cash flow the value of Erawan furniture is positive because there is cash inflow more

than cash outflow. It represents the positive dimension in the operating expense

5.2.2.2 Cash flow from selling and administrative activity is the cash

transaction of company for selling and administrative.

Cash inflow, the cash inflow in this activity is to adjust the non cash

transaction that has already including in the income statement which are depreciation,

rental rand that pay the lump-sum at the beginning of year, and offices supplier.

Cash outflow, the cash out flow from selling and administrative also imported

from the income statement.

Net cash flow, The net cash flow from selling and administrative of Erawan

furniture is negative it means that the cash outflow is more than cash inflow in selling

and administrative activity. It is the general situation.

5.2.2.3 Cash flow from investment activity, represent the cash that

transaction in investment activity. Erawan furniture including investment transaction

in both plant and current asset that will be represented in the balance sheet

The transactions reflect that how much money that Erwan furniture spent for

the investment activity for each year.

Cash inflow, is the cash that received from selling the equipment. Erawan

furniture hardly sells the equipment on the market

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Cash outflow, is cash paid for purchasing new equipment in both current and

plant that including cash paid for purchasing administrative and operating plant asset,

cash paid for rental land, office supplier, operating suppler.

Net cash flow, the net cash flow from investment activity of Erawan furniture

usually be the negative number because we seldom to sell the equipment but invest in

current asset every year.

5.2.2.4 Cash flow from financing activity, represent the cash the occur in the

find out the fund for Erawan furniture.

Cash inflow, including the cash borrowing that occur only one time from the

investor who invest to the Erawan furniture

Cash outflow, represent the cash payment to the investor that including

repayment the principle and interest payment. Erawan furniture has ability to pay the

interest for the investor every month.

5.2.3 Balance sheet statement

Balance sheet is the statement that represent the financial status of the

company that strong or weakness that there are two side of balance sheet which are

Asset, and Liability and Equity that always equal together.

5.2.3.1 Asset, there are 2 mainly type of asset which are current asset that can

be use within 1 year, and Plant asset that has the depreciation

Current asset Erawan furniture has cash, inventory, office suppler, operating

suppler, prepaid land expense, and account receivable

Fixed asset Erawan furniture has operating asset that use in the warehousing

and assembly Zone that including car, Equipment show room, assembly, and

warehouse zone. And administrative asset that including building, equipment office,

and toilet zone less by the accumulative depreciation

5.2.3.2 Liability and equity

Liability of Erawan including tax payable that Erawn furniture need to

pay tax about 2 time per year which in June and December, so we need to have the tax

payable. In the Long term note payable is not reduce because Erawan furniture would

like the investor to get the maximum of interest rate that is 1,500,000 baht per year for

5 years and then will repay the entire principal at the end of year 5.

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Equity of Erawan furniture, there are only retain earning in the equity because

Erawan furniture loan 100% in liability.

5.3 Financial ratio

Ratio analysis Year 1 Year 2 Year 3 Year 4 Year 5 Long-term solvency Long-term dept ratio 81.99% 68.07% 57.18% 48.37% 0.00% Time interest earned 3.09 3.37 3.66 4.03 4.41 Cash coverage 3.31 3.59 3.88 5.22 5.51 Asset utilization Total asset turnover 1.40 1.16 1.14 1.04 1.63 Fixed asset turnover 3.63 3.90 4.93 5.77 6.82 Inventory turnover 6.08 6.25 6.59 6.78 6.84 Day’s sale in inventory 58.42 56.79 53.84 52.33 51.92 Receivable turnover 5.02 4.07 3.47 3.05 2.74 Day’s sales in receivable 70.72 87.15 102.27 116.50 129.58 Profitability Gross margin 47.28% 47.27% 46.55% 46.55% 46.30% Profit margin 12.87% 13.52% 14.00% 14.81% 15.40% Return on asset 18.01% 16.97% 19.63% 15.41% 25.10% Return on fixed asset 46.75% 56.96% 69.01% 85.39% 104.99% Return on dept 21.97% 24.93% 27.98% 31.85% N/A EBIT margin 27.17% 27.45% 27.51% 28.12% 28.46%

5.4 For the ratio analysis

5.4.1 Long-term solvency is intended to address the firm’s long-term ability

to meet its obligation, or, more generally, its financial leverage.

According to Erwan furniture need to loan 100% in liability to operate the

business, so the long-term dept ratio is quite be high at the first year. However

because of the increasing of the asset every year thought, we need not to loan any

fund more it case the long-term dept ratio continuous to decline and reach the number

0 at the end of year 5 because Erawan furniture pay all of the principal to the investor.

Time interest earn and the cash coverage represent the ability to pay the

interest to the investor of Erawan furniture that has enough to pay 3-4 time for each

year.

5.4.2 Asset utilization

The total asset turnover and fixed asset turn over of Erawan furniture is quite

high because we generate more sale by use less in asset when compare , that represent

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the high efficacy rate of Erawan furniture. The inventory turnover of Erawan furniture

is quite high it mean that we have more efficiently that we can mange the in the

ending inventory because we ordering forward for the next month. Erawan furniture

also has well managing the account receivable because we have the inventory care

taker to look after the account receivable

5.4.3 Profitability ratio

Because Erawan furniture has lower in cost of goods sold, so it quite higher in

the gross margin and earning before interest and tax , so we can pay the higher in the

interest rate for the investor. The profitable ratio of Erawan furniture is quite higher,

that represents the good in generating the profit.

5.5 NPV analysis is use to estimate and analyze the value of money at the present

time

Net present value 1,782,848 for 60 month at the discount rate 3.3% per year

that comes from the average inflation rate 3 year at Surat Thani. By did not including

the repayment for the principal of the initial investment at the end of year 5 .This

project also represents the positive NPV that very interesting to invest. However, if

we including the repayment for the end of year 5 the NPV will be negative to -

6,698,009

5.6 Internal rate return is the rate that measure the internal return for this project

Internal rate return of Erawan furniture is equal to 17% per year or 1.39% per

month that overcome the inflation rate. This rate not including the computation of the

principal 5.7 Conclusion

Erawan furniture will have the fund by loan from the investor and will pay the

interest rate 15% per year for the investor. The overall of 3 financial statement which

are income statement, cash flow statement, and the balance sheet show the number

that quite good that represent higher in net income, the good liquidity that represented

in the cash flow statement, and the strong financial in the balance sheet . And in the

ratio analysis also give the percentage that excellent the NPV which positive (not

including the repayment the initial investment for the investor, the IRR of Erawan

144


furniture represent the satisfaction number that higher than the interest rate the we

offer to the investor. That can be concluding that there is feasibility in the financial of

Erawan furniture.

145


Table of Income statement

Year 1

Year 1 January February March April May June July August September October November December Total Sale Sale on cash 334,422 236,830 464,883 287,328 336,272 302,153 463,616 504,769 397,042 281,953 356,801 473,306 4,439,375 Sale on credit 999,361 878,510 920,042 1,168,841 1,691,754 1,163,699 890,376 856,122 1,033,366 1,200,485 842,910 989,678 12,635,144 Total sale 1,333,783 1,115,340 1,384,925 1,456,169 2,028,026 1,465,851 1,353,992 1,360,891 1,430,408 1,482,438 1,199,712 1,462,984 17,074,518 Cost of goods sold On cash 237,440 168,149 330,067 204,003 238,753 214,528 329,167 358,386 281,900 200,187 253,329 336,047 3,151,956 On credit 462,704 406,750 425,979 541,173 783,282 538,793 412,244 396,384 478,449 555,824 390,268 458,221 5,850,071 Total cost 700,144 574,899 756,046 745,176 1,022,035 753,321 741,411 754,771 760,348 756,011 643,596 794,268 9,002,028 Gross margin On cash 96,982 68,681 134,816 83,325 97,519 87,624 134,449 146,383 115,142 81,767 103,472 137,259 1,287,419 On credit 536,657 471,760 494,063 627,668 908,472 624,906 478,132 459,737 554,918 644,660 452,643 531,457 6,785,072 Total Gross margin 633,639 540,440 628,879 710,993 1,005,991 712,531 612,580 606,120 670,060 726,427 556,115 668,716 8,072,491 Operating Expense Fuel 22,141 18,515 22,990 24,172 33,665 24,333 22,476 22,591 23,745 24,608 19,915 24,286 283,437 Operating suppliers 1,000 0 0 1,000 0 0 1,000 0 0 1,000 0 0 4,000 Expected the bad dept 9,994 18,779 27,979 39,668 56,585 58,228 58,347 57,708 56,353 51,440 48,233 49,226 532,539 Electricity in operating 6,000 2,268 2,236 3,066 2,260 2,224 2,264 2,281 2,268 1,931 2,383 2,269 31,450 Operating depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Pre operating expense 12,983 12,983 12,983 12,983 12,983 12,983 12,983 12,983 12,983 12,983 12,983 12,983 155,800 Total operating Expense 44,998 45,425 59,068 73,770 98,374 90,649 89,951 88,443 88,230 84,843 76,394 81,644 921,790 Operating income 588,641 495,015 569,811 637,223 907,617 621,881 522,629 517,677 581,830 641,584 479,721 587,072 7,150,701 Marketing expense Selling expense Discount sale 16,721 11,842 23,244 14,366 16,814 15,108 23,181 25,238 19,852 14,098 17,840 23,665 221,969 Sale commission 26,676 22,307 27,698 29,123 40,561 29,317 27,080 27,218 28,608 29,649 23,994 29,260 341,490 Total selling Expense 43,397 34,148 50,943 43,490 57,374 44,425 50,261 52,456 48,460 43,746 41,834 52,925 563,459 Advertising expense

146


Radio local 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000 Calendar 13,000 0 0 0 0 0 0 0 0 0 0 13,000 26,000

Brochure 500 500 0 500 0 0 0 500 0 1,000 500 500 4,000

Signboard 40,000 0 0 0 0 0 40,095 0 0 0 0 0 80,095

Souvenir 4,000 0 0 4,000 0 0 0 0 0 4,000 0 4,000 16,000

Public relation 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000

Other 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000



Administration Expense Salary 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 912,000 Utilities expense 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 96,000 Insurance expense 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 74,007 Office supply 2,500 0 0 0 2,500 0 0 0 2,500 0 0 0 7,500 Rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Property tax expense 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 37,500 Facia tax 12,000 0 0 9,000 0 0 6,000 0 0 3,000 0 0 30,000 Administrative depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Total administrative expense 153,941 139,441 139,441 148,441 141,941 139,441 145,441 139,441 141,941 142,441 139,441 139,441 1,710,791 Selling and administrative expense 263,838 183,089 199,384 205,431 208,315 192,866 244,797 201,397 199,401 200,187 190,775 218,866 2,508,345 Earning before interest and Tax 324,804 311,926 370,427 431,792 699,302 429,016 277,833 316,280 382,429 441,396 288,946 368,206 4,642,356 Interest expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Interest income 199,804 186,926 245,427 306,792 574,302 304,016 152,833 191,280 257,429 316,396 163,946 243,206 3,142,356 Income Tax 59,941 56,078 73,628 92,038 172,291 91,205 45,850 57,384 77,229 94,919 49,184 72,962 942,707 Net income 139,863 130,848 171,799 214,755 402,011 212,811 106,983 133,896 180,200 221,477 114,762 170,244 2,199,649

147


Year 2

Year 2 January February March April May June July August September October November December Total Sale Sale on cash 361,176 255,776 502,073 310,314 363,173 326,325 500,705 545,151 428,805 304,510 385,345 511,171 4,794,525 Sale on credit 1,079,310 948,790 993,645 1,262,348 1,827,094 1,256,795 961,606 924,611 1,116,035 1,296,524 910,343 1,068,852 13,645,955 Total sale 1,440,486 1,204,567 1,495,719 1,572,662 2,190,268 1,583,120 1,462,311 1,469,762 1,544,841 1,601,033 1,295,688 1,580,023 18,440,480 Cost of goods sold On cash 252,101 178,532 350,447 216,599 253,495 227,775 349,492 380,515 299,306 212,548 268,971 356,797 3,346,578 On credit 504,340 443,351 464,311 589,870 853,765 587,275 449,339 432,052 521,501 605,840 425,385 499,453 6,376,482 Total cost 756,441 621,883 814,758 806,469 1,107,260 815,050 798,831 812,568 820,807 818,387 694,356 856,250 9,723,060 Gross margin On cash 109,075 77,244 151,626 93,715 109,678 98,550 151,213 164,636 129,499 91,962 116,374 154,374 1,447,946 On credit 574,970 505,440 529,335 672,478 973,330 669,520 512,267 492,559 594,534 690,684 484,958 569,399 7,269,473 Total Gross margin 684,045 582,684 680,961 766,193 1,083,008 768,070 663,480 657,195 724,034 782,646 601,332 723,772 8,717,420 Operating Expense Fuel 24,632 20,598 25,577 26,893 37,454 27,071 25,006 25,133 26,417 27,378 22,156 27,018 315,332 Assembly suppliers 1,033 0 0 1,033 0 0 1,033 0 0 1,033 0 0 4,132 Expected the bed dept 51,457 50,612 48,543 52,738 61,112 62,887 63,015 62,325 60,861 55,556 52,091 53,164 674,360 Electricity on operation 1,922 2,518 2,492 3,421 2,519 2,468 2,511 2,536 2,529 2,146 2,646 2,566 30,273 Operating depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Total operating Expense 84,908 79,591 82,476 89,948 106,948 98,290 97,428 95,857 95,671 91,976 82,757 88,612 1,094,461 Operating income 599,137 503,093 598,485 676,245 976,060 669,780 566,052 561,337 628,363 690,670 518,575 635,161 7,622,959 Marketing expense Selling expense Discount sale 18,059 12,789 25,104 15,516 18,159 16,316 25,035 27,258 21,440 15,225 19,267 25,559 239,726 Sale commission 28,810 24,091 29,914 31,453 43,805 31,662 29,246 29,395 30,897 32,021 25,914 31,600 368,810 Total selling Expense 46,869 36,880 55,018 46,969 61,964 47,979 54,281 56,653 52,337 47,246 45,181 57,159 608,536 Advertising expense Radio local 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 6,198 74,376 Calendar 13,429 0 0 0 0 0 0 0 0 0 0 25,000 38,429

148


Brochure 517 517 0 517 0 0 0 517 0 1,033 517 517 4,132

Signboard 41,320 0 0 0 0 0 41,418 0 0 0 0 0 82,738

Souvenir 4,132 0 0 4,132 0 0 0 0 0 4,132 0 4,132 16,528

Public relation 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 24,792

Other 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 1,033 12,396



Administration Expense Salary 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 912,000 Utilities expense 8,264 8,264 8,264 8,264 8,264 8,264 8,264 8,264 8,264 8,264 8,264 8,264 99,168 Insurance expense 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 74,007 Office supply 2,583 0 0 0 2,583 0 0 0 2,583 0 0 0 7,748 Rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Property tax expense 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 37,500 Facia tax 4,000 0 0 0 4,000 0 0 0 4,000 0 0 0 12,000 Administrative depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Total administrative expense 146,287 139,705 139,705 139,705 146,287 139,705 139,705 139,705 146,287 139,705 139,705 139,705 1,696,207 Selling and administrative expense 261,850 186,399 204,020 200,619 217,548 196,981 244,702 206,171 207,922 201,413 194,699 235,809 2,558,133 Earning before interest and Tax 337,287 316,695 394,465 475,625 758,512 472,799 321,350 355,166 420,442 489,257 323,876 399,351 5,064,826 Interest expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Interest income 212,287 191,695 269,465 350,625 633,512 347,799 196,350 230,166 295,442 364,257 198,876 274,351 3,564,826 Income Tax 63,686 57,508 80,840 105,188 190,054 104,340 58,905 69,050 88,632 109,277 59,663 82,305 1,069,448 Net income 148,601 134,186 188,626 245,438 443,458 243,459 137,445 161,116 206,809 254,980 139,213 192,046 2,495,378

149


Year 3

Year 3 January February March April May June July August September October November December Total Sale Sale on cash 391,274 277,091 543,913 336,174 393,438 353,519 542,430 590,580 464,539 329,886 417,457 553,768 5,194,068 Sale on credit 1,169,252 1,027,856 1,076,449 1,367,544 1,979,352 1,361,528 1,041,740 1,001,662 1,209,038 1,404,567 986,205 1,157,923 14,783,118 Total sale 1,560,527 1,304,947 1,620,362 1,703,718 2,372,790 1,715,046 1,584,170 1,592,242 1,673,578 1,734,453 1,403,663 1,711,691 19,977,186 Cost of goods sold On cash 281,303 199,212 391,041 241,689 282,858 254,159 389,975 424,592 333,976 237,168 300,127 398,126 3,734,224 On credit 549,174 482,764 505,587 642,308 929,662 639,482 489,284 470,461 567,861 659,697 463,201 543,853 6,943,335 Total cost 830,477 681,975 896,627 883,997 1,212,520 893,641 879,259 895,052 901,837 896,865 763,328 941,979 10,677,558 Gross margin On cash 109,972 77,879 152,872 94,485 110,580 99,360 152,455 165,988 130,563 92,718 117,331 155,642 1,459,845 On credit 620,078 545,093 570,863 725,236 1,049,690 722,045 552,456 531,202 641,177 744,870 523,004 614,070 7,839,783 Total Gross margin 730,049 622,972 723,735 819,721 1,160,270 821,405 704,911 697,190 771,741 837,588 640,335 769,712 9,299,628 Operating Expense Fuel 27,465 22,967 28,518 29,985 41,761 30,185 27,881 28,023 29,455 30,526 24,704 30,126 351,598 Assembly suppliers 1,067 0 0 1,067 0 0 1,067 0 0 1,067 0 0 4,268 Expected bad dept 55,610 54,728 52,528 57,100 66,205 68,127 68,266 67,518 65,933 60,185 56,432 57,594 730,226 Electricity on operating 2,176 2,860 2,820 3,868 2,851 2,805 2,855 2,877 2,861 2,435 3,005 2,853 34,265 Operating depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Total operating Expense 92,181 86,419 89,729 97,883 116,680 106,981 105,933 104,282 104,113 100,077 90,005 96,436 1,190,721 Operating income 637,868 536,553 634,005 721,837 1,043,590 714,425 598,978 592,908 667,628 737,510 550,330 673,276 8,108,907 Marketing expense Selling expense Discount sale 19,564 13,855 27,196 16,809 19,672 17,676 27,122 29,529 23,227 16,494 20,873 27,688 259,703 Sale commission 31,211 26,099 32,407 34,074 47,456 34,301 31,683 31,845 33,472 34,689 28,073 34,234 399,544 Total selling Expense 50,774 39,954 59,603 50,883 67,128 51,977 58,805 61,374 56,699 51,183 48,946 61,922 659,247 Advertising expense 0 0 0 0 0 0 0 0 0 0 0 0 0 Radio local 6,402 6,402 6,402 6,402 6,402 6,402 6,402 6,402 6,402 6,402 6,402 6,402 76,824 Calendar 13,871 0 0 0 0 0 0 0 0 0 0 13,871 27,742

150


Brochure 534 534 0 534 0 0 0 534 0 1,067 534 534 4,268

Signboard 42,680 0 0 0 0 0 42,781 0 0 0 0 0 85,461

Souvenir 4,268 0 0 4,268 0 0 0 0 0 4,268 0 4,268 17,072

Public relation 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 25,608

Other 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 1,067 12,804



Administration Expense Salary 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 912,000 Utilities expense 8,536 8,536 8,536 8,536 8,536 8,536 8,536 8,536 8,536 8,536 8,536 8,536 102,432 Insurance expense 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 74,007 Office supply 2,668 0 0 0 2,668 0 0 0 2,668 0 0 0 8,003 Rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Property tax expense 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 37,500 Facia tax 4,000 0 0 0 4,000 0 0 0 4,000 0 0 0 12,000 Administrative depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Total administrative expense 146,644 139,977 139,977 139,977 146,644 139,977 139,977 139,977 146,644 139,977 139,977 139,977 1,699,726 Selling and administrative expense 268,374 190,067 209,183 205,264 223,375 201,557 251,166 211,487 212,946 206,098 199,060 230,175 2,608,752 Earning before interest and Tax 369,494 346,486 424,822 516,573 820,215 512,868 347,811 381,421 454,682 531,412 351,270 443,101 5,500,155 Interest expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Interest income 244,494 221,486 299,822 391,573 695,215 387,868 222,811 256,421 329,682 406,412 226,270 318,101 4,000,155 Income Tax 73,348 66,446 89,947 117,472 208,564 116,360 66,843 76,926 98,905 121,924 67,881 95,430 1,200,046 Net income 171,146 155,040 209,876 274,101 486,650 271,508 155,968 179,494 230,777 284,488 158,389 222,671 2,800,108

151


Year 4

Year 4 January February March April May June July August September October November December Total Sale Sale on cash 421,372 298,406 585,752 362,033 423,702 380,712 584,156 636,009 500,273 355,261 449,569 596,366 5,593,612 Sale on credit 1,259,195 1,106,922 1,159,253 1,472,740 2,131,610 1,466,261 1,121,874 1,078,713 1,302,041 1,512,611 1,062,067 1,246,994 15,920,281 Total sale 1,680,567 1,405,328 1,745,005 1,834,773 2,555,312 1,846,973 1,706,030 1,714,723 1,802,314 1,867,872 1,511,637 1,843,360 21,513,893 Cost of goods sold On cash 302,941 214,536 421,121 260,280 304,616 273,709 419,973 457,253 359,666 255,412 323,213 428,751 4,021,472 On credit 591,419 519,899 544,478 691,716 1,001,175 688,673 526,922 506,650 611,543 710,443 498,832 585,688 7,477,438 Total cost 894,360 734,435 965,598 951,996 1,305,791 962,383 946,895 963,903 971,209 965,855 822,045 1,014,439 11,498,909 Gross margin On cash 118,431 83,870 164,631 101,753 119,086 107,003 164,183 178,757 140,607 99,850 126,356 167,615 1,572,141 On credit 667,776 587,023 614,775 781,023 1,130,435 777,587 594,952 572,063 690,499 802,168 563,235 661,306 8,442,843 Total Gross margin 786,207 670,893 779,406 882,776 1,249,521 884,590 759,135 750,820 831,105 902,018 689,591 828,921 10,014,984 Operating Expense Fuel 30,418 25,436 31,585 33,209 46,251 33,430 30,879 31,036 32,622 33,808 27,361 33,365 389,401 Assembly suppliers 1,102 0 0 1,102 0 0 1,102 0 0 1,102 0 0 4,409 Expect bed dept 60,169 59,148 56,695 61,560 71,297 73,368 73,517 72,712 71,005 64,815 60,773 62,024 787,084 Electricity on operating 2,416 3,177 3,132 4,296 3,166 3,115 3,171 3,195 3,178 2,705 3,338 3,191 0 Operating depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Total operating Expense 99,970 93,625 97,275 106,032 126,578 115,777 114,534 112,807 112,668 108,294 97,335 104,444 1,289,338 Operating income 686,237 577,268 682,131 776,745 1,122,943 768,813 644,601 638,013 718,437 793,724 592,257 724,477 8,725,646 Marketing expense Selling expense Discount sale 21,069 14,920 29,288 18,102 21,185 19,036 29,208 31,800 25,014 17,763 22,478 29,818 279,681 Sale commission 33,611 28,107 34,900 36,695 51,106 36,939 34,121 34,294 36,046 37,357 30,233 36,867 430,278 Other selling expense 0 0 0 0 0 0 0 0 0 0 0 0 0 Total selling Expense 54,680 43,027 64,188 54,797 72,291 55,975 63,328 66,095 61,060 55,121 52,711 66,685 709,958 Advertising expense 0 0 0 0 0 0 0 0 0 0 0 0 0 Radio local 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 6,613 79,358

152


Calendar 14,329 0 0 0 0 0 0 0 0 0 0 14,329 28,657

Brochure 551 551 0 551 0 0 0 551 0 1,102 551 551 4,409

Signboard 44,088 0 0 0 0 0 44,193 0 0 0 0 0 88,281

Souvenir 4,409 0 0 4,409 0 0 0 0 0 4,409 0 4,409 17,635

Public relation 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 2,204 26,453

Other 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 13,226



Administration Expense Salary 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 912,000 Utilities expense 8,818 8,818 8,818 8,818 8,818 8,818 8,818 8,818 8,818 8,818 8,818 8,818 105,811 Insurance expense 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 74,007 Office supply 2,756 0 0 0 2,756 0 0 0 2,756 0 0 0 8,267 Rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Property tax expense 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 37,500 Facia tax 4,000 0 0 0 4,000 0 0 0 4,000 0 0 0 12,000 Administrative depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Total adminstrative expense 147,014 140,259 140,259 140,259 147,014 140,259 140,259 140,259 147,014 140,259 140,259 140,259 1,703,369 Selling and administrative expense 274,990 193,756 214,366 209,935 229,225 206,153 257,699 216,824 217,994 210,810 203,441 236,152 2,671,347 Earning before interest and Tax 411,247 383,512 467,765 566,809 893,718 562,660 386,902 421,188 500,443 582,914 388,816 488,324 6,054,299 Interest expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Interest income 286,247 258,512 342,765 441,809 768,718 437,660 261,902 296,188 375,443 457,914 263,816 363,324 4,554,299 Income Tax 85,874 77,553 102,830 132,543 230,615 131,298 78,571 88,857 112,633 137,374 79,145 108,997 1,366,290 Net operating income 200,373 180,958 239,936 309,267 538,102 306,362 183,331 207,332 262,810 320,540 184,671 254,327 3,188,010

153


Year 5

Year 5 January February March April May June July August September October November December Total Sale Sale on cash 454,814 322,089 632,240 390,766 457,329 410,928 630,517 686,486 539,977 383,457 485,250 643,696 6,037,550 Sale on credit 1,359,131 1,194,773 1,251,257 1,589,624 2,300,785 1,582,630 1,210,911 1,164,325 1,405,378 1,632,659 1,146,358 1,345,962 17,183,795 Total sale 1,813,945 1,516,862 1,883,497 1,980,390 2,758,115 1,993,558 1,841,429 1,850,812 1,945,355 2,016,116 1,631,608 1,989,658 23,221,345 Cost of goods sold 0 On cash 325,429 230,461 452,381 279,601 327,228 294,027 451,148 491,195 386,364 274,371 347,206 460,578 4,319,988 On credit 644,554 566,609 593,396 753,863 1,091,124 750,547 574,263 552,170 666,486 774,272 543,649 638,309 8,149,243 Total cost 969,983 797,070 1,045,777 1,033,464 1,418,353 1,044,574 1,025,410 1,043,364 1,052,851 1,048,643 890,855 1,098,887 12,469,231 Gross margin 0 On cash 129,386 91,628 179,860 111,165 130,101 116,901 179,370 195,292 153,613 109,086 138,044 183,119 1,717,562 On credit 714,577 628,164 657,861 835,761 1,209,661 832,084 636,649 612,156 738,892 858,387 602,709 707,653 9,034,552 Total Gross margin 843,962 719,792 837,721 946,926 1,339,762 948,984 816,018 807,447 892,504 967,473 740,753 890,772 10,752,114 Operating Expense 0 Fuel 33,739 28,214 35,033 36,835 51,301 37,080 34,251 34,425 36,184 37,500 30,348 37,008 431,917 Assembly suppliers 1,139 0 0 1,139 0 0 1,139 0 0 1,139 0 0 4,554 Expected bad dept 64,828 63,756 61,142 66,418 76,956 79,191 79,352 78,483 76,640 69,959 65,596 66,947 849,268 Electricity on operating 2,702 3,545 3,503 4,808 3,541 3,476 3,537 3,569 3,555 3,020 3,725 3,725 42,708 Operating depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Total operating Expense 108,272 101,378 105,542 115,063 137,661 125,611 124,142 122,341 122,242 117,481 105,533 113,543 1,398,810 Operating income 735,690 618,414 732,178 831,862 1,202,101 823,374 691,877 685,107 770,262 849,992 635,220 777,228 9,353,305 Marketing expense Selling expense 0 Discount sale 22,741 16,104 31,612 19,538 22,866 20,546 31,526 34,324 26,999 19,173 24,262 32,185 301,877 Sale commission 36,279 30,337 37,670 39,608 55,162 39,871 36,829 37,016 38,907 40,322 32,632 39,793 464,427 Total selling Expense 59,020 46,442 69,282 59,146 78,029 60,418 68,354 71,341 65,906 59,495 56,895 71,978 766,304 Advertising expense 0 0 0 0 0 0 0 0 0 0 0 0 0 Radio local 6,831 6,831 6,831 6,831 6,831 6,831 6,831 6,831 6,831 6,831 6,831 6,831 81,972 Calendar 14,801 0 0 0 0 0 0 0 0 0 0 14,801 29,601

154


Brochure 569 569 0 569 0 0 0 569 0 1,139 569 569 4,554

Signboard 45,540 0 0 0 0 0 45,648 0 0 0 0 0 91,188

Souvenir 4,554 0 0 4,554 0 0 0 0 0 4,554 0 4,554 18,216

Public relation 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 2,277 27,324

Other 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 1,139 13,662


Total marketing expense 134,730 57,257 79,528 74,516 88,275 70,664 124,249 82,156 76,152 75,434 67,710 102,148 1,032,822

Administration Expense Salary 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 912,000 Utilities expense 9,108 9,108 9,108 9,108 9,108 9,108 9,108 9,108 9,108 9,108 9,108 9,108 109,296 Insurance expense 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 6,167 74,007 Office supply 2,846 0 0 0 2,846 0 0 0 2,846 0 0 0 8,539 Rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Property tax expense 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 37,500 Facia tax 4,000 0 0 0 4,000 0 0 0 4,000 0 0 0 12,000 Administrative depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Total administrative expense 147,395 140,549 140,549 140,549 147,395 140,549 140,549 140,549 147,395 140,549 140,549 140,549 1,707,126 Selling and administrative expense 282,125 197,806 220,077 215,065 235,670 211,213 264,798 222,705 223,548 215,983 208,259 242,697 2,739,947 Earning before interest and Tax 453,565 420,607 512,101 616,798 966,430 612,161 427,079 462,402 546,714 634,009 426,961 534,531 6,613,357 Interest expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Interest income 328,565 295,607 387,101 491,798 841,430 487,161 302,079 337,402 421,714 509,009 301,961 409,531 5,113,357 Income Tax 98,570 88,682 116,130 147,539 252,429 146,148 90,624 101,220 126,514 152,703 90,588 122,859 1,534,007 Net operating income 229,996 206,925 270,971 344,258 589,001 341,013 211,455 236,181 295,200 356,306 211,372 286,672 3,579,350

155


Table of cash flow statement

Year 1

Year 1 January February March April May June July August September October November December CF year 1 Cash flow from operating activity Cash inflow Cash received on cash sale 334,422 236,830 464,883 287,328 336,272 302,153 463,616 504,769 397,042 281,953 356,801 473,306 4,439,375 Cash received on credit sale 189,879 356,795 531,603 753,683 1,075,116 1,106,341 1,108,595 1,096,450 1,070,710 977,369 916,419 935,287 10,118,248 Adjust depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Cash inflow from operating activity 530,165 599,489 1,002,350 1,046,875 1,417,252 1,414,357 1,578,075 1,607,083 1,473,616 1,265,186 1,279,084 1,414,456 14,627,986 Cash out flow Purchasing inventory 2,000,000 756,046 745,176 1,022,035 753,321 741,411 754,771 760,348 756,011 643,596 794,268 756,441 10,483,425 Cash paid for operating expense 44,998 45,425 59,068 73,770 98,374 90,649 89,951 88,443 88,230 84,843 76,394 81,644 921,790 Cash paid for income tax 545,180 397,527 942,707 Cash out flow from operating activity 2,044,998 801,471 804,244 1,095,805 851,695 1,377,241 844,722 848,792 844,241 728,440 870,662 1,235,612 12,347,922 Net cash flow form Operating activity -1,514,833 -201,982 198,105 -48,930 565,557 37,116 733,353 758,292 629,375 536,746 408,422 178,844 2,280,065 Cash flow from selling and administrative activity Cash inflow Adjust depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Adjust rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Cash inflow from S and A activity 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 553,784 Cash outflow Marketing expense 109,897 43,648 59,943 56,990 66,374 53,425 99,356 61,956 57,460 57,746 51,334 79,425 797,554 Administrative expense 153,941 139,441 139,441 148,441 141,941 139,441 145,441 139,441 141,941 142,441 139,441 139,441 1,710,791 Cash outflow from S and A activity 263,838 183,089 199,384 205,431 208,315 192,866 244,797 201,397 199,401 200,187 190,775 218,866 2,508,345 Net cash flow form S and A activity -217,689 -136,941 -153,235 -159,282 -162,166 -146,717 -198,648 -155,249 -153,253 -154,039 -144,627 -172,717 -1,954,561 Cash flow Cash received from sold equipment Cash inflow from investment activity Cash outflow Cash paid investment on operating (fixed) 351,815 351,815

156


Cash paid investment on administrative (fixed) 4,683,641 4,683,641 Cash paid for prepaid rental land (current) 300,000 300,000 Cash outflow from investment activity 5,335,456 0 0 0 0 0 0 0 0 0 0 0 5,335,456 Net cash flow form investment activity -5,335,456 0 0 0 0 0 0 0 0 0 0 0 -5,335,456 Cash flow form financing activity cash inflow Borrowing cash 10,000,000 10,000,000 Cash inflow from financing activity 10,000,000 0 0 0 0 0 0 0 0 0 0 0 10,000,000 cash outflow Repayment the principle Interest payment 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Cash outflow from financing activity 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Net cash flow from investment activity 9,875,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 8,500,000 Net cash increase or decrease 2,807,022 -463,923 -80,129 -333,212 278,390 -234,601 409,705 478,043 351,122 257,708 138,795 -118,873 3,490,047 Beginning cash 0 2,807,022 2,343,099 2,262,969 1,929,758 2,208,148 1,973,547 2,383,252 2,861,295 3,212,418 3,470,125 3,608,920 0 Ending cash 2,807,022 2,343,099 2,262,969 1,929,758 2,208,148 1,973,547 2,383,252 2,861,295 3,212,418 3,470,125 3,608,920 3,490,047 3,490,047

157


Year 2

Year 2 January February March April May June July August September October November December CF year 2 Cash flow from operating activity Cash inflow Cash received on cash sale 361,176 255,776 502,073 310,314 363,173 326,325 500,705 545,151 428,805 304,510 385,345 511,171 4,794,525 Cash received on credit sale 977,692 961,623 922,323 1,002,017 1,161,126 1,194,848 1,197,283 1,184,166 1,156,367 1,055,559 989,733 1,010,110 12,812,846 Adjust depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Cash inflow from operating activity 1,344,732 1,223,263 1,430,260 1,318,194 1,530,163 1,527,036 1,703,851 1,735,181 1,591,036 1,365,932 1,380,942 1,527,144 17,677,734 Cash out flow 0 Purchasing inventory 621,883 814,758 806,469 1,107,260 815,050 798,831 812,568 820,807 818,387 694,356 856,250 830,477 9,797,096 Cash paid for operating expense 84,908 79,591 82,476 89,948 106,948 98,290 97,428 95,857 95,671 91,976 82,757 88,612 1,094,461 Cash paid for income tax 601,615 467,833 1,069,448 Cash out flow from operating activity 706,791 894,349 888,945 1,197,208 921,997 1,498,736 909,996 916,665 914,058 786,332 939,007 1,386,922 11,961,005 Net cash flow form Operating activity 637,941 328,914 541,315 120,987 608,165 28,300 793,856 818,516 676,978 579,600 441,934 140,222 5,716,729 Cash flow from selling and administrative activity 0 Cash inflow 0 Adjust depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Adjust rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Cash inflow from S and A activity 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 553,784 Cash outflow 0 Marketing expense 115,563 46,694 64,315 60,914 71,261 57,276 104,997 66,466 61,634 61,708 54,995 96,104 861,927 Administrative expense 146,287 139,705 139,705 139,705 146,287 139,705 139,705 139,705 146,287 139,705 139,705 139,705 1,696,207 Cash outflow from S and A activity 261,850 186,399 204,020 200,619 217,548 196,981 244,702 206,171 207,922 201,413 194,699 235,809 2,558,133 Net cash flow form S and A activity -215,702 -140,250 -157,871 -154,471 -171,400 -150,832 -198,553 -160,023 -161,773 -155,264 -148,551 -189,661 -2,004,349 Cash flow 0 Cash received from sold equipment 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash inflow from investment activity 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash outflow 0 Cash paid investment on operating (fixed) 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash paid investment on administrative (fixed) 0 0 0 0 0 0 0 0 0 0 0 0 0

158


Cash paid for prepaid rental land (current) 300,000 0 0 0 0 0 0 0 0 0 0 0 300,000 Cash outflow from investment activity 300,000 0 0 0 0 0 0 0 0 0 0 0 300,000 Net cash flow form investment activity -300,000 0 0 0 0 0 0 0 0 0 0 0 -300,000 Cash flow form financing activity 0 cash inflow 0 Borrowing cash 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash inflow from financing activity 0 0 0 0 0 0 0 0 0 0 0 0 0 cash outflow 0 Repayment the principle 0 Interest payment 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Cash outflow from financing activity 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Net cash flow from investment activity -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -1,500,000 Net cash increase or decrease -2,760 63,664 258,444 -158,484 311,766 -247,532 470,303 533,494 390,205 299,336 168,384 -174,439 1,912,380 Beginning cash 3,490,047 3,487,287 3,550,951 3,809,395 3,650,911 3,962,677 3,715,145 4,185,448 4,718,942 5,109,147 5,408,483 5,576,866 3,490,047 Ending cash 3,487,287 3,550,951 3,809,395 3,650,911 3,962,677 3,715,145 4,185,448 4,718,942 5,109,147 5,408,483 5,576,866 5,402,427 5,402,427

159


Year 3

Year 3 January February March April May June July August September October November December CF year 3 Cash flow from operating activity Cash inflow Cash received on cash sale 391,274 277,091 543,913 336,174 393,438 353,519 542,430 590,580 464,539 329,886 417,457 553,768 5,194,068 Cash received on credit sale 1,056,591 1,039,837 998,023 1,084,891 1,257,886 1,294,419 1,297,056 1,282,847 1,252,731 1,143,522 1,072,210 1,094,285 13,874,300 Adjust depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Cash inflow from operating activity 1,453,729 1,322,792 1,547,799 1,426,928 1,657,188 1,653,801 1,845,350 1,879,291 1,723,134 1,479,271 1,495,531 1,653,917 19,138,731 Cash out flow 0 Purchasing inventory 681,975 896,627 883,997 1,212,520 893,641 879,259 895,052 901,837 896,865 763,328 941,979 894,360 10,741,441 Cash paid for operating expense 92,181 86,419 89,729 97,883 116,680 106,981 105,933 104,282 104,113 100,077 90,005 96,436 1,190,721 Cash paid for income tax 672,137 527,909 1,200,046 Cash out flow from operating activity 774,157 983,046 973,726 1,310,404 1,010,321 1,658,377 1,000,986 1,006,119 1,000,978 863,405 1,031,985 1,518,706 13,132,209 Net cash flow form Operating activity 679,572 339,746 574,073 116,525 646,867 -4,576 844,365 873,171 722,156 615,866 463,547 135,211 6,006,522 Cash flow from selling and administrative activity 0 Cash inflow 0 Adjust depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Adjust rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Cash inflow from S and A activity 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 553,784 Cash outflow 0 Marketing expense 121,730 50,090 69,206 65,288 76,731 61,580 111,189 71,510 66,302 66,121 59,083 90,198 909,027 Administrative expense 146,644 139,977 139,977 139,977 146,644 139,977 139,977 139,977 146,644 139,977 139,977 139,977 1,699,726 Cash outflow from S and A activity 268,374 190,067 209,183 205,264 223,375 201,557 251,166 211,487 212,946 206,098 199,060 230,175 2,608,752 Net cash flow form S and A activity -222,225 -143,918 -163,034 -159,116 -177,226 -155,408 -205,018 -165,339 -166,797 -159,950 -152,911 -184,026 -2,054,968 Cash flow 0 Cash received from sold equipment 0 0 Cash inflow from investment activity 0 Cash outflow 0 Cash paid investment on operating (fixed) 0 0 Cash paid investment on administrative (fixed) 0 0

160


Cash paid for prepaid rental land (current) 300,000 300,000

Cash outflow from investment activity 300,000 0 0 0 0 0 0 0 0 0 0 0 300,000 Net cash flow form investment activity -300,000 0 0 0 0 0 0 0 0 0 0 0 -300,000 Cash flow form financing activity 0 cash inflow 0 Borrowing cash 0 0 Cash inflow from financing activity 0 cash outflow 0 Repayment the principle 0 0 Interest payment 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Cash outflow from financing activity -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -1,500,000 Net cash flow from investment activity -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -1,500,000 Net cash increase or decrease 32,347 70,827 286,039 -167,591 344,640 -284,985 514,347 582,833 430,359 330,916 185,636 -173,815 2,151,554 Beginning cash 5,402,427 5,434,774 5,505,602 5,791,641 5,624,050 5,968,690 5,683,705 6,198,052 6,780,885 7,211,244 7,542,160 7,727,796 5,402,427

Ending cash 5,434,774 5,505,602 5,791,641 5,624,050 5,968,690 5,683,705 6,198,052 6,780,885 7,211,244 7,542,160 7,727,796 7,553,982 7,553,982

161


Year 4

Year 4 January February March April May June July August September October November December CF year 4 Cash flow from operating activity Cash inflow Cash received on cash sale 421,372 298,406 585,752 362,033 423,702 380,712 584,156 636,009 500,273 355,261 449,569 596,366 5,593,612 Cash received on credit sale 1,143,217 1,123,814 1,077,205 1,169,646 1,354,647 1,393,989 1,396,830 1,381,527 1,349,095 1,231,485 1,154,688 1,178,461 14,954,604 Adjust depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Cash inflow from operating activity 1,570,452 1,428,084 1,668,820 1,537,543 1,784,212 1,780,565 1,986,849 2,023,400 1,855,231 1,592,610 1,610,121 1,780,690 20,618,580 Cash out flow 0 Purchasing inventory 734,435 965,598 951,996 1,305,791 962,383 946,895 963,903 971,209 965,855 822,045 1,014,439 969,983 11574532.2 Cash paid for operating expense 99,970 93,625 97,275 106,032 126,578 115,777 114,534 112,807 112,668 108,294 97,335 104,444 1,289,338 Cash paid for income tax 760,713 605,576 1,366,290 Cash out flow from operating activity 834,405 1,059,223 1,049,272 1,411,823 1,088,961 1,823,385 1,078,436 1,084,016 1,078,523 930,339 1,111,774 1,680,003 14,230,160 Net cash flow form Operating activity 736,048 368,860 619,549 125,720 695,252 -42,820 908,413 939,384 776,709 662,271 498,347 100,687 6,388,420 Cash flow from selling and administrative activity 0 Cash inflow 0 Adjust depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Adjust rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Cash inflow from S and A activity 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 553,784 Cash outflow 0 Marketing expense 127,976 53,498 74,107 69,677 82,211 65,895 117,441 76,566 70,980 70,551 63,182 95,894 967,978 Administrative expense 147,014 140,259 140,259 140,259 147,014 140,259 140,259 140,259 147,014 140,259 140,259 140,259 1,703,369 Cash outflow from S and A activity 274,990 193,756 214,366 209,935 229,225 206,153 257,699 216,824 217,994 210,810 203,441 236,152 2,671,347 Net cash flow form S and A activity -228,842 -147,608 -168,217 -163,787 -183,077 -160,005 -211,551 -170,676 -171,845 -164,661 -157,292 -190,004 -2,117,563 Cash flow 0 Cash received from sold equipment 0 Cash inflow from investment activity 0 0 Cash outflow 0 Cash paid investment on operating (fixed) 0 0 Cash paid investment on administrative (fixed) 10,600 10,600

162


Cash paid for prepaid rental land (current) 300,000 300,000 Cash outflow from investment activity 300,000 0 0 0 0 0 0 0 0 0 0 0 300,000 Net cash flow form investment activity -300,000 0 0 0 0 0 0 0 0 0 0 0 -300,000 Cash flow form financing activity 0 cash inflow 0 Borrowing cash 0 0 Cash inflow from financing activity 0 cash outflow 0 Repayment the principle 0 0 Interest payment 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Cash outflow from financing activity 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Net cash flow from investment activity -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -1,500,000 Net cash increase or decrease 82,206 96,253 326,331 -163,066 387,175 -327,825 571,863 643,708 479,863 372,610 216,055 -214,317 2,470,857 Beginning cash 7,553,982 7,636,188 7,732,440 8,058,772 7,895,705 8,282,881 7,955,056 8,526,919 9,170,627 9,650,490 10,023,100 10,239,155 7,553,982 Ending cash 7,636,188 7,732,440 8,058,772 7,895,705 8,282,881 7,955,056 8,526,919 9,170,627 9,650,490 10,023,100 10,239,155 10,024,839 10,024,839

163


Year 5

Year 5 January February March April May June July August September October November December CF year 5 Cash flow from operating activity Cash inflow Cash received on cash sale 454,814 322,089 632,240 390,766 457,329 410,928 630,517 686,486 539,977 383,457 485,250 643,696 6,037,550 Cash received on credit sale 1,231,740 1,211,359 1,161,702 1,261,938 1,462,158 1,504,623 1,507,690 1,491,173 1,456,166 1,329,222 1,246,330 1,271,990 16,136,092 Adjust depreciation 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 5,864 70,363 Cash inflow from operating activity 1,692,419 1,539,312 1,799,806 1,658,568 1,925,351 1,921,414 2,144,070 2,183,522 2,002,007 1,718,542 1,737,443 1,921,550 22,244,004 Cash out flow 0 Purchasing inventory 797,070 1,045,777 1,033,464 1,418,353 1,044,574 1,025,410 1,043,364 1,052,851 1,048,643 890,855 1,098,887 1,098,887 12,598,134 Cash paid for operating expense 108,272 101,378 105,542 115,063 137,661 125,611 124,142 122,341 122,242 117,481 105,533 113,543 1,398,810 Cash paid for income tax 849,499 684,509 1,534,007 Cash out flow from operating activity 905,342 1,147,155 1,139,006 1,533,416 1,182,235 2,000,520 1,167,506 1,175,192 1,170,886 1,008,336 1,204,420 1,896,938 15,530,951 Net cash flow form Operating activity 787,076 392,157 660,800 125,151 743,116 -79,105 976,564 1,008,331 831,121 710,207 533,024 24,611 6,713,053 C&S 0 Cash inflow 0 Adjust depreciation 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 21,149 253,784 Adjust rental land 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Cash inflow from S and A activity 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 46,149 553,784 Cash outflow 0 Marketing expense 134,730 57,257 79,528 74,516 88,275 70,664 124,249 82,156 76,152 75,434 67,710 102,148 1,032,822 Administrative expense 147,395 140,549 140,549 140,549 147,395 140,549 140,549 140,549 147,395 140,549 140,549 140,549 1,707,126 Cash outflow from S and A activity 282,125 197,806 220,077 215,065 235,670 211,213 264,798 222,705 223,548 215,983 208,259 242,697 2,739,947 Net cash flow form S and A activity -235,976 -151,658 -173,929 -168,916 -189,522 -165,064 -218,649 -176,557 -177,399 -169,834 -162,111 -196,548 -2,186,163 Cash flow 0 Cash received from sold equipment 0 Cash inflow from investment activity 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash outflow 0 Cash paid investment on operating (fixed) 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash paid investment on administrative (fixed) 0 0 0 0 0 0 0 0 0 0 0 0 0

164


Cash paid for prepaid rental land (current) 300,000 0 0 0 0 0 0 0 0 0 0 0 300,000

Cash outflow from investment activity 300,000 0 0 0 0 0 0 0 0 0 0 0 300,000 Net cash flow form investment activity -300,000 0 0 0 0 0 0 0 0 0 0 0 -300,000 Cash flow form financing activity 0 cash inflow 0 Borrowing cash 0 Cash inflow from financing activity 0 0 cash outflow 0 Repayment the principle 10,000,000 10,000,000 Interest payment 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000 Cash outflow from financing activity 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 10,125,000 11,500,000 Net cash flow from investment activity -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -125,000 -10,125,000 -11,500,000 Net cash increase or decrease 126,100 115,499 361,871 -168,765 428,595 -369,170 632,915 706,774 528,722 415,372 245,913 -10,296,937 -7,273,110 Beginning cash 10,024,839 10,150,939 10,266,438 10,628,309 10,459,545 10,888,139 10,518,970 11,151,885 11,858,659 12,387,381 12,802,753 13,048,666 10,024,839 Ending cash 10,150,939 10,266,438 10,628,309 10,459,545 10,888,139 10,518,970 11,151,885 11,858,659 12,387,381 12,802,753 13,048,666 2,751,729 2,751,729

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Table of Balance sheet statement

Year 1

Balance sheet 1 January February March April May June July August September October November December Asset

Current asset Cash 2,807,022 2,343,099 2,262,969 1,929,758 2,208,148 1,973,547 2,383,252 2,861,295 3,212,418 3,470,125 3,608,920 3,490,047 Inventory 1,299,856 1,481,003 1,470,133 1,746,992 1,478,278 1,466,368 1,479,727 1,485,305 1,480,968 1,368,553 1,519,225 1,481,398 Prepaid land expense 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 Account receivable 809,482 1,331,197 1,719,635 2,134,793 2,751,431 2,808,789 2,590,570 2,350,241 2,312,897 2,536,013 2,462,504 2,516,895 Total current asset 5,191,360 5,405,298 5,677,737 6,011,542 6,612,856 6,398,704 6,578,549 6,796,841 7,081,282 7,424,691 7,615,649 7,488,340 Fixed Asset Operating fixed asset 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 ( Accumulative depreciation) -5,864 -11,727 -17,591 -23,454 -29,318 -35,182 -41,045 -46,909 -52,772 -58,636 -64,499 -70,363 Administrative asset 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 ( Accumulative depreciation) -21,149 -42,297 -63,446 -84,595 -105,743 -126,892 -148,041 -169,189 -190,338 -211,487 -232,635 -253,784 Total fixed asset 5,008,444 4,981,431 4,954,419 4,927,407 4,900,395 4,873,382 4,846,370 4,819,358 4,792,346 4,765,333 4,738,321 4,711,309 Total asset 10,199,804 10,386,730 10,632,157 10,938,949 11,513,251 11,272,087 11,424,919 11,616,199 11,873,628 12,190,024 12,353,970 12,199,649

Liability and Equity Liability Income tax payable 59,941 116,019 189,647 281,685 453,975 0 45,850 103,234 180,462 275,381 324,565 0 Long term note payable 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Total laibility 10,059,941 10,116,019 10,189,647 10,281,685 10,453,975 10,000,000 10,045,850 10,103,234 10,180,462 10,275,381 10,324,565 10,000,000 Equity Retain earning 139,863 270,711 442,510 657,264 1,059,276 1,272,087 1,379,069 1,512,965 1,693,166 1,914,643 2,029,405 2,199,649 Total owner equity 139,863 270,711 442,510 657,264 1,059,276 1,272,087 1,379,069 1,512,965 1,693,166 1,914,643 2,029,405 2,199,649 Total laibility and Equity 10,199,804 10,386,730 10,632,157 10,938,949 11,513,251 11,272,087 11,424,919 11,616,199 11,873,628 12,190,024 12,353,970 12,199,649

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Year 2


Current asset Cash 3,487,287 3,550,951 3,809,395 3,650,911 3,962,677 3,715,145 4,185,448 4,718,942 5,109,147 5,408,483 5,576,866 5,402,427 Inventory 1,346,839 1,539,714 1,531,426 1,832,216 1,540,006 1,523,788 1,537,524 1,545,764 1,543,344 1,419,313 1,581,207 1,555,434 Prepaid land expense 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 Account receivable 2,618,513 2,605,680 2,677,002 2,937,334 3,603,302 3,665,249 3,429,572 3,170,017 3,129,686 3,370,651 3,291,261 3,350,004 Total current asset 7,727,639 7,946,346 8,242,823 8,620,461 9,280,985 9,054,182 9,277,544 9,534,723 9,857,176 10,248,446 10,474,334 10,307,865 Fixed Asset Operating fixed asset 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 ( Accumulative depreciation) -76,227 -82,090 -87,954 -93,817 -99,681 -105,545 -111,408 -117,272 -123,135 -128,999 -134,862 -140,726 Administrative asset 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 ( Accumulative depreciation) -274,933 -296,081 -317,230 -338,379 -359,527 -380,676 -401,825 -422,973 -444,122 -465,271 -486,419 -507,568 Total fixed asset 4,684,297 4,657,284 4,630,272 4,603,260 4,576,248 4,549,235 4,522,223 4,495,211 4,468,199 4,441,186 4,414,174 4,387,162 Total asset 12,411,936 12,603,630 12,873,096 13,223,721 13,857,233 13,603,417 13,799,768 14,029,934 14,325,375 14,689,633 14,888,509 14,695,027

Liability and Equity Liability Tax payable 63,686 121,194 202,034 307,222 497,275 0 58,905 127,955 216,587 325,865 385,527 0 Long term note payable 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Total liability 10,063,686 10,121,194 10,202,034 10,307,222 10,497,275 10,000,000 10,058,905 10,127,955 10,216,587 10,325,865 10,385,527 10,000,000 Equity Retain earning 2,348,250 2,482,436 2,671,062 2,916,499 3,359,958 3,603,417 3,740,863 3,901,979 4,108,788 4,363,768 4,502,981 4,695,027 Owner equity 0 0 0 0 0 0 0 0 0 0 0 0 Total owner equity 2,348,250 2,482,436 2,671,062 2,916,499 3,359,958 3,603,417 3,740,863 3,901,979 4,108,788 4,363,768 4,502,981 4,695,027 Total liability and Equity 12,411,936 12,603,630 12,873,096 13,223,721 13,857,233 13,603,417 13,799,768 14,029,934 14,325,375 14,689,633 14,888,509 14,695,027

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Year 3


Current asset Cash 5,434,774 5,505,602 5,791,641 5,624,050 5,968,690 5,683,705 6,198,052 6,780,885 7,211,244 7,542,160 7,727,796 7,553,982 Inventory 1,406,932 1,621,584 1,608,953 1,937,477 1,618,598 1,604,216 1,620,009 1,626,794 1,621,822 1,488,284 1,666,936 1,619,317 Prepaid land expense 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 Account receivable 3,462,665 3,450,684 3,529,110 3,811,763 4,533,229 4,600,338 4,345,021 4,063,837 4,020,144 4,281,190 4,195,184 4,258,822 Total current asset 10,579,371 10,827,869 11,154,704 11,573,289 12,295,516 12,038,259 12,288,083 12,571,516 12,928,210 13,361,634 13,614,917 13,432,121 Fixed Asset Operating fixed asset 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 ( Accumulative depreciation) -146,590 -152,453 -158,317 -164,180 -170,044 -175,908 -181,771 -187,635 -193,498 -199,362 -205,225 -211,089 Administrative asset 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 ( Accumulative depreciation) -528,717 -549,865 -571,014 -592,163 -613,311 -634,460 -655,609 -676,757 -697,906 -719,055 -740,203 -761,352 Total fixed asset 4,360,150 4,333,137 4,306,125 4,279,113 4,252,101 4,225,088 4,198,076 4,171,064 4,144,052 4,117,039 4,090,027 4,063,015 Total asset 14,939,521 15,161,007 15,460,829 15,852,402 16,547,617 16,263,347 16,486,159 16,742,579 17,072,261 17,478,673 17,704,944 17,495,136

Liability and Equity Liability Tax payable 73,348 139,794 229,741 347,213 555,777 0 66,843 143,770 242,674 364,598 432,479 0 Long term note payable 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Total liability 10,073,348 10,139,794 10,229,741 10,347,213 10,555,777 10,000,000 10,066,843 10,143,770 10,242,674 10,364,598 10,432,479 10,000,000 Equity Retain earning 4,866,173 5,021,213 5,231,089 5,505,190 5,991,840 6,263,347 6,419,315 6,598,810 6,829,587 7,114,076 7,272,465 7,495,136 Owner equity Total owner equity 4,866,173 5,021,213 5,231,089 5,505,190 5,991,840 6,263,347 6,419,315 6,598,810 6,829,587 7,114,076 7,272,465 7,495,136 Total liability and Equity 14,939,521 15,161,007 15,460,829 15,852,402 16,547,617 16,263,347 16,486,159 16,742,579 17,072,261 17,478,673 17,704,944 17,495,136

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Year 4


Current asset Cash 7,636,188 7,732,440 8,058,772 7,895,705 8,282,881 7,955,056 8,526,919 9,170,627 9,650,490 10,023,100 10,239,155 10,024,839 Inventory 1,459,392 1,690,555 1,676,953 2,030,748 1,687,339 1,671,851 1,688,859 1,696,166 1,690,811 1,547,002 1,739,396 1,694,940 Prepaid land expense 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 Account receivable 4,374,801 4,357,908 4,439,957 4,743,050 5,520,013 5,592,285 5,317,328 5,014,514 4,967,461 5,248,587 5,155,966 5,224,499 Total current asset 13,745,380 14,030,904 14,400,681 14,869,503 15,665,233 15,369,192 15,658,106 15,981,307 16,383,763 16,868,689 17,159,517 16,944,277 Fixed Asset Operating fixed asset 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 ( Accumulative depreciation) -216,953 -222,816 -228,680 -234,543 -240,407 -246,271 -252,134 -257,998 -263,861 -269,725 -275,588 -281,452 Administrative asset 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 ( Accumulative depreciation) -782,501 -803,649 -824,798 -845,947 -867,095 -888,244 -909,393 -930,541 -951,690 -972,839 -993,987 -1,015,136 Total fixed asset 4,036,003 4,008,990 3,981,978 3,954,966 3,927,954 3,900,941 3,873,929 3,846,917 3,819,905 3,792,892 3,765,880 3,738,868 Total asset 17,781,383 18,039,894 18,382,660 18,824,469 19,593,187 19,270,133 19,532,035 19,828,224 20,203,667 20,661,581 20,925,397 20,683,145

Liability and Equity Liability Tax payable 85,874 163,428 266,257 398,800 629,415 0 78,571 167,427 280,060 417,434 496,579 0 Long term note payable 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Total liability 10,085,874 10,163,428 10,266,257 10,398,800 10,629,415 10,000,000 10,078,571 10,167,427 10,280,060 10,417,434 10,496,579 10,000,000 Equity Retain earning 7,695,509 7,876,467 8,116,402 8,425,669 8,963,771 9,270,133 9,453,465 9,660,797 9,923,607 10,244,147 10,428,818 10,683,145 Owner equity Total owner equity 7,695,509 7,876,467 8,116,402 8,425,669 8,963,771 9,270,133 9,453,465 9,660,797 9,923,607 10,244,147 10,428,818 10,683,145 Total liability and Equity 17,781,383 18,039,894 18,382,660 18,824,469 19,593,187 19,270,133 19,532,035 19,828,224 20,203,667 20,661,581 20,925,397 20,683,145

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Year 5


Current asset Cash 10,150,939 10,266,438 10,628,309 10,459,545 10,888,139 10,518,970 11,151,885 11,858,659 12,387,381 12,802,753 13,048,666 2,751,729 Inventory 1,522,027 1,770,733 1,758,421 2,143,309 1,769,530 1,750,367 1,768,321 1,777,808 1,773,600 1,615,811 1,823,843 1,823,843 Prepaid land expense 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 Account receivable 5,351,889 5,335,303 5,424,858 5,752,543 6,591,170 6,669,178 6,372,399 6,045,552 5,994,765 6,298,202 6,198,230 6,272,202 Total current asset 17,299,855 17,622,474 18,036,587 18,555,397 19,423,840 19,088,514 19,417,605 19,782,019 20,230,745 20,766,766 21,095,739 10,847,774 Fixed Asset Operating fixed asset 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 351,815 ( Accumulative depreciation) -287,316 -293,179 -299,043 -304,906 -310,770 -316,634 -322,497 -328,361 -334,224 -340,088 -345,951 -351,815 Administrative asset 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 4,683,641 ( Accumulative depreciation) -1,036,285 -1,057,433 -1,078,582 -1,099,731 -1,120,879 -1,142,028 -1,163,177 -1,184,325 -1,205,474 -1,226,623 -1,247,771 -1,268,920 Total fixed asset 3,711,856 3,684,843 3,657,831 3,630,819 3,603,807 3,576,794 3,549,782 3,522,770 3,495,758 3,468,745 3,441,733 3,414,721 Total asset 21,011,710 21,307,318 21,694,419 22,186,216 23,027,646 22,665,309 22,967,387 23,304,789 23,726,503 24,235,512 24,537,472 14,262,495

Liability and Equity Liability Tax payable 98,570 187,252 303,382 450,921 703,350 0 90,624 191,844 318,358 471,061 561,649 0 Long term note payable 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 0 Other Total laibility 10,098,570 10,187,252 10,303,382 10,450,921 10,703,350 10,000,000 10,090,624 10,191,844 10,318,358 10,471,061 10,561,649 0 Equity Retain earning 10,913,141 11,120,066 11,391,037 11,735,295 12,324,296 12,665,309 12,876,764 13,112,945 13,408,145 13,764,451 13,975,823 14,262,495 Owner equity Total owner equity 10,913,141 11,120,066 11,391,037 11,735,295 12,324,296 12,665,309 12,876,764 13,112,945 13,408,145 13,764,451 13,975,823 14,262,495 Total laibility and Equity 21,011,710 21,307,318 21,694,419 22,186,216 23,027,646 22,665,309 22,967,387 23,304,789 23,726,503 24,235,512 24,537,472 14,262,495

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Chapter 6

Risk Management


This chapter explains about risk of company. In the real life, it is a lot of and

varieties risk which occur different depend on industries, generally involve grouping

and assessing risk under the following heading; Strategic, Operational, Compliance

(including health and safety), Environmental, and Financial. We will show chart of

Measuring the impact and likelihood of risk for measuring level of risk.

6.1 Business risk

The most business has problem about risk. So, many owner of business find to

the best way for reduce risk and in Erawan Furniture too. It is clear that risk

management is now a core business process and should be planned accordingly and

on a continuing basis so as to reduce and protect risk and volatility and improve

returns.

6.2 Erawan Furniture risk

Our company divided by 8 risks which identify 5 groups as follow:

6.2.1 Strategic

It arises from being in a particular industry and geographical area.

Erawan furniture has a particular industry, it is second hand product which the most

furniture store don’t have its. This Erawan furniture risk is:

Risk of purchasing stolen things, the customer might stole the furniture

from anywhere and sold to us to be the discount.

6.2.2 Operational

It arises from the various operational and administrative procedures

that the business uses to implement its strategy. Erawan furniture has a second hand

product which is strategic so, we must fix second hand product before sale again by

mechanicals of company. We have transportation to customers when they order big

product.

This Erawan furniture risk is:

Risk of accident by work

Risk of accident by logistic

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6.2.3 Compliance (including health and safety)

It derives from the necessity to ensure compliance with laws, regulations and

other less formal social expectations which, if infringed, can damage a company.

Health and safety risks are sometimes straightforward and can be considered as a

subset of compliance or operational risk, but in many industries (e.g. transport) health

and safety are key areas which require major resources and concentration so, this

Erawan furniture risk is:

Risk of health and safety of employee

Risk of robber

6.2.4 Environmental

It can be relatively routines and covered under compliance but in many

businesses (and in an increasingly large number) they are a major area requiring

separate consideration. The most risk environmental south of Thailand is season so,

so, this Erawan furniture risk is:

Risk of fire

Risk of flood-waters

6.3 Measuring the impact and likelihood of risk

The risks must then be evaluated in terms of their likelihood of occurrence and

their severity if they do occur. There are a number of ways of doing this, including

‘risk mapping’, which plots the likelihood of the risk occurring on one axis and the

severity or impact of the risk on the other.

Impact can be measured in many ways ultimately there will be a financial

effect but as this is often extremely difficult to calculate with any certainty, businesses

often use a series of levels (measuring the overall effect on the business or selected

business unit in a larger organization). Whatever method is chosen it must be clear

and easily understood by everyone in the organization.

Once each risk is plotted, the chart can be divided into categories of risk,

usually high (top right corner), medium and low (bottom left corner). The

concentration should then be on reducing the higher risk items lying in the top right

corner of the chart.

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The chart show level of likelihood and impact by likelihood have 14 level

measuring 1 to 14 or low to high possible and impact have 8 level measuring 1 to 8 or

low to high, too.

A Risk of purchasing stolen things

B Risk of robber

C Risk of health and safety of employee

D Risk of accident by work

E Risk of flood-waters

F Risk of fire

G Risk of accident by logistic

6.3.1 Explanation about the graph

A Risk of purchasing stolen things

From chart risk of purchasing stolen things range of Low Risk, show that

likelihood level 1 and impact level 1 which means that low possible and low impact.

B Risk of robber

From chart risk of robber range of Low Risk, show that likelihood level 2 and

impact level 2 which means that low possible and medium impact.

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C Risk of health and safety of employee

From chart risk of health and safety of employee range of Medium Risk, show

that likelihood level 5 and impact level 4 which means that medium possible and

medium impact.

D Risk of accident by work

From chart risk of accident by work range of Medium, show that likelihood

level 5 and impact level 4 which means that medium possible and medium impact.

E Risk of flood-waters

From chart risk of flood-waters range of low Risk, show that likelihood level

0.5 and impact level 7 which means that low possible and high impact.

F Risk of fire

From chart risk of fire rent of low Risk, show that likelihood level 2 and

impact level 7 which means that low possible and high impact.

G Risk of accident by logistic

From chart risk of accident by logistic range of Medium Risk, show that

likelihood level 9 and impact level 2 which means that low possible and high impact.

6.4 Appropriate action for risks

We uses generally the four main ways of dealing with risks are grouped as

follows:

Accept

Transfer (usually via insurance)

Reduce/manage

Eliminate

6.4.1 Risk of purchasing stolen things

Risk of purchasing stolen things will occur with customer bring old

product for discount new product. We can eliminate this risk by when customers buy

new product, we will deliver to home and appraise for discount from old product,

immediately.

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6.4.2 Risk of robbery

Risk of robber, we can reduce it by hire security for inspect around the

company in night time and set up FUJIKO cameras inside our company. However our

company doesn’t worry about robber because location of company is near police

booth.

6.4.2.1 Security

We hire security from Sri-Tommasit Co. Ltd.

Address : 22/67 Ratautid, Tarad, Muang, Surat Thani 84000

Tel : 077-285287

Security : 1 person

Gender : Male

Time work : Monday - Sunday (6 pm. - 6 am.)

Salary : 7,000 Baht

6.4.2.2 FUJIKO cameras

We use FUJIKO CCTV cameras and we use be packaging as follow:

Name of Package : FK-608.NET

Component : - FUJIKO CCTV cameras 8 pieces - Speed recording 50 Fleming - Epson's hardware can support 2 pieces - Freedom to adjust the camera to the camera Fleming - High definition recording on a MJPEG system - Display Popup system when unusual events occur - Free hard disk 500 GB - Monitor and remote control

Price : 38,000 Baht

Cameras in package :

and place set up Upstairs (used Infrared series) FK-515B 3 pieces Downstairs (used Box camera series) FK-523 4 pieces

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Office (used Dome series) FK-331D 1 pieces

Contact as : Telephone - 0-2704-9093 (11.00-20.00 am.) - 081-639-8162, 080-594-0639 (8.00 am-5.30pm.) E-mail - [email protected], [email protected]

Source : http://www.gunkamoy.com/index.php?lay=show&ac=article&Id=323250&Ntype=1

6.4.3 Risk of health and safety of employee and Risk of accident by work

Every company will protect about health and safety and accident by

work to employee for welfare of them. Erawan furniture does this by transfer to

Social security insurance for employee everyone.

6.4.3.1 Social security insurance

We make Social security insurance for employee for safety in work. Employers with employees from 1 or more people must apply for registration within

30 days.

Employees to begin work age not less than 15 years and not more than 60 years.

Subsidy payments of employers and employees must to pay every month to the Social Security

Fund. Employers and employees will pay 5% of employee salaries in every

month. Social security insurance will guarantee to Death, Disability cases,

Maternity cases, Illness, Experiencing harm, Unemployment, and Child welfare

cases.

Detail Salary of month Rate social security insurance 10 %

Expense of social security insurance

Administrative expense 64,000 64,000*5% 3,200

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Option of Social security insurance

Accident or illness can not work.

Is able to receive medical treatment in hospital to ensure the rights set

forth in the card treatment without charge if any, but is unable to receive

emergency treatment in hospital as an insurance card to ensure their right to access

treatment at any hospital that is nearest. And should inform relatives or related

hospitals by the card to guarantee the right to be informed immediately for

medical insurance, they can withdraw the charges was as clinical. Actually paid as

necessary within the first 72 hours

Disabled

1. Receive medical treatment as they actually paid less than 2,000 baht per

month.

2. Receive compensation for lack of a monthly income of 50 per cent wage

subsidy to deliver life.

3. Costs are in the process of rebuilding physical disability physical

Psychological and professional. Notice Social Security office actually paid not

exceeding 40,000 baht.

Die

1. Receive 40,000 baht

2. If people pay their insurance contributions, then from up to 3 years but less

than 10 years, or the heirs have the right to receive aid equal to the average wage

of the deceased. One-half months

3. If people pay their insurance contributions from 10 years ago or more heirs

have the right to receive aid equal to the average wage of the dead 5 months

Childbirth

1. Insurance receives maternity 12,000 baht.

2. Receive subvention vacation for 50 percent of maternity pay to deliver an

average subsidy for a period of 90 days.

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3. The insurance man with his wife is not entitled to use their insurance will be

2 times the value Maternity Package 12,000 Baht each, but no right to receive

subvention vacation to childbirth.

4. Their insurance is both husband and wife. Who can exercise their insurance

has 2 different times, which suggest that the exercise of their insurance before

wife due to be paid. Welfare to work to stop childbearing than with childbirth

costs 12,000 baht, however the right to withdraw up to childbirth combined must

not exceed 4 times.

Aid for child

Who receive their insurance benefits are received child welfare Package 350

Baht per child per month for 1 child who likes the old law that no more than 6

years old can now withdraw no more than 2 per person.

Senile

1. old-age pension

2. old-age perpetuity

Jobless

1. People from unemployment insurance to register as unemployed and filed a

request replacement benefits at the Employment Bureau of State within 30 days

from the first unemployment.

2. Be provided to new work as appropriate.

3. Will receive training as skilled workers needed to get a new job. Source: http://mx.kkpho.go.th/uc/index.php?option=com_content&task=view&id=230&Itemid=2

6.4.4 Risk of flood-waters

In South of Thailand is near sea, it may be flood-waters from storm.

Our company is located Surat Thani province which near sea. We can eliminate this

risk by establish company on elevation land if our company flooded-waters, it means

that flood-waters everywhere in Surat Thani too.

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6.4.5 Risk of fire

Generality of much furniture are woods or knockdown. So, fire

problem is the most take damage to much in store. Therefore, we will find the ways

for protect or reduce damage which happens. The best way to reduce risk of fire is

insurance about fire. We will to do insurance with Muang Thai Insurance Company as

follow:

6.4.5.1 Location insured property

The business of small shop or office will consider only Class 1 buildings (all

concrete walls) and buildings, Class 2nd floor (half a block half wall wood)

Located in the Bangkok and all of Muang Districts in the country only

6.4.5.2 Asset insurance

Edifice or building (excluding foundation and land prices) and renovation of

the building

Furniture and furnishings installed appliances and electrical equipment, and

various appliances.

Stock is if the insured need to protect buildings with capital insurance refund

Property value. That is new (New Replacement Value Cost) insured must be quote the

buildings under construction in the current value. As well as adjust the sum insured on

buildings price that changes in construction each year. If the insurance capital is lower

than actual value when the happen the damage. Insured must be average insured

damages.

6.4.5.3 Threats of protect.

1. Fire.

2. Lightning.

3. Gas explosion of cooking that used to live in the household

6.4.5.4 Buildings

It can calculate the cost of insurance. Total area is square meters multiplied by

construction value per square meter, following formula to calculate

Size of store = width (m) x Long (m) number of units x number of booths

30 x 35 x 1 x 1= 1,050 square meter.

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6.4.5.5 Cost estimate

There are types of store divide by 2 types

Class 1 buildings (all concrete walls) = 8,000 baht / square meters

Class 2 buildings (half wall wood building) = 6,000 baht / square meters

Therefore, Erawan Furniture selects class 1 because building of Erawan

furniture used concrete everything for durability and we will calculate of sum

insurance premium by

Sum insured= Size of store (m) x type of store (฿)

1, 050 x 8,000 = 8,400,000 Baht

6.4.5.6 Insurance premium

Table the insurance premiums of the fire insurance.

Small shops Offices Class 1 building Class 2 building Class 1 building Class 2 building

Sum insured Insurance premium




8,000,000 20,197.32 8,000,000 47,268.32 8,000,000 10,313.73 8,000,000 24,494.44

9,000,000 22,721.45 9,000,000 53,176.86 9,000,000 11,603.08 9,000,000 27,555.71Source: www.muangthaiinsurance.com/products_ business.htm *Full of table look at in the appendix A From the table of insurance premiums of the fire insurance, you can see that

our company is small shops and select class 1 building insurance type. From calculate

sum insured of Erawan furniture equal 8,400,000 baht so, when we compare zone

between 8,000,000 with 9,000,000 of insurance in table which can calculate as follow:

Insurance premium Sum insured of Erawan furniture x Insurance premium of table

of =

Erawan furniture Sum insured of table

= 8,400,000 x 20,197.32

8,000,000

= 21,207.186 baht pre year

So, we will pay 21,207.186 baht per year for Fire insurance

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6.4.6 Risk of accident by logistic

Erawan furniture does this by transfer to logistic insurance for driver

employees which deliver goods to customers. We will do Damage to the car to take

insurance for them.

6.4.6.1 Damage to the car to take insurance

Accident of car has increase more than past example when employee

of store drive for send product to customer may be have accident. So, Erawan

furniture has to make car insurance level 3 with Allianz CP Company for protect and

reduce risk about accident to be happening. About detail follow by:

Damage to the car to take insurance Age of car not more than 7 years

Plan 1 Plan 2 Plan 3

Damage caused by such vehicles on land 100,000 200,000 300,000

The first damage (If the insured party is negligent) 2,000

Liability to outsider

Damage to life, body, and healthy/Person 500,000

Damage to life, body, and healthy/Time 10,000,000

Damage to Asset 1,000,000

Protected by the attachment end

Accident of the driver or passenger /Person 100,000 * 7

Medical treatment of the driver or passenger / Person 100,000 * 7

insurance of the driver 300,000

Price premium insurance 6,200 7,200 8,200 Source: www.insurethai.com/insure3plus.html

From the table, we will stay in plan 2 because if we see to appropriate about

product and employee. So, we will to pay price premium insurance is 7,200 per year.

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6.4.7 Summary cost of risk management

Risk Cost per month Cost per year Risk of purchasing stolen things - - Risk of robber - Security 8,000 96,000 - FUJIKO cameras *38,000 - Risk of health and safety of employee and Risk of accident by work

3,200 38,400

Risk of flood-waters - - Risk of fire - 21,207.186 Risk of accident by logistic - 7,200

Total * Pay only first month.

6.4.8 Financial risk

For the financial risk, Erawan furniture show the risk acceptable in the from of the scenario that explain about the volume of sale cost, and expense that might change.

6.4.8.1 Expense and cost analysis

Erawan furniture needs not to concern more because the expense can be

controlled by the Erawan furniture that will adjust to be increase or decrease

Marketing expense has 2 type of cost which is fixed and variable. The variable

cost are the sale commission and cash discount that we be increased or decreased

depend on the sale for each month that Erawan furniture can control the rate of sale

commission or discount. Fixed expense such as radio local, calendar etc also control

by the Erawan furniture that Erawan furniture need not aware more about those

expense. Thus, Erawan furniture need not to concern more about the marketing

expense when it increase or decrease because Erawan furniture can control all of

them.

Operating expense, also has both fixed and variable cost. The variable cost of

the cost of the operating expense including fuel that depends on sale, and electricity

that depend on the inventory purchasing, and the bad dept

If the price of fuel increased it will affect the fuel expense in the income

statement but the fluctuation of the oil price dose not effect more with the net income

of Erawan furniture. In the real situation the fee of electricity quite not fluctuation so

the expense for the electivity in the operating expense dost not affect Erawan furniture

more.

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For the bad dept is the account receivable that cannot collected the cash from

the customer, it also be the risk for Erawan furniture

The fixed expense including the depreciation and office supply that the

depreciation is the fixed expense that cannot be change, so it is not concerned to be

the risk for the expense. But the office supply can be control by Erawan furniture

Administrative expense, the mainly part of the administrative expense are the

fixed expense that including salary, insurance expense, rental land, property tax

expense, facia tax, and administrative depreciation that can not be change in the

scenario analysis. There are only utility expense and office supply that change in the

scenario analysis.

For the scenario analysis we expected that the expense will increase by 100%

for each year

6.4.8.2 Base sale fore estimation

Sale in Year 1 100%Sale in Year 2 108%Sale in Year 3 117%Sale in Year 4 126%Sale in Year 5 136%

6.4.8.3 Base for the cost of goods sold estimation

The cost of goods sold year 1 100%year 2 100%year 3 103%year 4 103%year 5 104%

Scenario 1 Sale decrease but cost, and expense is the same that can be

acceptable by there are not negative in the net income for each month for each month

and also have the principal enough for pay to the investor.

1 Year 1 decrease by 14% to be 84% in the estimation




5 Year 5 decrease by 15% to be 121 % in the estimation

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For the scenario 1 represent the maximum of sale that can be decreasing by

dose not affect the investor and the overall of business that Erawan furniture need not

to do anything that net income in all of year still be positive that still has the liquidity

enough to operate the business and pay compensation to the investor for every month

In this scenarios represent the percentage of decreasing in sale that higher

However, Erawan furniture can be accept by did not adjust any thing. Because we

have higher in the gross margin

However, if they occur in the real situation, Erawan furniture need to find out

adjust the organization and strategy particularly in the cost to solve this problem by

try to increase the sale or reduce the cost.

Table of statement in scenario 1

Income statement Year1 Year2 Year3 Year4 Year5 Sale 14,684,086 15,879,302 17,416,009 18,952,715 19,908,137 Cost of goods sold 7,741,744 8,372,635 9,308,641 10,129,991 10,555,855 Gross margin 6,942,342 7,506,667 8,107,368 8,822,724 9,352,282 Operating Expense 803,992 952,716 1,046,514 1,143,578 1,235,829 Selling and administrative expense 2,429,461 2,473,615 2,524,233 2,586,828 2,602,786 Earning before interest and tax 3,708,889 4,080,336 4,536,621 5,092,318 5,513,667 Interest expense 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Income Tax 662,667 774,101 910,986 1,077,695 1,204,100 Net income 1,546,222 1,806,235 2,125,635 2,514,623 2,809,567

Cash flow statement Year1 Year2 Year3 Year4 Year5 Net cash flow form Operating activity 1,826,674 5,058,093 5,342,293 5,766,324 5,931,924 Net cash flow from selling and administrative -1,875,677 -1,919,831 -1,970,449 -2,033,044 -2,049,002 Cash paid for interest -1,500,000 -1,500,000 -1,500,000 -1,500,000 -1,500,000 Cash repayment from the principal 0 0 0 0 -10,000,000 Net cash flow 3,115,541 1,338,263 1,571,844 1,933,281 -7,917,079 Total net cash flow 3,115,541 4,453,804 6,025,648 7,958,928 41,850

Balance sheet Year 1 Year 2 Year 3 Year 4 Year 5 Asset

Current asset Cash 3,115,541 4,453,804 6,025,648 7,958,928 41,850 Inventory 1,554,842 1,627,468 1,691,351 1,725,927 1,823,780 Account receivable 2,164,530 2,884,024 3,698,078 4,568,991 5,521,931 Total current asset 6,834,913 8,965,296 11,415,077 14,253,847 7,387,561 Total fixed asset 4,711,309 4,387,162 4,063,015 3,738,868 3,414,721 Total asset 11,546,222 13,352,458 15,478,092 17,992,715 10,802,281

Liability and Equity Total liability 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Retain earning 1,546,222 3,352,458 5,478,092 7,992,715 10,802,281 Total liability and Equity 11,546,222 13,352,458 15,478,092 17,992,715 10,802,281

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Scenario 2 Cost of goods sold increase but sale and expense still be the same.

The risk for increasing in cost of goods sold is very low from the filed trip survey, so

we assume that the cost will increase about 7% of estimation for each year. That is

scenario quite less possibility to occur in the real situation. How ever if it occur the

investor also have the total principle repayment at the end of year 5.

6.4.8.4 Base for the cost of goods sold estimation

The cost of goods sold year 1 100%year 2 100%year 3 103%year 4 103%year 5 104%

1 Year 1 increase by 7% to be 117% in the estimation





This scenario effect to reduce net income in less a month of the Erawan

furniture, so Erawan furniture can accept if the cost reduces by 15% of estimation for

each year.

Table of statement in scenario 2

Income statement Year1 Year2 Year3 Year4 Year5 Sale 17,074,518 18,440,480 19,977,186 21,513,893 23,221,345 Cost of goods sold 9,433,596 10,392,899 11,403,218 12,280,388 13,308,506 Gross margin 7,640,922 8,047,580 8,573,969 9,233,505 9,912,839 Operating Expense 923,050 1,096,544 1,193,050 1,291,924 1,401,684 Selling and administrative expense 2,508,345 2,558,133 2,608,752 2,671,347 2,739,947 Earning before interest and tax 4,209,527 4,392,903 4,772,167 5,270,234 5,771,208 Interest expense 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Income Tax 812,858 867,871 981,650 1,131,070 1,281,362 Net income 1,896,669 2,025,032 2,290,517 2,639,164 2,989,845

Cash flow statement Year1 Year2 Year3 Year4 Year5 Net cash flow form Operating activity 1,988,687 5,242,042 5,492,589 5,835,068 6,114,872 Net cash flow from selling and administrative -1,954,561 -2,004,349 -2,054,968 -2,117,563 -2,186,163 Cash paid for interest -1,500,000 -1,500,000 -1,500,000 -1,500,000 -1,500,000 Cash repayment from the principal 0 0 0 0 -10,000,000 Net cash flow 3,198,670 1,437,693 1,637,621 1,917,506 -7,871,291 Total net cash flow 3,198,670 4,636,362 6,273,983 8,191,489 320,198

186



Current asset Cash 3,198,670 4,636,362 6,273,983 8,191,489 320,198 Inventory 1,469,795 1,548,173 1,616,397 1,696,526 1,834,106 Account receivable 2,516,895 3,350,004 4,258,822 5,224,499 6,272,202 Total current asset 7,185,360 9,534,539 12,149,203 15,112,514 8,426,507 Total fixed asset 4,711,309 4,387,162 4,063,015 3,738,868 3,414,721 Total asset 11,896,669 13,921,701 16,212,218 18,851,382 11,841,227


Scenario 3 represent that if the bed dept higher than estimation about 10 % for

every year to be like this

Income statement Year1 Year2 Year3 Year4 Year5 Sale 17,074,518 18,440,480 19,977,186 21,513,893 23,221,345 Cost of goods sold 9,002,028 9,723,060 10,677,558 11,498,909 12,469,231 Gross margin 8,072,491 8,717,420 9,299,628 10,014,984 10,752,114 Operating Expense 1,454,329 1,768,821 1,920,947 2,076,422 2,248,078 Selling and administrative expense 2,508,345 2,558,133 2,608,752 2,671,347 2,739,947 Earning before interest and tax 4,109,817 4,390,465 4,769,929 5,267,215 5,764,089 Interest expense 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Income Tax 782,945 867,140 980,979 1,130,164 1,279,227 Net income 1,826,872 2,023,326 2,288,950 2,637,050 2,984,863

Cash flow statement Year1 Year2 Year3 Year4 Year5 Net cash flow form Operating activity 1,374,748 4,570,317 4,765,138 5,050,376 5,269,298 Net cash flow from selling and administrative -1,954,561 -2,004,349 -2,054,968 -2,117,563 -2,186,163 Cash paid for interest -1,500,000 -1,500,000 -1,500,000 -1,500,000 -1,500,000 Cash repayment from the principal 0 0 0 0 -10,000,000 Net cash flow 2,584,730 765,967 910,170 1,132,813 -8,716,865 Total net cash flow 2,584,730 3,350,698 4,260,867 5,393,681 -3,323,185


Current asset Cash 2,584,730 3,350,698 4,260,867 5,393,681 -3,323,185 Inventory 1,481,398 1,555,434 1,619,317 1,694,940 1,823,843 Account receivable 3,049,435 4,556,904 6,195,948 7,948,709 9,845,681 Total current asset 7,115,563 9,463,035 12,076,132 15,037,330 8,346,339 Total fixed asset 4,711,309 4,387,162 4,063,015 3,738,868 3,414,721 Total asset 11,826,872 13,850,197 16,139,147 18,776,198 11,761,060


187


This scenario represent that the default rate higher than estimation from 5% to

10 % every year in the term of operating business is can be acceptable but for the

investor the repayment of the principal is not cover all of them. However Erawan

furniture also have the back up plan for the investor that represent in the chapter 5,

and Erawan furniture also have the Account receivable care taker to be the special

employee that look after the account receivable of the company.

Scenario 4 The important expense higher than estimation about 10 % for

each year which are fuel expense, operating expense, administrative expense, the

marketing expense and the default rate. The sale and cost still be the same.

Income statement Year1 Year2 Year3 Year4 Year5 Sale 17,074,518 18,440,480 19,977,186 21,513,893 23,221,345 Cost of goods sold 9,002,028 9,723,060 10,677,558 11,498,909 12,469,231 Gross margin 8,072,491 8,717,420 9,299,628 10,014,984 10,752,114 Operating Expense 1,003,787 1,193,843 1,299,330 1,407,427 1,527,384 Selling and administrative expense 2,598,451 2,592,516 2,645,654 2,709,466 2,779,322 Earning before interest and tax 4,470,253 4,931,060 5,354,644 5,898,091 6,445,409 Interest expense 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Income Tax 891,076 1,029,318 1,156,393 1,319,427 1,483,623 Net income 2,079,177 2,401,742 2,698,251 3,078,664 3,461,786

Cash flow statement Year1 Year2 Year3 Year4 Year5 Net cash flow form Operating activity 2,196,444 5,590,040 5,868,544 6,238,484 6,549,937 Net cash flow from selling and administrative -2,044,667 -2,038,732 -2,091,870 -2,155,682 -2,225,538 Cash paid for interest -1,500,000 -1,500,000 -1,500,000 -1,500,000 -1,500,000 Cash repayment from the principal 0 0 0 0 -10,000,000 Net cash flow 3,316,321 1,751,308 1,976,674 2,282,803 -7,475,601 Total net cash flow 3,316,321 5,067,630 7,044,304 9,327,106 1,851,506


Current asset Cash 3,316,321 5,067,630 7,044,304 9,327,106 1,851,506 Inventory 1,481,398 1,555,434 1,619,317 1,694,940 1,823,843 Account receivable 2,570,149 3,470,694 4,452,535 5,496,920 6,629,550 Total current asset 7,367,868 10,093,757 13,116,155 16,518,966 10,304,899 Total fixed asset 4,711,309 4,387,162 4,063,015 3,738,868 3,414,721 Total asset 12,079,177 14,480,919 17,179,170 20,257,834 13,719,620


188


This scenario of the risk of financing also can be acceptable from the Erawan

furniture. Because we can repay all of principal to the investor at the end of year 5,

and it not affect the overall of the project.

6.5 Conclusion

The overall level of the risk for Erawan furniture in the term of both business

and financial risk. The level of risk in the term of operating business is quite low but

Erawan furniture also have the risk management for those risk, and in the financial

risk Erawan furniture also prepare for this risk.

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Chapter 7

Summary


The Erawan furniture project is the furniture store project that operates in the

Surat thani. Our project business is furniture store. Furniture store business has many

types for sale and response to customer need and want such as table, cupboard, bed,

chair, etc. South of Thailand, furniture store is possible business that can make high

profit and easy to growth in Surat Thani.

In the market feasibility study we found that there many information that

support the market to be feasible for example the growth rate of gross provincial

profit, personal and household good, and the growth rate of population in the Surat

Thani. Erawan furniture has the core competency about the low cost of furniture,

because we will selective more about the suppler who will give us the low price as

much as possible especially, from Lamphoon province. Erawan furniture also

provides the variety way of purchasing for the customer. There are two mainly type of

product of Erawan furniture which are special product, general product, and second

hand product. We set the main target on the normal market and the used market.

For the sale forecast from feasibility of the potential market, the target market

of Erawan furniture, as well as strategy and core competency of Erawan furniture, we

confident that Erawan furniture can generate the sale to 0.85% of the potential market

or about 17,074,518 baht that at the first year and increase by 8% every year.

Erawan furniture is register as the juristic person according to the Thai law. It

rent the land the need to pay in advance for 1 year. Erawan furniture need to build it

owns building that there are 2 mainly zoned which are Core building and Option

building. The core building is the main building for selling and administrative and the

option building for the assembly and warehouse zone for assembly fixed and keeps

the package furniture. The total investment cost for the Erawan furniture is 5,035,456

baht.

We find out the source of funding from the investor that we will offer the

interest rate about 15% per year and will pay all of the interest rate at the end of year 5

that we guarantee the all of principal of the investor by we have the backup plan for

the investor In the financial analysis that represent in 3 financial statement, Erawan

furniture have strong in the financial status that also represent in the ratio analysis

For the risk the mainly of risk for Erawan furniture in both business risk and

financial risk is quite be and can be acceptable. However, we also prepare about the

handle of risk by using the risk management.

191


Reference

Allianz CP Company, Damage to the car to take insurance (Online):

www.insurethai.com/insure3plus.html

CSI specs, Evaluation of Thailand Furniture,(Online):

(http://web.ku.edu/~itech/program/start_prog.html

* Other source: under table, graph, or detail

192


Appendix


Member group

1. Mr. Kla Kreankrai ID 4931203009

Tel: 0869111746 E-mail: [email protected]

2. Mr.Kanit Winyousawalak ID 4931203017


3. Mr.Peerapol Choomeeboon ID 4931203075


4. Mr.Akaracheewin Bualuang ID 4931203129


5. MissSupaporn Boonruang ID 4931203168


194


The statement of grade C furniture store

195


The catalogue for the goods of the suppler

196


The invoice and bill of furniture

197


The from of questionnaire

198

Documents

Project feasibilty Study and Evaluation . Aj. chaiyawat Thongintr. Mae Fah Luang University (MFU) 2010