BUSINESS PLAN DEVELOPMENT QUESTION AND ANSWERS

QUESTION ONE

Wanachi bicycles limited specialize in designing and building customized bicycles to meet the specific needs of mountain bike racing professionals.

The company has earned a reputation of designing the best mountain bikes in the world because of its founder and master designer, Hassan wa baiskeli, a great entrepreneur.

Since the company started in the year 2002, 70% of all the greatest mountain bike races the world have been won by cyclists using bicycles designed by wananchi bicycles limited. Wananchi Bicycle limited intensified its marketing activities from the year 2007. The marketing budget has since grown four folds.



To generate business idea the company has cultivated a culture of involving all the employees through focus groups discussions. As more people gain interest in competitive cycling, the demand for custom built bicycles is expected to increase significantly going by the performance of Wananchi Bicycles limited. During the year 2012 London Olympics games, mountain bike racing was one of the competitive sports. The sales for the custom built bicycles are expected to increase exponentially next year.

To meet the expected demand for custom build racing bicycles that can handle mountain riding as well as road racing, wananchi Bicycles limited is seeking for additional financing to enable the company add new work stations and hire additional designers. If this investment is made, marketing projections and written commitments from several mountain bike racing teams will result in increase in sales by 50% next year. This increase translates into sales revenue of shs.200, 000, 000. To achieve the target sales, the company plans to undertake extensive marketing activities

Required:

Using the above information and introducing any other relevant information, formulate a detailed marketing plan component for wananchi bicycles limited business plan.

 

Target Markets

There are three main target markets for Wananchi Bicycle Limited

  1. Mountain riders
  2. Road riders

Wananchi Bicycle Limited specialises in designing and building Customized bicycles to meet the specific needs of mountain bikes racing professional. It is estimated that 70% of all greatest mountain bike races in the world have been won by cyclists using bicycles designed by Wananchi Bicycle Limited. It is estimated that the value of the local market and economic output will increase as a result of the sale of custom built bicycles that can handle mountain riding as well as road racing. This increase translates into sales revenue Sh. 200,000,000

These impressive figures are what the focus group is forecasting as the beginning of a long term trend.

The Competition

The company’s main competition, corned from bicycle manufacturing company located in a strip mall twenty kilometers from Wananchi Bicycle Limited It is a small, family-run business that has recently been suffering from negative Word-of-mouth. While they do have skilled manpower equipment, most of their business comes from clients that engage road riding. They rarely offer after self-services and their employees complain of mistreatment from the management. Our location combined with the positive relationships we have built within the community will provide us with an opportunity to increase our client base aggressively. We will also be competing indirectly with the retail sale of bicycles. With our more expensive and sophisticated equipment, we will be able to provide substantial economies of scale that will cater for the needs of our customers Services.

The quality of our service is paramount in ensuring that customers return. We will be providing exceptional, personalized service, which will be the crucial factor in building and protecting the company’s brand within the community. We solve our clients’ problems by offering them cost effective access to needed the custom built bicycles for mountain and road riders. We have been setup to receive orders from clients via e-mail. All of the sales activities will be monitored by computer to track costs and operating efficiencies.This information will also be linked to a simple database that will track purchase activity for customers and will allow me to provide more personalized service.

Sales/Distribution Plan

Wananchi Bicycle Limited will get a jump-start building its client base primarily because of its location and the fact that it is the only service provider of its kind in the area.  This will make it very easy for new clients to try Wananchi Bicycle Limited for the first time. It will then take our total focus on customer service to ensure that those clients return.

Credit Terms & Guarantees



Once we have verified their credit history with a credit agency -check, our business clients will be offered 30 day account-terms. A 3 percent penalty will be applied to all overdue accounts. Frequent and high volume customers will be eligible for discounts and specials. To minimize wastage, clients will be asked to sign-off on a proof before duplication begins.

Advertising and Promotions Plan

Wananchi Bicycle Limited will be promoted as the retail center for mountain and road riders.

Here are some of the ways we will promote our goods:

  • Local newspaper advertising (Shi00,000)
  • Community bulletin boards (free)
  • Opening specials promoted through hand-bills and flyers (Sh.400)
  • Direct sales
  • Direct mail (Sh.1000)
  • Store front signage |included, in leasehold .improvements)

Total cost for advertising arid promotion: Sh. 101,400 in the first year

Public Relations

Press releases will be issued; to the local paper highlighting the story of “custom built for mountain and road riders”. We will continue to maintain my community profile and contribute articles to the newsletters of the community service organizations of which where we are members.

Collateral Marketing Material

  • Three-fold, glossy brochure outlining our products and the after sale services that the •
  • Company offers
  • Business cards
  • Price list

The company’s materials must be visually sharp to give clients confidence that their materials can look professional if they do business with Wananchi Bicycle Limited.

 

QUESTION TWO

Summarise the application of Abraham Maslow’s need theory to entrepreneurship development

Maslow developed the hierarchy of needs theory of motivation based on the idea that human needs can be arranged in order of importance from the most basic. Once a need is fairly well satisfied it no longer motivates behaviour and man is then motivated by the next higher level of needs. Maslow divided human needs into five levels

  1. Physiological Needs

These are the most basic Human needs for sustaining life e.g., food, air, shelter and clothing. These needs have certain characteristics:

  • They are relatively independent of each other
  • They can be identified with-specific location of the body
  • To remain satisfied they must be met repeatedly, within a short time
  • Unless these needs are satisfied to the degree necessary to sustain life other needs will not motivate people.

 

Application

Entrepreneurs should ensure that their employees are able to meet their, basic needs by providing them with better wages and salaries for employees are motivated

  1. ii) Safety or Security Needs

These needs are expressed as desire for protection against danger, threat or deprivation. The desire may be economic, physical or for social safety. Employees may for example desire economic security, orderly working relationships etc.

Application

Entrepreneurs should make provision for the future e.g. pension or gratuity

iii)       Social Needs

These include need for belonging, love, acceptance, friendship, association, and need to give and receive love. Man being a social being will aspire for a place in his own group and will strive to achieve it

Some managers who fear informal organizations may attempt to direct and control employee relationships in ways that frustrate their natural grouping and employees may react by being antagonistic, hostile and uncooperative.’

Application



Entrepreneurs: should provide a warm and friendly working relationships to motivate their employees

  1. iv) Esteem needs (Ego)

According to Maslow these needs do not become motivators until the lower level needs have been reasonable Satisfied. These needs are rarely completely satisfied. Once these needs become important to an individual he will continually seek satisfaction of them. The typical industrial organization offers only limited opportunity for the satisfaction of these needs at the lower levels of employment. Esteem needs consist of both self-esteem and esteem by others. Self-esteem needs- include achievement, self-confidence, self-respect, competence, Independence and freedom. Satisfaction of these needs .leads to feelings of worth, power, prestige, status, capability, strength and feelings of being useful and necessary in the world Frustrating these needs may lead to feelings of inferiority, weakness and helplessness,

Application

The entrepreneur should treat his employees with esteem and status they deserve based o their position and ranks

  1. v) Self Actualization Needs:

These needs according to Maslow emerge after all other needs have been satisfied, Self-actualization needs include the: realization of one’s potentialities, self fulfillment, self-development and creativeness.

The form these-needs take varies from person to person just as human personalities vary. Self-actualization can be satisfied through any of these ways,, athletics, politics, academics, family, religion, hobbies or business.

A creative state is involved since creativity is realizing one’s potential to the fullest degree whatever it may be. It may be. It is a feeling of accomplishment and attainment and being satisfied with oneself.

Application

Entrepreneurs should encourage career development and growth by providing their employees with training and development opportunities to realize their full potential.

 

 

Discuss the content of an operational plan for a manufacturing entity

An operational plan is a document that lays out the basic structures and practices of a business.

It may exist as an independent document or as part of a large business plan. For a manufacturing business, an operational plan is absolutely vital because operations are intrinsically complex and detail-intensive. To successfully outline the other a manufacturing business, an operational plan must address several key items.

 



Facilities and equipment

An operational plan for a manufacturing company should detail the metrics and operational status of all company facilities and equipment. It should take into account geographical location, floor space, operational purposes and floor plans of the facilities. It should also describe the various types of manufacturing equipment that the facilities employ, giving information regarding their purpose and their state of repair.

Supply chain

A supply chain is the total organization that a company utilizes to acquire items from suppliers. Manufacturing companies tend to employ very complex supply chains because they often need a wide array of materials and components from, various suppliers. Due to intrinsic complexity of such, arrangements, a manufacturing company’s operational plan should include information on the supply chain and how the company plans on managing it.

Labour Structure

The labour structure section of a manufacturing company’s operational plan should take into account the various employees that work for the company and what they do. It should also lay out in the organizational structure of the company, especially when it comes to hierarchy, showing which managers are in charge of which aspects of the business. This section should stipulate who is the responsible party in every aspect of production.

Production Process

While the labour structure section details the structure of the workforce from the prospective of human  capital, the production process section details the specifics of manufacturing from the prospective of components and materials moving down, the production line. it should lay out the steps of production and give numerical details, such as production capacity.

 

Storage and Distribution

To allow for quick responsiveness to orders, a manufacturing company must create a certain amount of a product and store it as inventory. This inventory must have a detailed and logical system of storage to allow for ease of access. The operational plan should explain this system. It should also explain the methods that the company will use to distribute its products, after production, whether it plans to do so by purchasing its own vehicles or by contracting with transportation firms.

 

 



QUESTION THREE

Briefly describe the following effective distribution strategies

Intensive distribution system

  • Intensive distribution refers to distributing from as many outlets as possible to provide location convenience e.g. Newspapers, Photo processing shops.

Selective distribution system

  • Selective distribution which refers to appointing several but not all retailers
  • Exclusive distribution system
  • Exclusive Distribution which refers to limiting the distribution to only one intermediary in the territory

Outline four strategies of setting the price of a product

Skimming pricing

  • Charging a high price initially and reducing the price over time
  • Commonly used when introducing new & innovative products in the ASPAC region

 

  1. Penetration pricing
  • Charging a low price when entering the market to capture market share
  • Used when competitors are closing in with similar or better products

 

  1. Intermediate pricing
  • Pricing somewhere in between the skimming strategy and the penetration strategy

 

  1. Leasing strategy which is more common for industrial goods e.g.
  • Singapore Airlines sold many of their aircraft and lease them back for their operations. There is a growing trend toward leasing consumer goods as well

E.g. leasing of office equipment

 

Explain the primary sources of marketing intelligence

  • Business cards
  • Classified ads in the local newspaper Direct marketing
  • Telemarketing (this format can be expensive, also)
  • Yellow Pages advertising
  • Sampling – mailing or distributing free samples of your product to the public.
  • Advertising in community-based magazines or newspapers.

QUESTION FOUR

 explain the importance of a business plan to an entrepreneur ii) Formulate a sample business plan for a new venture

  • Better understanding of the business

A business plan helps the entrepreneur appreciate the business needs of his venture beforehand. Through a well prepared business plan, the entrepreneur will be able to see clearly the problems he had not thought of earlier, so he becomes well prepared psychologically to deal with them

 

  • Financing from financial institutions

An entrepreneur will need to secure funds for his business. Most lenders will require that he comes up with a business plan before they consider him for financing.

  • A tool for management

The entrepreneur refers to the business plan to the business plan to check whether the growth of the business is in line with the plan he had envisioned earlier. If not, he will have sufficient basis to manage the growth of the business s to direct it towards the right direction

  • Communication tool

A business plan is a strong communication tool for the business. It defines the purpose, competition, management and personnel. It clearly identifies the vision and mission of the business to all the stake holders.

  • Highlights risks involved

A credible plan will incorporate the risks the business is likely to encounter. They could be financial, operational or control risks as well as the measures put in place to manage the risks.

QUESTION FIVE

Explain the importance of the statement of cash flows in the business plan of an entrepreneur

  • It helps depict changes in the cash position of the business
  • Necessary to assess the ability of a business entity to generate cash so that it can be used as and when it is needed
  • Moreover, it is required to assess the liquidity and solvency position of a business
  • it explains the changes in cash and gives the information related to the business operating, investing and financing activities
  • The basic objective of cash flow statement is to provide the information to the management about the cash receipts and the cash payments of an organization
  • it is used in efficient cash management
  • ensure if adequate cash is available to meet the liabilities
  • Cash flow statement is useful to plan financial operations in an efficient manner.

QUESTION SIX



A project report is prepared by an expert after study and analysis of the different aspects of the project

With reference to the above statement, summarize the importance of a project report to an entrepreneur.

  • To summarise investigations into causes and effects of problems or problems or trends and to recommend solutions e.g. the reason for a fall in sales
  • To provide statistical or financial summaries e.g., monthly sales reports.
  • To record decisions made at a meeting.
  • To supply information for legal purposes.
  • To monitor progress e.g. in implementing a new scheme.
  • To look into the feasibility of introducing new procedures, making new products, changing machines.

QUESTION SEVEN

Identify the symptoms of each of the challenges listed below in a business organization and suggest ways of resolving each of the challenges:

Cash flow challenge

  • Difficulty in meeting financial commitments
  • Resorting to cash purchases rather than on credit
  • Negative bank statements or huge overdrafts
  • Delay in paying creditors or other long term credit arrangements
  • Cutting down on the scale of operations or lowering, the level of financial commitments

 

Outgrowing business facilities challenge

  • It helps depict changes in the cash position of the business
  • Necessary to assess the ability of a business entity to generate cash so that it can be used as and when it is needed
  • Moreover, it is required to assess the liquidity and solvency position of a business
  • it explains the changes in cash and gives the information related to the business operating, investing and financing activities
  • The basic objective of cash flow statement is to provide the information to the management about the cash receipts and the cash payments of an organization
  • it is used in efficient cash management
  • ensure if adequate cash is available to meet the liabilities
  • Cash flow statement is useful to plan financial operations in an efficient manner.

Human resource challenge

  • High labour turnover
  • Inability to attract competitive employees
  • High levels of dissatisfaction among the employees
  • Frequent industrial actions such as strikes, go slows and mutiny

Marketing challenge

  • High labour turnover
  • Inability to attract competitive employees
  • High levels of dissatisfaction among the employees
  • Frequent industrial actions such as strikes, go slows and mutiny

QUESTION EIGHT

  • Briefly explain six benefits that accrue to an entrepreneur from preparing a business plan.

A business plan can help the entrepreneur;

 

  • Better understanding of the business
  • Obtain financing from financial institutions
  • Use it as a tool for management
  • Use it as a tool for planning and guidance.

Highlight risks involved

  • An entrepreneur should ensure that his business offers a conducive working environment for his employees. With reference to the above statement, outline eight health and safety measures that an entrepreneur should put in place to enhance the work environment.

 

  • Provision of safety clothing such as gloves and safety vests in cases where the employees are engaged in manual work
  • Use of safety signs to advise the employees appropiately such as slippery floor, exit only.
  • Investing in a medical insurance scheme for all the employees to reduce their burden of medical costs.
  • Safety training of all employees to avoid fatal accidents and injuries of employees at the work place.
  • Health checkups- The entrepreneur should take a proactive stance on the prevention of lifestyle related disease and work-related illness. He should aim to effectively offer general and specialized health checkups as opportunities for employees to create healthier lifestyle choices, think about the relationship between their health and the workplace, and improve their work environment and way of working.
  • Mental healthcare- The entrepreneur should further enhance mental health care by providing internal training for production-line workers through training for production line supervisors, individual services from his own industrial physician and counsellors, a mental health counselling desk staffed by psychiatrists and clinical psychologists, and counselling.
  • No smoking policy-To protect the health of all of our workers, smokers and non-smokers alike, the employer should continually advise employees to stop smoking at their health checkups, reduce the number of designated smoking areas, promote no-smoking days, and help employees quit the habit.
  • Make sure that ventilation, temperature, lighting, and toilet, washing and rest facilities all meet health, safety and welfare requirements
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