MARKETING STRATEGY FOR FRACE BOOKS
Target Markets
The company’s target market will be readers of both the non-academic and the academic literature who are currently internet users. This is because those targeted are students who source for materials online and the non-academic readers in search of magazines and information material. Frace books will strive to provide accessibility of titles to their online readers since the demand of such materials is high on sites of colleges, book publishers’ websites, and on online academic journals’ websites.
The titles of books to be offered reflect the make-up of the recent trends and developments and individuals’ interests. In addition to the academic journals, books, and editorials to be loaned and sold, there will be the availability of other non-academic but relevant and engaging content for the readers. The publications and materials available that is to be stocked in the online bookstore will be void of degrading content towards any particular group.
Description of Competitors
Currently the competitors who Frace Books will face mainly will be the online titans Amazon and Barnes & Noble. Other providers of online academic material would be the libraries of the respective colleges and learning institutions and further book stores that have become cross-over marketers since having initially been physically structured. They have the advantage of capital formation and a subscriber base of millions unlike the partnership proposed for Frace Books. In addition, the competitors in this particular industry have the advantage of numerous stocked titles, clear and distinct distribution channels that are efficient hence amass high returns.
Analysis of Competitive Position
Frace Books is motivated to be in operation since the products to be availed by the company for loaning and purchase by its customers are of great quality, conveniently delivered, and customers receive the highest possible service by the company’s staff. The company employs unique features that are quick and efficient; they utilize modern technology resources effectively so as to offer customers most relevant and updated content according to their specifications. The online positioning is an added advantage since geographical limitations are eliminated and there is increased ability of capturing massive book sales in various regions.
Product strategy
The availing of other resource material such as music albums and non-academic related material will provide the company a competitive edge especially to the traditional bookstores and those who deal in single line of business. Also, the company will provide the materials at a cost effective price for the customers since there is reduced expenses by leveraging on the internet. The company can therefore become a leading store by ensuring the sale of numerous titles that are diverse in nature.
Price strategy
The price strategy will entail the capping of prices for the resource materials as it is listed on the cover of the books. This is however limited in case of stock clearance from the shelves of slow and non-moving information material. In addition, it is dependent on the distributor for the discounts to be received by the store which is 25% to 35% off the cover prices.
Promotional Strategy
Frace Books has the plan to publicize the company’s entry into the market with particular spots on TV stations, radio stations as well as use other promotional techniques such as advertisements on other newspapers and editorials. The use of search engine optimization where traffic to the company’s website is expected to be amplified by the use of certain words that are key and filtered through search engines as Bing, Yahoo, and Google will enable the company increase its visibility to its targeted customers. Other promotional advertisements will be located in websites of colleges, learning institutions, online academic institutions, and books and information publishers’. Once the store is operational, self-advertising to those customers who visit the site would be important as ensuring they become repeat customers thus improving brand image.
Distribution Strategy
The sloe distribution mechanism to be implemented by the company is through the online delivery of material in soft PDF files and paper backs of book titles. The other distribution technique of the company is through shipping for the hard cover material ordered by customers. Each of these distribution mechanisms is offered to the company at cheap and efficient prices for the consumers and at their convenience. Distributions partnerships with other companies will also save the company extra finances and also increase its efficiency in distribution.
FINANCIAL PLAN
Projected Net Income
The company’s revenue projections for the start of the business are dependent on the revenue projections of the previous company. This would therefore mean that a growth of 10 – 30% annually is expected on the basis of previous performance. This average growth will be attained and improved through the application of aggressive marketing techniques and the expected increase in customers buying magazines, music, and educational material. The majority of revenue will be derived from the book sales and loans from the colossal paperbacks. The bad debts on the business are estimated to be at least 1% of the sales.
The expected direct cost of sales will be approximately 60% of sales thereby achieving a gross margin of 40%. The massive direct sales cost of the magazines at 11% of the gross sales and purchase cost of books at 49%. The company has to set minimum base lines on their salaries on the first year so as to take full advantage on the lower taxes and achieve a sustained positive cash flow. During the subsequent years, the wages would tend to be increased slightly and is expected to increase at an average of 16% on gross sales. The property and utility expenses will average 10% of gross sales while the operating expenses being majorly incorporation fees during the first year will amount to 1% of gross sales. The company’s net income is projected to increase at to $28,881 in 2016 from $2,670 in 2014. These increases in income to be realized will be derived from the increased market share and massive revenue streams from the diverse investment portfolio of the Frace Books.
Since the company requires funding initially, the loan sought which is a term loan is payable over 2 year period at a rate of 8% annually while the interest on operating loans is 12% per annum. The depreciation on the company’s assets will be set at an annual rate of 25% with the computation of the provincial and federal income taxes at 22.8% of the net income. The company will incur costs in form of lease rates increasing by $1,200 in the 3rd year of operation.
Monthly Cash Flows
The initial month of operation will be impacted with massive start-up costs and therefore the revenues attained during the second month will fall below sufficient levels that are enough to sustain a positive cash flow for the business. This will compel the business to source for additional financing through an operating loan that amounts to $1,000 that will be paid back in full by the end of the company’s 6th month of operation.
Projected Annual Cash Flow
The company will experience an increase in sales wage costs and increase in inventory within the second year of operation hence additional operational loans are required for the company to maintain positive cash flows every month. It is during the first month of third year of operation that the company will pay back the operating loans, term loans, and interest accrued. The company’s cash balance will be on a substantial increase as there are no more term or operating loans that are due to be paid after the first month of operation in the 3rd year.
Pro-forma Balance Sheet
The company’s current assets including; inventory and cash both at hand and at bank will be increasing as the net sales increases equally. Since equipment and buildings are leased, there are no fixed assets possessed by the company hence the only valuable for the business is the computer and liabilities are paid when due.
Business Ratios
The company’s ratios as compared to those compiled by the respective audit companies show consistency in industry averages while the expected profit margins are slightly higher than the industry average. This is due to the minimal costs incurred in less intense marketing, wages, and property costs as compared to its competitors in the industry.
The company’s return on assets is equally higher than that of the industry because of lower asset value from the leases rather than acquiring property and minimal long term debts. In addition, the stock turnovers are also higher than those industry averages experienced by competitor companies and as a single payment is made in the first month of the 3rd year then the company is to experience a disproportionate massive interest coverage ratio during that particular year whilst all other ratios show consistency with the respective industry averages.
References
Chandler, S. (2010). How to start and run a used book store: A book store owner's essential toolkit with real-world insights, strategies, forms, and procedures. Gold River, CA: Authority Pub.
Kingaard, J., & Entrepreneur Press. (2007). Start your own successful retail business: Your step-by-step guide to success. Irvine, Calif.: Entrepreneur Press.
