Introduction
Umbrellas play a very important role in making lives easier, especially during wet weather. The design that is presently used for umbrellas has been in existence for many years and remains the same, with very little modifications over a very long period of time. Our company will tweak the current design of the umbrella to withstand strong winds. This will be done by using steel instead of aluminium in the structure of the umbrella, using stronger water proof fabric on the umbrella. The new design umbrella will also be made in various sizes, from very small which will be appropriate for individuals of small size and very huge will be sufficient for use in beaches and lawn gardens. The company will also expand to new markets, with more focus on the Caribbean Islands and Hawaii which are great tourist destinations and there is a high demand for beach umbrellas. Europe will also form a considerable market since it experience a lot of wet weather. The high quality product, a highly experienced marketing department and the potential high demand international market will ensure that the company registers success in this endeavour. However, the company will have to deal with high riding production wage costs and increased competition in the international market will pose challenges that will need to be overcome before the move is considered a success.
Marketing Plan
The specific market that will be covered by this product will be in the United Kingdom, the European Union. The company currently enjoys a market share of about 20% in the United Kingdom. With the implementation of the marketing plan, it is expected that the market share in the United Kingdom will grow to 40%. The company will also acquire a 10% market share in the European Union if the company implements the marketing plan successfully. This will be achieved by increasing the sales of Umbrellas from 4 million pieces to 5 million pieces over the next two financial years.
This change in the sales will be achieved through two major strategies. Advertising through several channels will be used to create awareness among consumers about the existence of higher quality umbrellas from our company. This will be done by placing advertisements in the print media, television and on the web. Professional advertising agencies will be used to create the most appealing advertisements to ensure that we get the attention of potential customers.
The company will also seek to remove the middlemen involved in the supply chain for the umbrellas. Sales will be made directly to retailers so as to ensure that the prices of the umbrellas is not adversely affected by having to go through a long supply chain, which more often than not results in the increase in price as all players need to increase their profit margins. This mark up is finally transferred to the consumers who have to do with high prices.
The company will also seek to develop agreements with large scale retailers to ensure that the department stores retailing the umbrellas are located near the exits of malls. This location will be advantages to the marketing strategy of the company since it will provide a strategic location by which a higher number of consumers can be reached. The argument for this placement is that since many individuals purchase umbrellas as a reaction to wet weather, location near the exits of such malls would provide the best location where consumers can easily access the product when they need it.
In the new European market that the company wants to venture into, franchising will be used. The company will use already established retail stores to sell the company’s brand of umbrellas. Agreements with these partners will be structured in a manner to ensure that this franchising does not adversely affect the prices of the products, and also ensure optimal placement in the said retail stores.
Development Plan
The company enjoys the benefit of having developed a superior product with the user of stronger materials in the manufacture of the umbrellas. These new umbrellas will be more appealing to customers who do not have to suffer the structural weaknesses shown by the current brands in the market. A good sales team is also another strength that the company enjoys, and this will play a key role in ensuring that the sales target for the new product are met. However, strengthening the current sales team may become necessary. This will involve hiring new members into the sales team who have the necessary experience in the markets which the company wants to venture into. Though this may increase the costs in wages and salaries, the long term benefits will be higher. The company may also be forced to open new offices in the new markets that it ventures into. This will be assist in meeting the needs of customers in those new markets while acting as important liaison point with the head office regarding the response of these markets to the new products.
The inexperience that the company has in marketing in Europe is a weakness that will have to be dealt with. The company plans to employ the use of franchising in the continent to deal with this weakness. The current marketing strategy that the company uses in the United Kingdom will be replicated in the new markets since very little differences exist in terms of the targeted demographic. To deal with this challenge, the company will make use of professional marketing agencies in its move to the new markets to conduct market research and advice on the best strategies to use as new entrants into these new markets. This will reduce the risk that the company will assume and will play a role in ensuring that the company does not invest in new markets in which it is likely to make a loss both in the short run and the long run.
The market for umbrellas in the United Kingdom and Europe is unsaturated. This presents an opportunity which the company can utilise to meet the demand of the underserved segment of the market. The marketing strategy of the company will involve marketing in those areas which have been underserved by the current marketers of the product. This may involve setting up selling points in areas which have previously not been served by our brand. This strategy will involve conducting market research for potential markets to which the company can expand to in the future. Asia, Africa, the United States form potentially lucrative markets which the company can take advantage of in the future.
The competition in the potential market represents a threat to the plans of the company. There is also the threat of failure due to dealing with different business environments in the different countries of the European Union. The different tax jurisdictions and laws may pose a challenge to the smooth operations of the marketing strategy of the company, and it may take some time before the company establishes a footprint in these new markets.
The development of the prototype will involve employing structural engineers to ensure the strength of the product is assured. This will involve the purchasing of steel wires and rods that will be used in the production. Waterproof clothing material will also be used. This will involve making agreements with suppliers of these raw materials for the best price. Competitive bidding will be used to obtain the best prices in the market. The initial costs of setting up production, making and testing the prototype and setting up initial supply arrangements and cover indirect overhead cost is expected to cost a total of £ 50000.
It is estimated that the cost of manufacturing one umbrella will cost £ 1.75. At an estimated selling price of £ 2.00 per umbrella, it is estimated that each unit produced will make a profit of £ 0.25 on sale. This means 200,000 units will have to be sold before break even can be achieved.
Production in the first quarter is estimated to be at 150,000 units. This will involve having a production work force of 50. Production is expected to be an average of 1500 units per day. This rate of production is expected to be constant through the first year. This means that in the first year, production is expected at 600,000 units.
Since breakeven point will be achieved by the sale of 200,000 units, the period needed for breaking even will be:
Breakeven point in units = 200,000 units
Production in 12 months = 600,000 units
Therefore: Break even period = 200/600 * 12 = 4 months
Cost 400000
Break-even point
0 200,000 400,000
units
Financial section
Profit and Loss Account
Balance Sheet
Cash Flow estimates
Cash Flows
Gantt chart
