kinyeni -business planb

7/29/2019 Kinyeni -Business PlanB

1/22

CHAPTER TWO

2.0 THE MARKETING PLAN

In order to have a workable or realistic market plan, the proprietor intends to

conduct a market research.

Methods to be used Questionnaire. A questionnaire with questions related to the

plan will be prepared and shall be distributed to the present and prospective

customers. The expected information is that these customers can disclose

problems that confront them and areas of dissatisfaction that can be addressed.

The information to be obtained may also reveal whether new products can be

offered.

Environment. The business will try to understand the environment it will be

operating in because this will help to discern the threats and opportunities

associated with the area of business.

The external threats are:-

Political and legal changes such as new regulations

Economic factors such as interest, exchange rates and consume confidence

Social factors such as changing attitudes and life styles and the ageing

population

Technological factors such as new materials and growing use of the internet

1


2/22


3/22

(d) Highly Employed

Married- Those married may be promising customers because they are settled and

mindful having profitable investment like building houses.

Permanently employed- These can be relied upon because they have a permanent

job and therefore have job security. In case of buying on credit the possibility of

them paying their debts is high.

Highly educated- These are people who are holding executive position in their

organization and receive good remunerations.

Self employed These are people who are self employed and can be relied upon as

they can buy product and make cash payment.

The potential customers can be described as:

i) people who need or want the product

ii) people who are able to buy the product

iii) people who are willing to buy the product

The meaningful buyer group shall be divided into two groups

a) Those ranging the age of 25 years to 35 years

b) Those ranging the age of 35 years and above.

Those 25 to 35 years of age groups are potential customer who have completed

their college education and have been either employed or are self employed and are

in need of the product for painting their newly built houses.

Those 35 years group and above are the potential customers who are either

employed or self employment and are in need of the product for painting their

existing house or their newly built house. They can be married or not married so

long as they are able and willing to buy the product.

3


4/22

According to a survey that was conducted by the proprietor, the customer look for

the original product, high quality, type of package and durability of the product.

In view of this information, the business will sell original product, which is of high

quality and durable in nature. Although some customer may be buying during the

day, most are predicated to be buying in the morning hours and in the evening on

their way home after leaving their places of work.

However, it is expected that high volume of sales will be realized at end of the

month when the customers who are employed have received their remunerations

and those in self employment when they receive money from their debtors.

Since the business will be new and small in size, the mode of payment of the

product by the customers will be restricted to cash payment.

The other mode of credit and reward of cash discounts may be introduced as and

when the business growth to the level that it is able to meet both direct and indirect

cost comfortably.

2.1.2 MARKET SIZE

The market is already established and some business have already taken up their

number of customers.

The market is mainly dominated by certain business which are the potential

competitors of the business.

According to the survey carried out by the proprietor of the proposed business, the

potential competitors in the industry would each take a share of customers as

analysed below:

4


5/22

Kamiti Hard ware Store__________ 15,000

Banana Hill Hardware Store____ 10,000

Ruaka harware Store ______ 25,000

Ebenezer Enterprise ______ 20,000

Utungi Harware (proposed Business) ______ 30,000

Total Customers 100,000

Percentage _______________Customers

Kamiti Harware______________ 15,000x100= 15%100,000

Banana Hill Hardware_________ 10,000x100= 10%100,000

Ruaka Harware______________ 25,000x100= 25%100,000

Ebenezer Hardware___________ 20,000x100= 20%100,000

Utungi Hardware ____________ 30,000x100= 30%100,000

Proposed sales of Units of paint per Month

Business (proposed) Utungi Hardware

Sizes in Litres Cost Number of Units Total Sales Per Month

Sh sold per month Per month Ksh

Litre 200 1000 1000x200 = 200,000

1 litre 400 1000 1000x400 = 400,000

4litre 1,200 400 400x1,200 =480,000

20 litre 3,000 200 200x3,000 = 600,000

Total Sales per month Kshs 1,680,000

5


6/22

KEY

(i) Estimated total No unit of paint tobe sold each month ________ 2,600

(ii) Estimated total sales per month Ksh_______1,680,000

COMPETITORS AND THE TARGET NUMBER OFCUSTOMERS

COMPETITORS TARGET CUSTOMETS PERCENTAGEI Kamiti Hardware Store 15,000 15%II Banana Hill Hardware Store 10,000 10%III Ruaka, hardware store 25,000 25%IV Ebenezer Enterprise 20,000 20%V Utugi Hardware (proposed Business) 30,000 30%

Total Target Customers 100%

Table 2.1.2

The number of people/customers who would need the business product will be

30,000 (30%) when the business will be in operation. It will be expected to sell

Units(No) of the product (paint) 2,600 per month.

The business is expected to perform effectively and would therefore be making

estimated sales of Ksh 1,680,000 per month.

2.2 THE COMPETITION

2.2.1 POTENTIAL COMPETITORS

The potential competitors in the Industry are;-

i) Kamiti Hardware Store

ii) Banana Hill Hardware store

iii) Ruaka Hardware Store

iv) Ebenezer Enterprise

These competitors conduct/operator their business from the premises which are

slightly interior from the main Road Nairobi Banana Limuru Road as

opposed to the proposed business which will occupy the premises which is just

6


7/22

near the main road and adjacent to the bus stop where matatu pick and drop

passengers.

Advantages due to the location of the business are;

The nearness to the main road

The customer will easily locate the business

Many customer will stop and buy as they can have access to window display

of product

Volume of sales will increase due to number of customers who buys theproduct

Number of potential customer will increase.

SIZES OF COMPETITORS

The sizes of the potential competitor range from small, medium and large and have

been assessed by the value of the Assets, annual sales volume and number ofemployees. The table below illustrate the sizes.

THE SIZE OF POTENTIAL COMPETITORS IN RELATION TO THE

PROPOSED BUSINESS.

PROPOSED

UTUGI

HARDWARE

KAMITI

HARDWARE

BANANA

HILL

HARDWARE

RUAKA

HARDWARE

EBEBEZER

ENTERPRISE

7


8/22

KSHS

ASETS

700,000

TO

900,000

300,000

To

500,000

400,000

To

600,000

500,000

To

700,000

600,000

To

800,000Sales

Volume

90,000

To200,000

50,000

To150,000

60,000

To170,000

70,000

To180,000

80,000

To190,000

Number of

Employees

1- 5 2 4 2 5 5 8 8 - 10

SIZES OF FIRMS IN THE INDUSTRY

KEY

Small size Medium size Large size

Assets - Ksh 300,000 to 500,000 500,000 to 700,000 700,000 to 900,000

Sales &

Volume Ksh 50,000 to 150,000 70,000 to 180,000 90,000 to 200,000

No. of Employees 1-5 5 8 8 - 10

Advantages of the small size (sole proprietorship) of business are as follows:-

a) A sole proprietor keep all the profit

b) It is simple to start

c) It takes a short time to make decision like expansions

d) A sole proprietor makes his own decision concerning the business. He does

not have to consult others before making decision

Disadvantages

a) A sole proprietor meets all the losses

b) A sole proprietor pays tax alone

c) A sole proprietor contribute the start up capital alone

8


9/22

As the proprietor is aware of these disadvantages it will be appropriate to avoid

losses and make good profit which will be added to the capital for the business to

run profitably.

2.2.2. Comparison of proposed product/service with those of potential

competitors

The proposed business will be selling paints. The manufacturer makes paints and

classify them into various grades in term of quality. The grades are first, second,

third and fourth quality.

In view of the above the business will sell first quality paints which is original,

durable and manufactured by crown paint a leading company know for their

classical product. The survey which was conducted by the proprietor revealed that

most of present competitors obtain their paints from Jua kali manufacturers whose

products are of poor quality and fake. However, for comparison with the potential

competitors, the proposed business will sell original and high quality paints which

can be rated as below.

TABLE 2.2

PROPOSED

BUSINESS

PROPOSED

UTUGI

HARDWARE

KAMITI

HARDWARE

BANANA

HILL

HARDWARE

RUAKA

HARDWARE

EBERNEZER

ENTERPRISES

PERFORMANCE 3 2 2 3 3

9


10/22

QUALITY 4 1 2 2 1AFTER SALES

SERVICE

3 1 3 3 2

TOTAL SCORE 10 4 7 8 6

The above is the proposed product in relation to the potential competitors product.

KEY

1 Very Low2 - Low3 Moderate

4 High

5 - Very High

The competitive advantage of the product of proposed business over those of

potential competitors are:

a) Highly quality product

b) It is original in nature

c) The package is excellent and executive

d) The paint is durable

This comparison can be evidenced by the ratings given in the table No. 2.2 in the

following order.

Performance - Moderate - 3Quality - High - 4

Reputation after - Moderate - 3

Sales service

10


11/22

Total score 10

2.2.3 The overall strength and weakness of potential competitors

Understanding the competitors is the key to understanding how to best compete in

the market place. It can help develop strategy and enhance the efficiency of

marketing plans. The proprietor would assess the overall strength and weakness of

his potential competitors by drawing a competitive analysis.

The analysis would include the following areas:

Assessing their strength and weakness

Evaluating their activity in the market eg pricing, promotion

Review their product range

Establishing their level and quality of distribution

Understanding their objectives and strategiesCompetitors analysis should aim to understand the competitors business and pre-

empt their plans in order to build competitive advantage.

Strengths and weakness are critical factors to the effectiveness and success of a

business. Most often these are internal to the business and are elements that a

business can control. Examples of strength would include high brand awareness,

good reputation for quality, good service levels, high margins or unique product

positioning. Weakness would include unsatisfactory product delivery, poor

relationship between price and quality, lack of unique selling point, low investment

in marketing.

11


12/22

However, promoting strengths can be an effective strategy for growth and can lead

to improved competitive advantage. Equally, redressing a weakness puts the

business in a strengther position to capitalize on the effect of its marketing

activities.

In order to have advantage over the potential competitors it is good to consider the

benefits in terms of the following

Customer

Knowledge Technology

Management

Distribution of channels

CUSTOMER

The proprietor has known that consumers need to be motivated to buy the product

and customer will dictate the success or failure of the product.

The employees must therefore make sure that the customers needs are truly

satisfied and leave customers with feeling that they would enjoying coming back.

TECHNOLOGY

12


13/22

The business will not lag behind in introducing the technological use of service

like internet. As failure to enter the era will make business not compete effectively

in the existing technologies.

LOCATION

The business location is promising because it is situated along Nairobi Banana

Limuru Road. Along the road there is a bus stage where matatus pick and drop

passengers. With this activities in place customers have easy access to the

business premises. This is a good advantage over the potential competitors whose

business premises are in the interior of town.

MANAGEMENT

The management which consists of the proprietor assistant manager and the

accountant posses knowledge and skills of running the business.

The management is expected to ensure proper utilization of the resources

available that is staff/human resources, materials (product) and finance.

Identifying opportunities and threats is the responsibility of the management . It is

expected to do a forecast of these external factor as they can easily adversely affect

the achievement of the business goals both short and long term.

DISTRIBUTION CHANNELS

13


14/22

The potential business will start small. As a result the potential customer will be

expected to purchase the product directly from the business enterprise during the

early few months of doing business.

ASSESSEMENT OF THE OVERALL STRENGTH AND WEAKNESS OF

THE POTENTIAL COMPETITORS

TABLE 2.3

UTUGI

HARDWARE

COMPETITOR 1 COMPETITOR 2 COMPETITOR 3 COMPETITOR 4

Benefits tocustomers

4 3 3 2 2

Technology 3 2 2 1 1Location 4 3 2 2 1Management 3 2 1 2 1Distribution

channels

3 1 2 1 2

Totals 17 11 10 8 7

KEY

1 - Very low2 - Low

3 - Moderate4 - High5 - Very high

14


15/22

As shown above each area of comparison has been allocated on a scale from 1

very low 2 low 3 - moderate 4 high and 5 very high.

Considering the competitors overall strength and weakness, the following are

ways in what it will be easy to compete with them.

1) by selling original paints

2) by selling product or paints of high quality

3) by selling at reasonable prices

4) by introducing customer care

2.3 PRICING STRATEGY

While fixing the selling prices of the product the proprietor will have to consider

that the money received from sales must do three things:-

1) To cover the direct costs or the cost of prices of all the goods including

transport expenses

2) To cover indirect cost or the cost of running the hardware shop

3) To provide reasonable profit.

Before any entrepreneur or a trader fix the selling price one must have to add a

little amount to the prices of the goods they buy before they sell to the customer.

This little money which is added to the cost of goods is called a mark up in order to

make up a profit. This means that a business needs a trade margin which is stated

as a percentage of the selling price. In order to get the percentage on the selling

15


16/22

price, the trader must make assumptions on the expected sales and cost for the

year.

PRICE STRATEGY

How to calculate the selling price of the product

Example. A 4 litre container of paint bought from the wholesaler at Ksh 1000 will

be sold at Ksh 1110 so as to get a profit of Ksh 110.

The profit is arrived by adding mark up to the price of the paint bought at 11%

percent as shown below

Wholesale price Item bought

One paint

Percentage

11% Markup

On cost price

Selling price

Ksh

1000

One (4litre) Paint 11% Ksh

1110Table 2.3

Cost price Ksh 1000x11 =110

100

Add

Cost price Ksh 1000

Mark up price 110

Selling price 1110

16


17/22

In addition to the mark up, the price to be fixed must be compared with that

offered by the competitors. A well calculated observation must be done so a to fix

a selling price of the product at the same level or slightly level of the competitors.

This is because it can be disastrous if one fix price below or above that of the

competitor as the customer can be attempted to buy where the price is low. The

prices which the proprietor proposes to fix are valuable because they will be

reasonable compared to those of the competitors which are exorbitantly high.

The entrepreneur has plans of introducing discount policy as way of encouraging

customer to pay their debts on time specified or agreed.

The discount will be granted at the rate of 2% percent to those who are able to pay

their debts at date specified when they were buying the product.

2.4 SALES TACTICS

The proprietor decides to use direct method of selling the products.

The sales force of the business shall be engaged to do the selling since ability and

motivation leads to good performance, the proprietors as the manager will ensure

that sales people are properly motivated and sales incentives provided where

possible. In sales, one of the most common ways to manage motivation is to use

incentives.

As a small business, the following sales incentive systems may be introduced in

order to effectively boost the sales.

17


18/22

a) Recognition

Taking the time to recognize a leading performer with a plaque, cake or special

lunch. This will not require much in terms of expenses.

b) Work place perks

This method is free. It involves giving top performers the right to work from

home, one day a week and regular time off for child care or any other kind of work

place perks. Although this work place flexibility cost nothing it can be very

valuable to employees.

It can also motivate sales people to look up to the proprietor trusting them.

2.5 Advertising and promotion strategies

2.5.1 Advertising strategies

An advertising strategy is a campaign developed to communicate ideas about

products and services to potential customers in the hope of convincing them to buy

those products. This strategy when built in a rational and intelligent manner will

reflect other business considerations (overall budget, brand recognition effect and

objectives) (public image enhancement, market share growth) as well. As a

business one of the major goals of advertising is to generate awareness of the

business and its products.

Advertising can rather be costly especially for a small business and one need

direct advertising ideas that work well and dont come with high prices.

18


19/22

Advertising strategy can be as simple as word of mouth and as varied as in print,

by radio and through television. Before one advertise, whatever the medium, it is

good to know the target market so as to direct the advertising efforts in the right

directions.

Advertising in the local newspaper is good because they offer box ads and

advertising inserts. Some newspapers will offer special advertising and even give

discounts for agreeing to list the advertisement as per terms.

Advertising. There are various types of advertising such as; Newspapers, direct

mail, billboards bus boards, broadcast advertising on radio and T.V

Material Collateral One might choose to distribute materials such as brochures,

newletters and posters.

As a result the proprietor shall use the following method of advertising.

Advertising Strategy and the cost

Methods frequency Cost per month Total cost

Radio 2 TimesSh1000x2

Sh2000

T.V 2 times 1,500 3000Newspaper 4 times 500x4 2000

Total cost per Month 7,000

Table 2.5.1

The products which is paint will be selling in plastic containers litres, 1 litres, 4

litres an 20 litres.

- see the appendix (A) for the image of the product

However, the effectiveness of the advertisement will be measured by the high

volume of sales and increase of the number of customers coming to buy the

product.

19


20/22

2.5.2 PROMOTION STRATEGIES

Promotion is primarily aimed at creating awareness of the product to the potential

customers. It should praise the product in order to attract many buyers.

Promotion does not only help boost sales but helps a business to draw new

customers while at the same time retaining old ones.

The promotion can be done through exhibitions, free product sample free

introductory services and public relation activities.

There is rapid growth in sales promotion in the recent past. Organizations are

using part of its budget on sales promotion and to attract new customers who

would buy the products. Utugi Hardware (potential business) intends to use parts

of its budget on sales promotion. It will adopt trade shows of promotion to attract

new customers who would buy the products.

The business is to use competitions method of promotion to sale the product.

The promotional activities to be used are:

Methods frequency Cost per Month Total cost

Bill Boards 1

Sh.

200x1

Sh.

200

Posters 1 2000x1 2000Sales Personnel 1 300x1 3000

Total cost per month 5,200

Table 2.5.2

2.6 Distribution Strategy

20


21/22

2.6.1 Channels of Distribution

The business sells product and during its early days of operating, the customers

will be coming to buy direct from the business.

As the business grow and develop and even introduce a new product the plans put

in place are that, it will be hiring pick up to deliver hardware product to the

contractors who buys product in large quantity.

The cost of transport will depend with the owner of the vehicle and the distance

where to take the product.

However, in normal practice, the transporters who are doing this business charge

roughly Ksh 500 per trip when the place where the product (goods) shall be taken

is not outside Ruaka trading centre.

The charges to the areas surrounding Ruaka Trading Centre where the business is

situated will be charging Ksh 1000 per trip. Since majority of the potential

customers will not need transport, having to buy the product directly from the shop

and quantity not being large the business does not expect to spend much in

transport distribution. The expected times/period per month which the proprietor

would hire a pick up deliver goods to the contractors may be five times per month

ie. 5xKsh1000 =5,000 per month.

2.6.2 DISTRIBUTION PROBLEMS ANDPOSSIBLE SOLUTION

Since the distribution of the product (paint) will be restricted to those who may buy

large quantities of the product especially the contractors the initial specific

distribution will be to hire transport of pickups and lorry respectively.

The expected problems to be faced will be using transporters who are not reliable.

The existing business owners complain of hiring transporters who delay delivery of

goods to the customers.

21


22/22

In business, the entire entrepreneurs complain of dishonest employees who sell

goods and collude with customers to defraud the business.

UNRELIABLE TRANSPORTERS This problem can be solved by getting a

specific transporter who can always be used to do the delivery of goods to the

customers.

DISHONEST EMPLOYEES The employees can be trained on how they can

develop self discipline and hence reduce such misconduct.

kinyeni -business planb

Documents