New Business Green Grocer

SAN INSTITUTE OF MANAGEMENT SCIENCE LAHORE

Strategic Management

SUBMITTED TO

Col. Sohail

SUBMITTED BY

Naveed Aslam

TOPIC

Benefits of Strategic Management

DATE

April 24, 2009

Affiliated with

RIPHAH INTERNATION UNIVERSITY

Naveed Aslam Gondal

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Name of Business: The name of the business that we are going to start is “Green Grocer”. Address of Business: Green Grocer Shop No.5, Eden Avenue, New Airport Road. Lahore, Cannt TEL: +92-042-6502688 Names of Principals: Owner of business: Mr. DJ Barnard Co-owners: Mr. Bray’s Pork Pies, Mr. Samphire, Mr. E J Perowne The credentials of the owner and co-owners are mentioned in their resumes attached in annexure. Nature of Business: As our name reflect the nature of our business that we are dealing in vegetables. We are providing the vegetables to our customers through different services. Our future plans are to expand our business in terms of services such as in future we can provide fruits and meat to our customers. Mission Statement: Our mission is serving the customers through best grocery services. Our Core Values: •

To achieve maximum customer satisfaction.

•

To deliver quality services to customers.

•

Practice what we preach: honesty, integrity and ethics.

Nature of Services: The products from which we will start our business will be only the vegetables but the services that we are providing: •

Vegetables on door step of the customers

•

Home delivery after receiving the orders

•

Cut vegetables on order

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Reasons for Success: It will be successful because in our business we are providing special services like free home delivery, cut vegetables to our customers and also they can get vegetables from store if they need more and more. Location of Business: The location of our business is “Aden Avenue, near new Air Port”. The main reason for starting this business is that the area in which we are going to start our business is the newly established area and that needs too much facilities because that area is a little far away from the main commercial place where there are only one or two ways of getting vegetables but that ways are not sufficient to fulfill their needs so in that area there is more need to start our vegetable retail store. Building on Lease: The store from which we are going to start our business is not our own but we are starting business by taking it as lease and paying monthly rent Rs. 7000 for this store. Space: Besides all of these factors we should also keep in our mind some others points like space required for business that is about 15*8 sq ft. in our business renovation of the building is not necessary because it is already well-shaped. And the facilities that we are providing that are easily accessible from traffic. And also the location where we are going to start our business there are also chances of expansion of facilities in the future. Equipment: The main equipment which is requires for our vegetables retail and distribution store: •

Cycles

•

Shelves

•

Packaging bags

•

Fan

•

Computer

•

Trays for cut vegetables

•

Office furniture

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We have purchased the equipments required for our business that are not on lease. Green Grocer:

Shleves Spplier Entrance

Washing Facility

OFFICE Administration

Store Keeper Welcome To Green Grocer

Customers Entrance

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Organizational Plan

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Management Team: According to our plan our management team should not attempt to operate the business as a sideline or part-time venture while employed full time and at a modest salary. Legal Form of Business: Form of our business is partnership in which all individuals are liable for business liabilities and have complete freedom to sell or transfer any part of business. Partners make all decisions and can act immediately and they are also responsible for all profits and losses. Costs of Starting the Business: As we know that the more complex the organization, the more expensive it is to start. The least expensive are the partners, where the only cost incurred may be for filling for a business or trade name. So we are determining the cost of our business in such a way that will be feasible for our business as well as for its partners. Continuity of Business: The continuity of our partnership will be based on the agreement held between all the partners so that in case of death of any partner; there will be no affect on the business. Transferability of Interest: As our business contains the type of limited partnership so in our business the limited partners can sell their interests at any time without consent of the general partners. Capital Requirements: As the need for capital during the early months of the new venture can become one of the most critical factors in keeping a new venture alive. The capital that we required for starting our venture is Rs.5000, 000. So to fulfill these requirements in our business; each partner has contributed as personal financing. The owner of the venture is contributed Rs.2000, 000 while the co-owners are contributed equally i.e. Rs 1500,000. Management Control:

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In our business there will be compromise on all decisions taken for the betterment of the business. As it is necessary to control day-to-day business so it is the responsibility of the administration department to control and manage the day-to-day records.

Distribution of Profits and Losses: In our business all the partners are equally responsible for loss and the profit gained from the business will be distributed among all the partners equally. Attractiveness for Raising Capital: In our business due to the two reasons we will be able to raise our capital. •

Success of the business

•

Personal capabilities

Organization‘s Design: The design of the organization will be the entrepreneur’s formal and explicit indication to the members of the organization as to what is expected of them. Typically these expectations can be grouped into the following five areas. •

Organization Structure

Our organization structure as mentioned below shows that there are three managers in our business that are responsible for different departments like operational, financial and administration. The responsibility of the operational manager is to control the marketing activities, inventory management, and order supply. The responsibility of the financial manager is to control the record keeping and other tasks related with the finance arrangements and distributions. While the responsibility of the administrative manager is to monitor all the operations held in the organization and to control other receiving and distribution tasks. President (Mr. DJ Barnard) Financial Manager (Mr. DJ Barnard) Naveed Aslam Gondal

Operational Manager (Mr. Bray’s Pork Pies)

Administrative Manager (Mr. Samphire) 7

•

Duties & Responsibilities of Financial Manager:

Financial Manager (Mr. DJ Barnard)

Finance Arrangements & Distribution

Record Keeping

In our business, Mr. DJ Barnard is working as a “President”; there are two reasons behind it: •

The major investment in the business is contributed by Mr. DJ Barnard. As he is contributed 40% of total investment.

•

He has his contents in the business

So Mr. DJ Barnard is doing work in this business as a president and as a finance manager, responsible for record keeping and other finance arrangements and distributions. •

Duties & Responsibilities of Administrative Manager:

Administrative Manager

Monitoring Naveed Aslam Gondal

Receiving & distribution 8

E J Perowneis doing work as an Administrative manager, because she can manage very well his business due to interest in management and monitoring. And he can manage his employees and monitor them. He has studied these courses as a core subjects. •

Duties & Responsibilities of Administrative Manager:

Operationa l Manager

Inventory Management

Marketing Activities

Order Supply

Mr. Bray’s Pork Pies is doing work as a Marketing manager, because he has marketing skills and his references that can be helpful in making advertisements etc. •

Duties & Responsibilities of storekeepers:

Besides all of these three managers there will be two employees and two hawkers working for our business. One employee’s work is to maintain inventory on the shelves, to cut the vegetables that will be given through orders and other tasks related to the business. While other employee’s work is to deliver the vegetables to the homes in case of emergency required. Means that if any home needs extra vegetable in the whole day they will contact us and our employee will deliver those vegetables to their homes.

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•

Duties & Responsibilities of hawkers:

Then the duties of the hawkers are to provide/ sell vegetables at doorstep. There are 500 homes in the area in which we are going to target so our two hawkers will go to the two dimensions and sell the vegetables •

Planning, measurement, and evaluation schemes

All of our organizations activities reflect the goals and objectives that underlie our business’s existence. Like our goal is to provide unique vegetables to our customers and good quality vegetables so that they can better be satisfied. And each task held within the organization will be measured and evaluated by the management. •

Rewards

Currently there is no any reward process in our business but when it will expand and will be on a large scale then we will launch any scheme related with the rewards. •

Selection criteria

The selection criteria in our business depend on the good communication and good qualification. The qualification required for our business for selecting employees is minimum F.A. •

Training

Currently there is no any training process that can be held within our business but in future when this business will be on large scale then we will give training to our employees that how to manage the different tasks. Employees’ Monitoring: To monitor the employees within the organization is very complicated and important task. Our management team in this way will monitor the employees of our business: •

Firstly we will make records of all employees’ attendance and their work behaviors. We have two hawkers in the business that will deliver our vegetables door to door. When they will go to deliver it they will first record in the register

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that how much quantity they are going to deliver today then when they will come back after whole day then they will enter in the register that how much quantity of vegetables they have sold and how much quantity have left. •

Similarly with the case of two employees that are doing work within the business. Firstly they will give attendance in the register early in the morning then one of them will be responsible to arrange the vegetables whole day either in the shelves or on cycles. His work is to maintain the inventory within the store during the whole day. The duty of second employee is to record all material sold on orders on the whole day. Means that if during the whole day if any customer needs extra inventory of vegetables that are immediately required then he will be responsible to deliver them and record them that how much quantity have sold and how much have left. All of these responsibilities performed by employees are to be monitored by the management team and are used to record.

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Operational Plan

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Operational plan is the back bone for “Green Grocer”. Operational plan contains that how we will receive and distribute the vegetable, so it contains different modes or methods of distribution. Channels of Distribution: As we are dealing in perishable goods i.e. vegetables so we need direct channel of distribution. For this we select the different methods of distribution:  Retailing of vegetables  Delivery on order  Cut vegetables  Distribution through hawkers 1. Retailing System

Sabzi Mandi

Supplier

Arranged on Shelves

Store

Ready for Sale

Properly Washed For our operations we will hire the services of supplier, he will provide us vegetables on daily basis. For this purpose he supplier that we select is Mr. Rasheed who has the five years of experience in same business. We will receive the first supply at 8:00am. Administrator will record the opening units of inventory. We will order the 100kg of vegetables in first month.Out of this the 40 kg will be arranged on shelves while remaining will use for door step service.After receiving vgetables from supplier our store

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keeper will wash them properly and then the vegetables will arrange on shelves. Now the vegetables are ready for sale. The whole process will complete in 60 minutes.

2. Door Step System

Hawker# 1 250 Families Sabzi Mandi

Supplier

Distributed to Hawkers

Store

Properly Washed

Hawker# 2 250 Families

After arranging the particular quantitiy on store shelves we will divid the remaining 60 kg vegetables betweem our two distributors (hawkers) equally. Then they will arrnge it on their bicycles and will go for their route. Admistrator will record the inventory level. Hawker # 1 will cater the families of extension I area,while hawker # 2 will cater the families of extension II area.This whole process will take 20 minutes. The hawker will perform their duty from 9:00 am to 3:00 pm. Administrator will record the sales of the whole day.

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3. Home Delivery System

Telephonic orders

Carry out by Received Operational by Manager Administrator

Arrangement by Store Keeper

Final Destination

Ready to Serve

For free home delivery service we will receive the orders on telephone. The order will receive by the adminstrator he will held over it to the operational manager. Now operational manager will be responsible for fufilling the order.Under his supervision the store keepers will make arrangement according to the nature of order whether it is for cut vegetables or an ordinary order. Adminstrator will record all information about order ang will give receipt to the store keeper so that after fullfilling the demand the customer will sign the receipt.The store keeper will use the bicycle for the purpose of transportation. the time of completion will depend up on the nature of order. an ordinary order will fullfill within 15 minutes, while the order for cut vegetables will take 30-45 minutes.

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Industry Analysis

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International Trends: The business of grocery stores varies from nation to nation; however, the stores are all similar in their principle selling of edible goods. The nature of these goods varies with local availability and traditional diet.When a small grocery store is in competition with large supermarkets, the grocery store often creates its own niche market by selling unique, premium quality, or traditional foods that cannot be easily found in a supermarket. A grocery store may also compete by being located in a mixed commercialresidential area that is close to, and convenient for, its customers.Although large chains have begun to add food service, smaller grocery stores have an advantage in that they can generally provide fresher and cheaper food.There seem to be astiff competition among the grocery stores. The success rate of grocery stores depends upon the nature of the services provided. It is observed that the success rate of grocery rate is high as they compete on the basis of differentiation. Grocery stores ranked among the largest industries in providing the numerous jobs. There are million workers employed by retail grocers. Although food is a basic, necessary expenditure, changes in shopping and spending habits are reflected in grocers' bottom lines. According to a surveys of consumer attitudes price is considered a major factor in food purchase. The grocery business is dominated by the multi-unit and regional supermarket chains Wal Wart, Kroger, Albertson's, and Safeway. Other companies with a significant portion of the market share included Albertson's, A&P, Winn-Dixie, Super-valu, Publix, and Food Lion. National Trends: Pakistan is an agriculture country therfore it mostly fulfills its demand of fruits and vegetables itself.There are number of sabzi and fruit shops serving to the customers. The concept of green grocers are existed in the form of sabzi and fruit shops.People of farflung areas go to sabzi mandi in order to fullfill their requirments and keep that stuff for a wholer week.The availbility of both vegetables and fruits to a single shop is not there,only super stores provide the fruits and vegetabes collectively.

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Local Trends: Lahore is the poplus city of Pakistan. There is a sabzi mandi located near Minar-ePakistan.Number of socities are situated in farflung areas. The people of that areas faces the problem of availbilty of timely and fresh vegetables.The area that we are going to serve is located near “New Airport” , known as “Eden Avenue Society”.The people of that area belongs to upper class.They are health concious therefore not concious about price as compare to quality.They are also facing the problem of availbility of timely and fresh vegetables.They already fulfill their need by purshaing through super store, sabzi shop and through hawker.But still they faces some problems realted to freshness, shortage and time.Our business is best to serve them as it fulfills the need of the people in terms of seervices such as availbility of fresh vegetables,timely provideness of vegetables,delivery on orders specially of cut vegetables. Competitors Analysis: We are facing the direct competitions from:  Dania Super Store  Sabzi Shop  Hawker 1. Dania Super Store: Services Strategy: Dania Super store gets vegetables from Sabzi Mandi. It supplies the vegetables itself. They get them from Sabzi market once in a day and keep only up to 60kg due to shortage of space. They keep the vegetables on shelves on which price tag is labeled so that customers can not bargain. Pricing Strategy: The superstore is charging high price from customers. They are charging 30% more from its customer as compare to market price. They changes the prices of vegetables as the market rate changes, therefore they use the price stickers to label the prices.

Distribution Strategy:

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The store offers the retailing services to its customers. They are directly serving the customers. They are not providing home delivery service. They are using only retail system for providing services. Promotion Strategy: Super store only uses the cable media as a source of promotion tool. It hires the services of cable operator of “Eden Avenue” area. Weaknesses of Dania Super Store: Location: The store is located at a large distance from the societies; customers have to cover a distance of half an hour. There is not proper parking area due to its location at the road side. Inventory: As super store is it not only keeps the inventory of vegetables but it has to maintain the inventory level of other items such as fruits, meats and other daily life accessories. The customers are facing the problem of inventory shortage especially of vegetables as they keep the low level of vegetables inventory. It could not fulfill the demand of the people. Strength of Dania Super Store: Quality: The major strength of the store is its high quality products. As in case of vegetables the store is also providing the fresh vegetables to its customers. 2. Sabzi Shop: Services Strategy: Sabzi shop takes the vegetables from Sabzi Mandi at low price. They arrange their vegetables in baskets. There is no price tag, as the shop keeper personally negotiates on prices. Pricing Strategy: The Sabzi shop is charging at 20% more as compare to market price. Therefore the customers who are willing to pay low prices are its target market.

Distribution Strategy:

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The Sabzi shop distributes its vegetables through personal selling. They directly distribute to customers. Promotion Strategy: Sabzi shop does not use any promotion strategy due to unawareness and financial resources. Therefore it does not cover both societies. Only the customers of extension I buy the vegetables from that shop. Weaknesses of Sabzi Shop: Location: The location of the Sabzi shop is out of the societies. The shop is located at side of main road. The customer has to cover the rough path in order to reach that shop. Quality: Sabzi shop keeps the remaining inventory for the next day operations therefore the freshness level get decreases and the quality of vegetables get affected. Strengths of Sabzi Shop: Negotiation Opportunity: The Sabzi shop provides the opportunity of bargaining to its customers. It provides the opportunity to the servants to save the money for their personal use by deceiving their owners. 3. Hawker: Services Strategy: The hawker gets its daily required vegetables from Sabzi mandi and provides it to customers through direct distribution. He arranges the vegetables on its cart. Due to space limitation he has to keep the inventory level low. Pricing Strategy: Hawker charges 25%more from customers as compare to the market rates therefore earning the high profit. Distribution Strategy: Hawker personally distributes the vegetables to the customers.

Promotion Strategy:

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Hawker personally promotes his business by making customers relationships. He contracted to some houses to provide them vegetables on daily basis. After fulfilling their demand the he goes to other customers. Weaknesses of Hawker: Inventory: Hawker keeps the low level of inventory which does not fulfill the requirements of the customers. Quality: Quality level of vegetables is low especially of green vegetables. Strengths of Hawker: Inventory: The hawker maintains low level of inventory so at the end of day he has not left with extra inventory. An over view of competitors are summarized in the table given below: Assessment of Competitors Marketing Strategies and Strengths and Weaknesses Dania Store • No supplier • Fixed area • Arranged shelves

Sabzi Shop Hawker • No supplier • No supplier • Arranged baskets • Use Cart/Thala • Use the tent to cover the shop

Pricing Strategies

•

High Price

•

Market Price

•

High Price

Distribution Strategies

•

Direct Selling

•

Direct Selling

•

Direct Selling

Promotion Strategies

•

Cable Media

•

Nil

•

Self Promotion

Strengths

•

Quality

•

Bargaining Power

•

Inventory

Weaknesses

• •

Location Inventory

• •

Location Quality

• •

Inventory Quality

Services Strategies

Table1-1: Green Grocer’s Competitors Analysis Purpose of Research:

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The purpose our market research is: •

To study the studying behavior of our potential customers.

•

To analyze the market situation.

•

To analyze the competitors’ strengths in market.

Collection of Data: Primary Data: We have conducted the informal interviews of our potential customers and also of our competitors. Secondary Data: For secondary data we have developed the Questionnaire. Survey Tool: For the purpose of research we have developed a questionnaire. Questionnaire is attached in annexure. Survey Technique: We have selected the “Simple Random Sampling”. Population: Our population is the families in Aden Avenue Area. There are 500 houses in that area. Extension I consist of 250 houses and also same number of houses are present in Extension II. Sample: We selected 20 families, 10 from extension I while remaining 10 from extension II. Our sample is the true representative of our population.

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Marketing Plan

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Purpose and Timing of the Marketing Plan: The marketing plan establishes how the entrepreneur will effectively compete and operate in the marketplace. Marketing planning should be an annual activity focusing on decisions related to the Marketing mix variables. The marketing plan section should focus on strategies for the first three years of the venture. For the first year, goals and strategies should be projected monthly. For years two and three, market results should be projected based on longer-term goals. Preparing an annual marketing plan becomes the basis for planning other aspects of the business. Understanding the marketing plan The marketing plan should answer three basic questions: Where have we been? -The history of the marketplace, marketing strengths and weaknesses, and market opportunities. Where do we want to go (short term)? - Marketing objectives and goals in the next twelve months. How do we get there? -Specific marketing strategy that will be implemented. The marketing plan should be a guide for implementing marketing decision-making and not a superficial document. The mere organization of the thinking process involved in preparing a marketing plan can be helpful in understanding and recognizing critical issues. Market Situation: As the food is basic necessity of people and people add vegetables to their food for getting the nutritious values and changing their tastes. The people of the area that we are going to serves are also found of vegetables and almost 300 families need vegetables on daily basis. Market Segmentation: Our market is integrated so we have only one segment to serve that is “House hold Families” Target Market: The market that we like to enter is “Families”. There are five hundred families in that area. They all belong to upper class. They are health conscious and time is important for them as they have their own social and professional circles. They are not sensitive

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towards prices. Most families have servants who perform the major duties such as cleaning houses, purchasing, cooking etc. Positioning Statement: “Green Grocers provide vegetables to consumers who are health conscious and want to save their time” Our business “Green Grocer” covers all future prospects. Currently it will sell only vegetables, it will be the store of containing only vegetables now but in the future when our business will get success then we will do it on large scale. The positioning statement reflects our strengths in terms of quality & time. Marketing Mix Variables: Services: We are dealing in vegetables and providing this service to our customers in following ways: Retailing: We have a shop that is located at the middle of the two societies. We arrange the vegetables on shelves so that the customer can easily make the buying decision. We give the opportunity to our customers to visit the store and buy whatever they want. Hawkers: At the beginning of the day we will send our two hawkers in both areas. They will visit the areas only once in a day. They will be there from 9:00 am – 3:00 pm. The hawkers are facilitated with bicycles on which there will be vegetables up to 30kg for each hawker they will distribute the vegetables in brown papers packaging Home Delivery: We are also providing the free home delivery to our customers. As in some families there is a trend of cooking in evening so by ordering us they can easily get vegetables without tension of arranging the food stuff in day time. The other potential reasons may be the shortage of vegetable, sudden arrival of guests or unplanned cooking. Two kilogram (2-Kg) is the minimum order for which we will provide home delivery services.

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Cut Vegetables: We are providing opportunity to our customers to get cut vegetables from our store by ordering us. The customers can get benefit of this service who wants to save their time. The cut vegetables will pack in plastic and then in brown packing. Pricing Strategy: Sale price: For finding the sale price per unit the most famous formula is: Sale price = Cost + Profit (p.u)

(p.u)

(p.u)

Profit is some % of the cost of good sold per unit, but the problem is accrued when, there is need to find out the cost. Cost includes fix and variable cost. In this venture fix and variable costs are given bellow: Fix Cost:

Variable Cost: Rs

Rs

Salaries

28000

Utility bills

2000

Rent

8000

Supplier cost

12000

Stationary

1950

Gloves &cap

37

Brochures

1800

Bags

5100

Inventory cost

64680

Total:

37950

85617

For finding out the cost per unit there is need to find out the per unit selling expense and per unit admin expense.

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Selling Expenses:

Admin Expenses Rs

Rs

Bags

5100

Salaries

28000

Supplier cost

12000

Rent

8000

Stationary

1950

Utility bills

2000

Total:

17100

39950

Per Unit Costs: Total cost of good sold (p.m) Cost of good sold per unit =

Total units sold

So per kg cost plus Profit % are including in sale price. SP = CGS (p.u) +Profit % of CGS (p.u) For cut vegetables, on order delivery and sell the extra inventory profit margin is set according to the conditions. For extra inventory which will be sell on next day in the poor area profit margin will be low and for cut and ordered vegetables profit margin will be high. Distribution: As we are dealing in perishable goods i.e. vegetables so we need direct channel of distribution. For this the methods that we are using: Retailing: We are providing the retailing service to our customers. So that we can check directly their buying behavior and can also get direct feedback from them. Hawkers: •

We select the hawkers who will directly distribute the vegetables. They will distribute the vegetables. The reason for this is that our competitor “Hawker” is also serving in that area. To compete with that we have to serve in the similar but in a unique way.

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•

We are also providing the facility of free home delivery. The people who want to get cut or ordinary vegetables at home on a phone cal.

Promotion: Current Strategy: We are currently using the print media for the purpose of promotion. We are using brochures and pamphlets for advertising. As it will cost effective for us as compare to any other media. We have also contacted the other shop keepers to give our brochures to their customer when they come to purchase. Future Strategy: In future we will use cable media, banners and bill board. In order to cover more markets. As the number of new housing schemes are build there.

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SWOT Analysis of Green Grocer: Strenghts of Green Grocer: The factors that can make our business sussessful are: Location & Accessibility to Customers: Our store is located at the junction of the two society’s i.e. Aden Avenue Extension I & Aden Avenue Extension II. Therefore the people of both areas can easily serve. The surrounding of the stores is good; there is no traffic and parking problems for us as well as for our customers. We have the advantage upon our competitors in terms of location, service delivery time and access.

250 House s

250 House Green Grocer s Home Delivery:

We are providing free home delivery to our customers as no our competitor is providing this service. Serving/Delivery Time: Due to our location we can fullfill the order of our customers wqithin 15 minutes. while special servives of cut vegetables can be fullfdilled within 30-35 minutes. Cut Vegetables: we give our customers the unique service of proviuding them cut vefgetables on order so that their time to prepare food get reduce. Weakenesses of Green Grocer: The weaknesses of our venture are: Inventory Management: The management of vegetables is our major problem that how to manage the extra Inventory because extra invntory will sale at anoter shop in poor area near to the Aden Avenue at very low profit. Long Distance: There is problem of long distance from Sabzi Mandi so, supplier cost is higher.

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Opportunities of Green Grocer: Introducing Fruits & Meat: We can expand our business by introducing fruits and meat so that our customers can get the food items what they want. Online Services: In order to cover more market online services can be helpful for us. Threats of Green Grocer: The threats of this venture are: •

Most important is that to create the customers trust because the cut vegetables and simply on order delivery services are introducing first time in that area by “Green Grocer”. So there is most important point is to keep in mind the human health. It is a threat, may people do not believe on our safety steps, so we are very much conscious about our customer’s health and care it by providing washed vegetables, and keep the employee appearance suitable by providing him proper uniform.

•

The natural disasters e.g. flood, lack of rain etc are another threat for us. May be due to these disasters the prices of vegetables rise and profit margin may decrease.

•

Another threat is from competitors because there is direct competition with Dania Market, and the one hawker who is already serving this area. But “Green Grocer” is providing the unique services i.e. washed and cut vegetables, on order delivery, hawkers of “Green Grocer” are selling vegetables in the whole day because people of this area are buying in whole day.

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The SWOT analysis of Green Grocer is summarized in the table below: SWOT Analysis of Green Grocer Strenghts • • • •

Location Home Delivery Serving/Delivery Time Cut Vegetables

Opportunities • •

Intrtoducing Fruits & Meat Online srvices

Weakeneses • •

Inventory Mnagement Long Distance

Threats • • •

Customer Trust Fluctuation in Prices Competitors

Table: 1-2: SWOT Analysisof Green Grocer

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Financial Plan

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THE FINANCIAL PLAN A. The financial plan provides a complete picture of: 1. How much and when the funds are coming into the organization. 2. Where the funds are going. 3. How much cash is available? 4. The projected financial position of the firm. B. The financial plan provides the short-term basis for budgeting and helps prevent a common problem-lack of cash. C. The financial plan must explain how the entrepreneur will meet all financial obligations and maintain its liquidity. D. In general, the financial plan will need three years of projected financial data for outside investors. OPERATING AND CAPITAL BUDGETS: A. Before developing the pro forma income statement, the entrepreneur should prepare operating and capital budgets. 1. If the entrepreneur is a sole proprietor, he or she will be responsible for the budgeting decisions. 2 In a partnership, or where employees exist, the initial budgeting process may begin with one of these individuals. 3. Final determination of budgets will ultimately rest with the owners or entrepreneurs. B. In the preparation of the pro forma income statement, the entrepreneur must first develop a sales budget, an estimate of the expected volume of sales by month. 1. From sales forecasts, the entrepreneur will determine the cost of these sales. 2. Estimated ending inventory will also be included. C. Production or Manufacturing Budget. 1. This budget provides a basis for projecting cash flows for the cost of goods produced. 2. The important information in this budget is the actual production required each month and the needed inventory to allow for changes in demand. 3. This budget reflects seasonal demand or marketing programs, which can increase demand and inventory.

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4. The operating budget is an important document, as the pro forma income statement will only reflect the actual costs of goods. D. Operating Budget. 1. Next the entrepreneur can focus on operating costs. 2. Fixed expenses (incurred regardless of sales volume) include rent, utilities, salaries, interest, depreciation, and insurance. 3. The entrepreneur will need to calculate variable expenses, which may change from month to month depending on sales volume, such as advertising and selling expenses. E. Capital budgets are intended to provide a basis for evaluating expenditures that will impact the business for more than one year. 1. A capital budget may project expenditures for new equipment, vehicles, or new facilities. 2. These decisions can include the computation of the cost of capital and the anticipated return on investment using present value methods. 3. The entrepreneur should enlist the assistance of an accountant.

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Financial plan is an important part of the business plan that determines economic feasibility and necessary financial investment commitment. One type of financing needs is to be considered. Equity Financing: Equity financing does not require collateral and offers the investor some form of ownership position in the business. So in “Green Grocer” there will be a total investment of Rs 5000,000 by the three partners. Two partners will contribute equal amount in the business i.e.Rs.1500, 000 each and third partner is contributing Rs. 2000, 000.Similarly, there will be a ratio of 30% in profit and loss of the venture for two partners and 40% third partner. Parts of Financial Statements: Financial statements include the following parts: 1. First-month start-up costs 2. Income statement 3. Pro Forma Income Statement 4. Balance sheet 1. First month start-up cost: Cost of inventory (vegetables) and other costs which are incurred for starting the business and marketing expenses and day to day operating expenses are estimated in first month start-up cost. Income: The income which we earn from our operation of the business can be through these sources. •

Sale on order

•

Sale through hawkers

•

Sale through retailing

•

Sale through cut vegetables

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2. Income Statement Income statement tells about the profit and loss of the business. All the revenues and expenses are included in the income statement. The nature of these revenues and expenses are fixed as well as variable. For this venture income statement has been made for the one month. Revenues related to the sale of vegetables have been included in this statement. In income statement expenses are related the salaries as well as the day-to-day operations of the venture. There will be expense on the marketing through broachers including the cost of printing of broachers, questionnaire etc. The cost will be incurred on distributing broachers in the “Aden Avenue”. There will be an advertisement of this venture on cable media and newspapers in the coming months. So in the beginning of this venture there will be a huge amount of the expenses as compare to revenues because the business will be started from the scratch. 3. Pro-forma income statement (in annexure) In pro-forma income statement in first month there is no as much sale because of starting the venture and people are habitual to buying from competitors, so some time is required to change this habit of people. 4. Balance Sheet Balance sheet tells about the financial position of the company. To start this venture Rs. 5000,000 have been invested by the three partners. In the start different assets have been purchased that would be helpful in order to generate the revenues in future. For day-today operations some cash will be kept in hand. In first month there are no long and short term liabilities because by the mutual concern all partners are agree to starting pay back the loan which is lend by parents.

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Break Even Analysis: Break even analysis tells the stage of the business at which business is bearing no lose and earn no profit. In our venture “Green Grocer” we have loss in first month because our operating expenses are very high and G.P is very low. We do not hiring may employees to do work but only four employees excluding management are enough to do work inside and out side of the store. After five months we start to earn profit and bear our expenses. We can find break even point through this formula. Total fix cost Break Even = Sale price – Variable cost /unit Risk in the Venture: The risks in this venture are, firstly and the most important is that to create the customers trust because the cut vegetables and simply on order delivery services are introducing first time in the area by “Green Grocer”. So the re is most important point is to keep in mind the human health. It is a risk may people do not believe on our safety steps, so we are very much conscious about our customer’s health and care it by neat & clean uniform of employees, gloves & cap, and washed vegetables. Second risk is about the natural evils e.g. flood, lack of rain etc may be due to these evils the prices of vegetables rise and profit margin may decrease. Third risk is from competitors because there is direct competition with Dania Market, and the one hawker who is already serving this area. But “Green Grocer” is providing the unique services i.e. washed and cut vegetables, on order delivery, hawkers of “Green Grocer” are selling vegetables in the whole day because people of this area are buying in whole day.

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Contingency Plan

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Plan 1: If we are short of initial capital investment then we can consult the asset financing institutes that are •

SME Bank

•

Askari commercial Bank

Plan 2: If there are shortage of professional workers . Than we can hire some of the contract workers.

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References: http://www.thegreengrocers.com http://www.google.comr http://www.wikipedia.com http://www.ask.com http://www.altavista.com

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