Posted on : 2024-02-25 20:36:29
Article : Good Morning Monday Management solution for TASK 282- Their success story-Grandeur’s business plan reflects on their capabilities and execution perfection to their goals.
Grandeur’s promoters initially planned that they would need $ 2,25,000 to start with, in which their investment would be $1,71,000, short term loans $ 30,000 and rest as long-term loans. To attain their break even in second year their sales revenue should be $ 1million in the first year, $ 1.3 million second year and $1.5 million in the Third year. To do this the company's long-term goals are to achieve a 20% market share in the U.S, build brand image and brand equity through marketing, achieve a sustainable 55% profit margin, and eventually produce luxury watches in addition to the initial moderately-priced line. Its Production takes place in Germany and sales and marketing are focused on the United States - California - for the short-term future. The watches will be initially sold in upscale watch stores in Los Angeles and San Francisco.
The initial product line will be elegant analog watches with sporting characteristics, able to be used to depths of 100 meters under water. The company plans to release two versions, the "sport" watches and the "night" watch. The intended retail outlets are full price and full service; therefore, Grandeur will not need to use an extreme price penetration strategy to gain a foothold in the market. Hence the pricing strategy will be to initially undercut their main competitors by 10%, using a price market penetration strategy. Then, pricing will be adjusted to be directly competitive with the other major competitors. The price per watch is expected to be around $100-$200. Entry into the high-end watch industry comes at a propitious time. Over the past two years, the purchase of mid-level and high-level European watches has increased by 50 percent in the U.S. and this trend is expected to continue.
Promotion will be initially spearheaded by public relations because of its low cost, and initially their marketing campaigns will be out door and print media this apart their focus is on POS product merchandising. Once the company begins to increase cash flow to an acceptable figure, outlets that achieve the highest figures in sales will receive 2% discounts in order to encourage their increasing sales.
Their main competitor is Swiss Army Watches and their next closest competitor is Tag Heuer. Both of these firms have strong brand equity, but there is room in this market for a new company as brand loyalty is not high on potential consumers' reasons for purchasing. Growth will be supported by cash flow and owner investment. This will keep initial growth slow and manageable, and will allow the management to have complete control over the firm. Key Financial Indicators are Keeping average collection days at 60 days or below is very important as this could become a major cause of cash flow problems for the first year. And Gross margins must remain above 55%.
Grandeur heavily depending on their watches manufacturing quality, market product visibility, retailer product push and controlled marketing spend could achieve their estimated target with market acceptance in the first year and there on gained expected market equity from the second year there by allowing the promoters to expand the new markets occupancy.
End point – To fortify their idea the partners of this startup have done a market research on North America watch market and built a moderate business plan for execution. For cost savings they have opted for direct selling by the other two partners of the company in California, advertisement is limited to only Brand /product brochures in the selected outlets and offering incentives on shop keepers on sales turnovers. Executing their plan perfect they were able to break even in the second year. For success of any business enterprise, need is the “idea” based on their domain expertise and a strong business plan to execute. If this is followed every startup will grow to be a mega brand marketer.
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