Business Plan: Auckland Tyre Manufacturing Limited

This business plan is for a tyre manufacturing company in Auckland, New Zealand. It includes a situation analysis, SWOT analysis, market segmentation, financial projections, and more.

Business Plan: Auckland Tyre Manufacturing Limited
1

Executive summary
This business plan is for a business organization that is operating under the manufacturing
industry (tyre manufacturing) in New Zealand. Proposed name of the organization is
Auckland Tyre Manufacturing Company as business operations will take place in Auckland.
This organization will be indulged in manufacturing, retail and wholesale selling of Tyres.
Mission, vision and value statement of Auckland Tyre Manufacturing Company includes
capturing the mass market and developing and implementing long terms strategies. For the
success of business political factor, environmental factor and technological factors are the
most important factors that need to be considered. Auckland Tyre Manufacturing Company
needs to work on its supply chain management. On the other hand, there are opportunities
like growth in sales of vehicles and scope of good quality tyres. According to this business
plan personal selling, social media marketing and TV advertisement will be used for
marketing the product of Auckland Tyre Manufacturing Company i.e. tyres. All P’s i.e. price,
place, promotion, positioning, product, packaging and people are taken into consideration on
the basis of SWOT analysis conducted for Auckland Tyre Manufacturing Company.
Different aspects of market and market positioning are discussed in this report. In addition to
that this report has also calculated the initial cost of investment and projected profit/ loss for
the next five financial years. On the basis of this analysis, it can be said that this project will
be financially viable. According to projected cash flow analysis, there are profits in all 5
years.
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Contents
Executive summary....................................................................................................................2
Contents......................................................................................................................................3
Business concept........................................................................................................................4
Situation analysis.......................................................................................................................5
External considerations..........................................................................................................5
Internal considerations............................................................................................................7
SWOT analysis.......................................................................................................................8
Strategy....................................................................................................................................10
Market segmentation............................................................................................................10
Market Positioning...............................................................................................................10
Market positioning using 7P's of marketing.........................................................................11
Financial Projection.................................................................................................................14
Set up initial capitalisation...................................................................................................14
Cash flow forecast................................................................................................................14
Reference..................................................................................................................................16
Appendices...............................................................................................................................18
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Business concept
The main objective of preparing these business plans to evaluate the operational and financial
viability of a project before starting the development of business. This is due to the fact that
starting a business organization required different resources including financial resources.
Financial resources will be extracted from different sources of financing such as debt sources
and equity finance. Any business organization or individual will ask for a business plan
before making an investment in the organization.
The first step that is taken in the preparation of the business plan is evaluating vision,
mission, strategies, and values for the proposed business. This type of strategy helps the
business organization to provide a direction to business operations through which
profitability and productivity can be achieved (Kenny, 2014). Development of organizational
culture is also an important aspect of developing vision and mission statements. Following
will be the vision, mission, and values of the company.
Vision- Vision of the organization can be defined as the long-term objectives of the company
which will help in direction to the business operations in proposed business. The primary
vision of this organization would be to provide quality goods and services to customers.
According to the vision statement of the company primary objective of the organization
would be to maintain the quality of product and services (Breuer & Lüdeke-Freund, 2017).
Maintaining quality is one of the most critical factors that can result in the acquisition of a
market share in a limited period of time.
Mission statement- Mission statement can be defined as the statement that shows strategies
adopted by the organization for the achievement of a vision. The mission statement of this
organization would be to using cutting edge technology process and practices for the
development of high quality and cost-efficient Tyre solutions. In addition to that, another
important mission of this organization is profit and wealth maximization.
Values- Development of effective and efficient organizational culture will be one of the
primary values of this organization. Integrity and honesty will be primary factors that will be
included in rules and regulations developed for establishing such organizational culture
(Campbell & Tawadey, 2016).
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Situation analysis
Situation analysis can be defined as a combination of strategies used for analysing the
business environment in which a business organization is operating. This type of analysis in
ensuring that changes are made in business operation in accordance with the change in
business environment. There are different external factors that have a direct negative or
positive impact on business operations and it is important to analyse these factors before
entering into any business industry (Shenkar, Luo & Chi, 2014). Management of the
company would be able to mitigate negative factors and take advantage of positive factors if
proper situation analysis is conducted before business starting a business.
External considerations
Macro-environmental analysis
The macro environment can be defined as the external business environment that is affecting
business operations where is microenvironment can be defined as the internal environment of
an organization. The situation analysis will help in undertaking macro-environment analysis
show that positive and negative factors emitted by the business environment can be analysed.
Pestle analysis strategy will be used for evaluating macro environmental factors.
Political environment- Political environment of New Zealand is stable as the general election
is conducted once every three financial years. The constant change in political organizations
in-charge of making rules and regulations can have a significant negative impact on the
business environment. All political organizations in New Zealand are focused on developing
business environment sector, therefore, it can be said that changes in political organizations
will not affect rules and regulations that are governing tyre manufacturing industry
(Bloomfield, 2017).
Economic environment- Economic environment can be best described with the help of the
annual growth rate in GDP. The average annual growth rate of New Zealand is 3% which is a
good GDP rate for a growing economy. On the basis of GDP growth rate can be said that the
economy of the country is moving in the right direction. The overall unemployment rate in
New Zealand has also decreased from 4.5 % to 4.4% in the year 2018. A significant change
in the unemployment rate can be identified in the last three financial year is as this date to
was 5.2 % in the year 2015 which has reduced to 4.4% in 2018. On an overall evaluation, it
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can be said that the economic condition of New Zealand is stable and it will provide business
opportunities for new business organizations (Barlow, Jayasuriya & Tan, 2014).
Social environment
The social environment of a country can be defined as the lifestyle of people living in a
particular country. With the help of developing economic environment to the social
environment is also growing rapidly. The lifestyle of people is improving with the reduced
unemployment rate which will help in the creation of new customers on a regular basis.
Technological environment
Advanced technology is available in New Zealand with relation to the production and
manufacturing process. In addition to that, there are no restrictions on business organizations
to import machines and equipment from other countries. Therefore Auckland Tyre
Manufacturing Limited would not have any problem in the use of latest and advanced
technology for the production process. IT sector of New Zealand is also developing
effectively which will help in the use of information technology for the management of
different business operations (Gupta, Narayanamurthy & Acharya, 2018).
Legal environment- Some of the most important factors that affect business operations are
generated by the legal environment as there are various rules and regulations that are required
to be followed by business organizations all across the globe. Regulatory authorities of New
Zealand have also developed the various legislatures applicable to business organizations.
Legal environment applicable to the Tyre manufacturing industry is designed in such a
manner that a competitive environment can be developed to help customers in the purchase of
quality material at reasonable prices. There are no restrictions on entry and exit in the Tyre
manufacturing industry which increases the level of competition.
Environmental factors- There are various rules and regulations applied by the government of
New Zealand that helps in the protection of the environment. These rules and regulations are
required to be followed by every business organization (Hirata, Kondo & Ozawa, 2014).
Industry profile
It is expected that this market will cross 1 million dollar by the year 2020 due to the constant
increase in the sale of vehicles over a period of time. There are different Infrastructure
Projects initiated by the government of New Zealand such as Waite Mata Harbour Crossing
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and Puhoi Wellsford which clearly indicate that there is a scope of development for business
organizations operating in the Tyre manufacturing industry.
Business organization in this industry can be divided into three major segments i.e.
manufacturers of tyres for two-wheelers and cars, manufacturer for light commercial vehicle
and manufacturer for heavy commercial vehicles (Najafi, Flintsch & Medina, 2017). Business
organization proposed Indus business plan will operate in the manufacturing of Tyre for two-
wheelers, cars, and light commercial vehicles. It is expected that this organization will
operate in this market for the initial 5 years and if profitability is maintained over the period
of five years then the proposal will be made to enter in the heavy commercial vehicle market.
Competitor analysis
An overall analysis it can be said that the Tyre manufacturing industry in New Zealand is
highly competitive there is a number of business organizations that are already established in
this market. After conducting a competitive analysis it can be said that the primary
competitor of the proposed organization would be Bridgestone, Firestone, Good Year and
Michelin (Wadud, 2017). Management of the company is required to conduct an overall
analysis of strategies adopted by this Organization in order to compete with them effectively.
Internal considerations
The legal form of business
There are different legal forms in which a business organization can be established such as
proprietorship, corporate structure, partnership, one Person Company, etc. Each of this
structure of business operation has its own advantages and disadvantages. If a business
organization wants to start to business operations on a large scale then it is suggested that
legal form used as the business structure should be a corporate structure (Schell, 2018). In the
given a business proposal, it is proposed that the manufacturing unit is required to be
established therefore it is suggested that the corporate sector should be used in the given
scenario. Prospects of growth and development in corporate structure are very high there are
different schemes and tax rebates available to business organizations established as a
corporate structure.
Structure and culture
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Organizational structure- organizational structure can be defined as the manner in which
hierarchy is developed by business organization for distribution of accountability and
responsibility. There is various type of organizational structure that can be adopted by a
business organization and such as functional structure, divisional structure, Line
organizational structure, team-based organizational structure, etc. Majority of large-scale
organizations are using functional organizational structure in which roles and responsibilities
are divided on the basis of different types of a function undertaken by a business organization
such as accounting, marketing, manufacturing, financing, research, and development, etc.
(Cavusgil, Knight, Riesenberger, Rammal & Rose, 2014). This structure should be used in a
given scenario as it will help in the appointment of expert employees.
Organizational culture- Competitive organizational culture should be developed in this
organization as Auckland Tyre Manufacturing limited will be operating in a highly
competitive market.
Resources and capabilities required
Following resources will be required for starting a business-
Financial resources- Establishment of the manufacturing unit and the hiring of employees for
working will be dependent on the availability of financial resources. The financial plan will
be discussed in a later part of this business plan.
Human resources- Efficiency of maintaining different resources is dependent on the
efficiency of human resources. For example, the use of technology is dependent on the skills
and experience of human resources to use such technology. Therefore it can be said that one
of the primary resource requirement in the organization will be related to human resources
(Cascio, 2015).
Technological resources- the mission of this organization is to provide advanced technology
Tyre solutions. Therefore the use of the latest technology is essential for the purpose of
manufacturing and maintaining the quality of products.
SWOT analysis
SWOT analysis helps in identification of strength weakness opportunities and threats in a
particular business organization. It can be defined as a combination of internal and external
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analysis strategies as strength and weaknesses identify internal factors whereas opportunities
and threats identify external factors.
Strengths
 The company would be new in the market and can analyse strategies of other business
organizations to operate effectively (Hatten, 2015).
 There is no restriction on entry and exit in this market which will help in easy business
development.
Weaknesses
 Supply chain management system of the organization is not too very efficient as it is new
in the industry (Burns & Dewhurst, 2016).
 Management would be required to find suppliers for product and services in a Limited
period of time.
Opportunities
 All the business organizations are providing similar product and services; therefore
market share can be increased effectively by providing good quality at lower prices.
 Sale of vehicles is increasing constantly over the years and it will increase the number of
customers significantly.
Threats
 Level of competition in this market is the primary threat to business operations.
On an overall an internal and external analysis that can be said that the main problem that
might be faced by the business organization in this industry is competition from other
organizations. Competitive positioning and strategies will be prepared during the initial
phases. For example, a penetration pricing strategy will be used during the initial stages
which provide the goods and services at a price lower than competitors for achieving the
desired market share in a limited period of time.
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Strategy
Market segmentation
Market segmentation can be defined as the process of dividing different target customers on
the basis of their similar characteristics. Needs and requirements of different customers can
be different from each other. For example, the requirements of a transportation company
from a Tyre manufacturer will be totally different as compared to an individual customer.
Market segmentation is one of the most essential strategies of marketing management as it
helps in preparing advertisement and marketing strategies. Target customers of this
organization will be divided into two following segments-
Individual customers- Majority of customers in this market segment will be owners of bikes,
cars and lightweight commercial vehicles. The marketing strategy used for this category of
the market segment would be social media marketing and TV advertisements (Camilleri,
2018). Social media marketing will help in reaching a large number of customers within a
limited budget whereas celebrity endorsements will be used for the purpose of a TV
advertisement.
Corporate customers- the majority of revenue will be generated from this category of
customer i.e. corporate customers such as transportation companies or car manufacturing
units. A major focus of marketing strategies should be on the acquisition of corporate
customers as more than 60% of revenue is expected to be generated from corporate
customers. Personal selling strategy should be used for getting business of corporate
customers. In addition to that different discount offers and incentives can be provided to
corporate customers as a marketing strategy (Andaleeb, 2016).
Market Positioning
Market positioning can be defined as the ability of a business organization to influence the
perception of customer towards the product and services offered by them. It can be said that
Market Positioning helps in increasing sales and number of customers. The primary objective
of market positioning strategy establishes a brand image in order to increase sales of product
and services offered by a particular organization. Following will be the market positioning
strategies used by Auckland Tyre Manufacturing Limited-
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Customer profile- Customer profile will be developed by the organization with the help of
market segmentation. Management of the company has already divided the target customers
into two categories i.e. individual customers and corporate customers (Chernev, 2018).
Marketing strategies will be developed on the basis of the customer profile.
Gap fulfilment- Gap fulfilment strategy helps in ensuring that the needs and requirements of
customers are satisfied by the product and services. Management of the company would be
required to conduct market research in order to identify the needs and requirements of
customer along with the services provided to by current competitors. The gap between needs
and requirements of customer and services provided by competitors will be analysed and
changes in business organization's product and services will be decided accordingly.
Product price strategy- In this type of strategic management of the company tries to keep
selling price of product and services lower as compared to competitors during the initial
stages of operation so that larger market share can be attained. This type of strategy will be
very effective in a competitive market such as Tyre manufacturing and selling industry of
New Zealand (Urde & Koch, 2014). This is strategy is also very useful while entering or
diversifying into a new market.
Product quality strategy- Primary objective of this strategy is to make sure that quality
provided by a particular business organization is superior as compared to their competitors.
One factor that should be considered in this strategy is that the price of product and services
should not be very high as compared to competitors. The main focus of marketing strategies
in this type of Market Positioning strategy should be on communicating the advantages of
using high-quality product and services.
Management of Auckland Tyre manufacturing Limited will be using a combination of
product pricing strategy and product quality strategy to maintain an effective balance between
price and quality of products and services.
Market positioning using 7P's of marketing
Market positioning in a competitive environment can also be developed with the help of
focusing on the following seven factors-
The product-the Main objective of this factor is to evaluate whether the product and services
offered by the company are in demand or not. It is already identified that the level of
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competition in the Tyre manufacturing industry of New Zealand is very high. In addition to
that, it is also identified that two over the period of time sale of vehicles is also increasing,
therefore it can be said that the market for Tyre industry will be increasing in the future
(Khan, 2014).
Prices- Pricing strategy is also developed in the above business management plan i.e.
penetration pricing strategy. According to this strategy prices of product and services during
the initial stages of business operation will be lower as compared to other competitors in the
market. The main objective of this strategy is to ensure that management is able to acquire a
significant portion of market share during the first three business operation years. An
important factor that is considered while reducing the price of a product and services is to
maintain an effective level of quality in product and services. Maintaining quality is most
essential for achieving long term goals and objectives (Hashim, N., & Hamzah, 2014).
Place- This factor will help in finding location at which the business operations will be
conducted. In the given scenario business operations of manufacturing and selling will be
conducted in Auckland as there are various other manufacturing units established in this
location. This will help in getting suppliers and mode of transportation easily as other
business organizations are operating in this area for a long period of time.
Promotion- Promotion strategies have been prepared in accordance with market
segmentation. Management of the company has divided customers into two major categories
i.e. individual customers and corporate customers. The marketing strategy used for individual
customers will be online marketing and TV Advertisement. On the other hand, personal sales
and advertisement will be used for attracting corporate customers. In addition to that discount
offers and another incentive will also be used for corporate customers.
Packaging- Packaging can be defined as the visual representation of the product under
consideration. A major focus of the business organization would not be on packaging factor
as none of the other business organizations is using packaging as a marketing strategy.
Positioning- Positioning strategy can be defined as the manner in which management is able
to influence the behaviour of customers in a particular market. Advertisement strategies will
be used for the purpose of the positioning of a product and services among customers. In
addition to that combination of strategies like quality strategy, pricing strategy, marketing
plans, etc. (Hashim & Hamzah, 2014) would also be used to influence customers for
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purchasing product and services of Auckland Tyre Manufacturing Limited. The main focus
of the organization will be on conducting gap analysis i.e. identifying the gap between needs
and requirements of the company and product and services offered by all the organizations in
the market. Additional services will be provided to fulfil the expectation of customers in this
market.
People- Motivation of human resources employed by the organization will also be an
effective strategy for increasing and boosting the sales of the company on a regular basis.
Majority of operations in the organization will be undertaken by human resources and if
management is not able to maintain the efficiency of these resources there is a probability
that management operations will not be undertaken at 100% capacity. Management strategies
like motivation leadership and reward strategy will be used to increase the efficiency of
human resources (Londhe, 2014). Structured selection and recruitment policies will also help
in the recruitment of skilled, professional and experienced employees.
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Financial Projection
Set up initial capitalisation
Statement showing initial cost
Particular
Amount
($)
Cost of equipment 250000
Cost of machinery 500000
Initial Working capital 125000
Furniture and fixture 75000
Total initial investment cost 950000
Cash flow forecast
Statement of expected cash flow from proposed business-
Particular 2020 2021 2022 2023 2024
Sales 1800000 1980000 2178000 2613600 3267000
Cost of production 720000 792000 871200 1045440 1306800
Gross Profit 1080000 1188000 1306800 1568160 1960200
Marketing expense 180000 198000 217800 261360 326700
Commission 90000 99000 108900 130680 163350
Transportation cost 108000 118800 130680 156816 196020
Fixed salary 30000 30000 30000 30000 30000
Rent 65000 65000 65000 65000 65000
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Total expenses 473000 510800 552380 643856 781070
Net profit 607000 677200 754420 924304 1179130
Net profits of the proposed business are increasing over the next five years, therefore it can
be said that this business will be financially viable (McKeever, 2016).
Statement showing break even sales-
Particular 2020 2021 2022 2023 2024
Sales 1800000 1980000 2178000 2613600 3267000
Variable cost 1098000 1207800 1328580 1594296 1992870
Contribution 702000 772200 849420 1019304 1274130
Contribution
margin (A) 39 39 39 39 39
Fixed cost (B) 95000 95000 95000 95000 95000
Break even
sales (B/A*100) 243589.7 243589.7
243589.
7 243589.7 243589.7
It can be said that break-even sales are very high as compared to actual expected sales,
therefore it can be said that management of the company would be able to attain profitability
over the next 5 financial years (Kepczynski, Jandhyala, Sankaran & Dimofte, 2018).
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Appendices
Evidences of market/ industry research
GDP growth rate-
Source- https://www.statista.com/statistics/375262/gross-domestic-product-gdp-growth-rate-in-
new-zealand/
Unemployment rate-
Source- https://www.stats.govt.nz/indicators/unemployment-rate?
gclid=Cj0KCQjwhuvlBRCeARIsAM720Ho3cn_ex7hNrYcKg8ixa-
n1qBPXVpwgKuprCRbTFrO6JxUewtjAp9AaAkWdEALw_wcB
Evidence of target customer
Trend in tyre industry-
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Source- https://www.techsciresearch.com/report/new-zealand-tire-market/3762.html
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