Electric Bicycle Manufacturing Business Plan

This assignment delves into the potential of starting an electric bicycle manufacturing company. It involves analyzing the market landscape using PESTEL, Porter's Five Forces, and SWOT frameworks. The document further outlines a comprehensive business plan with a Gantt chart illustrating the project timeline and critical path method.

Business
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Table of Contents
INTRODUCTION ...............................................................................................................................3
MARKET ANALYSIS AND STRATEGIES.......................................................................................3
ANNUAL FINANCIAL STATEMENTS/ ANNUAL CASH FORECASTING..................................5
COST AND BREAK EVEN ANALYSIS............................................................................................6
SWOT ANALYSIS...............................................................................................................................7
GANTT CHART..................................................................................................................................8
REFERENCES...................................................................................................................................10
Index of Tables
Table 1: Projections of various variable factors...................................................................................6
Table 2: Projected Income statements for two proceeding years.........................................................7
Table 3: Projected Balance Sheet for proceeding two years................................................................8
Table 4: Cost analysis for the upcoming two years..............................................................................8
Table 5: Calculation of Break-even point in sales units 8
Table 6: Sequence of activities and time duration..............................................................................10
Illustration Index
Illustration 1: Porter's Five Forces Model 5
Illustration 2: Swot Analysis................................................................................................................9
Illustration 3: Gantt Chart for the project...........................................................................................10
Illustration 4: Critical Path Method....................................................................................................10
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INTRODUCTION
Planning is the most effective tool and a staircase towards success. Therefore business plans
are promoted to picturing clearly the goals of the business, procedures or steps to attain them and
reasons for attainment. Every business is driven by profit motive. Small manufacturing business
involved in the manufacturing of bicycles with a strong financial base aspiring towards growth and
desiring to introduce an innovative product into the market. Launching of electronic bicycles into
market requires lots of studies and research about the market and available resources and its
effective utilisation which is demonstrated by the report following. Since the company has loyal
staff and customer base which will contribute to the innovating new product. Further investment
appraisal techniques will be adopted to analyse whether to prefer in-house designing or outsourcing
the same to experts. Moreover, new product will require the additional staff which is highly skilled
in addition to an advertising campaign for target customers and wider reach to market.
MARKET ANALYSIS AND STRATEGIES
Marketing strategy is driven by the motive of gaining high market share with increased revenue
and profitability. Market-oriented strategies are framed keeping in mind all the short term and long
term operations related to marketing(Viorica, Sorin and Cristina, 2013).
Market Analysis
The marketing plan includes evaluation and study of various factors in the market and formulation
of strategies to deals with the same. For conducting the market analysis, Porter's five forces model
is applied(Rachet, 2014).
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Illustration 1: Porter's Five forces model
(Source : Scrum and Porter's Five Forces, 2016)

 Competitive Rivalry: Company will face stiff competition from the existing players such as
Atlas, hero cycles and Hercules which have a strong customer base in the market. These
companies spend huge amounts of product promotion and innovation to attract customers.
 Supplier Power: Bargaining powers of the suppliers is moderate in bicycle industry as there
are limited number of the manufacturer. Suppliers of raw material required such as rubber,
tyre, battery and metal industry.
 Consumer Power: Consumers are rationally aware of the prices range as there are only 3-
45 companies popular in the bicycle industry. Therefore they can easily switch over from
one to another.
 The threat of new entrant: Potential threats from domestic companies existing in
motorbike manufacturing may enter the bicycle market. Also foreign entrants with better
technology and eco-friendly techniques.
 Threat Of Substitution: Further threat from substitution is very high. As various sport solar
powered or electric two wheeler bikes may hamper the market. Moreover, fitness clubs or
geared cycles or automatic exercise equipment have the calibre to replace bicycles.
Marketing Strategies
The focus of strategies is based on maximising profits through gaining competitive
advantages in the market. Advertising is the major area where attention is placed to promote the
product and grab the attraction of customers. Advertising through booking slots on new channels is
the cheap and effective source(Mullins, 2012). In addition to brochures in newspaper, internet
should be used beneficially. Social media needs to be explored for promoting the electric bicycles
by catchy slogans and spreading health and fitness consciousness among citizens. It deals with
product designing, customer targeting, branding, pricing and considering publicity of
product(McDonald, 2013).
In-house manufacturing will require an additional cost on research and designing and adoption of
expensive technology. On the contrary, if the business opts for outsourcing the design work to the
experts it will be benefited in two ways. Firstly, the agency will design the best framework because
of its experience and the expertise(Chwolka and Raith, 2012). Secondly, the initial cost for
designing will be very high if the company perform the task on its own. Therefore it should be
given to experts to prepare the detailed design and its full proof projection which will support the
manufacturing process of the company.
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ANNUAL FINANCIAL STATEMENTS/ ANNUAL CASH FORECASTING
Table 1: Projections of various variable factors.
Year 2016 Year 2017
Particulars Amount in £ Amount in £
No of units projected to be sold 485 600
Selling price per unit 540 540
Cost per unit 410 430
Assumptions :
1: No of units sold of electric bicycles gradually in the second year as the product will become
familiar in the market. However, selling price will remain same for both years.
2: Cost per unit is increasing at 5% on inflation rates.
Table 2: Projected Income statements for two proceeding years.
2017 2018
Particulars Amount in £ Amount in £
Revenue 261900 324000
Less: Cost of goods sold 198850 258000
Gross profit 63050 66000
Expenses
Marketing expenses 7000 2000
Administration expenses 2100 2205
Finance cost 2500 2625
Insurance 950 998
Rent 800 840
Salary and wages 25000 26250
Depreciation 22000 23100
Other operating expenses 2730 2867
Sum of expenses 63080 60884
PBIT -30 5116
Tax 0 1535
Net profit -30 3581
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2017 2018
Marketing expenses 2.67% 0.62%
Administration expenses 0.80% 0.68%
Finance cost 0.95% 0.81%
Insurance 0.36% 0.31%
Rent 0.31% 0.26%
Salary and wages 9.55% 8.10%
Depreciation 8.40% 7.13%
Other operating expenses 1.04% 0.88%
Assumptions :
1. Huge Marketing expenses will be incurred at the time of launching the product on
advertising and testing performed however will reduce in next year.
2. Salary in wages will increase from current year due to the hiring of skilled workers.
3. Depreciation will be increased from current year due to additional machinery purchased for
supporting the production.
4. All the other expenses will be growing at the rate of 5% in respect to the inflation rate.
Table 3: Projected Balance Sheet for proceeding two years
Year 2016 Year 2017 Year 2016 Year 2017
Liabilities Amount in £ Amount in £ Assets Amount in £ Amount in £
Equity Share Capital 35300 35300 Goodwill 10000 10000
Reserves 2500 5000 Furniture 25000 25500
Long term debt 25000 28000 Plant and Machinery 20000 25000
Provision for bad debts 200 210 Investment 5000 4200
Trade Payables 4100 4590 Trade receivables 4800 5900
Cash in hand 2300 2500
67100 73100 67100 73100
Assumptions:
1. There is a significant increase in long-term debt to support the production of the innovative
bicycle.
2. A further increase reserves due to rise in profits.
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3. The increase in Plant and machinery is due to the installation of technology.
COST AND BREAK EVEN ANALYSIS
Table 4: Cost analysis for the upcoming two years
Year 2016 Year 2017
Particulars Amount in £ Amount in £
Sales 261900 324000
Less: COGS 198850 258000
Less: Variable Cost
Marketing expenses 7000 2000
Administration expenses 2100 2205
Salary and wages 25000 26250
Other operating expenses 2730 2866.5
Contribution 26220 32678.5
Less: Fixed costs
Finance cost 2500 2625
Insurance 950 997.5
Rent 800 840
Depreciation 22000 23100
Net Operating Profit -30 5116
Cost analysis of the two years depicts that there is significant shift or reduction in the marketing
expenses due to initial product launch in the first year. Further depreciation has increased due to
additional machinery purchased to support the production of electric bicycles. Other operating
expenses include various commission and electricity which varies in the proportion of production
units.
Table 5: Calculation of Break-even point in sales units
Year 2016 Year 2017
Particulars Amount in £ Amount in £
Fixed cost 26250 27562.5
Contribution per unit (Total contribution/no. Of Units) 54.06 54.46
Break-even Point (Fixed Cost/Contribution per unit) 486 506
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Break even analysis refers to the no of units sold which covers the fixed cost of the company. In the
year 2016 company will have to sale 486 units to cover the fixed costs whereas in the year 2017 it
will have to make sales of 506 units in order to cover the fixed costs.
SWOT ANALYSIS
SWOT analysis refers to the analysis of internal strength, weakness, threats and opportunities to the
company(Yuan, 2013).
 Strengths: Strengths are the uniqueness or core competencies possessed by the companies.
Bicycle company has the electric bicycle which is almost energy free and also does not need
driving licences.
 Weakness: However bicycle manufacture face the challenge of high prices, and also
seasonability of business and limited target customers are the weakness of the company.
 Opportunity: Since the awareness about eco-friendly means of commuting is rising
opportunity can be grabbed. Moreover, the increased trend of health consciousness will
generate the demand.
 Threat: Company will face a threat from online bicycle sellers and also large discount
chains as pressure will increase from mass merchants.
GANTT CHART
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Illustration 2: Swot Analysis
Source: Using a SWOT to enhance personal learning, 2015.

Table 6: Sequence of activities and time duration
Activities Duration in weeks Preceding activity
1 Designing the bicycle 6
2 Staffing 4 1
3 Arranging Finance 2 1,2
4 Manufacturing 20 2,3
5 Packaging 5 2,4
6 Marketing 3 1,3
Gantt chart depicts the detailed schedule of the project in series. It states the sequence of the project
and relation between activities regarding preceding or succeeding(Grünig and Kühn, 2015). It also
shows the start and terminal activity of the project.
Critical Path of the Project = 1-2-3-4-5 = 37 weeks
Critical path method evaluates the maximum time by which project can be delayed. Any delay in
the activity on the critical path will delay the entire project and increase the cost and time of
project(Chadwick, 2013). Bicycle company will take 37 weeks maximum to complete all the
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Illustration 3: Gantt Chart for the project
Illustration 4: Critical Path Method

activities concerned with electric bicycles.
From the above analysis and study it can be concluded that electric manufacturing of
bicycles will be a profitable project in long run and company will p[roper due to this.
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