Assignment a pricing strategy is competitive pricing. This

Assignment 1 – Unit 9 – Business
Planning

P1

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What is a
business plan?

A business
plan is a document used to varying extents by all businesses that allows a
business to show people such as potential investors their plans for the future.

They allow a
business to do many things. These include:

·        
Checking
their progression as a business, ensuring they are staying true to their
original objectives throughout the growth of the company. This is done via a
lot of differing comparability tests, such as simply checking against their
daily or even monthly quotas given by the owners or managers within the
business.

·        
Ensuring
they are on track, meeting their targets and objectives in a timely manner, and
then allowing them to make any necessary changes to ensure they are met.

·        
Pleasing
investors making them more likely to invest their own money into your business
venture, because it makes it a more secure investment, as the people being
given the money have evidence of a plan of the company getting the investor
his/her money back plus whatever interest the investor gives.

A business plan consists of:

·        
Objectives
– These are the places a business wants to reach in order to be used as a
measure of the company’s progress, or lack of depending on the situation. An
example of this in use is in the company Nestle, where to check their progress,
they are set daily quota objectives to meet, and they can vary the speed and
strain put on their machinery depending if they need more or less product to be
manufactured in the given amount of time.

·        
Strategies
– These are the variety of methods the business is going to use in order to
meet its objectives. These could include pricing strategies, marketing
strategies and even growth strategies. An example of a pricing strategy is
competitive pricing. This is a strategy where a company analyses its
competitors pricing, and sets its own prices accordingly. Also, they could
adopt cost plus pricing, where you simply add an extra percentage onto the
production costs of the product/service, and then guarantee yourself a set
profit margin. This can be varied depending on what customers are willing to
pay, which can, depending on the elasticity of the product, correlate with the
consumer demand for the product.

·        
A
layout of the market – This is the evidence the business owners will use the
show an unsaturated gap located in the market that they are going to try and
penetrate in order to then saturate and hence, make a profit and try to ensure
demand and likely, success. This is done by creating a market map, which is
where all of the products being cold by the companies close competition is
placed on a grid, scoring price against quality, leaving ‘gaps’ where there is
no completion. However, in this system there is almost nearly always a gap
located at high quality and low price, purely due to the positive correlation
between price of production and quality, hence meaning that they would have to
charge the consumer a higher price for the product in order to make a clear
profit.

·        
Financial
Information – This is all of the information on the company’s cash flow. This
includes the companies forecasted spending’s/expenditures, income from sales,
income from other investors and even projected breakeven amounts required for
the company to be successful. This includes a breakeven forecast, which is a
piece of data created by comparing the variable costs, fixed costs, and the
profit from every product on a graph, and where the profit being made covers
all of the costs of the production of the product, then they are said to be
“breaking even”. This is a vital piece of information for investors such as
banks, because it shows the target the company has to meet in order to make a
profit, which is then usually followed by an explanation of how they are going
to ensure this, making the investor trust in the company and, therefore want to
invest in it.

·        
Operations
– This is the day to day running of the company, that is used to show to
investors how they are going to actually produce, trade and sell their product
or service to their customers. This could include the potential for
outsourcing, where they sell the production of the company’s products to a
different company, lowering the stress on their own manufacturing departments,
and also saving them on costs, as they wouldn’t have to go and purchase the
required machinery and staff required for production if they can get someone
else to do it. This is good in the short term, however as you use it for longer
periods of time, it becomes less and less cost effective.

Resources:

In a business plan, there is a wide multitude of resources
that are significant to the success of the company, and therefore have to be
maintained very precisely. These are critical a company’s survival and success,
as they are the foundation that all of a company’s profitability is built on,
and a lack of control of a company’s resources will almost definitely end in
the failure of the company. These include:

·        
Physical
Resources – These are resources that are actually put to use by the company, in
making their products/services. This includes Sub categories such as employees,
equipment, suppliers, production processes and distribution channels (who
you’re going to sell the product/service to). 
A failure to manage these resources may result in a lack of staff to
maintain or increase production to the potentially increasing demand, meaning
the company is not operating at its capacity.

·        
Financial
Resources – These are all of the companies resources related to money, and how
the money is coming in and out if the business, potentially allowing for better
use and less wastage of their capital. This includes all financial aspects of
the company, such as the companies cash balances, Bank overdraft, loans,
shareholders, working capital (assets), and creditors. However it is also the
company’s ability to be able to raise funds or even decrease costs through
means such as the sale of the product/service itself and building relations
between the business and its suppliers in order to use economies of scale to
get a better, bulk price. A lack of control of these resources could result in
bankruptcy for the company, where they just run out of money to be able to
maintain their production and, therefore, they cannot operate and must end the
company.

·        
Human
Resources – These are resources that directly affect people within the
business. This includes the number of staff currently employed by the company,
rate of staff turnover, standard of the training given to employees, employee
motivation management, and even the management of human resources that includes
changes the organisation can make such as a new location and/or product and
sources of human resources such as outsourcing (giving the production demand to
another company). A failure to maintain control of these resources could result
in industrial action, where employees begin to strike, leaving the company with
little to no production capabilities until the employees get what they desire.

·        
Intangible
Resources – This includes the non-physical resources that can be managed and
maintained by the company, such as morale, reputation, motivation and brand
names. A good example of brand names being a valuable resources is Nestles
purchasing of Rowntree’s to own the rights to the name KitKat, even though they
could have quite easily made an equally tasty product without doing so, however
they purely wanted to be able to sell them named KitKats, as the name already
has its own loyal customer base, and therefore guaranteed to make them their
money back. A failure to manage these resources effectively could result in
customers wanting to go and purchase their products from the companies
competition, who may have a better reputation, and could also cause brands
value to diminish, resulting again in les people wanting to purchase the company’s
production, which correlates negatively with the profits the company would
make, decreasing them accordingly.

 

 

 

 

P 2

 

What
are corporate expectations?

 

Corporate
expectations are the things that a company expects from its employees when fulfilling
their jobs. These include:

 

·        
A
sense of responsibility to be held by the business, so that the company takes
blame where blame is due, from things such as not getting their quotas met in a
timely manner. This promotes people to strive to be better after learning from
their mistakes, developing their workforce as people, not just as employees,
giving them character building skills that are transferable to other jobs.

·        
A
persona of professionalism, in regards to how they intake information and hence
manage their operations and decisions appropriately, ensuring they maintain
their ability to reach objectives. This ensues a feeling to the customers, of
how nice the place is to purchase from with their staff being so professional,
increasing the likelihood of said customer repeating purchases from the
company, therefore increasing sales, and increasing profits, making the company
more successful.

·        
A
good enthusiasm regarding teamwork and being able to work as a member of a team
effectively, as this is also transferable skill, and is applicable to a wide
range of jobs available, and also massively increases the productivity and
efficiency of the team, decreasing the time it takes to make a product, and
therefore decreasing labour cost per unit, increasing profit per unit, and
therefore decreasing the number of staff required and increasing the amount of
profit margin the company makes by reducing costs.

·        
Performing
your task to your very best ability and giving a great customer service
throughout. This is done to try and gain repeat purchases from customers, and
can range from just being polite and not swearing, to carrying the customer
through every single stage of the purchasing process making it as easy as
possible for them to buy from your company, showing great customer care and
attention throughout.

·        
A
very open and talkative persona, promoting them to listen to other people’s
thoughts and feelings on/about work and to trust in others as you would want to
be trusted to complete a job well, and fully. This inspires people in in the
workforce to improve and strive for more, adding to the creativity of the
workforce and with a higher demand for responsibility being advertised, then
the company is more likely to give the workforce more promotions, promoting from
internal sources.

·        
A
great sense of respect for yourself and those around you, ensuring you
understand and support members of the workforce and their ideas and feelings,
encouraging them to work harder and to a higher quality, striving to be the
best they can be. This is great for the company as it creates a higher
productivity from their workforce and this therefore, as already stated,
creates a higher profit margin.

 

What is Reputation and Trust?

Reputation and trust are important when a company considers
its customers because its customers are the ones with the power to control the
strength of this. This is also dually because reputation and trust are very
closely linked. This is because, if a customer trusts a product, then they are
likely to purchase from them again, and that therefore builds the company’s
reputation to that customer as they now like that product from the company over
any other, similar products being offered from the company’s competition.

A great example of reputation and trust is Nestle’s
purchasing the KitKat brand. They did this because the brand already had a
great reputation and loyal customer base, which meant they were actually buying
the rights to a product, and all of the loyalty that followed behind, almost
ensuring sales would continue to be as good, if not better because they had a
greater production capacity and a better marketing campaign for the product, to
further increase the reach and strength of the reputation.

In other cases, companies such as Nike could be said as to
have a bad reputation, as they were recently exposed as to have been using
child labour in the production of some of their products. This affected them as
now, nobody wants to purchase from them because they don’t want to be perceived
as to be supporting a company that uses such a cruel, un-ethical form of
labour, and hence supporting the ideology of child labour. They are now
fighting this claim and are correcting their mistakes, recovering their strong
brand image and reputation.

 

 M 1

Tendering –The process a company or organisation goes through to get the best
business to complete a task at possibly the lowest price, by giving the
opportunity to a wide range of companies in order to make them compete against
each other to force them to make good offers. This involves a few different
stages that combine to make the final tender. Firstly, the company gives an
estimate of how much it would cost for the customer to get what they want.
Then, secondly they give a more precise quote for the work, including costs of
materials and labour, however depending on the size of the operation, they will
then give a Tender. This is the final piece of documentation that includes and
overall price for the operation, a breakdown of all of the contribution factors
making the overall price, a time schedule which they will try to adhere to
throughout the project, the terms and conditions for the project, including
factors such as weather constraints and accessibility of materials etc., and
the payment terms for the work, including how the money has to be paid, and who
to, and can be a very larger piece of documentation. At the end of the final
Tender, the company has to get signed acceptance from the customer to the
constrictions and to state that they are clear about what has been agreed.

This is important to a
companies’ business plan because it has to ensure a level of competitiveness is
enforced in everything they do, increasing the quality of the companies
finished product/service as a result. It also dictates the prices the company
can charge for its product to a certain extent, by reducing or decreasing the
profit margin the company takes from every sale, managing this against the
demand and interest for the product/service. Also, a company’s business plan
includes all of their financial planning as well, and therefore the tendering
process is a source of income for the company, and would therefore have to meet
certain criteria such as the level of money they are going to make from the
ordeal.

 

Contracting – The legal documentation created in order for a company to
complete a task, and guarantees specific guidelines and rules the company has
to adhere to throughout, such as time and financial constraints. If not met,
this could result in a potential decrease in pay for the company being
contracted, or even the cancelation of the given contract. This is important to
a companies’ business plan because it is the only thing that the company has as
evidence to bind the customers to paying for their product, and also gives them
the times scales for the production of the product, aiding in the planning and
preparation of the production processes of which they have to state when
planning their business decisions for the year.

Innovation – The process of making new and
improved designs by a company in order to make a better and more desirable
product/service compared to the company’s competition. This is done by taking
an existing product or service, and improving the features of it, such as the
materials it is made of into newer and more suitable and perhaps cheaper
materials in order to make more money per product or the way a job is completed
such as what machinery is used for what tasks. This attracts more customers and
increases the likelihood of sales. This is important to a companies’ business
plan because it allows companies to stay ahead of competition, and therefore
gain interest from customers. It also introduces the opportunity of creating
trends to the company, which can be monetised and would therefore increase the
company’s profits. Also, creativity and innovation lead to higher productivity
due to the increased motivation of employees thanks to the increased creative
freedom it associates. For example, the company Google uses a Laissez Faire
leadership style when it comes to their company’s innovative and creative
departments, allowing employees creative freedom and responsibility, and to
develop the skills they already have, whilst also introducing new ones,
increasing employee productivity.   So to conclude, the winning of contracts is
vital to the success and meeting of a business’s plan because it is the winning
of contracts that gives the company work, and therefore allows them to meet
their financial targets.

Intellectual Rights

Patents – These protect creator’s designs for things like
machines, machine parts and tools. This includes the owners actually drawings
of the designed product and prevents anyone from making one that is deemed too
similar, or operates in a similar way to achieve the same goal, and therefore
if another company wants to use the design, then they have to pay the patent
owner a fee in order to do so, making the owner money.

Copyrights – These protects pieces of text done by people and
businesses such as books, product descriptions and even music, and prevents
people from copying it without having some changes made, or a fee being paid to
the Copyright owner.

Design Registration – This protects a company’s physical products. This
includes aspects such as “Appearance, physical shape, configuration (or how different parts of a
design are arranged together), decoration ” (gov.uk, 2017).

 

Trade Marking – This protects a company’s logos by checking the “words, sounds, logos, colours, or
a combination of any of these” (gov.uk, 2017) for things like Product names, logos
and jingles.

 

All of these aspects combined are
crucial during the tendering process because when the tender is submitted,
people can copy aspects of your tender for their own, potentially making their
tender better than yours by using your own designs against you. To prevent
this, a combination of the Intellectual rights above can be used to protect a
company’s designs, texts and logos. This ensures that a company’s tender cannot
simply be copied by another company, who could potentially win just by offering
a lower price.

They protect by ensuring that if
someone does copy your ideas, and you have it protected, then you can therefore
hire a patent or trademark attorney who will stake your claim to a judge, who
will decide if the product that is being produced by your competition is too
similar, and if it is, you can then sue them for money and then prevent them
from doing it in the future.

Local Impact

The local impact of successful
tendering is that it both directly and indirectly creates jobs for the local
community, possibly increasing the strength of the company’s public reputation
locally. Also, it therefore increases the income to the local council, possibly
increasing the quality and amount of infrastructure in place for the local
community, such as road quality and internet access, and a new, large tendered
process in the community could create public interest about the community,
which could increase the local image to the rest of the country, adding a level
of prestige.

However, there is also some negative
impact to the community such as the increased amount of pollution from all of
the construction and related vehicles, the disruption to the local communities
day to day running from the influx of large vehicles coming in and out,
possibly causing some traffic congestion or even just the increased number of
people in the area, putting strain potentially on the infrastructure currently
in place, decreasing the quality of things like roads, covering them in mud, or
having vehicles that are too heavy use them, or even the strain on services
such as water and power supply to the area.

Statuary
Controls

These are the compulsory laws put in
place by the government and H+S bodies around the world. These include meeting
necessary H+S laws and legislation such as the Health and Safety at Work Act
1974, where employees have to care for the safety of themselves and others
around them. Also, applicable environmental laws have to be abided by as to
minimalize the constructions impact on the local environment, such as the
particulates created form construction, which could damage local ecosystems, so
would have to be controlled and contained.

 

M 2

 

Quality Assurance – This is the minimalizing of ways that the
overall quality of the finished product could be reduced by the processes
during the manufacturing process. This involves processes such as ensuring the
machines used are all to a high standard.

Quality Control – This is checking and testing the finished
product for errors, and then making changes accordingly to prevent it
continuing. This involves checks such as the dimensions and weight of the
finished product.

Quality
control and assurance both massively affect a company’s business plan because a
high quality being guaranteed by a company provokes a sense of trust into the
customer, making them more likely to purchase from them, as they know they
won’t be receiving a product that doesn’t do what it’s designed to, well enough
to the customer’s expectations. Also, quality control directly effects a
company’s financial forecasting, as the amount of returned products due to
imperfections or problems in general would mean that the company has to replace
their product for free, costing them money, and the likely hood of this
happening is drastically reduced by the implementation of methods of assuring a
high quality, such as sensors throughout the production process. Also, having
these sensors at every stage of manufacture allows for problems in the
manufacturing process to be found easily and quickly, making the machines have
less down time if a problem occurs, which would completely halt production for
a potentially long period of time, reducing their output, and therefore the
amount of product they have available to be sold, decreasing sales. This is
massively reduced however by the implementation of the checks at every stage,
as it then allows for the problem to be sourced, and therefore corrected,
easily and quickly.

Also, both
quality control and assurance will can be shown using a BSI kite mark on the
product, which is done to prove to the customer that the product has been
sufficiently tested and checked by the company, inspiring trust in the
customer, as BSI is a widely recognised and trusted institute.

They also
however affect a company’s corporate expectations, as they massively effect the
responsibilities placed on employees. For example, they would mean that
employees have to pay much more attention to detail as to ensure a higher
quality throughout production, and reduce the possibility of human error in any
aspect of manufacture. Also however, it places a duty to report any processes
or problems that could be potentially reducing the quality of the finished
product, meaning there is increased responsibility on the employee regarding
the overall product quality, and therefore company reputation.

An example
of Quality Assurance in use is at the Nestle factory in York, England, where
the Kit Kats are produced, and throughout production they are weighed, scanned
using lasers to check their size, x-rayed to prevent any contaminants or debris
entering the product, and even taste tested as to ensure they have the desired
taste. This is all done to ensure the customer is getting exactly what they
want and expect from the company, and the employees have a great amount of
control of reducing the possibility of there being any problems, such as
ensuring they wear hair nets and don’t wear too mush deodorant, as these could
contaminate the food, and also ensure they don’t leave tools near the food, as
they could fall in and clog up the machinery, causing a massive disruption to
the production process.