Neem Oil Head Lice Solution Issues - Example

Business Proposal [Your Name] [Your Title] [Neem Oil Manufacturing Limited] [Main Business Address] ABN: [ABN] ACN: [ACN] [Neem Oil Manufacturing Limited] Business Plan Prepared: [Date prepared] Table of Contents Business Plan Summary Neem Oil head lice solution will most likely register huge profits in the first year of operation, especially owing to the fact that for the first time, Australia will have a head lice solution that is not only natural, but one that has the combined benefits of being affordable, readily available, a one-time solution, and clear of any negative side effects. The head lice problem is serious in Australia and parents have always been eager to test products that promise efficacy. Unfortunately, none of the existing results ever live up to the 100% efficacy benchmark. With the proven 100% efficacy, neem head lice solution is likely to gain fast market penetration and as projected in the financial section, the business will most likely turn up profits even in the first year. The Business Business name: Neem Oil Manufacturers Limited. Business structure: Sole Trade ABN: 01290192776 ACN: 123556689 Business location: Sydney, Australia Date established: June 2013 Business owner(s): Ahmed Abdukadir Relevant owner experience: A graduate with a Bachelor of Science (Chemistry) degree. Has worked with a drugs manufacturing company for three years Products/services: Neem Oil. The Market Target market: Neem Oil targets parents to school-going children, who at some point in their lives, suffer from head lice infestation. The main target is therefore the millions of school-going children in Australia and their parents. Consumers will be encouraged to purchase Neem Oil because in addition to being a natural product that has no side effects, the product is affordable and has been proven to have 100% efficacy. Marketing strategy: Neem Oil will be produced and marketed in the Australian market, and based on the performance therein, it is expected the product will be marketed in the New Zealand and UK markets in the next three years. Attracting customers will be done through a combination of strategies, which will include properly packaging the Neem Oil, distributing it to different retail outlets including supermarkets, chemists and beauty shops, and pricing it appropriately. The product will also be promoted through sales promotions and placing web advertisements on all Australian school websites. Packaging the product appropriately is meant to provide the right visual appeal and create the right impression about the product; distributing the product to chemists, supermarkets and beauty shops is meant to increase its exposure to the target market while ensuring that it is easily available to the target market; right pricing is meant to ensure that the product is affordable to the targeted market, and that they appreciate the product’s value. Correct pricing is also meant to ensure that the product manufacturer will be able to recoup his investments (after some time), which he spent in researching, developing and manufacturing the product. Finally, promoting the product is meant to generate sales while informing the targeted market about the benefits and availability of the product. The Future Vision statement: To become the ultimate head lice solution provider for all school-going children in Australia and abroad, providing efficient, affordable, natural and safe insecticides for use on children’s hair. Goals/objectives: (Short-term goals) Attain 50-percent market penetration in Australia in the next three years Attain 30-percent profitability by the second year of operation Become a renowned brand name in Australia (Long-term goals) Expand production of Neem Oil Start exporting Neem Oil into the New Zealand and United Kingdom Markets. Enhance business profitability by at least 150 percent To meet the above mentioned objectives, the company will need to invest more in marketing its products, and when demand rises, it will invest more into the production processes, which include establishing relationships with suppliers of the neem plant, employing more people to work in its production, marketing and accounting departments. The company will also seek to understand the export requirements and regulations in order to export its products into the New Zealand and UK markets. The Finances By the end of the first year, the business intends to have started making profits in the range of $1000-$1200 per month. Initially however, the business needs: $4,800 for registration and IP rights processing; $20,000 to set up the manufacturing process (including leasing property and purchasing furniture and installing telephones); $8,000 to acquire the initial stock; $5,000 for packaging and branding; $5,000 for distribution across Australia; $5,000 for legal work involving a lawyer; $15,600 for insurance; $5,500 for initial marketing campaigns; and $20,000 for office administration A further $21,200 will be set aside for miscellaneous costs. In total therefore, the initial capital requirement for the neem oil business will be $100,000. The business owner has raised half of the above amount – $50,000 from own savings, and is hoping to raise the remainder from angel investors (people who are within the business owner’s family or friends circle). Sourcing capital from an angel investor will enable the business owner negotiate better terms of repayments including lower interest rates. Should the angel investors’ option fail, the business owner will seek the additional capital from financial lenders (banks), in which case he will need to have security to secure the loan. The Business Business details Products/services: Neem oil head lice solution. By 2011, Australia has 2,042,081 children attending primary schools. Research shows that 25% of all primary school going children suffer from head lice. As such, the Neem Oil head lice solution will target 510,520 students at any one time across the country. Since the head lice problem is continuous, especially since head lice are passed from one student to another, and because deficient hygiene practices contribute greatly to the never-ending problem of head lice, this product is assured of a continuous market, even among adults who suffer from the same problem. Registration details Business name: Neem Oil Manufacturers Limited Trading name(s): Neem Oil Head Lice Solution Date registered: 22 October 2013 Location(s) registered: New South Wales Business structure: Sole Trader ABN: ABN 00001 NSW ACN: ACN 00001 NSW GST: (Not registered yet) Domain names: neemoilmanufacturerslimited.com.au Licences & permits: Pest Management Technician’s License; Pest Management Business registration; operating licence from the Department of Health Business premises Business location: As a manufacturing business, the business will be located in the outskirts of Sydney, and will occupy a ¼ acre piece of land, which the business owner has already identified and negotiated for leasing. The identified place has an existing building, which will need minor modifications in order to fit the purpose of a manufacturing firm. Some parts of the building will be transformed into offices for use in the administrative procedures and other back-office operations. The ¼ acre piece of land will also be fitted with a semi-permanent structure that will serve as the main warehouse where all packaged Neem Oil will be stored and later distributed to retail outlets. Buy/lease: The ¼ acre piece of land has been leased by the business owner for a period of five years. The negotiations however concluded that the payment for the 5-year period will be paid gradually until the five-year term is over. Organisation Chart Figure 1: Organisational Chart for Neem Oil Manufacturers Limited Management & Ownership Names of owners: Ahmed Abdikadir Details of Management & Ownership: The neem oil business is owned solely by Ahmed Abdikadir, who will also act as the general manager. This means that the owner will be responsible for overseeing all operations and processes and ensuring that the company attains its strategic objectives. The GM/Owner will work with other employees in order to ensure that all strategic objectives are met. Experience: The GM/Owner has a Bachelor of Science (chemistry), and has worked in a drug manufacturing firm for three years. Combined, the knowledge gained though education and the experience gained through the three years work period has helped him in the development of the Neem Oil head lice solution. To help him with management-related activities, the GM/owner has taken up a management diploma, which he will complete in the next three weeks. Key Personnel Current staff Job Title Name Expected staff turnover Skills or strengths Marketing Manager Janet Houghton 12-24 months Degree in Marketing & Human Resource Management. Has 10 years working experience in similar positions Operations Manager Doug Little 24-36 months Relevant qualifications, has five years working experience in a similar position Sales & Merchandising Fess Campbell 12-24 months Relevant qualifications. An award as a leading sales person Sales & Marketing Peggy Scott 12-24 months Relevant qualifications in marketing. Has been working in a similar position in the past 4 years Accountant Janet Wairns 24-36 months Relevant accounting qualifications Receptionist Faith Martins 12-24 months Relevant front-office qualifications Required staff Job Title Quantity Expected staff turnover Skills necessary Date required Sales Executives [3] 12-24 months Relevant qualifications in marketing and 2 years work experience April 2014 Human Resources Manager [1] 24-36 months Relevant qualifications in human resource management and three years working experience April 2014 Recruitment options Vacant positions will be advertised online and interested candidates encouraged applying through the same means. Shortlisted candidates will then be invited for interviews. Training programs Initial orientation training will be offered to all people working in the marketing department to make them aware of the unique value proposition that Neem Oil head lice solution has to offer the targeted consumers. The training will take a maximum of two days. Skill retention strategies All employees will be employed on a contractual basis. Before signing a contract, each employee will need to complete a 90-day probation period during which their performance and contribution towards the company’s strategic objectives will be analysed. In the contract of employment, each employment will be informed of their duties, responsibilities and performance expectations. Performance appraisals will be conducted every six months to ensure that employees’ competencies are still relevant. Products/services Product/Service Description Price Neem Oil Head Lice Solution A natural insecticide manufactured from natural neem plant for the elimination of head lice. The product has a proven 100% efficacy, and it has been found that the product has no negative side effects on users. $7.5 Market position: This is a competitive product that compares well with other insecticides claiming to offer head lice solutions. Unique selling position: 100% efficacy, while other competing brands cannot assure the same. The product does not have negative side effects, and neither does one need other products (e.g. shampoos or hair treatment solutions) to boost its efficacy. Anticipated demand: Frankowski and Bocchini (2010), Nitwits (2013), and Abder-Ghaffar et al. (2012) indicate that effective head lice treatments do not exist. On its part, the Australian Bureau of Statistics (2012) indicates that there are over 2 million primary school-going children in Australia. If the Department of Health (2013) statement that all children get head lice infestation at different times of their attendance, then one can safely assume that the demand for this product will be at least 1,000 units in the first one year. Pricing strategy: The product will be priced at $7.5 for a 100 ml bottle that will be used for one treatment. With the 100% efficacy promise, this price will be competitive because similarly priced insecticides do not guarantee 100% efficacy. The price is also affordable and as such, it is expected that it will enhance the product’s adoption by the consumer market. Value to customer: Since the Neem Oil product provides a long awaited solution to head lice, it is a necessity product for those with head lice infestations. Growth potential: As a product that has efficacy levels that no other product in the market can lay claim to, Neem oil’s growth potential is huge. Additionally, the fact that the oil does not have any negative side effects will most likely spur demand in Australia and abroad. Innovation Research & development (R&D)/innovation activities After six months of being in the market, a formal audit will be done to determine aspects of Neem Oil that consumers prefer most, and areas where customers would like to see improvements on. Depending on the answers, the company will use externally generated technical expertise to transform the product to one that appeals to a wider market. Some of the areas that may need external technical expertise include branding and packaging. As Zahra and George (2002) indicate however, firms eventually develop an absorptive capacity where they acquire, assimilate, transform and exploit the technological expertise sourced from external sources. Similarly, Neem Manufacturing Company Ltd will most likely develop a research and development capacity in different areas as time goes by. The company intends to follow the four-scale R&D orientation as proposed by Crawford (1972). It involves introducing a strong product in the market based on strong R&D, risk taking and technical leadership; acting quickly through development resources as the market gets into a growth phase; using engineering applications to modify the product hence making it fit into the needs and expectations of the consumer market; and establishing manufacturing efficiency and cost control, which will help the product maintain market leadership. Intellectual property strategy To protect the neem oil for head lice solution innovation, the company will first need to conduct a name search to determine the likelihood of the patent being granted. During this time, the innovation will remain a secret. The claim to the patent will state the following: MY innovation (neem oil head lice solution) is a unique solution drawn from pure neem extracts. This is the first of a kind antiseptic in Australia which has proven efficacy in killing all head lice and nitwits without causing any negative side effects to users. Additionally, the Australian population will for the first time have a head lice solution that does not require them to retreat hair after seven or so days. Insurance Workers compensation: Has a workers’ compensation insurance cover worth $1,000,000. The premiums are $2,580 Public liability, Product liability & Professional indemnity: Has treatment risk liability and professional indemnity insurance worth $10,000,000. The premiums payable are $750. Business assets: The building, machinery, motor vehicles, finished products, raw materials and other inputs are insured against burglary/theft, fire and damage at a cost of $7,000. All five cars have a comprehensive insurance cover, which protects them from most of the car-related risks. The cover costs $5,000 in premiums. Business revenue: N/A Risk management Risk Likelihood Impact Strategy Low market penetration Likely High Aggressive marketing Competition from rival products Likely Medium Use the unique selling position of value for money, 100% product efficacy and no negative side effects Copying from other manufacturers Likely High Patent the innovation to protect the Intellectual Property therein and hence discourage copying Legal considerations Neem Oil for head lice solution was registered with the Australian Pesticide and Veterinary Medicines Authority (APVMA) in line with the Pesticides Act 1999 which makes such registration mandatory. In the workplace, the manufacturer has to comply with occupational Health and Safety regulation 2001, and the Occupation Health and Safety Act 2000 in addition to observing the code of practice established by the NSW Government (2006) for the safe use and handling of pesticides. Operations Production process The production process starts with separating kernels to obtain the neem seeds. The next step involves grading neem seeds based on quality (determined based on seed maturity and moisture levels. Ideally the seeds should have 12% moisture levels) and size. Next, neem oil is extracted from the seeds through mechanical pressing. Thereafter, filtration is done in order to remove unwanted particles from the neem oil. Finally, the oil is packaged ready to be delivered to the retail outlets. Suppliers The main suppliers are those who bring neem seeds to the manufacturing company. The packaging containers as well as the printed label are other supplies that the company receives. The operations manager is responsible for ensuring that supplier relations are enhanced. Plant & equipment Equipment Purchase date Purchase price Running cost Mechanical pressing machine 01 June 2013 $1,500 $50 Computers 01 June 2013 $600 $45 Printers/scanners/photocopiers 01 June 2013 $750 $30 Phones 01 June 2013 $100 $60 Fax machines 01 June 2013 $75 $30 Five cars Jan-August 2013 @ av. $10,000 =$50,000 $5,000 (annually) Inventory Inventory item Unit price Quantity in stock Total cost Neem Seeds $25 5000 $125,000 Packaging bottles $2 20,000 $40,000 Labels $0.5 20,000 $10,000 Technology (Software): The company will need to put up a website at an estimated cost of $5000. The website will act as a marketing tool and will even have an online store where consumers can place orders for the Neem Oil. The company will also require a point of sale software for use in the office. The software is essential for accounting purposes since all the sales will be recorded therein. Based on the point of sales entries, the accounting department will be able to identify just how much stock there is, and together with the operating manager, they will be able to track the demand of Neem Oil in good time to make the necessary adjustments in the production. The estimated cost of the point of sale software is $2,000. Trading hours: Our trade hours will be 0800 hrs to 1800 hours every weekday. On Saturdays, the company will be in operation from 0800 to 1200 hours. Since Neem Oil will be stocked in retail outlets through ought the country, our closure during Sunday will not have a major effect on our sales. It may however affect our supplies and as such, it is expected that Mondays and Saturdays will be very busy days as suppliers try to get in as much supplies and as distributors try to restock the retail outlets. The demand levels may be higher during school terms, but not beyond levels where the normal retail outlets can handle on their regular working hours. Communication channels: The company will indicate its website address, email address, telephone and fax numbers on the Neem Oil package hence making it easier for customers to contact us. Payment types accepted: Cash, cheques and credit card payments will be the only accepted payment methods Credit policy: The company’s credit policy indicates that established distributors can access good on credit on the condition of a 50% down payment. Repayment cannot exceed three months, as indicated in the credit policy document and failure to pay up within 3 months will result to the involvement of debt collectors acting on our behalf either to review the repayment plan, demand payment, or inspect or recover goods that can be mortgaged to settle the debt as stipulated by the Australian Securities & Investments Commission (2013). Our company receives neem seeds on credit, but such debts are cleared on a weekly basis. All seeds delivered from Wednesday to Monday are paid for on every Tuesday. Warranties & refunds: Customers have an obligation to ensure that the seal to Neem Oil is not tampered with during purchase. Retailers also have the same responsibility to ensure that they do not accept faulty products from our distributors. Based on the foregoing arrangement, we do not have a refund policy because it is the responsibility of retailers and consumers to ensure that the products they receive are fault proof. Quality control: Quality control starts at the manufacturing stage where only quality seeds are used. The oil is then filtered and packaged in bottles whose quality is already proven. A seal is then used to ensure that quality is maintained throughout the supply chain. Memberships & affiliations: No. Sustainability plan Environmental/resource impacts Like all manufacturing processes, moving inputs to the farm and finished products to the retailers and consumers involve a lot of car use. As such, we are aware of the possible impact that our transport systems have on carbon emissions. Community impact & engagement We encourage our suppliers to use clean energy in their transport methods Risks/constraints The main risk is that the company’s direct and indirect contribution to carbon emissions may be harmful in the long-run Strategies Although the company has not adopted an environmental management or conducted an environment audit yet, it has bought fuel efficient cars as a way of reducing the amount of emission released into the air during transport. Action plan Sustainability milestone Target Target date [Reduce water transport-related carbon emissions [40% reduction] Jan. 2015 The Market Market research Three experts were interviewed relating to the viability of Neem Oil head lice solution. Market targets In one year, the company targets to sell at least 1 million units of Neem Oil head lice solution. Environmental/industry analysis The head lice problem is an age-old problem among children. One’s hygiene practices notwithstanding, the interaction that children have while in school makes it easier for head lice to be passed from one child to another. This means that no child can claim to be safe from head lice. Since more children are being born and many more are going to school, there seems to be a never-ending consumer market for neem oil solution for head lice. Additionally, consumers are increasingly being attracted to natural products and this means that compared to other chemical-based solution, neem oil head lice solution may appeal such consumers. Ideally, consumers should change from chemical-based products that do not assure them of 100% efficacy and start using neem oil, which in addition to being affordable is also made from natural products hence eliminating the probability negative reactions. Your customers Customer demographics Neem oil head lice solution targets all school-going children who at one time in their school going lives, have had to deal with the head lice problem. Some promotional activities will also target parents to such children because in most cases, it is the parents who make purchases for their children. Key customers The key customers will therefore be parents to school going children. The marketing campaign will be designed in a manner that catches the attention of both parents and children. Customer management By keeping our communication channels open, we will ensure that all customer queries, questions or concerns are addressed in an efficient and satisfactory manner. S.W.O.T. analysis Strengths Weaknesses 100% proven efficacy in the elimination of head lice and nit wits Made from natural neem extracts It has no negative side effects Sells at a competitive, yet affordable price No other products with similar efficacy levels and benefits exist in the Australian market at the moment. A new market entrant where other antiseptics have already established their presence (this weakness will resolve itself with time as the product gains more market share) Low brand awareness among the targeted consumer market (this will be addressed by enhancing marketing activities) Opportunities Threats Head lice are also a problem in other markets outside Australia hence meaning that the business can expand outside the country Possible copying from rival companies (the threat will be mitigated through Intellectual property protection). Competing products offering head lice solutions (this will be addressed by enhancing the marketing efforts in order to gain more market share) Your competitors As a new market entrant, the Neem Oil Head lice Solution does not have as much market share as most of the established competitors. With time however, and considering that the head lice problem still persists, the product is certain that Australian parents will prefer it to other non-effective products. Competitor details Competitor Established date Size Market share (%) Value to customers Strengths Weaknesses Hit nitz 4 6 2006 40 15% Contain natural ingredients A once-off lotion treatment for hair Effectiveness depends on buying an additional hair spray in addition to the treatment, which one is required to use for 7-10 days. KP24 Rapid 2001 36 15% kills head lice and eggs in 10 minutes Market leadership Chemical based product a research done by Grieve et al. (2007) indicated that the product had a 29.7% cure rate MOOV head lice solution 2002 52 25% A herbal-based lice solution Market leadership and penetration. Established 82.5% cure rate 17.5% of people using it were proven as not cured of head lice Banlice Mouss 2000 40 20% Kills head lice and eggs in one application Market leadership and penetration Established cure rate of 29.7% Nitpro professional head lice treatment 2009 40 15% Offers salon services where head lice are treated and removed One has to travel to where the salons are They offer to perform lice removal and treatment on behalf of the parents. Advertising & sales Advertising & promotional strategy Once parents know that the 100% efficacy proposition is not a fad advanced by the company to obtain sales, the company believes that word-of-mouth advertising will advance it to new levels of market acceptance. The foregoing argument is based on an understanding that Australian parents have been searching for an effective head lice solution for far too long without finding one. In the initial phase of product introduction into the market, the following strategies will be used: Planned promotion /advertising type Expected business improvement Cost ($) Target date Online advertising It will create more brand awareness among parents most of whom surf the internet 1500 January 2014 Bill board advertising Will be strategically positioned near schools to attract the attention of school-going children and their parents 2500 January 2014 Sales & marketing objectives The sales team will have two executives in the beginning, and their duties will involve creating product awareness and generating sales in the Sydney area. As the customers test the product, it is probable that a lot of word of mouth publicity will be generated. With time, more sales executives will be hired. Unique selling position Natural, 100% efficacy, no negative side effects after use, and affordable. Sales & distribution channels Channel type Products/services Percentage of sales (%) Advantages Disadvantages Shop front Neem Oil head lice solution 25% One-on-one interaction with customers Time limitations especially where too many customer flock the front office Wholesale Neem Oil head lice solution 75% Far reaching distribution Product visibility may suffer hence requiring a merchandising executive to inspect how products is placed in retail outlet The Finances Key objectives & financial review Financial objectives To become a profitable company based on the efficacy of our product Finance required $250,000 Assumptions The financial tables on the subsequent pages are based on the assumptions listed below: That interest rates will be constant in the three year period That market penetration will not be so hard a fete for Neem Head Lice Solution That no competing products (in terms of efficacy) will make an entry into the Australian market in the three-year period Start-up costs for [2013] Balance sheet forecast Profit and loss forecast Expected cash flow Break-even analysis References Abder-Ghaffar, F., Al-Quraushy, S., Al-Rasheid, K.A., & Mehlhorn, H. (2012). Efficacy of a single treatment of head lice with a neem seed extract: an in vivo and in vitro study on nits and motile stages. Parasito Research 110 (1), 277-280. Australian Bureau of Statistics. (2012). 4221.0 – Schools, Australia, 2011. Retrieved September 23, 2013, from http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4221.0main+features302011 Australian Securities & Investments Commission. (2013) The debt collection guideline: the public consultation process. Retrieved October 24, 2013, from http://www.asic.gov.au/asic/asic.nsf/byheadline/The+debt+collection+guidelines%3A+the+public+consultation+process. Crawford, C.M. (1972). Strategies for new product development. Business Horizons, XIII (4), 48-58. Department of Health. (2013). Head lice fact sheet. Government of Western Australia. Retrieved September 23, 2013, from http://www.public.health.wa.gov.au/2/261/2/head_lice_fact_sheet.pm. Frankowski, B.L. & Bocchini Jr. J. A. (2010). Head lice. Paediatrics 126(2), 392-403. Grieve et al. (2007). A randomised, double-blind, comparative efficacy trial of three head lice treatment options: malathion, pyrethrins with piperonyl butoxide and MOOV head lice solution. Pharmacist 26(9), 738-741. New South Wales Government. (2006). Safe use if pesticides including herbicides in non-agricultural workplaces: code of ethics. Work Cover New South Wales. 1-80. Nitwits. (2013). Head lice. Retrieved September 23, 2013, from http://nitwits.com.au/ Zahara, S. A. & George, G. (2002). Absorptive capacity: A review, reconceptualisation, and extension. Academy of Management Review, 27(2), 185-203. Read More