DSI Samson Group,
No. 110, Kumaran Rathnam Road,
Colombo 02.
T : +94 (0)11 21 31 800
F : +94 (0)11 21 31 777
E : info@dsi.lk (General)
Letter of Transmittal
Board of Directors,
DSI Samson Group
Dear Sir/Madam,
Enclosed hereby is the report with regard to the New Product that was commissioned to be
undertaken by the New Product Development team of DSI Samson Group as means of
introducing a new product line under the prestigious “DSI” brand name. Shown below are the
highlights that would be obtained out of this report. The information that was required for the
completion of this report was acquired by adhering to Marketing Principles, Practices and
New Product Development that can be deemed ethical at the time of completion.
The product that was deemed to be the most appropriate for kids growing up and with the
concept design of one size fits all in the name of “The Shoe That Grows” that can be
identified as the most suitable name for the new product which justifies its purpose and
characteristics. The new product is guaranteed to add value to the DSI brand by increasing
the company’s overall market share and to ensure long term company growth and
sustainability. It should be noted that the findings and information included in this report are
subject to approval of the management. We would like to acknowledge the support that was
given to the team in the completion of this project and have the pleasure of forwarding the
report to the concerned parties.
Thanking you,
Aathif Saleem
(Project Leader)
Executive Summary
The purpose of this report is to provide an insight on how the ‘shoe that grows’ can be made
a success. Within this report it is possible to see how the product was developed and made,
up until the financial aspect of the final product. Through the observation of this report one
can get a basic to in-depth idea how the company plans to make and sale this product to the
general public. Furthermore the marketing aspect is also highlighted where we can see the
potential target market for this particular product. This product fills in a gap that no other
shoe in the market can satisfy, with little to no competition.
With the analysis of the external environmental forces; articulating the direction of the
economy implicates the relationship of the Product context to the business prospective, in
review of the compatibility of the concept in the domestic market. In a broader aspect the
research carried out, the prominence of the market leader within the footwear industry ‘D.
Samson's’ holdings proved to initiate the welcoming versatility within this process.
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Table of Contents
Executive Summary.................................................................................................................................. i
1.0 Summary of the proposal................................................................................................................. 1
2.0 Idea Screening .................................................................................................................................. 3
2.1 Kuczmarksi 6 (K6) ......................................................................................................................... 3
2.2 Growth role .................................................................................................................................. 3
2.3 Category Screens.......................................................................................................................... 3
2.4 Strategic Role Screens .................................................................................................................. 4
2.5 New Product Type Screens .......................................................................................................... 4
2.6 Internal Strength Screen .............................................................................................................. 4
2.7 Financial Screen ........................................................................................................................... 5
3.0 Concept development ...................................................................................................................... 6
3.1 Product positioning ...................................................................................................................... 6
3.2 Development................................................................................................................................ 6
4.0 Concept Testing................................................................................................................................ 8
4.1 Discussion..................................................................................................................................... 8
4.2 Research Problem ........................................................................................................................ 8
4.3 Research Objectives ..................................................................................................................... 8
4.4 Research Methodology ................................................................................................................ 8
4.5 Data analysis ................................................................................................................................ 9
5.0 Business Analysis ............................................................................................................................ 10
Shareholders ................................................................................................................................. 10
Suppliers........................................................................................................................................ 11
Workforce ..................................................................................................................................... 11
Competitors .................................................................................................................................. 11
Employees ..................................................................................................................................... 11
Media ............................................................................................................................................ 11
5.2 Macro Environmental Analysis (PESTLE) .................................................................................... 12
Political factors.............................................................................................................................. 12
Economic Factors .......................................................................................................................... 12
Social Factors ................................................................................................................................ 12
Technological factors .................................................................................................................... 13
Legal factors .................................................................................................................................. 13
Ecological factors .......................................................................................................................... 14
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5.3 Market Size................................................................................................................................. 14
5.4 Market and Sales potential ........................................................................................................ 14
6.0 Financial Analysis ........................................................................................................................... 15
6.1 Initial Investment ....................................................................................................................... 15
6.2 Projected Sales & Cost of Sales .................................................................................................. 15
6.3 Profit Graph Analysis .................................................................................................................. 16
6.4 Expense Graph Analysis ............................................................................................................. 16
6.5 Return on Investment (ROI) ....................................................................................................... 17
6.6 Net Present Value Analysis ........................................................................................................ 17
6.7 Payback Period ........................................................................................................................... 18
6.8 Break-Even Sales Analysis .......................................................................................................... 18
7.0 Commercialization ......................................................................................................................... 19
7.1 Market penetration.................................................................................................................... 19
7.1.1 Place .................................................................................................................................... 19
7.1.2 Product ................................................................................................................................ 19
7.1.3 Price..................................................................................................................................... 20
7.1.4 Promotion ........................................................................................................................... 20
7.2 Integrated marketing communication campaign [IMC]............................................................. 20
7.2.1 Campaign objectives ........................................................................................................... 20
7.2 Integrated Marketing Communication plan .............................................................................. 21
7.2.1 Advertising .......................................................................................................................... 21
7.2.2 Sales promotion .................................................................................................................. 21
7.2.3 Public relations .................................................................................................................... 21
7.2.4 Support media ..................................................................................................................... 22
7.2.5 Press release ....................................................................................................................... 22
8.0 Product Launch .............................................................................................................................. 23
8.1 Launch Objectives ...................................................................................................................... 23
8.2 Launch Strategy.......................................................................................................................... 23
8.3 Launch Plan ................................................................................................................................ 23
8.3.1 What .................................................................................................................................... 23
8.3.2 When ................................................................................................................................... 23
8.3.3 Where.................................................................................................................................. 24
8.3.4 Who ..................................................................................................................................... 24
8.3.5 Why ..................................................................................................................................... 24
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8.4 Launch Budget ........................................................................................................................... 24
9.0 Conclusion ....................................................................................................................................... 25
Reference List........................................................................................................................................ 27
Appendices............................................................................................................................................ 28
Appendix ........................................................................................................................................... 29
1. Questionnaire ........................................................................................................................... 29
2. SWOT......................................................................................................................................... 31
3. Fertility Rate in Sri Lanka........................................................................................................... 31
Poverty rate in Sri Lanka ............................................................................................................... 32
4. Market & Sales Potential .......................................................................................................... 32
5. Projected Sales and Cost of Sale ............................................................................................... 33
6. Profit graph analysis ................................................................................................................. 33
7. Expense graph analysis ............................................................................................................ 34
8. ROI ............................................................................................................................................. 34
9. NPV............................................................................................................................................ 34
10. Projected Income Statement .................................................................................................. 35
11. Projected Cash flow Statement .............................................................................................. 38
12. Launch budget......................................................................................................................... 40
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1.0 Summary of the proposal
New product development is a mark that is highly associated by organizations who thrive to
venture into newer markets and possibilities, with the end result assuring market
competencies. The current economic conditions within the nation illustrates uprising of the
economy; shifting towards a middle-income country. With the potential and hub represented
with this island guarantees the free flow of goods, services, and capital that will gradually
carry forward results in the future. But under the duress from global competition, domestic
business organizations will be facing challenges in higher degrees. Thus, taking on the role of
‘New product developers’, this proposal ensures to grant a new start with a degree of ideas
and concepts viable for any organization for the choosing.
Withholding the ideals of a single paradigm to make shift innovation, that can set forth a
revolution; in which we believe to have brainstormed our idea gathering to take the market by
force. The ideas in which being generated is bounded by the objectives and opportunities to
be shared with a company that understands and shares our mutual ideals. Thus, the company
that will enable to bring our concepts to reality is ensured to be non-other than D. Samson's
Group of companies.
The reason the team has embraced to propose such notions to such a company is the
realization of creating the best solution in the eyes of the customers as much as the
organization.
I.
II.
SHOE THAT GROWS – “ONE SIZE FITS ALL”
STRETCHY LACES – “NEVER TIES YOU DOWN ”
III.
INTERCHANGEABLE SHOES – “RE-DESIGN YOURSELF ”
IV.
PLANET PROOF SHOES – “ONE FOR ALL”
V.
SLIP-PRINTS – “MAKE YOUR MARK IN THE WORLD”
VI.
POCKET SHOES – “O NE CANNOT BE TOO CAREFUL”
VII.
MASSAGE PADDING – “RELAXATION WITH EVERY STEP”
VIII.
REMOVABLE HEELS – “AT THE END OF THE DAY ”
In evaluating the best fit for the criteria selection, the “Shoe that Grows” revealed to have
most prominence. Targeting on the price; ‘Bang for the Buck’ the sandal attack the price
factor as well as the usability of the product and value it has to offer. Proved to have to have
5 year lifespan with the additional emphasis on usability with genuine leather and rubber
1
crepe is aimed to match every outcome intended. Proving there is still to be made available
in the local markets, DSI is enable to utilize its functionality on resources and networks to
lead a monopolistic approach viable to making profits in short lengths of time.
DSI is no stranger in understanding the demeanors within the domestic market, as per their
current rankings as the leading footwear manufacturer in the country. But, the brand name is
not sufficient to justify its success; as we also have gathered our analytical framework to
conserving our market knowledge and intelligence within the framework of non-other than in
the Porter’s Five Forces model.
Within the proposal, we have carried out the GAP analysis in consideration of the feasibility
of the idea concepts to the company as well as within the degree of complexity in the idea
itself. Within the internal analysis of DSI, the results brought forth the reluctance in the
creativity department for the ‘Sandals’ collection.
While the external GAP analysis derives the target markets and the direct product
competitors, with the same capability. Which justifies the reason in developing a new product
to conceive to leap ahead of the competitors.
The use of the porter’s five forces model is emphasized on the company to determine the
weaknesses and strengths in possession to compete in this nature of the business.
The five forces of the shoe industry are summarized as follows; the threat of substitute
products will be high as the customers can easily switch between the products. The threat of
rivals will be high because the competition of other products will be high. The threat of new
entrants will be high because of any competitor can easily enter into the market. And also the
bargaining power of suppliers is low because the DSI is buying supplies from a single buyer.
Finally the bargaining power of customers is high because DSI has a strong brand image that
the customers won't buy other rivalry products.
2
2.0 Idea Screening
2.1 Kuczmarksi 6 (K6)
Screening is vital factor in the stages of new product development, screening assesses the
type of product and how ‘new’ it is. New refers to is it new to the market? Or is it new to the
company? Or is new to the world? Or is it just a new product which is distinctive from its
competition? Screening will differ accordingly to the newness of the product and below will
be addressed how each product will be screened. Most new products tend to fail before they
are even entered introduced as they fail in the testing stage, but this doesn’t mean that every
company should ignore the advantages of new product development. ‘The perks of new
product development are infamously identified as a sustainable source of competitive
advantage’ (Thomas, 1993).
2.2 Growth role
The growth role identifies products that have the potential to grow in the market and has a
high growth rate for sales and expanding market share. Under the list for DSI two products
come under this type of screening. The first is the show that grows or in other words the
expandable sandal, as it’s able to grow in 5 sizes it will also be able to grow in acquiring
market share for the company as it has the price advantage that increases market share at the
expense of competitors. The other product that has a high growth potential is ‘slip prints’ as it
can be seen as something very trendy for beachwear the idea of it will catch on quickly and
result in more people buying and trying it out, furthermore they would even inadvertently
advertise it in social media.
2.3 Category Screens
This refers to the screening of new products that are most suitable to the company and the
product that falls under this category would massage padding’s, as it doesn’t require
marketing or high investments so therefore it can be managed easily with a low budget. If
DSI were to focus on this it would save a tremendous amount of cost and time and also make
room to introduce this into new products if the opportunity presents itself. In the perspective
of the consumer also it looks to be very simple and cost saving, it’s an idea they would
definitely consider worth spending time on purchasing it. Another product that comes under
this would be the stretchy laces, as the type of product is completely doable by the company
3
as it also convenes to the needs of the market; it’s simple, effective and also can be produced
at a low budget.
2.4 Strategic Role Screens
Of course a firm is going to look at how they will be able to gain from their service apart
from the products making a profit or otherwise. Well, taking the expandable shoe the idea
was solely created on giving back to the people enduring poverty and thus it’s a form of
corporate social responsibility and thus increases the reputation of the company. This type of
product is also considered new to the market and thus the company will be able to gain a new
kind of experience of investing on it.
The other type product that is also quite unique in the strategic role would be the pocket shoe.
The idea of the product is quite unique and is unnoticed by the rest of the competition. It
helps the company experience something new in investing and has the potential to make a big
impact in the market.
2.5 New Product Type Screens
The expandable shoes is definitely considered to be a new product type. It’s seldom you see a
sandal being able used by more than one person and also has the ability to the capture what
the market wants. The other type of new product would the removable or detachable heels,
the idea of this is so unique as mostly every female out there complains about the difficulty of
lasting in heels this is a big coping mechanism towards. It can be worn in parties where they
detach the heel to dance or go on long walks after a stressed out night at work.
2.6 Internal Strength Screen
This refers to the level of difficulty with which the new product can be developed,
manufactured and sold. Makes use of patented technology, exploits engineering, marketing
design etc. The interchangeable shoes would be quite suitable in this category. The reason
being the idea of it is quite sophisticated as such DSI could focus on their internal strengths to
highly invest on this. Changing parts of the shoe to design it into new styles is not an easy
task but would definitely be considered profitable if the approach taken was done
methodically and whether the target market find the idea attractive.
4
2.7 Financial Screen
Uncertain to assess in the early stages of the product life cycle, the financial screen looks at
the payback period, return on investment, growth rate etc. The product that comes under this
category is likely to be resistance shoes. Acquiring the appropriate raw materials and
focusing on production is not an easy task for this as the cost and time invested in making a
pair of shoes that is basically ‘planet proof’ is immense, not to mention if the product doesn’t
live up to its standard it’s going to quickly fall off the market and furthermore damage the
reputation of DSI. That being said, if all the criteria above were to be met, it could be a game
changer in the market as product is so sophisticated it would result in a lower payback period
and higher return on investment.
5
3.0 Concept development
3.1 Product positioning
This product will be positioned according to a particular segment of customers and their
wants and needs. Every customer in the market may not purchase this product, however as
majority of the people in Sri Lanka have a considerable low income they will be attracted and
interested in purchasing this product. The expandable shoe would be positioned according to
the people’s wants and needs.
This type of product is mainly targeted at the “low income families with kids”. Through
research, it is possible to see that currently there is no product available which can satisfy this
partial need of the customer. Through the introduction of this expandable shoe, D. Samson
will be addressing this need. This expandable shoe will help the consumer use this product
longer than the other shoes as it could be adjusted according to the foot size. Therefore it
would take time to outgrow the shoe.
This intern will help D. Samson to be many steps ahead of its competitors and will give a
lifetime value in the eyes of the customer. However this sort of product may not be so
attractive to the up market customers because it will be manufactured according to a low
budget in order to keep the price low. Though it is cheap, it does not mean that the shoe
quality will be affected by the budget price. This means it would not be very trendy and be in
fashion as much as other shoes. For instance, most of the people are attracted towards the
durability of the product and it has to be used for a longer period of time when compared to
other shoe products in the market.
The shoe that grows will be available in two types of materials, leather and plain rubber. In
addition, the shoes that are manufactured out of rubber will be made available to the
customers preference in four different colors.
3.2 Development
The expandable shoes was developed in order to fill a particular void in the market where
other shoes had a limit which mostly affected kids and young adults as they out grew their
shoes before the products life span could end. Through the innovation of this product, to an
extent, it is possible to say that this product has solved the issue as it can grow up to five sizes
in order to suit that particular person’s foot. This means that this shoe that grows could be
6
used to its maximum potential as it will take a longer time for the shoe to be out grown. The
shoe can be expanded and adjusted through a system of buckles and buttons as this was the
most suitable and durable method to be used in order for the product to last the duration
which it is intended for. Through the development of this shoe it could be a product that
satisfies the need of customers which other shoes were not able to satisfy before and also
draw in new customers. With this in mind, this shoe was developed accordingly by the
research and development team.
7
4.0 Concept Testing
4.1 Discussion
In order to test this concept, many qualitative and quantitative methods have been used
during the research process. Concept testing was particularly targeted at the consumers and
the two ways communication which took place showed that majority of the people were
attracted to this concept irrespective of the level of income.
4.2 Research Problem
To find out the market attractiveness of the industry [market potentiality] for the DSI
expandable shoe.
4.3 Research Objectives
The objectives were filtered using the current market needs. Majority of the people were
seeking for the benefits in proportion to the amounts they spend on footwear. The research
objectives are mentioned below;

To find out the demographic and other factors affect the buying behavior of footwear

To find out the consumer perception and attitude towards the brand name [DSI]

To find out consumer perception and awareness of an expandable sandal

To find out the market acceptance of the new expandable sandal

To find out the price that consumers willing to pay for an expandable sandal

To assess purchase intentions and product positioning
4.4 Research Methodology
In order to test this concept many surveys were done by the research team involving the
existing customers. It was seen that, through the communication took place, most of the
customers needed alterations to discuss on the newly developed product. Hence, the team was
able to arrange special events to gather the ideas on the expandable shoe. Many were
confused with the need of this product where most of them asked why people cannot afford a
better product at an average price. The reason was forecasted before as many of the selected
samples were earning a sufficient income to live day to day life. Though the sample selected
generated effective ideas, the research team was able to visit the rural areas of Sri Lanka and
collect their ideas. For instance, there were many people who had money to afford shoes but
8
did not waste their money on the shoes that were lasting only for few months. This concept to
them was more of a long lasting need as the kids of these parents were searching for such a
response from the market.
4.4.1 Primary data
A questionnaire has been used which included 10 questions. They varied in many types such
as Likert scale, open ended and dichotomous. As another primary data collection method
focused group also was used.
4.4.2 Secondary data
DSI annual reports were used to retrieve information regarding the existing shoes and sandal
sales that were done recently. Other articles and journal articles were used to collect more
data.
4.4.3 Sample framework
To be more accurate representative samples were used where each sample contains 100
respondents from the entire population. This was conducted at many public places where
there were shoe sales, schools in rural areas and at DSI stalls that were displayed at BMICH.
4.4.4 Sample technique
This was used as the technique because it is a probability sampling method which has an
equal and known chance of being selected in the study.
4.5 Data analysis
A sample of 100 people was taken to do the questionnaire which reveals that about 68% have
agreed towards the feasibility of this new product. Given that the show is a ground breaking
innovation of the shoe market many customers have portrayed that they are willing to try out
the new product. Therefore this data analysis clearly identifies that targeting the ‘innovators’
as the focus, and rely on feedback and word of mouth to capture far beyond the market
potential.
(Refer appendix 1.0 for data analysis)
9
5.0 Business Analysis
5.1 Micro environment analysis
The overall micro environmental analysis is focused within the boundaries of the S.W.O.T
analysis; highlighting the direct affluence to the business activities. The understanding of
such stakeholders within this project is a necessity for the full support for the succession of
this project lifeline.
(Refer appendix 2.0 for SWOT analysis)
Shareholders
Shareholders are a crucial participant per each project undertaken, that can be considered as
the puppeteers of each new product developments. Investments and financial security is
crucial since inception to this idea, as per the relationship maintained throughout the
screening process will make or break the Identity of the concept, if not for the support of the
proper financial stability in the short term for the times to come.
10
Suppliers
Procurement of raw materials is essential in considering the materials used to embalming the
sandal within the components. The success is equally adhered to the succession of attaining
quality material which goes into the production process in which the outcome is good as it
gets with the inputs. Thus, suppliers have stake in the quality and assurance at stake in the
outcome per each pair of the ‘Shoe that Grows’.
Workforce
Customers - Every business to be successful is accounted to the demand forecasted for the
intended target market. In which this case refers to catering mostly to the low and middle
income people and children with the added-value beneficial to the customers’ needs and
wants with customizations.
Competitors
The name of the game in this field is differentiating one’s self from the rest. DSI is
considered to be the market leader for the past decade, thus competitive edge is crucial to the
succession for another decade in the making. Instilling the belief of attaining more market
share within this break-through concept is aimed to improve the competitive gap and
distinguish in this heavily competitive era.
Employees
Employees play a vital role in the company as they portrait the driving force in achieving
goals and objectives. Although this shoe is not necessarily complicated, the production of
these units needs amass of skill and training through the design and final form of the product
made available as intended. Any business will thrive in necessary satisfaction of the
employees; as per the DSI is instilled for the employee oriented working environment.
Media
The power withheld with the ‘Press’ can take a huge toll that will either integrate positive or
negative outcomes for the project. Thus, DSI needs to manage the media relations to secure
positive reinforcements to the product in support of ‘Positive’ publicity and disregard any
negative outcomes with certain offerings.
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5.2 Macro Environmental Analysis (PESTLE)
A PESTLE analysis is conducted to identify the external factors that affect an organization
which will help it to strategize accordingly with forces outside the business. DSI needs to
conduct a PESTLE analysis as it will help to analyze factors which will devise it to stay
ahead of the market and its competitors. Furthermore a PESTLE analysis will help to identify
what factors will ensure the success of the shoe that grows.
Political factors
Political factors refer to aspects or laws the government improvises. This consists of tax laws,
tariffs, regulation laws, bureaucracy, corruption, trade control, competition, health and safety
laws etc. Political factors which DSI will experience are the general tax laws, competition
laws and employee health and safety laws. Political factors are considered to be very
unpredictable as the government can decide whether or not to change laws. Political laws
always have to be followed or companies will be fined for not following regulations, thereby
it’s vital that DSI considers these factors.
Economic Factors
Economic factors play a great role in identifying the competitiveness in which a company or
business operates in. As it identifies factors which relate to the economy which happen to be
analyzed such as the inflation rate, unemployment level, exchange rate etc. Taking the shoe
that grows it’s important to identify something as crucial as the disposable income of
households. As our target market focuses on low income groups where their general income
is low creates a much accurate notion in how to price the product. The purchasing power
parity in 2013 is around $134.5 billion, this is what economists generally use in order to find
the income per hear thereby the target market would be around Rs. 10,000 – Rs. 15,000.
Social Factors
Social factors refer to change in changes in culture, changes in trends, change in consumer
patterns and change in the behavior of society in general. Taking the shoe in respect to these
changes it is imperative the target market identified or even a sample of the target market to
be tested have predictable changes in attitudes towards the shoe. If a questionnaire or such
was done to assess the likability of the shoe that sample that has been taken should identify
the criteria a regular child who wants a normal shoe would have. Of course each child has
12
different needs in respect to what they want in a shoe but finding out what they have in
common can be essential in determining buyer behavior. Another important factor would be
the fertility rate of economy, the fertility rate in 2012 was 2.35 births per woman.
(Refer Appendix 3.0 for social factors)
The poverty rate in Sri Lanka is at 6.7% ( Refer Appendix 3) which is comparatively high
when looked at with other countries therefore the target market for low income groups has
quite a high customer base.
Technological factors
Technological factors play a huge role in terms of production of the shoe, advertising of the
shoe and the kind of competition the shoe would create. Taking social media for example
would create a huge impact in creating awareness of the product as the product caters to the
low income groups and since people take pity towards the unfortunate it would result in more
shares of the post regarding the shoe. This in turn will give DSI a competitive edge with its
competitors. Of course technology also affects the capacity in which the shoe can be
produced. Technology is much more sensitive and vital than it was in the past; more often
than not the business which succeeds is the business that is technologically updated.
DSI mostly focuses on the latest trends with regard to the shoe industry, being the market
leader they always invest in the new and latest products thereby having a good technological
competition.
Legal factors
Legal factors refer to the legal considerations within the business. These might refer to
patents, consumer protection laws, product assurance etc. The product DSI makes will no
doubt be copied by competitors thereby in order to prevent this DSI will have to patent the
product to reject competitors from copying it. Legal factors cover commercial laws to prevent
harmful advertising and other various types of organizational law. Legal considerations are
important for DSI to implement to make sure they follow every aspect of the law within the
necessary requirements. Laws that have to be taken into account are the Sri Lankan Standards
of which include pattern cutting regulations and resistance and reliability of the shoes have to
be regulated.
13
Ecological factors
The shoe that grows contains recyclable materials and are very resistant to various diseases
and other scratches on the surface. Ensuring good rapport with the ecological community can
help improve the awareness and assurance of the product therefore it’s crucial that these
minor details are also ascertained. The ecological factors play a strong role for the consumer
in deciding whether the product harms the environment or not.
5.3 Market Size
Analyzing the market size will create the opportunity to identify the number of people in Sri
Lanka that consumes DSI shoes. Through the referred journal articles it was found that
overall within Sri Lanka DSI has 35% of the total population that consume footwear. And
each year the usage of leather products has been increased by 63% each year after 2013. This
provides a clear indication of the entire market in relation to footwear usage. Through the
research conducted, more than 75% of the respondents were enthusiastic to experience such
everlasting shoe. This fact further confirms the potentiality of the market towards DSI , the
shoe that grows.
5.4 Market and Sales potential
The shoe that grows is aimed at customers who are expecting a shoe to be used for few years
as the feet grow. Mainly the kids aged 5 to 10 would be the appropriate segment.
The other market followers like Bata, RanPa has a lower market share percentage compared
to DSI. It is estimated that DSI will carve minimum 10% market share in addition at the
initial stage. Most of the market followers are owned by locals while some have joint
ventures with the foreign footwear companies. DSI will not target on competing with
international market at the moment. This will help to minimize the unnecessary costs and
reputation of DSI.
It is a known fact that identifying market and sales potential is an effective marketing
process. New market opportunities such as FDIs, Trade agreements in future will take DSI to
another step that will make the D. Samson Group still the market leader.
(Refer appendix 4.0 for graphical representation)
14
6.0 Financial Analysis
The purpose of carrying out a financial analysis of DSI is mainly to analyze past and current
financial information as a result an organization's risks and potentials would be evaluated.
Financial analysis would yield significant data about patterns and connections, the nature of
an organization's income, and the qualities and shortcomings of its financial position
(Woelfel, 2003).
6.1 Initial Investment
According to the research done on the new proposed shoe, the initial start-up cost for "The
Shoe that Grows" would be around Rs. 1,500,000.00. The below table shows the projected
start-up cost for the shoe that is proposed to market.
Initial Investment
Amount (Rs.)
Machinery
600,000.00
Advertising
300,000.00
Product Development Costs
275,000.00
Business License and Permits
325,000.00
Total costs
1,500,000.00
6.2 Projected Sales & Cost of Sales
The projected sales revenue & cost of sales graph clearly indicates how the estimated sales
revenue and estimated cost of sales affect the next five financial years. According to the
graph 1, the projected sales of Rs. 1,440,000.00 recorded in the Year 1 and would be
constantly increasing without any difficulties and recorded as Rs. 3,833,280.00 in the Year 5,
which clearly shows that there is a substantial demand for "The Shoe that Grows".
When analyzing the estimated cost of sales, a value of Rs. 660,000.00 recorded in the Year 1,
has increased steadily over the upcoming years, which recorded as Rs. 1,940,000.00 in the
Year 5. This clearly indicates that the purchases of raw materials are increasing, in other
words the demand for the shoe is also increasing.
(Refer Appendix 5.0 for projected sales and cost of sales analysis)
15
6.3 Profit Graph Analysis
By considering the Best, Base and Worst scenarios, estimated profits and losses for five years
for DSI's "The Shoe that Grows" has recorded a profit as Rs. 127,000.00 in the Year 1 for
best scenario as against the base scenario, which is an estimated loss of Rs. 90,500.00 and
finally in the worst scenario an estimated loss of Rs. 60,000.00. By considering all three
scenarios it is evident that the base scenario estimated loss is greater than the worst scenario
loss in the Year 1. As this is a new product people would tried out in the Year 1 but after few
years this product doesn’t seem to be a success in the market even though the profit increase
slightly in the worst scenario in the Year 5, which is the reason why base scenario profit is
higher than the worst.
In the Year 5 there is an increase in all three scenarios which is Rs. 1,343,730.00 in the best
scenario, Rs. 1,076,513.00 in the base scenario and in the worst scenario a profit of Rs.
768,446.00. More detailed profit forecast is given in the below appendix which shows the
projected income statements of Base, Worst and Best scenarios for "The Shoe that Grows".
(Refer appendix 6.0 for profit graph analysis.)
6.4 Expense Graph Analysis
The expense graph is also drawn for five years of Best, Base and Worst scenarios. Mainly the
base scenario has a high expense involved compared to the other two scenarios, which clearly
has an impact on the profit for the five years. Accordingly in the Year 1 for base scenario, an
estimated expenses of Rs. 710,000.00 is recorded. The best scenario recorded an estimated
expenses amounting to Rs. 653,000.00, whereas the worst scenario has Rs. 708,000.00.In
comparison to year 5, an estimated expenditure has deliberately decreased due to lower
operating costs and has recorded as Rs. 556,850.00 in the base scenario, Rs. 549,550.00 in the
best scenario and finally Rs. 532,775.00 in the worst scenario which would ultimately impact
the net profit for any given year. More detailed expense forecast refer to the projected income
statements which is attached in the appendix for Base, Worst and Best scenarios for "The
Shoe that Grows".
(Refer appendix 7.0 for expense graph to have a proper understanding.)
16
6.5 Return on Investment (ROI)
Return on investment (ROI) measures the addition or misfortune created on a speculation
with respect to the measure of cash contributed. Return for money invested is typically
communicated as a rate and is ordinarily utilized for individual monetary choices, to contrast
an organization's productivity or with look at the effectiveness of diverse ventures (Return on
Investment (ROI), 2001).
In Year 1 the ROI is ‘14.5%’ which will deliberately increase to ‘27.5%’ in the Year 5 which
is a good sign as a new innovative shoe which involves a huge cost for producing, is also
going to enhance the return on investment year by year. Therefore by analyzing ROI, it
proves that the producing this innovative shoe is an efficient investment for DSI. This
company is also in a best position to measure the benefits of this investment and revenues
under the changing scopes.
(Refer appendix 8.0 for ROI analysis.)
6.6 Net Present Value Analysis
Net present value is the present estimation of net money inflows created by an undertaking
including salvage value, if any, less the introductory speculation on the task. It is a standout
amongst the most dependable measures utilized as a part of capital planning in light of the
fact that it represents time estimation of cash by utilizing marked down money inflows.
Under this project a 10% of a discounted rate has been considered to reflect a number of
aspects, such as risk that the market involved. So in the Best scenario it has a positive NPV of
Rs. 100,511.64, in the Base scenario a positive NPV of Rs. 82,678.50 and in the Worst
scenario too, a positive NPV of Rs. 75,867.56. Therefore, when considering about the base
scenario which has a positive NPV, would indicates that this shoe is an acceptable investment
for DSI. Normally, if a venture has a positive net present value, it will increase the value of
the organization and also profits of the organization shareholder’s.
(Refer appendix 9.0 for NPV analysis.)
17
6.7 Payback Period
Payback period is the time in which the starting money outflow of a venture is relied upon to
be recovered from the money inflows produced by the speculation. It is one of the most
straightforward venture examination strategies (Payback period, 2011).
In the Best Scenario the payback period is 2 years and 8 months and in the Base scenario the
payback period is 2 years and 9 months where as in the worst scenario the payback period is
2 years and11 months. As a result, when comparing the base scenario with the worst scenario,
base scenario has low payback period which is good for this shoe. As payback is to be
considered as effective measure for investment risk, so for "The Shoe that Grows" the risk
involved is low compared to the worst scenario. Due to this the cost involved in this project
will get recover after 2 years and 8 months which is a valuable period for an innovative shoe
like this.
6.8 Break-Even Sales Analysis
Break-even is the point which involves a zero loss or benefit. At break - even point, the
income of the business is equivalent it's aggregate expenses and its contribution margin
equivalents to its aggregate fixed expenses (Break-even Point Equation Method, 2011).
According to the break - even analysis DSI will acquire break even by selling 64 units (pairs)
of the new product which is "The Shoe that Grows". It is a better signal which indicates
that the profit gain by the shoe will increase in the upcoming years. The breakeven analysis
normally involves the cost would equals to the revenue generated for a particular unit
therefore when it get reduced the tendency to generate high profits, which an advantage for
this shoe.
DSI can use this breakeven analysis information on deciding a wide range of future business
decisions, including the prices of this shoe might have in the upcoming years, the tendency to
brand the product in new ways may also depend on this, and also in future if this shoe need to
apply for a loans it also may depend on this reducing breakeven point because it ensure the
profitability of the new product "The Shoe that Grows".
18
7.0 Commercialization
7.1 Market penetration
Marketing Mix is compromised as a tool that enables the tactics to initiate within the process
of this new product development. The reason of utilizing this tool is accounting the fact on
combining the value addition of the product with the company objectives on hand.
In relation to this product nature; a ‘Footwear’ compartment, we have derived our market
proposition in focus within the 4Ps in the marketing mix.
7.1.1 Place
The product is intended to penetrate the market through the existing the retail channels coexistent with DSI.
The shoe that grows is going to be with the penetration strategy the shoe will be made
available throughout all the two hundred stores and Four Thousand dealer network
throughout the island wide.
The product extends its usability through announcing customers to procure additional
accessories complacent with the expandable possibility of the shoe.
7.1.2 Product
The shoe that grows is new concept and development within the domestic footwear industry,
in which actualizes the capability of DSI in creating a new ground-breaking stature as in
previous times.
The innovation incorporated within the design and the value created for the customers enable
to promote a personalized solution, as it’s not just a product but creating a value for the
money as it sets apart from the competitors and other product lines. The shoe that grows is
guaranteed a lifetime use of 4- 6 years, in which proposes the ideal investment in highlighting
the trick of ‘expandability’, from a size 4 to a size 10; with a push of the adjustable straps
placed within.
19
The shoe that grows being branded under the house of DSI is aimed to be perceived as a
whole new level of innovation. With a reputed brand image the shoe that grows consumers
are guaranteed full fledge assurance of quality in the materials and the intention it was
created to perform.
7.1.3 Price
According to the findings of the concept testing stage List price of a pair of shoes will be Rs.
1200. Setting the base price for new product is a necessary part of developing the marketing
mix. Will have a sales promotion price of Rs.1000 within the first 500 customers during the
launch.
7.1.4 Promotion
This will feature photo shoots for our news magazines upon purchase, incorporating our CSR
strategy; as with each pair purchased we are going to donate to the needy.
Easy customizable options are also given as a value added item for the customer’s preference.
As the shoe possesses interchangeable parts, each part including the straps to the tongue and
the sole can be made available from the materials of Canvas, Rubber, and Leather etc.
We also incorporate special discounts for trading in the old pairs purchased from DSI, as a
reasonable price can be saved and reimbursed to the purchase of each shoe.
7.2 Integrated marketing communication campaign [IMC]
7.2.1 Campaign objectives
•
Create primary demand for The Shoe that Grows
•
Create selective demand for The Shoe that Grows
•
Create and uphold the awareness of The Shoe that Grows within the entire target
market
•
Establish proper push and pull strategies
•
Clearly distinguish the key differences of the product compared to the competitors
•
Capture 60% of the total target market within first year
•
Encourage potential consumers to trial The Shoe that Grows and brand switching
20
7.2 Integrated Marketing Communication plan
The projected cost for all the entire IMC is Rs 1,500,000 in the first year. Following IMC
tools are used in the IMC strategy for the proposed campaign.
7.2.1 Advertising
An advertising campaign is basically done with the help of mass broadcasting through
methods such as Newspapers, television and radio by creating awareness of the product ‘the
shoes that grows’. Taking into consideration television we will be using a series of
advertisements for a considered amount of time. Radio programs such E FM's ‘Morning
show gram’ and newspaper the Sunday observer and daily news will be used in order to carry
out the advertising campaign. The products main target market will be middle level income to
lower level income generating families with kids that is why we have chosen the above
methods of advertising.
7.2.2 Sales promotion
Sales promotion is an activity conducted by an organization that wants to further its sales
interest towards the customer in order to increase its revenue. This includes incentives for
sales forces, distributors and the ultimate consumer with the objective of creating an
immediate sale. (Belch and Belch, 2007). ‘The shoe that grows’ will use two types of sales
promotion that is consumer oriented sales and trade oriented sales promotion. Consumer
oriented sales promotion will be used as the primarily tool in order to push the product to the
target audience out of the retailers’ shelves. This will further encourage the potential
customers to purchase this novelty product.
7.2.3 Public relations
‘The shoe that grows’ is a novelty product and public relations will be used in order to create
primary demand for this new product effectively. DSI will be conducting a public relations
program which will inform the people about the product and how to use it and its benefits to
the target market audience. With the introduction of the shoe the factories production
capacity will have to increase in turn DSI will try as much as possible to hire local employees
as much as possible.
21
7.2.4 Support media
This method of IMC will be used in order to further extend our reach to our respective target
market which the rest of the media methods have not been able to reach.(Belch, 2013, p.551).
However in the situation this method is used in order as a primary tool because this sort of
product is a novelty and it was not available for the target market to experience firsthand
previously. DSI will be using Handouts, Flyers, transit advertising. And the handouts out will
consist of details such what type of product, where it is launched along with the date and
time, why we need such a product and how it should be used. This hand out will be will
distributed in venues such Majestic city, Arcade independence square, Crescat Boulevard and
liberty plaza.
7.2.5 Press release
As this campaign created to cater every class within the Sri Lankan demographics, we have
incorporated the ‘Shoe that grows’ to be a new innovation to the domestic market.
We assure, the publicity created will be of news-worthy covered through all informational
channels in talk-shows, newspapers and social media mainly.
This is bound to feature story within magazines incorporated within our main stakeholder
clients that are shared with our own available product lines.
22
8.0 Product Launch
8.1 Launch Objectives

Initiate the primary demand for the selected target market

Officially introduce the sandal to the customers

Increase the awareness of the special designed sandal

Use public relations and mass media to promote the product and showcase the
specialty of the product

Give instructions to sales force on how to use the sandals and motivate them through
incentives on each sale at the launch place

Motivate channel partners including whole sellers and retailers
8.2 Launch Strategy
In relation to the initial launch, the expandable shoe can use the market penetration strategy.
The reason to use this strategy is due to the similar competitive forces available in the shoe
industry in Sri Lanka. This will be a whole new product to the market in Sri Lanka but there
is a chance of imitating the product by the other shoe manufacturers in the future. At present,
being the market leader, D. Samson industries have the ability to use its resources and finance
the project. Therefore this could be seen as a success.
8.3 Launch Plan
The plan of launching “the shoe that grows” is basically through the Five W’s. This will
help DSI to address the launch objectives.
8.3.1 What
The high quality shoe which is sold at a lower price will be introduced as the shoe that grows
by DSI and it will be commercialized towards the target market it intended for.
8.3.2 When
The launch will be scheduled to 27th September 2015 at 10.30am onwards. A Sunday was
selected due to the number of shoppers that hangout in the place and it could be an added
advantage to increase the awareness of the new product.
23
8.3.3 Where
The launch will be held at the Arcade Independence Square. The reason for selecting this
place is due to the number of middle level income people visiting the place on a daily basis.
8.3.4 Who
Board of directors of D. Samson industries will be invited along with the head of finance and
the head of marketing of DSI. Further, several media personals from both electronic and
printed media will be joining the product launch. A group of loyal customers will be
witnessing the launch at the same time.
8.3.5 Why
Initiate the primary demand for the selected target market, officially introduce the sandal to
the customers, Increase the awareness of the special designed sandal and use public relations
and mass media to promote the product and showcase the specialty of the product. Further,
this will motivate channel partners including whole sellers and retailers.
8.4 Launch Budget
Given the context of the launch, for the ‘Shoe that Grows’, the audience is considered
inclusive of the main target market and the media press throughout the event. The budget
allocated to the launch that takes place in the Independence Arcade Venue, is approximately
Rs.150,000.
Thus, in considering value addition to booking and advertising and public relation activities
resound the final accumulation of the budget.
(Refer appendix 12.0 for launch budget)
24
9.0 Conclusion
Overall this report covers the New Product Development process of the selected scope for the
new product introduced to the company; 'The Shoe that grows'. In estimating the current
trends of technology and innovation, the focus of this shoe since inception is capture
simplicity in resonant; ‘to put a pair to every child’s feet’ mainly targeting low income
families with kids incorporated to the positioning statement.
What makes this product special is the aim of satisfying the customers throughout their
lifetime through the ‘Expandability’ factor which can be worn by a size 4 to a full sized adult
Size 10 at the minimal cost. Into which this innovation found no one more capable than DSI,
with the expertise and the network integration to fully recognize the potential of the product.
In retrospect the initial investment for such a project was deemed to be Rs. 1,500,000
gathered by the investors who deemed worthy towards the marketing capability with profits
deeming 10x* over the next 5 years.
In depicting the primary research guarantee of the product sales potential is considered to be
high as 68% of the people within the focus group of 100 for the questionnaire have admitted
Excitement and enthusiasm in the product.
As to which commercializing the center stage of the sandal was primed and ready to go viral
through the throughout all the two hundred stores and Four Thousand dealer network
throughout the island wide. The product launch is centered on the Pull Strategies to
demonstrate the product reveal to the public. As this product is deemed new and exclusive to
the marketplace, aimed to provide competitive edge to DSI and made available to the
consumers at a value added price ranging from Rs.1100-1299/=**
The integrated marketing campaign was initiated to revolve around the main tools including
Advertising, sales promotion and various support media as the press and public relation
criteria to forecasting demand for the product, and achieving 60% share within the first year.
As there are no record of previous envision for an ‘Expandable’ sandal by DSI nor by the
competitors, this product will initiate to leap-frog the competition with this ground-breaking
innovation revolving around to penetrate the market utilized to carve out 10% market share in
25
sandals in the initial stage, whilst reducing the burden for the people with the price and
extended lifeline of the product particularly to age with the user.
26
Reference List
Sri Lanka's footwear and leather industry booming Retrieved 20th September, 2015, at
http://www.colombopage.com/archive_14A/Feb08_1391883450CH.php
DSI Footwear Retrieved 20th September, 2015, at
http://www.dailynews.lk/?q=business/dsi-captures-world-footwear-tyres
The marketing mix in marketing strategy. Retrieved 20th September, 2015, at
http://www.marsdd.com/mars-library/the-marketing-mix-in-marketing-strategy-productprice-place-and-promotion/
Net
Present
Value
(NPV).
(2011).
Retrieved
11th
September,
2015,
at
AccountingExplained.com:
http://accountingexplained.com/managerial/capital-budgeting/npv
Payback period . (2011). Retrieved 11thSeptember, 2015, at AccountingExplained.com:
http://accountingexplained.com/managerial/capital-budgeting/payback-period
Return on Investment (ROI). (2001). Retrieved 11th September, 2015, at Investing Answers,
Inc.:
http://www.investinganswers.com/financial-dictionary/technical-analysis/return-investmentroi-1100
Woelfel, C. J. (2003). Eagle Traders. Retrieved 11th September, 2015, at Encyclopedia of
Banking &Finance :
http://www.eagletraders.com/advice/securities/financial_statements_analysis.php
Kokemuller, N. (2015). Six Micro environmental Factors That Affect Businesses. Small
Business. Retrieved from
http://smallbusiness.chron.com/six-microenvironmental-factors-affect-businesses-78023.html
27
Appendices
28
Appendix
1. Questionnaire
1. What do you wear when stepping- out?
•
•
•
•
Shoes
Sandals
Slippers
Other
2. How often do you wear Sandals?
•
•
•
•
Several days a week
Once a week
Once a month
Never
3. On average how much do you spend on a pair of footwear?
•
•
•
•
500-1,000
1,000-2000
2,000-4500
5,000 and above
4. Age and Sex
Male
•
•
•
•
Female
10- 15
16-20
20-30
30 and above
5. What do you look for in a footwear?
•
•
•
•
Comfort
Design
Quality
Brand
6. How often do you go shopping?
•
•
•
•
Frequently
Not often
Rarely
Not at all
29
7. What brand do you currently buy?
•
•
•
•
Bata
DSI
Catwalk
Bettans
8. Have you owned a pair from DSI?
• Yes
• No
9.
•
•
•
•
Channel used for Shopping
Store
Online
Promotions
Catalogues
10. Would you consider selling footwear that you no longer use?
•
•
Yes
No
11. What services do you look for in a purchase?
•
•
•
•
After sales
Customization
Review Period
Additional Packages
12. Why do you like DSI?
13. Is there a reason to not purchase DSI?
14. What will you recommend as room for improvement?
30
2. SWOT
Strengths

Focused customer service

Customer satisfaction guaranteed
Weaknesses

Does not have international
presence
programs

This sector is very price sensitive

Support of local merchants

No product branding

Information technology leader in its

Low production capacity
industry

Focused employees development
Opportunities
Threats

Increasing consumer wants

Regulation of company

Retail sales expected to increase

Varity of competition

Increase in environment conscious

International manufactures
consumers

Expand to international markets
3. Fertility Rate in Sri Lanka
31
Poverty rate in Sri Lanka
4. Market & Sales Potential
Market Sales & Potential
Market Share of DSI
Bata
Bettans
RanPa
Micheal Angelo
Cat Walk
32
5. Projected Sales and Cost of Sale
4500000
4000000
3500000
3000000
2500000
Sales
2000000
COS
1500000
1000000
500000
0
Y1
Y2
Y3
Y4
Y5
6. Profit graph analysis
1600000
1400000
1200000
1000000
Best
800000
Base
600000
Worst
400000
200000
0
-200000
Y1
Y2
Y3
Y4
Y5
33
7. Expense graph analysis
800000
700000
600000
500000
Best
400000
Base
300000
Worst
200000
100000
0
Y1
Y2
Y3
Y4
Y5
8. ROI
ROI
30.00%
25.00%
20.00%
15.00%
ROI
10.00%
5.00%
0.00%
Y1
Y2
Y3
Y4
Y5
9. NPV
NPV
150000.00
100000.00
NPV
50000.00
0.00
Best
Base
Worst
34
10. Projected Income Statement
Best Scenario
Description
Year 01 (LKR)
Year 02 (LKR)
Year 03 (LKR)
Year 04 (LKR)
Year 05 (LKR)
Revenue
Product - The Shoe that grows
sales per year (Units)
Price of the product (LKR)
Avg. sales per month
Total sales Revenue (LKR)
1200
1,200.00
100
1,440,000.00
1400
1,320.00
117
1,848,000.00
1600
1,584.00
133
2,534,400.00
1800
1,742.40
150
3,136,320.00
2000
1,916.64
167
3,833,280.00
550.00
660,000.00
630.00
882,000.00
730.00
1,168,000.00
840.00
1,512,000.00
970.00
1,940,000.00
Cost of sales
Unit Cost
Total
Gross Profit
Gross Profit margin
780,000.00
54%
966,000.00
52%
1,366,400.00
54%
1,624,320.00
52%
1,893,280.00
49%
Other Expenses
Advertising
Depriciation - Machinery
Business License and Permits
Product Development Cost
Electricity
Packaging and Labeling
Distribution Expenses
Salaries and Wages
Other Expenses
Total Expenses
300,000.00
120,000.00
65,000.00
55,000.00
18,000.00
10,000.00
20,000.00
60,000.00
5,000.00
653,000.00
50,000.00
120,000.00
65,000.00
55,000.00
20,400.00
11,475.00
22,950.00
68,000.00
5,525.00
418,350.00
80,000.00
120,000.00
65,000.00
55,000.00
28,800.00
16,200.00
32,400.00
96,000.00
7,800.00
501,200.00
120,000.00
65,000.00
55,000.00
39,600.00
22,275.00
44,550.00
132,000.00
10,725.00
489,150.00
120,000.00
65,000.00
55,000.00
49,200.00
27,675.00
55,350.00
164,000.00
13,325.00
549,550.00
Net Profit
Net Profit Margin
127,000.00
9%
547,650.00
30%
865,200.00
34%
1,135,170.00
36%
1,343,730.00
35.05%
127,000.00
120,000.00
150,000.00
397,000.00
150,000.00
247,000.00
10%
24,700.00
547,650.00
120,000.00
25,000.00
692,650.00
150,000.00
542,650.00
10%
54,265.00
865,200.00
120,000.00
40,000.00
1,025,200.00
150,000.00
875,200.00
10%
87,520.00
1,135,170.00
120,000.00
1,255,170.00
150,000.00
1,105,170.00
10%
110,517.00
1,343,730.00
120,000.00
1,463,730.00
Assumptions:
Business License for 5 yrs.
Product Development for 5years
machinery for 5 years
Income Tax rate is 10%
Tax computations
Profit
Depreciation
Advertising 50%
Capital Allowance
Taxable Profit
Tax Rate
Tax Payable
1,463,730.00
10%
146,373.00
35
Base Scenario
Description
Year 01 (LKR)
Year 02 (LKR)
Year 03 (LKR)
Year 04 (LKR)
Year 05 (LKR)
Revenue
Product - The Shoe that grows
sales per year (Units)
Price of the product (LKR)
Avg. sales per month
Total sales Revenue (LKR)
950
1,200.00
79
1,140,000.00
1250
1,320.00
104
1,650,000.00
1450
1,584.00
121
2,296,800.00
1600
1,742.40
133
2,787,840.00
1700
1,916.64
142
3,258,288.00
550.00
522,500.00
630.00
787,500.00
730.00
1,058,500.00
840.00
1,344,000.00
970.00
1,649,000.00
Cost of sales
Unit Cost
Total
Gross Profit
Gross Profit margin
617,500.00
54%
862,500.00
52%
1,238,300.00
54%
1,443,840.00
52%
1,609,288.00
49%
Other Expenses
Advertising
Depriciation - Machinery
Business License and Permits
Product Development Cost
Electricity
Packaging and Labeling
Distribution Expenses
Salaries and Wages
Other Expenses
Total Expenses
320,000.00
120,000.00
65,000.00
55,000.00
18,000.00
10,000.00
35,000.00
75,000.00
10,000.00
708,000.00
65,000.00
120,000.00
65,000.00
55,000.00
22,500.00
13,750.00
46,250.00
98,750.00
13,750.00
500,000.00
90,000.00
120,000.00
65,000.00
55,000.00
26,100.00
15,950.00
53,650.00
114,550.00
15,950.00
556,200.00
120,000.00
65,000.00
55,000.00
39,600.00
17,600.00
59,200.00
126,400.00
17,600.00
500,400.00
120,000.00
65,000.00
55,000.00
49,200.00
27,675.00
62,900.00
134,300.00
18,700.00
532,775.00
Net Profit
Net Profit Margin
(90,500.00)
-8%
362,500.00
22%
682,100.00
30%
943,440.00
34%
1,076,513.00
33.04%
(90,500.00)
120,000.00
160,000.00
189,500.00
150,000.00
39,500.00
10%
3,950.00
362,500.00
120,000.00
32,500.00
515,000.00
150,000.00
365,000.00
10%
36,500.00
682,100.00
120,000.00
45,000.00
847,100.00
150,000.00
697,100.00
10%
69,710.00
943,440.00
120,000.00
1,063,440.00
150,000.00
913,440.00
10%
91,344.00
1,076,513.00
120,000.00
1,196,513.00
Assumptions:
Business License for 5 yrs.
Product Development for 5years
machinery for 5 years
Income Tax rate is 10%
Tax computations
Profit
Depreciation
Advertising 50%
Capital Allowance
Taxable Profit
Tax Rate
Tax Payable
1,196,513.00
10%
119,651.30
36
Worst scenario
Description
Year 01 (LKR)
Year 02 (LKR)
Year 03 (LKR)
Year 04 (LKR)
Year 05 (LKR)
Revenue
Product - The Shoe that grows
sales per year (Units)
Price of the product (LKR)
Avg. sales per month
Total sales Revenue (LKR)
1000
1,200.00
83
1,200,000.00
750
1,440.00
63
1,080,000.00
950
1,584.00
79
1,504,800.00
1150
1,742.40
96
2,003,760.00
1400
1,916.64
117
2,683,296.00
550.00
550,000.00
630.00
472,500.00
730.00
693,500.00
840.00
966,000.00
970.00
1,358,000.00
Cost of sales
Unit cost
Total
Gross Profit
Gross Profit margin
650,000.00
54%
607,500.00
56%
811,300.00
54%
1,037,760.00
52%
1,325,296.00
49%
Other Expenses
Advertising
Depriciation - Machinery
Business License and Permits
Product Development Cost
Electricity
Packaging and Labeling
Distribution Expenses
Salaries and Wages
Other Expenses
Total Expenses
315,000.00
120,000.00
65,000.00
55,000.00
24,000.00
18,000.00
20,000.00
85,000.00
8,000.00
710,000.00
75,000.00
120,000.00
65,000.00
55,000.00
17,100.00
13,500.00
22,950.00
60,600.00
5,700.00
434,850.00
112,000.00
120,000.00
65,000.00
55,000.00
25,650.00
17,100.00
32,400.00
90,900.00
8,550.00
526,600.00
120,000.00
65,000.00
55,000.00
38,475.00
20,700.00
44,550.00
136,350.00
12,825.00
492,900.00
120,000.00
65,000.00
55,000.00
48,450.00
25,200.00
55,350.00
171,700.00
16,150.00
556,850.00
Net Profit
Net Profit Margin
(60,000.00)
-5%
172,650.00
16%
284,700.00
19%
544,860.00
27%
768,446.00
28.64%
(60,000.00)
120,000.00
157,500.00
217,500.00
150,000.00
67,500.00
10%
6,750.00
172,650.00
120,000.00
37,500.00
330,150.00
150,000.00
180,150.00
10%
18,015.00
284,700.00
120,000.00
56,000.00
460,700.00
150,000.00
310,700.00
10%
31,070.00
544,860.00
120,000.00
664,860.00
150,000.00
514,860.00
10%
51,486.00
768,446.00
120,000.00
888,446.00
Assumptions:
Business License for 5 yrs.
Product Development for 5years
machinery for 5 years
Income Tax rate is 10%
Tax computations
Profit
Depreciation
Advertising 50%
Capital Allowance
Taxable Profit
Tax Rate
Tax Payable
888,446.00
10%
88,844.60
37
11. Projected Cash flow Statement
Best Scenario
Description
Year 0 (LKR)
Year 1 (LKR)
Year 2 (LKR)
Year 3 (LKR)
Revenue
1,440,000.00
1,848,000.00
2,534,400.00
3,136,320.00
3,833,280.00
Cash Inflows
1,440,000.00
1,848,000.00
2,534,400.00
3,136,320.00
3,833,280.00
300,000.00
50,000.00
80,000.00
18,000.00
10,000.00
20,400.00
11,475.00
28,800.00
16,200.00
39,600.00
22,275.00
49,200.00
27,675.00
20,000.00
60,000.00
22,950.00
68,000.00
32,400.00
96,000.00
44,550.00
132,000.00
55,350.00
164,000.00
5,000.00
5,525.00
7,800.00
10,725.00
13,325.00
413,000.00
178,350.00
261,200.00
249,150.00
309,550.00
1,669,650.00
2,273,200.00
2,887,170.00
3,523,730.00
Expenses
Machinery
Advertising
Year 5 (LKR)
600,000.00
300,000.00
Electricity
Packaging and Labeling
Business License and Permits
Year 4 (LKR)
325,000.00
Distribution Expenses
Salaries and Wages
Other Expenses
Product Development Cost
275,000.00
Cash Outflows
1,500,000.00
Net Cashflows Before Tax
Tax incurred
(1,500,000.00)
1,027,000.00
Net Cashflows After Tax
(1,500,000.00)
Balance b/f
Balance c/d
(1,500,000.00)
1,002,300.00
(1,500,000.00)
(497,700.00)
24,700.00
54,265.00
87,520.00
110,517.00
146,373.00
1,615,385.00
2,185,680.00
2,776,653.00
3,377,357.00
(497,700.00)
1,117,685.00
1,117,685.00
3,303,365.00
3,303,365.00
6,080,018.00
6,080,018.00
9,457,375.00
Base scenario
Description
Year 1 (LKR)
Year 2 (LKR)
Year 3 (LKR)
Revenue
1,140,000.00
1,650,000.00
2,296,800.00
2,787,840.00
3,258,288.00
Cash Inflows
1,140,000.00
1,650,000.00
2,296,800.00
2,787,840.00
3,258,288.00
320,000.00
65,000.00
90,000.00
18,000.00
10,000.00
22,500.00
13,750.00
26,100.00
15,950.00
39,600.00
17,600.00
49,200.00
27,675.00
35,000.00
75,000.00
10,000.00
46,250.00
98,750.00
13,750.00
53,650.00
114,550.00
15,950.00
59,200.00
126,400.00
17,600.00
62,900.00
134,300.00
18,700.00
Expenses
Machinery
Advertising
Electricity
Packaging and Labeling
Business License and Permits
Year 0 (LKR)
Year 4 (LKR)
Year 5 (LKR)
600,000.00
300,000.00
-
-
325,000.00
Distribution Expenses
Salaries and Wages
Other Expenses
Product Development Cost
275,000.00
Cash Outflows
1,500,000.00
468,000.00
260,000.00
316,200.00
260,400.00
292,775.00
Net Cashflows Before Tax
Tax incurred
(1,500,000.00)
672,000.00
3,950.00
1,390,000.00
36,500.00
1,980,600.00
69,710.00
2,527,440.00
91,344.00
2,965,513.00
119,651.30
Net Cashflows After Tax
Balance b/f
Balance c/d
(1,500,000.00)
(1,500,000.00)
1,353,500.00
(831,950.00)
521,550.00
1,910,890.00
521,550.00
2,432,440.00
2,436,096.00
2,432,440.00
4,868,536.00
2,845,861.70
4,868,536.00
7,714,397.70
668,050.00
(1,500,000.00)
(831,950.00)
38
Worst scenario
Description
Year 0 (LKR)
Year 1 (LKR)
Year 2 (LKR)
Year 3 (LKR)
Revenue
1,200,000.00
1,080,000.00
1,504,800.00
2,003,760.00
2,683,296.00
Cash Inflows
1,200,000.00
1,080,000.00
1,504,800.00
2,003,760.00
2,683,296.00
315,000.00
75,000.00
112,000.00
24,000.00
18,000.00
20,400.00
13,500.00
28,800.00
17,100.00
39,600.00
20,700.00
49,200.00
25,200.00
20,000.00
85,000.00
22,950.00
60,600.00
32,400.00
90,900.00
44,550.00
136,350.00
55,350.00
171,700.00
8,000.00
5,700.00
8,550.00
12,825.00
16,150.00
Expenses
Machinery
Advertising
Electricity
Packaging and Labeling
Business License and Permits
Year 4 (LKR)
Year 5 (LKR)
600,000.00
300,000.00
325,000.00
Distribution Expenses
Salaries and Wages
Other Expenses
Product Development Cost
275,000.00
Cash Outflows
1,500,000.00
470,000.00
198,150.00
289,750.00
254,025.00
317,600.00
Net Cashflows Before Tax
Tax incurred
(1,500,000.00)
730,000.00
881,850.00
1,215,050.00
1,749,735.00
2,365,696.00
6,750.00
18,015.00
31,070.00
51,486.00
88,844.60
Net Cashflows After Tax
(1,500,000.00)
1,183,980.00
1,698,249.00
2,276,851.40
Balance b/f
Balance c/d
(1,500,000.00)
87,085.00
1,271,065.00
1,271,065.00
2,969,314.00
2,969,314.00
5,246,165.40
723,250.00
(1,500,000.00)
(776,750.00)
863,835.00
(776,750.00)
87,085.00
39
12. Launch budget
Launch Budget
Advertising
Print media
Radio advertising
TV advertising
Total Advertising
Amount (Rs.)
Total (Rs.)
10,000
35,000
50,000
95,000
Launch B
Collateral
Brochure
Refreshments
Total Collateral
Public Relations
Press release
Press release wire fees
Total Public relations
Total Amount
Advertising
3,000
2,000
P
5,000
40,000
10,000
Collateral
50,000
150,000
Public Relation
P
40