MBA 992: Project Report
Aparna Chandrakaladhar Reddy
Table of Contents
Executive Summary ........................................................................................................................ 6
1. Introduction ................................................................................................................................. 7
1.1 Industry Overview .............................................................................................................................. 7
1.2 Mission Statement ............................................................................................................................... 9
1.3 Goal ..................................................................................................................................................... 9
2.0 Operations Plan ....................................................................................................................... 10
2.1 Location and Site Plan ...................................................................................................................... 10
2.2 Flow of Work .................................................................................................................................... 11
2.2.1 Dyeing Process........................................................................................................................... 12
2.2.2 Block printing process ............................................................................................................... 14
2.3 Floor Plan .......................................................................................................................................... 15
2.4 Quality Control Programs ................................................................................................................. 16
2.5 Organizational Tasks ........................................................................................................................ 16
2.5.1 Daily........................................................................................................................................... 16
2.5.2 Weekly ....................................................................................................................................... 17
2.5.3 Monthly ...................................................................................................................................... 17
2.5.4 Yearly......................................................................................................................................... 18
2.6 Supply Analysis ................................................................................................................................ 18
2.7 Service Providers .............................................................................................................................. 19
2.8 Processes and Procedures.................................................................................................................. 19
2.9 Capital budget ................................................................................................................................... 20
2.10 Cost of Goods Sold ......................................................................................................................... 20
2.11 Operating Expenses ........................................................................................................................ 21
2.12 Working Capital Planning............................................................................................................... 21
2.12.1 Cash.......................................................................................................................................... 21
2.12.2 Inventories................................................................................................................................ 21
2.12.3 Accounts Receivable ................................................................................................................ 22
2.12.4 Accounts Payable ..................................................................................................................... 22
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2.12.5 Cash Conversion Cycle ............................................................................................................ 22
3.0
Human Resources Plan ...................................................................................................... 22
3.1 Organizational Structure ................................................................................................................... 22
3.2 Job Descriptions/Qualifications: ....................................................................................................... 24
3.2.1 Managing Director ..................................................................................................................... 24
3.2.2 Receptionist................................................................................................................................ 25
3.2.3 Sales Woman ............................................................................................................................. 25
3.2.4 Dyeing Work in charge .............................................................................................................. 26
3.2.5 Block Printing in charge ............................................................................................................ 26
3.2.6 Helper and Janitorial .................................................................................................................. 26
3.3 Recruitment ....................................................................................................................................... 26
3.4 Training Programs ............................................................................................................................ 27
3.5 Human Resource Strategy................................................................................................................. 27
3.6 Labour Costs ..................................................................................................................................... 28
3.7 Shareholders’ Agreement.................................................................................................................. 28
4.0
Marketing Strategy............................................................................................................. 28
4.1 The Marketing Mix ........................................................................................................................... 28
4.1.1 Products...................................................................................................................................... 28
4.1.2 Pricing ........................................................................................................................................ 29
4.1.3 Promotion ................................................................................................................................... 30
4.1.4 Place ........................................................................................................................................... 30
4.2 Segmentation, Targeting, Positioning ............................................................................................... 31
4.3 Competitive Analysis ........................................................................................................................ 31
4.4 Projections of Revenues and Marketing Expenses ........................................................................... 32
Table 4.2 Marketing Budget (Rupees) ................................................................................................ 33
4.5 Marketing Plan .................................................................................................................................. 33
4.5.1 The Market ................................................................................................................................. 33
4.5.2 Purchasing Patterns of Customers.............................................................................................. 34
4.5.3 Target Markets and Product Features ........................................................................................ 34
4.5.4 Sales and Profit Objectives ........................................................................................................ 35
4.5.5 Channels of Distribution ............................................................................................................ 35
4.5.6 Select Markets/Product/Service Mix.......................................................................................... 36
4.5.7 Selling and Advertising .............................................................................................................. 36
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5.0
Aparna Chandrakaladhar Reddy
Financial Plan..................................................................................................................... 37
5.1 Capital Requirements: ....................................................................................................................... 37
Table 5.1 Capital Requirements (Rupees) .......................................................................................... 37
5.2 Summary of Projected Income Statement ......................................................................................... 38
5.3 Summary of Projected Balance Sheet ............................................................................................... 38
5.4 Risk Analysis .................................................................................................................................... 39
5.4.1 Sensitivity Analysis.................................................................................................................... 39
5.4.2 Scenario Analysis....................................................................................................................... 39
5.5 Dividend Policy ................................................................................................................................ 40
5.6 Economic Forecasts .......................................................................................................................... 40
5.7 Ratio Analysis ................................................................................................................................... 40
5.8 Break-Even Analysis ........................................................................................................................ 41
5.9 Net Present Value ............................................................................................................................. 41
5.10 Internal Rate of Return.................................................................................................................... 41
6.0 Conclusion .............................................................................................................................. 41
Tables
Table 2.1 Initial investments..................................................................................................…....20
Table 2.2 Working Capital………………………………………………………….....………....20
Table 2.3 Cost of Goods Sold Rupees)…………......................……………… ………………...20
Table 2.4 Operating Expenses (Rupees)…. …………………...........................……….………..20
Table 2.5 Cash Conversion Cycle………………..........................................................…..……..22
Table 4.1 Marketing Budget (Rupees).… ……......................................................................…..33
Table 5.1 Capital Requirements (Rupees)…….........................................................…… ….…. 37
Table 5.2 Projected Revenues, Net Income, and Cash Flows (Rupees)……......................…......38
Table 5.3 Balance Sheet.................................................................................................................39
Table 5.4 Ratio Analysis................................................................................................................40
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Appendices
Appendix A-Shop location: .......................................................................................................... 43
Appendix B-Process Flow Chart .................................................................................................. 44
Appendix C-Pictures of blocks, sari spread on table and finished products ................................. 45
Appendix D- Floor Plan ................................................................................................................ 46
Appendix E-Unit Cost to make one sari ....................................................................................... 47
Appendix F-Unit Cost to make one shirt ...................................................................................... 48
Appendix G- Marketing Expenses for 5 yrs ................................................................................. 49
Appendix H- Financial Plan - Base Case (In Rupees)...................................................................49
Appendix I- Financial Plan- Best Case (In Rupees)......................................................................51
Appendix J- Financial Plan – Worst Case (In Rupees)..................................................................52
Appendix K- Financial Plan - Break Even (In Rupees).................................................................53
Appendix L- Balance Sheet projections (In Rupees).....................................................................53
Works Cited .................................................................................................................................. 54
Figure 3.1 ...................................................................................................................................... 23
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Executive Summary
Women of age 13 -60yrs are involved in various types of responsibilities – going to colleges,
offices, participating in social events etc. These women want designer casual clothes which can
give them ultimate comfort at their places of work and at home, and also make them feel special
and different from others. Surprisingly, there aren’t any small stores in Hyderabad selling
specifically cotton clothes. Big retail stores do sell cotton saris but at enormous prices. Young
women have less choice when it comes to casual wear as there are no stores specifically selling
designer block printed cotton shirts for them.
ADC is a designer cotton store selling cotton fabrics exclusively for women. ADC will sell
designer cotton saris and cotton shirts to its customers. Designer cotton shirts will attract women
of age group 13 – 30 with its enticing designs, high quality, and fabulous colors. Prices at ADC
are not cheap but definitely affordable compared to big retail stores.
The atmosphere, customer care and product satisfaction will create a competitive advantage for
ADC. It is a good choice of place for women who want to buy designer comfort clothes while
gaining a feel at home experience when shopping. ADC will also provide its customers and to
the people who accompany them many value added services, such as space to relax in the lobby
while reading magazines and having a sip of branded quality coffee.
Marketing strategies and advertisement will play a crucial role in bringing customers to ADC in
the first year of its operations as it is a women’s only exclusive designer cotton store. To achieve
success ADC will have to make enough unit sales. Marketing and TV advertising in the 1st yr of
its business will build brand image for ADC, which is extremely important for it to sustain in the
future.
ADC will place special emphasis on providing customer service and maintaining quality
consistently; to achieve this, all staff members at ADC will undergo professional training and
constant evaluations on a regular basis. The Managing Director will pay individual attention
towards the staff and will constantly motivate and guide them in achieving their full potential.
ADC’s objective is to achieve maximum sales in its new product line (cotton shirts) in the 1st yr
and also increase sales in cotton saris by developing a brand image of its own. ADC wants to be
recognized as the only store that comes into mind when people think of cotton fabrics.
With the opening of a designer store exclusively for women, ADC will be able to capture a major
share of the women’s market who wants casual wear with designer look and feel.
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Introduction
Aparna’s Designer Cottons (ADC) is a small sized manufacturing and designing clothing
business that plans to set up its business in the year 2010. The business will be set up in a prime
locality called Madhapur in the city of Hyderabad located in Andhra Pradesh, India. Madhapur is
both residential and commercial and is a hub for many IT companies- IBM, Satyam, Infosys.
And within 20 kms radius are located many prestigious schools – National Institute of Fashion
Technology (NIFT), International Institute of Information Technology (IIIT), Hyderabad Central
University (HCU). The business will primarily involve dyeing of colors and block printing on
cotton saris and cotton shirts and ADC intends to target women and teenage girls as its
customers.
1.1 Industry Overview
Dyeing and block printing on fabrics is a business that can be established with a small
investment which can be done either with one’s own equity or borrowing money in the form of
debt from banks or through other sources. For many women who are educated, aspiring to be
financially independent through self employment and who have passion for designing fabrics,
this type of business might be a good opportunity for them. At Madhapur, quite few dyeing and
block printing businesses have been established over a period of time. In a hurry to make profits
rather than emphasizing on quality, designs, marketing techniques, and customer satisfaction,
many businesses though they have generated profits in the initial phase are now in a stage of
shutting down their businesses. In this locality there is only one business of this kind which has
been running successfully for the past 20 yrs which would be the only competitor to ADC. The
business is owned by a woman who is doing it as a hobby rather than the business way. Also her
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business lacks varied product lines; they just sell cotton saris. Her business doesn’t focus on
proper marketing strategies and just through word of mouth she has been able to achieve success.
This locality (Madhapur) has women from various backgrounds – higher middle class, rich and
the neo rich. Few of them are house wives who always indulge in various activities like partying,
participating in social events etc, some are highly educated women placed in high positions,
some are elder women and the rest are college going teenagers. These women want clothing
(saris and shirts) that gives them comfort while travelling, at work places, at colleges and even
while staying in their own home. Product quality, design and colors are their priority for which
they would not mind paying high price. Though there are many big retail shops selling cotton
saris and shirts, because of their huge overhead costs the product becomes very costly. So many
women would prefer buying at a store like ADC because they get the same product for a decent
price and also in small businesses personal attention will be given to the ideas and tastes of
customers. ADC: Designer cotton store for women and teenage girls is going to take advantage
of this opportunity by emphasising on high quality product, by creating different product lines,
and implementing good marketing techniques. Apart from targeting young and elder women,
ADC will also target teenage girls through its different product line. ADC is a women only store
that offers a varied collection of designer cotton saris and shirts for all categories of women
(middle class to very rich) in an atmosphere designed exclusively for women.
The main reason as to why the business wants to focus only on cotton is due to the presence of
extraordinary features in the cotton fabric. Cotton fabric is known for its coolness, softness;
comfort and is said to be the principal clothing fiber of the world. Cotton "breathes”.1 This fibre
absorbs and releases perspiration quickly, thus allowing the fabric to "breathe". Its fibres’ are
highly porous, making cotton clothing light and breathable, but able to be woven into any desired
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density. This quality also enables cotton fabric to be dyed easily, making it a natural choice for
designers. Cotton is also a fabric that responds well to sewing. Its drape conforms well to the
curves of the body, which makes it a brilliant choice for women’s garments. Cotton does not
require the maintenance of silk or other fabrics: it does not need to be dry-cleaned and will not be
ruined in a rainstorm.2
Nothing compares to the traditional Indian attire- the sari. Apparently complicated, it so subtly
defines the beauty of a woman, bringing out her grace and elegance. Cotton Saris are the most
favoured saris for Indian Women. One can use cotton sari as daily wear and office wear during
all seasons. The owner of ADC has a strong aptitude for fashion designing and is trained in
dyeing and block printing techniques. Added to this, the elegant qualities and the rich look that
the cotton fabric has, had motivated her to set up this business.
1.2 Mission Statement
“ADC’s enticing designs, fabulous colors and uncompromising quality will capture the feelings
of the traditional and contemporary women along with the feeling of extraordinary comfort
confidence, and brilliance.”- Gain the feel at home experience while shopping.
1.2 Goal
The goals and objective for ADC are
To be a small business but capture major share of women’s market who wants casual
designer cotton clothes.

To achieve maximum sales in cotton shirts in the first year of its operations.

To build a brand image of its own; when women think of cotton, they should think of
ADC only.
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2.0 Operations Plan
2.1 Location and Site Plan
The store will be set up in a posh residential locality called Cauvery Hills at Madhapur. The
areas surrounding this location are both commercial and residential. The motive behind choosing
this location is many IT companies, Educational institutions and universities, Fashion
Technology Institute, Hospitals and various other businesses are located here. As ADC is
targeting teenage girls and women of age group 20 to 60 yrs, this would be an excellent location
to attract women who are house wives, office going, teenage girls who are school going and
university going. The shop will be set up in the ground floor and in the first floor of the building
the owner who is also the manager of ADC will reside. This arrangement will help the owner to
focus on the business and will also enable her to concentrate on her family needs at the same
time. This location is a traffic free zone and also ample parking space will be provided in front of
the shop so that at least five cars can easily be parked. For the customers to locate the shop
easily, direction boards to the shop will be displayed at least in six important places starting
2kms from the shop. The entry into the shop is very comfortable with just one main gate opening
into the shop. The big board in front of the shop which displays the name and the products will
help customers easily locate the shop. ADC will be designed in such a way that it will give
women a good shopping experience with relaxation and comfort in a home environment. As
well, by being located in a posh locality the image that ADC will convey is one of prestige.
As ADC will be a new building, there is no plan for new development in the first 5 years. The
space that is available to ADC will not allow for major renovations or expansions in the future.
Keeping in view the future needs, like addition of new equipment, addition of staff and
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accommodating new customers, ADC will plan well ahead and will have ample space for future
additions. See appendix A for the location plan.
2.2 Flow of Work
The production process will actually start from preparing the raw material for dyeing, then sun
drying the fabric, next dyeing the fabric, again sun drying, next block printing on the fabric,
again sun drying, and finally rolling/polishing the fabric. At this stage the saris and shirts are on
display to the customers. See appendix B for the process flow chart. The entire work process
involves the skill of human labour and there is no involvement of machinery in this kind of
business. The work process requires various equipment – dyeing of fabric requires plastic
buckets and mugs to mix colors and medium sized heavy bottomed utensils are needed to boil
liquids. At the time of dyeing, for safety purposes rubber gloves and plastic shoes are worn to
prevent acids and powerful agents falling on the bare feet and hands.
Block printing on fabric is done on a large wooden table; the wooden printing table is long and
rectangular usually about five metres in length, 120 centimetres in width and 90 centimetres in
height to accommodate the length and width of a sari so that time will not be wasted adjusting
the material during printing. To offer resilience during printing about 24 layers of jute are
stretched taut, and fixed to the tables, covering the entire upper surface. This padding is varied to
suit one’s convenience. Over this a heavy mattress is spread before printing to present a smooth
surface and to absorb any colour that might drop out during the printing process. The mattress or
achada is changed and washed frequently so that adhering dyes do not pass on to the new fabric. 3
Wooden blocks are used to print designs on the fabric. Blocks come in varied shapes and sizes.
Before the first usage, the blocks are dipped in oil to make them soft. Blocks are then dipped into
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pigment colors and pressed hard onto the fabric. The fabric gets the design and color. See
appendix C for a picture of Wooden blocks, sari spread on the table, and finished products.
2.2.1 Dyeing Process
The raw material purchased from the supplier will be a plain white color two piece cotton fabric
for the sari (sari and blouse) and a single piece for shirts. The sari will be 5 1/2 meters in length,
blouse is 1 meter and shirts require 2 meters length.
STEP A: Plain white saris and shirts are dipped in cold water to remove stiffness that comes
naturally to the cloth and also to remove any impurities. This process makes the cloth soft and
now the cloth is ready for dyeing. Two types of colors are used for dyeing- Napthol Colors
(mixing is done in cold water) and VAT colors (mixing is done in hot water). The detailed
method for Napthol Color mixing is described below where orange color is chosen as an
example.
Napthol color mixing (cold water) orange color
ASTR 20gms, Water 400ml,
Caustic 45 gms,
TRO oil 20 gms, Caustic 14gms, Salt 300 gms
The powders are mixed with TRO oil and little water and this mixture is added to hot boiling
water (5 lit) and now the complete mixture is boiled for some time. Now caustic 45 gms, and salt
300 gms is mixed in 8 lit of cold water to form caustic mixture.
Base color
Orange G.C 10gms,
HCL 12 gms + 1 lit water
Alum 12 gms + 1 lit water, Nitric 5gms+ 1 lit water
Mixing process for the above mixture-
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Orange G C is put in a mug, and is mixed with some cold water, and HCL with1 lit water, now
nitric water is added and kept aside for 10 min, now alum water is added. Now one small bowl of
boiled mixture containing the powders is added to the 8 lit caustic mixture. In another tub 8 lit of
cold water is taken and one small bowl of orange GC mixture is added to it. Now the sari or shirt
is dipped in the caustic solution for 2 or 3 min and then in the orange GC mixture for few
minutes, the fabric is squeezed to remove any excess color and is sun dried. The process is the
same for all napthol colors but the base colors will be changed according to the requirement (can
be red, blue, green etc). The above base color process is done with orange just to give the reader
a proper understanding of the process.
VAT color mixing (hot water) brown color
Brown 2G powder - 1.2 gms,
Caustic 18 gms+ 3 lit cold water
Caustic 1.8 gms,
Hydroze 15 gms + 3 lit cold water
Hydroze 1.8 gms,
TRO oil (approx), Water 50 ml
The above powders are mixed with TRO oil and water into fine paste. 10 lit of water is boiled to
fifty degrees temp. Caustic and hydroze solution is added to the boiled water. Now the powder
mixture is taken in small quantities and added to the boiled water. Now the sari and shirt is
dipped into the boiled solution for few min until the fabric absorbs the color. Fabric is now sun
dried. The process is the same for all VAT colors but instead of brown any other color can be
used. (Can be red, blue, green, orange, yellow etc). The above VAT color process is done with
brown just to give the reader a proper understanding of the process.
VAT colors are easy to mix and less time consuming because of simple procedure. Colors like
bright orange, red, dark blue and green come out very well with VAT colors. Depending upon
the color requirement either of the colors can be used. The saris and shirts are sun dried after the
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dyeing process; they are now spread on wooden table and pins are put throughout the edges of
the fabric so that the fabric remains intact.
2.2.2 Block printing process
Unlike the dyeing process, block printing also requires mixing of colors. The colors used are
called pigment colors that come in brand name TEXCRON pigment emulsions. Regular colors
like red, blue, green, yellow etc are used, but more recently usage of gold color has become a
fashion trend now.
Regular colors mixing process –
The ingredients required are SLN white binder (approx Qty), Asian paints clear synthetic varnish
(approx Qty) and little water.
To the white binder, water and varnish is mixed to make the mixture loose and then the required
color is added to it in small quantities to get the desired color.
Gold color mixing process –
Binder 100 gms, Gold powder 20 gms
Oil (approx), Fixer (approx)
To the gold powder some water is added to make it into a paste, then oil and fixer are added to it.
The purpose of the fixer is to see that the paint fixes properly to the fabric. Once the color mixing
is ready the wooden block is dipped into the color and pressed hard onto the fabric. The block
design is imprinted onto the sari or shirt. Once the color is absorbed into the fabric it is now
sundried. In the final stage of the dyeing and block printing process, the saris are given for
rolling/polishing for a crisp and fine look. Before the polishing stage if needed the saris and
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shirts are given for embroidery and other designing to enhance their look. The saris and shirts are
now kept on display for the customers.
2.3 Floor Plan
When customers enter the front door of ADC, the entrance leads them into a small lobby. In one
corner of the lobby there will be a small shelf where the customers can leaves their shoes. This
arrangement is to maintain hygiene and cleanliness in the shop. In the other corner drinking
water facility will be set up and in the other corner a small rack for magazines and news papers
will be set up. There will also be provision for setting up a Bru coffee machine. There will be
space for six to eight chairs. Sometimes men may accompany their wives but they may not want
to enter the display area, so they can be seated in the lobby. The lobby will be the first room in
the shop where customers and the people accompanying them can relax while having a cup of
machine coffee and reading magazines. While men are relaxing in the lobby, women can enjoy
their shopping inside. The lobby will lead into a room where billing counter is setup on one side
of the wall and the other wall will have laminated pictures of the various designs created in the
shop. For customers to get a feel of the fabric, designs and colors, few saris and shirts will be
hung from the ceiling to the floor from the four corners of the room. This room will have two
doors; one door will take the customer to another big room which is used for the display of saris
and shirts. One wall of this room will have a big shelf with a strong lock to store raw material
(fabric). The other two big walls will display cotton saris and shirts hung on hangers. This
display unit will not be closed with shelves because the customer can easily pull out the stuff
from the hangers and can easily put them back into place. On the other wall a big board will be
displayed that gives valuable information to the customer about maintaining the fabric, washing
instructions, ironing methods. The other door of the billing room will lead into the main work
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area where customers are not allowed. This area is divided into two rooms- One room will have
huge space enough to set up four wooden tables for block printing. Again many shelves are built
to store printing colors. There will be provision for an ironing table in one corner. The second
room is small and is used for dyeing purpose. The corner of the room will have tap facility as
dyeing requires lot of water usage. The dyeing room will open into a big backyard where fabrics
are sun dried. The patio of the building can also be used for this purpose. See Appendix D for
the floor plan.
2.4 Quality Control Programs
ADC will not need ISO or HACCP, but will have its own rules and regulations to ensure quality
and consistency with each product manufactured.
2.5 Organizational Tasks
2.5.1 Daily
The operating hours for ADC are: Monday – Saturday 9am – 5:30pm, and sunday is a holiday
for all the staff. During the first year of the operations of the business the owner will take full
responsibility to design, supervise, and coordinate the various aspects related to the business. As
business progresses into the second year the staff will be encouraged to participate in all
activities of the business (for e.g., the dyeing employee will be asked for any suggestions on
colors, like wise block printing worker will be asked for any ideas on designs ). The owner will
be the first person to open the shop and all the other staff will follow. The shop will first be
cleaned by the person responsible. Designs will be created by the owner beforehand. She will tell
the dyeing worker regarding how many saris and shirts need to be dyed each day and the
required colors. The worker will now start the dyeing process. The block printing worker will be
given design sheet that has clear information regarding the designs which have to be printed on
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the fabrics along with the color combinations. The worker in charge of sun drying the fabrics
will act as coordinator between the dyeing and block printing workers. Once dyeing is in process
the fabrics are sun dried by the person and then given to the printing person. This is a rotation
process. The receptionist will be responsible for setting up the lobby like change of newspapers,
changing water, and answering phones from the suppliers and customers, welcoming the
customers, handling cash, receiving stock and storing it. The sales woman will assist the
customers in purchases, customer service, and will ensure that each customer is comfortable and
their needs are met. At the end of each day the owner will check all the bills for the sales done
and the money will be deposited next day morning into the bank account. The owner will close
the shop after all the staff leave. Throughout the day the owner will supervise the staff and their
duties. The staff will have two short tea breaks each 15 min and a 1hr lunch break every day.
2.5.2 Weekly
Each week tasks such as reviewing the employee’s productivity and performance will be looked
upon and any improvements will be advised. Long term tasks such as marketing and financing
will be looked over and reviewed as needed to ensure that everything is running smoothly for
ADC.
2.5.3 Monthly
At the beginning or end of each month, the owner of ADC will order the supplies needed and the
bills will be paid out immediately. The business performance throughout the month will be
analyzed and any changes will be implemented. Month end sales will be analyzed. Marketing
efforts will also be analysed for that month and the future months and altered as needed. The
marketing for future months will be determined and continuously worked on throughout the year.
At the end of each month all the bills related to sales and raw material purchases will be sent to
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the accountant. Employee performance will be reviewed every month, to ensure that each
employee is aware of their performance at ADC and learn what areas they exceed in and need to
work on. Performance reviews will also be used as important measures when determining wage
increases for each employee. Most importantly feedback will be taken from the customers that
would be very helpful for ADC to make improvements in the future.
2.5.4 Yearly
At the end of each year financial statements are prepared by the accountant. Depending on the
profits made and feedback received from customers, and trends in the society, changes will be
considered for the next year. After all of the financial analysis has been done, the owner of ADC
will do a competitive analysis on prices and will determine appropriate price changes depending
on various factors. Marketing strategies will be developed for the next year. Once the owner has
decided what all needs to be done for ADC, a budget for the upcoming year will be developed
and will determine how much can be spent on each area of the business and what needs to be cut.
2.6 Supply Analysis
ADC will have two suppliers for its business – one who supplies fabric and one who supplies
dyeing colors and pigment colors. The raw material for saris and shirts will be supplied by one of
the best suppliers from Mumbai. For dyeing and block printing colors, the supplier will be a local
person who specializes exclusively in fabric colors. The order for raw material is placed to
suppliers by phone and the material is sent through transport. Administrative supplies, such as
paper, pens, scissors, painting brushes will be purchased from a stationary store in the city. Other
miscellaneous supplies will be purchased from the appropriate local store in the city.
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2.7 Service Providers
This usually represents services provided to the business, not by the business. This looks like a
desription of your human resources.ADC will have the following staff in its first three years of
operations. Staff will include only women and will not be a combination of both men and
women just to avoid any social problems and other nuisances.

1 Managing Director who will be
in charge of the operations and the overall
management of the business

1 woman for dyeing process and 1 woman for block printing

1 helper will sun dry the fabrics and will also do other minor jobs like ironing, and
cleaning the shop.

1 Sales woman will be in charge of showing the products to customers and will also
supervise the work going on in the work area when customers are not around.

1 receptionist will be in charge of billing, collecting raw materials from suppliers and
storing them and attending phone calls.
These numbers are for the start up of ADC clothing store and will increase as the demand for the
products increases.
2.8 Processes and Procedures
ADC will hire women with minimum qualification and good communication skills for the post
of sales woman and receptionist. Preference will be given to people who can speak in Hindi apart
from the native language. The other staff involved in the main work process need not be
qualified but should be trained well in the dyeing and printing process. Highly enthusiastic
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people having aptitude to learn will be preferred because final outcome of the product depends
entirely on these people.
2.9 Capital budget
All financial figures in rupees.
Table 2.1 Initial investments
Shop setup costs
Block Printing Table
Furniture
Wooden blocks
Machinery
Total capital budget
1,00000
40,000
10,000
10,000
18,000
1,78,000(one lakh seventy eight thousand rupees)
The proposed levels of working capital is as followsTable 2.2 Working Capital:
Cash
Inventory on hand
15,000
53,100
Total Working Capital
68,100
2.10 Cost of Goods Sold
Expected cost of goods sold in year one is as follows (for sales of 7, 50,000 (saris) & sales of 4,
28,400 (shirts)
Table 2.3 Cost of Goods Sold (Rupees)
Unit cost of one sari
513.5
Qty of saris sold
1000
Cost of goods sold for saris
5,13,500 ( cost times no. of units sold)
Unit cost of one shirt
229
Qty of shirts sold
1260
Cost of goods sold for shirts
2,88,540 (cost times no. of units sold)
How are unit costs determined – where do you show the detail for calculating each unit cost?
See appendix E & F for unit costs of sari and shirt
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2.11 Operating Expenses
The expected operating expenses for ADC in the first year are as followsTable 2.4 Operating Expenses (Rupees)
Bank charges
Accountant fees
Electricity
Insurance
Postage
Printing & Stationery
Repairs & Maintenance
Telephone charges
Transportation
Water charges
General Expenses
Car Maintenance
Coffee machine rent
Gas charges
Waste disposal charges
6,000
3,000
36,000
3,000
500
10,000
5,000
10,000
8,000
6,000
1,000
12,000
24,000
4,000
1,500
How are these costs estimated? Fixed vs variable?
Total
1,30,000 (One lakh, Thirty Thousand Rupees)
2.12 Working Capital Planning
2.12.1 Cash
ADC will need around Rs 15,000 in cash at the start of the business to pay bills for water,
telephone, electricity, salaries and other small maintenance. Throughout the year the cash
generated from the profits will be used to bear all the expenses related to the business. Each day
all the cash will be deposited in the bank account.
2.12.2 Inventories
Raw material for cotton saris and shirts will be ordered once in a month. This will lessen the
volumes of inventory that needs to be stored and reduce the amount of storage space needed.
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During the first year volumes of raw material will be an estimate and as days go by, ADC will be
able to better predict how much has to be ordered for each order.
2.12.3 Accounts Receivable
ADC will not have any accounts receivable; all products will be paid for when it is purchased by
the customer.
2.12.4 Accounts Payable
ADC will not have any accounts payable policy because the supplier will be paid immediately
after the raw material is purchased. Every month when the raw materials for fabric and colors are
purchased, immediately the supplier will be paid by cheque or cash.
2.12.5 Cash Conversion Cycle
The following is the cash conversion cycle for ADC Table 2.5 Cash Conversion Cycle
Average Days Inventory
Average Collection Period
Average Days Payables
Cash Conversion Cycle
3.0
30
0
0
30
Human Resources Plan
3.1 Organizational Structure
The staff at ADC clothing store will consist of a Managing Director, 1Receptionist, 1Sales
woman, 1 employee for dyeing process, 1 employee for block printing,1 employee for sun drying
and doing other small tasks including cleaning the shop. The Managing Director will be
responsible for running the company starting from operations to sales and will ensure that ADC
has all that it needs in order to be a successful business. The receptionist will be the person who
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is responsible for receiving raw materials, ordering them when needed and also storing them.
The receptionist will also distribute the raw material needed for the whole month to the
respective workers. The workers will stock their raw material in their work areas where shelves
are provided. The sales woman will handle customers and show them saris and shirts in various
designs and colors and will also help customers in choosing the right color and design that best
suits them. In the absence of customers, the sales woman will also help the receptionist in
handling the stock and will also supervise the dyeing and printing workers. The workers
involved in the dyeing and printing process will not handle any other tasks other than their
respective duties. But the employees in the front area will do overall supervision in their free
time. In the absence of the managing director, the three workers in the back area will report to
the front area employees. The other workers involved with ADC are- 1 rolling/polishing person,
1 embroidery woman. But these people will come now and then and take the products to their
places, finish the jobs and will bring them back to ADC. The following is the organizational
chart for ADCFigure 3.1
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3.2 Job Descriptions/Qualifications:
3.2.1 Managing Director
The entire business and all the employees will rely heavily on this person, so the managing
director must have very good knowledge and experience in dyeing and block printing, as well as
should be able to manage the business taking into consideration various aspects like HR
management, Finance, Marketing. She should also possess good communication skills and has to
be very interactive and outgoing personality. As the business will be completely customer
focussed the managing director should be able to generate high customer satisfaction. The
Managing Director is responsible for ensuring that the business has the necessary resources,
staff, equipment, etc to carry on business on a daily basis. She is the sole person to hire and fire
workers. The Managing Director is well qualified with an MBA degree and has strong aptitude
for fashion designing. She also has good amount of experience in dyeing and block printing
processes. All these years she has developed good rapport with many women who are mostly
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her friends, family friends, and relatives. Her networking abilities will bring in many customers
to ADC.
3.2.2 Receptionist
The Receptionist will play an important role at ADC. She is the first person whom the customers
see and interact with when they enter ADC and so she should be very appealing, outgoing, smart,
responsible, disciplined and organized. Preferred experience required for this position includes
good communication skills, maintaining cash register and writing bills, good control over
inventory and supervising ability. The primary responsibilities of the receptionist include making
orders to suppliers over phone, answering phones, customer service, and administrative tasks like
depositing and with drawing cash from the bank.
3.2.3 Sales Woman
When customers enter the display area, it is the responsibility of the sales woman to see that the
customers feel at ease and are seated comfortably. Most of the times customers move around to
see the saris but elderly people prefer seeing them while seated. The sales woman will pay
special attention to these people by bringing the products to them. Another important duty of
sales person is to see that customers achieve satisfaction. And this is achieved by helping them
choose the right color and design that best suits them, taking care of their personal needs like
serving water, coffee etc, asking for any suggestions and explaining them about the maintenance
of the products and so on. In the absence of customers, the sales woman will also help the
receptionist in handling the stock and will also supervise the dyeing and printing workers. The
sales woman and receptionist will also attend the embroidery person, rolling person who will
bring back the finished products to the store once their work is done.
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3.2.4 Dyeing Work in charge
The employee involved in the dyeing process will not handle any other tasks other than dyeing
the fabrics. Experience for this position will include-the person should be trained in this area and
will not require any other qualification. But she has to be very active and innovative in her work.
She will be supplied with all the colors required for that week. Every morning she will be given a
design sheet by the managing director who will explain her in detail how many saris have to
dyed for the day and what colors she has to use. In the absence of the managing director, she will
report to the front area employees.
3.2.5 Block Printing in charge
The block printing person will not handle any other tasks other than block printing on fabrics.
Experience for this position also includes that the person should be well trained in this area. No
other qualification is needed for this position. Every morning she will also have a discussion with
the managing director regarding the designs and colors. She will also report to the front area
employees in the absence of the managing director.
3.2.6 Helper and Janitor
The only responsibility of helper is to help the other staff in the store whenever required like
drying the saris, collecting them and giving them to the printing in charge, cleaning the shop,
ironing the clothes and other miscellaneous tasks. But as business expands and production
increases her responsibility will include helping the staff only. Janitor will be employed to take
care of the cleaning duties.
3.3 Recruitment
Recruitment of employees for ADC is not a difficult task because there are many unemployed
women who are trained in these areas through government self employment training programs.
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Methods of recruitment will consist of visiting these training centers and talking to people
directly. Advertising will also be done through newspapers, and by word of mouth. Women will
definitely show keen interest to work at ADC because they feel safe and secured working in an
environment where all the employees are women. ADC will start with few employees and will
recruit more as the business expands.
3.4 Training Programs
Dyeing and block printing processes are very crucial for ADC‘s success. ADC will recruit
people who are already trained in dyeing and block printing techniques. But to ensure that the
employees have achieved perfection, ADC will employ a professional trainer who will train the
dyeing and block printing people in a professional manner. This will take place only at the initial
phase of the business. These people who are well trained now will train the new batch of
employees themselves or if needed, the trainer will be called again.
3.5 Human Resource Strategy
The culture and environment at ADC will be welcoming and encouraging for its employees. All
the employees including the Managing Director will work together as a family. ADC will work
with each employee individually and as a team to ensure that everyone is meeting their best
potential. ADC’s professional approach to business will bring seriousness, discipline, and
dedication in the employees which will in turn help them to take up their careers seriously.
Employees will also have lot of flexibility and freedom and will be encouraged to share their
personal problems with the Managing Director. This will build confidence and trust among each
other. The Managing Director will pay individual attention to each employee on a regular basis,
this will provide the employee with support and they will work together on areas that needs
improvement; thus resulting in accountability and loyalty to each employee. All employees are
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accountable for what they do; this will make them feel that they are the bosses for their own
work.
3.6 Labour Costs
All the employees are paid on a monthly basis. To start with, the receptionist is paid Rs 2000,
sales woman is paid Rs 2000, dyeing in charge is paid Rs 1500, block printing in charge is paid
Rs 1500, helper and sweeper are each paid Rs 1000. Though dyeing and printing are very crucial
for this business their wages are lower compared to front area employees because the receptionist
and sales woman positions require educational qualification. But incentives are given to
employees (dyeing and printing) who perform well and also suggest new ideas. To motivate and
make the employees happy once in every year employees will be given small house hold
appliances as gifts. The Managing Director has many different responsibilities and does not have
a laid out schedule; she will work as much as required to ensure that the employees are happy,
customers are satisfied and the business runs smoothly and successfully.
3.7 Shareholders’ Agreement
ADC is a private business owned and managed by a single individual. The managing director
will hold the entire shares of ADC.
4.0
Marketing Strategy
4.1 The Marketing Mix
4.1.1 Products
ADC will sell designer cotton saris and cotton shirts for women. The raw material which is a
plain white fabric is processed and designed at the shop. The fabric, dyeing colors and block
printing colors used to make the final product are of very high quality. In spite of regular use of
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the sari and shirt over a period of 5 yrs, the fabric will still retain the new look. May be the fabric
might experience wear and tear over a period of time depending on the usage but the colors will
remain intact. Women who use ADC’s products will have product satisfaction in terms of
quality, design and colors for a minimum period of 5yrs. ADC will attract customers by
changing the designs and colors on a regular basis to keep up with fashion trends and customer
likes and dislikes. ADC’s customers can find similar products (cotton saris) in big retail shops
also but because of their huge overhead expenses their prices are very high. Along with the
cotton saris they will also sell many other products like silks, georgettes etc because of which
there might be limited choice in cotton saris alone. In big shops it is also not possible to pay
attention to each and every customer taking into consideration their likes and dislikes. Moreover
these big shops do not have their own workshops for designing; they buy in bulk from
wholesalers for a cheaper price and sell the products for premium prices. As ADC will sell only
cotton saris and shirts, women who want to buy them will have a lot of choice within the specific
product line. And also customers will gain a relaxed and feel at home experience while shopping
because of the personal attention given to each customer. Their likes and dislikes will be taken
into consideration. Their ideas with respect to designs and colors will be pooled up and changes
will be made in the future. Most importantly, as all the employees in ADC are women, customers
will feel extremely comfortable to converse with them.
4.1.2 Pricing
Compared to the big retail shops ADC’s prices are comparatively lower but when compared with
similar small stores ADC’s prices are a bit higher because it is a designer shop that will give its
customers a different experience in terms of high quality in fabric and colors, enticing designs
and also offers a new product line (cotton shirts) which other small stores do not have. And most
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importantly designing is the sole responsibility of the owner of ADC who has good experience in
fashion designing. This is definitely an added advantage as ADC will not compromise on the
quality of designs. ADC’s shop set up and design, customer service, presence of women
employees will attract customers due to which they wouldn’t mind paying slightly higher price.
ADC will have a professional component in every aspect of the business starting from shop
design, receiving the customer, helping them choose the products, communicating with them
efficiently, encouraging suggestions from customers etc. There is no discount policy in the store
as prices are appropriate to the product. The prices at ADC will generally remain the same but
they will increase with increase in wages, raw materials, inflation, etc. For ADC to cover its
expenses and to generate profits always increases will be evaluated on an annual basis.
4.1.3 Promotion
ADC’s clothes will give ultimate satisfaction and confidence to the person who wears it and this
is possible by maintaining high quality in its enticing designs, mind blowing colors, great
customer service and achieving 100% customer satisfaction. The products that ADC sells to its
customers will give them the image and status of being a confident and brilliant person. Women
wearing ADC’s clothes are sure to be the centre of attraction anywhere they go because of the
colors and designs on their clothes. When people hear the name ADC the image of quality,
status, great customer service, 100% guaranteed customer satisfaction will be associated with it.
This will be the store for women to frequently visit when they are preparing for a party, formal
meetings, informal get together, travel, festivals, or for even regular casual wear.
4.1.4 Place
ADC will be located in a posh residential locality, Cauvery hills at Madhapur in Hyderabad. This
location will be ideal for ADC as it is located within close proximity to many offices, IT offices,
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banks, colleges and universities in Hyderabad. As well, there are many modes of transportation
in this area like buses, autos, taxis. It is also easy for the customer to locate the shop because this
area is well known to everybody. ADC’s target market has an above average house hold income
of 12 lakhs rupees and higher.
4.2 Segmentation, Targeting, Positioning
ADC’s target market is women of age group 13 - 60. Young women of age 13 to 21 are still
pursuing education and do not have purchasing ability and so will depend on their parents to
purchase clothes at ADC. These young girls and women always want to look beautiful by
wearing fashionable clothes and also want to gain a high image among their friends, colleagues.
But they also want to look dignified in the society; ADC’s clothes will create this value
proposition to them through its designs, colors. Mothers always want their daughters to look
good and special in the eyes of the society. ADC’s cotton shirts will be a good choice for them.
Women of age 25 and above are married and well settled. Many of them are educated and
earning while some of them are settled as house wives and are dependent on their husband’s
income. All these women whom ADC is targeting belong to middle class and upper middle class
families who have high disposable income. These women buy clothes regularly to maintain
fashion and want to improve their self image among their friends, relatives. These women are
willing to pay a slightly higher price than other stores to gain the great experience that ADC will
offer to them.
4.3 Competitive Analysis
ADC has only one direct competitor Vasundhara saris and many other indirect competitors like
big retail shops who also sell cotton saris. ADC will not be effected by the retail shops because
there method of doing business is altogether different- have big set up, offer different products,
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have discount policies, have men and women employees, less scope for providing individual
attention to customers, difficult to make changes according to customer suggestions, high prices
due to high over head costs and have less privacy for women customers. If a woman wants to
buy cotton saris and shirts, ADC will be the right place to buy them because it is specializing
exclusively in cottons and provides many color and design options to its customers. And women
who buy saris also want to buy cotton shirts for their daughters. In a way ADC’s cotton shirts
will gain big recognition through these women. ADC’s direct competitor vasundhara sari’s is
owned and managed by a woman. Her shop is located in one of the posh localities of Madhapur
and she has been successfully doing her business for the past 20 yrs. But what differentiates her
business and ADC’s is mainly in the way of doing business. She has gained recognition just
through word of mouth, offers only single product (cotton saris), shop set up is not as appealing
as ADC’s and does not emphasize on innovation. The owner of ADC has a strong aptitude for
fashion designing which will help her to be more creative in bringing out new designs and also
her MBA qualification will help her to manage the business in a professional way. ADC’s new
product line (cotton shirts for young women) will gain huge recognition within no time because
there is no one else in this segment of the market offering this product. Also in the first year of
its business ADC will investment more on marketing strategies as this will make people aware of
what ADC does.
4.4 Projections of Revenues and Marketing Expenses
The revenues for ADC are dependent upon unit sales of saris and shirts. As cotton shirts are a
new product line, ADC expects to generate big sales in this product line through TV advertising
and marketing. Shirts revenues are based on selling 70% of the total shirts produced in first year
to 75.2% in the fifth year. As there is already one competitor selling cotton saris, sales in this
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product line may not reach the same level as shirts immediately. Saris revenues are based on
selling 56% of the total saris produced in the first year to 60% in the fifth year. To reach and
maintain these projected sales, the marketing of ADC becomes very important. The promotional
material will be used many times throughout the year whereas TV advertising will be utilized in
the opening year during the first couple of months to create awareness of ADC. Organizing
exhibitions will be done once in a year. This is the place where one can find big gathering; ADC
expects to achieve extraordinary sales during this time.
The following is a chart of the marketing expenses in the first year of ADC’s operation-
Table 4.1 Marketing Budget (Rupees)
Advertising:
Television
20,000
Promotion:
Brochures
Business cards
Fliers
In-house advertising
Exhibitions
Inauguration expense
2,000
500
1,000
3,000
15,000
20,000
Total
61,500
See appendix G for a detailed copy of the marketing budget for the projected 5 years.
4.5 Marketing Plan
4.5.1 The Market
ADC will have huge potential for its products from women. Women love cotton saris and shirts
because they give them comfort, elegance and a dignified look. And it is supposed to be the best
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clothing for casual wear and small parties. Cottons are supposed to be cheaper than silks but
even cottons are costly in big retail shops. For this reason women will prefer a store like ADC
where they can get good cottons at a reasonable price than the retail shops. Economic recession
and other factors will not affect the purchasing power of customers because clothes are not high
value commodities, but are day to day necessities.
4.5.2 Purchasing Patterns of Customers
As cotton saris and shirts are perfect attire for casual wear at home and outside, for small parties,
social gatherings, for work places and colleges, women tend to buy them frequently. On every
visit to the store, on an average a customer buys a minimum two saris. Women who buy saris for
themselves will also think of buying cotton shirts for their college going young daughters.
Working women and college going young women always want to add new clothes to their ward
robes. Women do not invest heavily on party clothing because they do not happen every day.
And also saris and shirts are great gifts to women of any age. For anniversaries, for festivals, for
house warming, for weddings etc women like to gift their friends and family members with these
saris and shirts. So women in India always have an occasion to buy these products. Most
importantly customers will find at ADC the same cotton saris that big retail shops have but for an
affordable price. And also there aren’t any stores offering exclusively block printed cotton shirts
that can be worn on pants and skirts. So, for teenage girls and young women ADC is a very good
option to find shirts with different designing concept that suits their purposes.
4.5.3 Target Markets and Product Features
ADC’s target market comprises of working women, school going girls, college going young
women, and house wives who involve in social events and gatherings. All these women prefer
cottons for their casual wear because they are extremely comfortable and easy to maintain. But at
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the same time they do not want a too casual look. ADC will provide them casual wear that has a
stylish look with attractive designs which they can wear for two purposes - casual and also small
party wear. ADC’s niche market is working women, college girls and school going teenage girls
because they are the ones who always want to look good and special in the eyes of their
colleagues, friends and society and so frequent the stores. Each customers experience at ADC is
very important. Customer service, spacious sitting area in the lobby, news papers and magazines,
branded quality coffee and drinking water facility will provide the customer and the people who
accompany her, a comfortable and relaxing experience while shopping. This will make ADC
gain competitive advantage over its competitor.
4.5.4 Sales and Profit Objectives
The main objective of ADC is to achieve high level sales through its new product line (cotton
shirts) in the first year of its operations. And also ADC is targeting a consistent level of sales and
profits. To achieve this target it will strongly emphasize on advertising and marketing to attract
new customers. In the first year it will achieve on an average 60% sale in saris and 75% sales in
shirts but very soon ADC will achieve 80% sales through its rigorous marketing and advertising
strategies.
4.5.5 Channels of Distribution
ADC will use different distribution methods such as TV advertising, brochures, fliers, cross
promotions, and networking. These methods will help ADC to reach large number of people.
Brochures are good channels for cross promotions as they contain all information about ADC;
these will be handed over to suppliers, customers and other guests who will in turn promote them
in the places they visit. Exploiting tele-media will help ADC’s products reach the customer
directly. ADC strongly believes that “one satisfied customer brings back thousand new
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customers”, so word of mouth marketing also plays an important role for ADC to get new
customers.
4.5.6 Select Markets/Product/Service Mix
ADC’s goal is to continue being a small store selling specific products (cotton saris and shirts),
but wants to capture working women and college going girls segment of the market who are just
looking out for these products. The feel at home experience that customers gain at ADC will not
be easily copied by the competitor. ADC’s shop design, customer service, ambience, hospitality,
and training of employees are a result of huge effort and cannot be easily imitated by others. To
open a new store is quite easy; anybody can do that but to run the business successfully and to be
able to gain sustainable advantage is not an easy task. Finding an appropriate location, having
good contacts with people, having passion and interest for designing, having business
knowledge, finding human resources and training them, satisfying customers constantly,
motivating employees are all important elements in order to start and continue this type of
business successfully. Many of the businesses of this nature were in fact closed after some time
by their owners just because they were not able to manage these fundamental things.
4.5.7 Selling and Advertising
The owner of ADC already has good networking with many people who are her friends, family
friends and relatives. These are the people who are aware of and looking forward towards the
opening of ADC because they know well in advance, the interest and passion that the owner has
towards fashion designing and they are sure that ADC’s owner will offer them something
different and unique. These people are the first customers to ADC and will contribute to ADC’s
advertising strategies because through word of mouth they will bring new customers. ADC’s
advertising program will begin big with the inauguration of the store. This inauguration event
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will be advertised in TV, posters will be pasted in all offices, colleges, schools, and other
institutions in this area and the surrounding colony’s, brochures will be posted to known people
who are living away from this city, fliers will be dropped in all the houses in this area. These
initial advertising techniques will certainly reach many people and will give them the first
glimpse of ADC’s business. To meet ADC’s objectives, employees will play a crucial role. They
will be trained and motivated through staff incentive programs to ensure that they provide
consistent customer satisfaction and quality in services constantly.
In the first year of its
operations advertising will play a crucial role to bring in customers. In the next few years more
and more customers will walk in through word of mouth, net working, and in-house advertising
and cross promotions. Once in a year during the months of May and June, ADC will organize
sari exhibition at Nellore; this place is very familiar to ADC’s owner. This place is very hot for
most of the time in a year and is well known for rich business people and doctors who have high
disposable income. And women in this place are high fashion lovers and spend a lot on clothes.
ADC will utilize this opportunity and will achieve maximum sales in this location.
5.0
Financial Plan
5.1 Capital Requirements:
ADC will require a total capital investment of approximately three lakh rupees. As this is not a
huge amount, the capital requirement will be raised through equity only. The capital requirement
is listed as followsTable 5.1 Capital Requirements (Rupees)
Debt Financing
Equity Financing
Total Financing
0
3,00,000
3,00,000
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The equity requirement will be met by the owner of ADC from her personal account.
5.2 Summary of Projected Income Statement
The revenues for ADC are dependent upon unit sales of saris and shirts. As cotton shirts are a
new product line, ADC expects to generate big sales in this product line through TV advertising
and marketing. Shirts revenues are based on selling 70% of the total shirts produced in first year
to 75.2% in the fifth year. As there is already one competitor selling cotton saris, sales in this
product line may not reach the same level as shirts immediately. Saris revenues are based on
selling 56% of the total saris produced in the first year to 60% in the fifth year. But through its
rigorous advertising and marketing strategies, ADC will achieve maximum sales in saris also.
The following is the total revenues, net income, and cash flows for the ADC. See appendix H
for income statement of ADC for the 5yrs projected.
Table 5.2 Projected Revenues, Net Income, and Cash Flows (Rupees)
Year
2010
2011
2012
2013
2014
Total
Revenues
11,78,400
13,85,798
16,29,699
19,16,526
22,53,834
Net Income
(84,940)
39,172
1,15,978
1,25,771
2,35,089
Cash Flows
66,860
1,68,652
2,26,441
2,79,528
3,66,110
5.3 Summary of Projected Balance Sheet
ADC has the flexibility of financing its business through equity. It will not rely on any external
debt. And also ADC will not have any credit policy with its customers and suppliers; accounts
receivables and payables are therefore zero.
See appendix L for the complete balance sheet for ADC for the 5years projected.
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Table 5.3 Balance Sheet This doesn’t show the whole balance sheet – cash, inventories,
payables, etc.
Year
2009
2010
2011
2012
2013
Total Assets
7,53,120
8,87,278
9,85,520
10,75,737
12,78,803
Total
Liabilities
0
0
0
0
0
Total
Shareholder’s
Equity
7,53,120
8,87,278
9,85,520
10,75,737
12,78,803
5.4 Risk Analysis
5.4.1 Sensitivity Analysis
Critical variables for ADC are unit sales of saris and shirts. The business cannot survive
without the sale of the products. It is only through sale of products that ADC will generate
revenues. Prices are also important but drastic increase in prices will reduce the sales. The
prices fixed for ADC are very appropriate. Prices will be increased based on new embroidery
designs and work patterns but as such ADC will try to focus on increasing its sales.
5.4.2 Scenario Analysis
Best Case Scenario
In creating the best case scenario sales forecasts, ADC in year 1 will achieve 70% sales in saris
and shirts and will go up to 75.2% sales in the 5th year. This will result in an internal rate of
return of 79%. See appendix I for ADC’s best case scenario.
Worst Case Scenario
The worst case scenario was calculated with an average of 37% sales of saris and shirts in all the
five years. This results in a negative net income every year with a negative internal rate of return
of -7%. This scenario will result in the bankruptcy of ADC. This situation would be caused by
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not being able to sell the required number of saris and shirts. For this reason unit sales will
become critically important for ADC. See appendix J for ADC’s worst case scenario.
Scenario Analysis
From the scenario analysis it is clearly evident that sales are needed for ADC’s success. If ADC
cannot generate enough sales for its products it will result in bankruptcy. To avoid this risk, the
marketing strategy and its implementation is vitally important for its success.
5.5 Dividend Policy
ADC does not plan to have outside equity investors; therefore will not pay out dividends.
5.6 Economic Forecasts
Inflation rate is expected to grow at 5% but economic trends will not affect the purchasing
power of ADC’s customers because the products are not high value commodities but are day to
day necessities for women. When they can afford food they can also afford clothes.
5.7 Ratio Analysis
Table 5.4 Ratio Analysis
Year
2010
2011
2012
2013
2014
Profitability Ratios:
Gross Profit Margin
31.9%
33.2%
34.5%
35.8%
37%
Net Profit Margin
-7.2%
2.8%
7.1%
6.6%
10.4%
Return on Total Assets
-11.2%
4.4%
11.7%
11.7%
18.3%
1.56
1.56
1.65
1.78
1.76
Turnover Ratio:
Total Asset Turnover
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5.8 Break-Even Analysis
The Break-Even was calculated by finding the unit sales of saris where ADC’s net income is
zero. The break-even quantity for saris in the first year is 1,359 units which is achieving 75.5%
sales of the total saris produced in the first year. See appendix K for ADC’s break even analysis.
5.9 Net Present Value
Based on the base case income statement projections the net present value for this business is Rs
3, 05,956 (Three Lakhs, Five thousand, Nine hundred, and Fifty Six).
5.10 Internal Rate of Return
Based on the base case income statement projections the internal rate of return for this business
is 56%.
6.0 Conclusion
ADC is a designer store which is set up to target women only. ADC’s shop environment, highly
trained staff, extraordinary designs and fabulous colors will capture the woman who wants to
enhance her looks and image. Women will also gain a feel at home experience while shopping.
ADC’s designer clothes and store experience to customers will gain competitive advantage over
its competition. With its advantage of being the women’s only designer store, ADC will
dominate a large portion of the feminine market. This business plan shows that ADC is a feasible
business and has huge potential in the area where it is established.
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Appendix A-Shop location:
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Appendix B-Process Flow Chart
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Appendix C-Pictures of blocks, sari spread on table and finished products
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Appendix D- Floor Plan
Floor Plan
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Appendix E-Unit Cost to make one sari (In Rupees)
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Appendix F-Unit Cost to make one shirt (In Rupees)
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Appendix G- Marketing Expenses for 5 yrs (In Rupees)
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Appendix H- Financial Plan - Base Case (In Rupees)
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Appendix I- Financial Plan- Best Case (In Rupees)
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Appendix J- Financial Plan – Worst Case (In Rupees)
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Appendix K- Financial Plan - Break Even (In Rupees)
This shows BE in only the first year – what about remaining years?
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Appendix L- Balance Sheet projections (In Rupees)
Balance sheet is incorrect – cash is not accumulating
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Works Cited
1. http://www.fabrics.net/cotton.asp
2.
http://www.nyfashioncenterfabrics.com/cotton-fabric-info.html
3. http://www.utsavsarees.com/fashion/blockprinting.htm
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