comfy shoes.docx

8/14/2019 Comfy Shoes.docx

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University of Management and Technology | Confidential

Inventory management .................................................................................................................................................. 25

Suppliers: ............................................................................................................................................................................. 29

Location: .................................................................................................................................................................................... 29

Logistics ..................................................................................................................................................................................... 30

Legal structure: ...................................................................................................................................................................... 31

Human Resource Management: ....................................................................................................................................... 31

Organizational Structure ............................................................................................................................................... 31

Staffing .................................................................................................................................................................................. 32

Salaries .................................................................................................................................................................................. 33

Job descriptions and specifications:.......................................................................................................................... 33

CRITICAL RISKS AND PROBLEMS .................................................................................................................................. 39

Growth potential problem ............................................................................................................................................. 39

Contingency plan .............................................................................................................................................................. 40

Balance Sheet .......................................................................................................................................................................... 43

Liabilities .............................................................................................................................................................................. 44

Assets ..................................................................................................................................................................................... 44

Profit and Loss Account ...................................................................................................................................................... 45

Income statement .................................................................................................................................................................. 46

Cash Flow Statement ............................................................................................................................................................ 47Sensitivity analysis ................................................................................................................................................................ 48

Project Startup cost .............................................................................................................................................................. 50

Price per shoe .......................................................................................................................................................................... 51

Packaging cost .................................................................................................................................................................... 52

Experience curve ................................................................................................................................................................... 53

Break Even Analysis ............................................................................................................................................................. 53

Ratio Analysis .......................................................................................................................................................................... 54


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Executive summary

This project is a business model with an attempt to start a new business. It successfully

identified the gap to provide masses with shoes with a combination of key variables like

comfort, quality, class, value and medical aid according to consumers requirements.

Companies currently in shoe industry do not tap all these variables so there is great potential

and opportunity in this business. The distinct features of the company shoes are that it provides

reliefs to sugar, blood pressure patients and other people who have pain in their joints or to

whom who feel tired quickly after walking few steps. Companys target market is the masses

with monthly income RS 40,000 or above .Company is introducing new idea in industry and it

will skim the price so it has selected its target market with that logic behind it. People included

in this target market belong to middle upper class and above and are capable of buying

companys products at that price. Competitors would require at least 6 months entering in it.

These would be business giants of industry and the company will respond by differentiating its

product. Company will even penetrate and expand its market afterwards. Company is

registered under partnership Act 1932 with a capital of RS 500,000 at initial level with 5 equal

share partners with an investment of 100,000 each. Company has its NTN number and partners

had signed a written agreement discussing their shares, obligations and rights. Company has

contracted with its supplier K-shoes which will provide consignments whenever required.

Company has a president and four managers which will handle marketing, finance, operations

and information systems according to their capabilities.


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Glance

Foot wear industry is one of the Pakistans rapidly growing industries. According to FBR, a

footwear manufacturer registered under Factories Act having annual turnover of Rs. 50 million

or more are earning more than 50 million rupees. In this industry usually SMEs are involved and

there is a huge competition on every level.

PFMA is a Trade Association representing Pakistani footwear manufacturers, exporters,

importers and traders. It is an Association duly approved by the Ministry of Commerce,

Government of Pakistan, registered with Directorate General Trade Organizations, incorporated

under the Companies Ordinance 1984 with Securities and Exchange Commission of Pakistan

and a member of Federation of Pakistan Chambers of Commerce and Industry (FPCCI). TheAssociation has been formed to protect and safeguard the interests of Footwear manufacturers

and traders by applications, deputation, delegations, petitions and memoranda to the

Government of Pakistan or the Provincial governments. It is to assist the members by

investigating problems peculiar to the industry and trade with a view to cause improvements

and progress.

Pakistans share in the international market is hovering at about 1.5% from the last five years,

earning an average foreign exchange of US$ 681 million per annum. According to Federal

Bureau of Statistics data, Pakistan exports for the year 2001 were about US$ 763 million. Out of

total leather exports, leather footwear accounts for 50.93%, which makes leather footwear

extremely significant. Total footwear production in 1994 in Pakistan was 205 million pairs. The

largest concentration of units for footwear production is in Lahore where 306 units are located,

which is nearly 59% of the total number of units in Pakistan. The second largest is Karachi

where about 8% of the total numbers of units are located.


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Form of Business

The business is the trading of medicated shoes which the company sells from its selected

distribution channels of pharmaceuticals. The company will make an agreement with the shoe

manufacturer named K-shoes which is agreed to manufacture the shoes for COMFY. The form

of business is partnership. All the five initial investors are the equal partners in the company.

The company is registered under the partnership firm act 1932. The fee for registration of

patent is RS 2250

Owners / Principals

The investors are the owners of the company. They are equal partners with the investment of

Rs.100,000 each in the beginning as capital.

Name of Business

Name of the business is COMFY, Which means relaxing, secure, restful, calming. Medicated

shoe have motive to provide relax. Make you calm while walking, and feel secure about your

feet, because when your feet hurt, you hurt all.

History of Reflexology

Below is a brief introduction about the origin of medicated shoes whose roots lies in reflexologywhich is a kind of therapy and its main points are discussed below:

Reflexology dates back to ancient civilizations such as Egypt, India and China, but thistherapy was only introduced to the West in the early 20th Century.

The oldest documentation of Reflexology comes from a pictograph in the tomb of anEgyptian Physician Ankhmahor (2500-2330 B.C.) at Saqquara near Cairo.

In China there is an evidence of some form of foot and hand therapy being practiced aslong ago as 4,000 B.C., and the North American Indians have practiced a form of foot

therapy for hundreds of years.

Had it not been for the enquiring medical minds in the late 19th and 20th centuries, themodern understanding of foot reflexology might never had happened.


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senior citizens and individuals

Dr. Nancy says that

"Gate control theory asserts that activation of nerves which do not transmit pain signals, called

non nociceptive fibers, can interfere with signals from pain fibers, thereby inhibiting pain."

Stimulating nerves that sense touch, heat, cold and pressure as does medicated shoes

overcomes the action of the pain nerves.

Cancer Care

If cancer patients use medicated shoes they can show improvements in physical and emotional

symptoms e.g.

lessened pain anxiety depression stress

Reduced nausea and vomiting; lowered fatigue and improved quality of life.

Association of Canada defines the working of pads in shoes

"A natural healing art based on the principle that there are reflexes in the feet, hands

and ears and their referral areas within zone related areas, which correspond to every

part, gland and organ of the body. Through application of pressure on these reflexes

without the use of tools, crmes or lotions, the feet being the primary area of

application, reflexology relieves tension, improves circulation and helps promote the

natural function of the related areas of the body.


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We use same criteria in our medicated shoes.

Benefits of Medicated shoes

Basically, medicated shoes cleanse your body and get your natural energy flowing the way it

should be. These benefits of medicated shoes can normalize the glands and reduces physical as

well as emotional tension.

Medicated shoes does not claims to be a miracle cure, but it is generally believed that its

benefits can have a powerful healing effect as it allows our bodies to recover their proper

balance and removes unhealthy blockages. We believed to heal a number of illnesses ranging

from back pain to migraine to sleep disorders. Some people who have had sports injuries

believed that it helped them to recover quickly. Arthritis sufferers have also found it had eased

their pain.

Medicated shoes are best for circulation, digestion, and respiratory problems. Sinus sufferers

claimed that it offers instant relief from congestion. It can also have a vivid impact on stress

levels as well as helping to restore hormonal imbalances. Stress is now believed to be a major

cause of physical illness so by reducing tension and improving blood and nerve supply, this

alternative therapy can contribute to better overall health.

As well as combating stress, Medicated shoes gave the benefits such as improving self-

confidence and helping increase your ability to concentrate. As it helps the body to naturally

maintain its balance, this therapy is thought to help prevent possible problems from emerging.

It aims to bring about greater unity of mind, body and spirit, as well as being an excellent form

of relaxation.

Furthermore medicated shoes can help both acute and chronic conditions including:

Managing stress


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Poor sleep Hormonal imbalances Headaches and migraines Infertility Digestive disorders Pain management

Gap Identification

Need Gap Analysis

GAP Analysis is all about what customer needs and how company is fulfilling that gap.

So for this reason we conducted research in the market to find that what customers are

thinking about the medicated shoes. Largely, people were not satisfied with the regular shoes

because of higher prices of shoes; the comfortable shoes are expensive, all low quality available

in the market. So in order to meet customer requirements regarding pain killer, we are

launching medicated shoes that will fill the gap that restricts the product to meet the

requirements of customers. And provide the quality medicated shoes at reasonable cost. If

these type of shoes previously exists in the market they have low quality and are highly

expensive but they do not meet the objectives of the customers.

How does our product/service fulfill this need?

Our product is serving customers because of different features in medicated shoes as required

by the market. So our product is satisfying the requirement of our customer and satisfying

them. Secondly regarding our services, we are providing appropriate medicated shoes with an

ease of environment according to the requirements of Customer. And we are trying to give

healthy environment in which every customer will be given necessary information that they


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requires. The customers can contact us through our telephone numbers and the calls will be

free of cost.

Hence our product is specially designed to meet the requirements of the customers and it will

provide value to them.

Justification of Innovation Based on Need Gap Analysis:

Our basic focus is to give consumer quality, reliability, satisfaction. Customers want to buy

quality at affordable price .So to meet the standards of customers; we are bringing innovation

in shoes with different features. So based on our analysis we are providing different product in

market for creating difference from other shoe sellers, As people are familiar with tradition onetype of shoes that are simple and far more expensive than our product.

So we are pretty much sure that our innovation will have worth and people will purchase it like

hotcakes. The gap which was created in a market segment consists of those people who have

money to buy medicated shoes but do not purchase because of highly expensive and the

increasing prices of regular shoes or pads. Those people will also afford to buy our medicated

shoes.


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A) Political:

Political environment has significant impacts on businesses in countries like Pakistan

where government is not stable. Changing governments normally leads to change in strategies

e.g. new tax system, spending on businesses. In these circumstances we need to be able to cop

with the continuously changing environment by making flexible strategies and contingency

plans.

In our case same roles apply. We need to watch environment carefully and keep

margin to deal with any change. According to news published in Jang on 13th

November

Currently PPP government has not providing any relief to businessmen and it is even highly

taxing them. Their undercover policy to cut short electricity and gas supply in Punjab as

compared to Sindh gives us clue to use alternative source of energy for production. This also

puts entrepreneur in our country under enormous pressure because they had to survive in 24%

inflation rate and scarce supply of energy.

B) Economic:

Economic condition of Pakistan is miserable. Inflation rate is 24% which adds on to

expensive raw material supply, higher transportation costs, higher utilities bills and higher wage

rates etc. All these factors lead towards higher product costs which will lead to higher prices

and lower value for consumers. It also reduces the buying power of consumers.

Loan rate is currently 14% which disheartens businesses to get loan as it makes this

option too risky. This is an indicator of suppressed business situation. Government is not even

giving any sort of subsides to any industry and even taxes are being applied on them. Pakistans

exports for the last year were to that of imports (financial times, august 23).foreigninvestment is also shrinked. Moreover the EIU expects real GDP growth to slow noticeably in

2009 from 6% to4.1%, before slowly picking up again over the next 5 years. As a result, the

government fiscal deficit will narrow significantly after 2010, but it will remain at more than 5%

of GDP for the next 2 years. Government investment will be constrained, as a result.


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C) Social:

Social concerns are relatively more delicate to handle .our literacy rate among men

and female is 50.5% and 27.6% respectively which shows that awareness is increasing in

society. Population is growing at 1.7% which demands a creative solution to handle these huge

masses of people.CPI is growing at 13% which shows miserable picture of our society. Threat of

terrorism is too high. Lives are not safe due to which frustration and aggression is being

developing among people.

In our country companies dump polluted water into the rivers and cause deceases like dhyria.

Air, noise and other pollutions are also present. Businesses should feel their responsibility and

play their part in society. This is not their social responsibility but legal obligation too.

Recently flood has eroded millions of peoples life so businesses have social responsibility to

keep in mind those people and serve them by giving quality ,value and low price

products/services because the soul purpose of entrepreneur is to serve humanity by fulfilling

their needs and providing quality to life.

Another aspect is the diversity issue. Today masses are spread around cities in suburbs and in

nearby areas. Population is huge and scattered so entrepreneurs have an opportunity to get

profit from them as well as serve them. By getting proper knowledge of the demographic and

psychographic trends one can plan better strategies to ensure higher returns.

D ) Technology:

It comes from research whether it is basic or applied. Businesses can improve

almost in all fields by doing research. Technology have numerous benefits .it can reduce costs

by applying fewer labor. It can improve quality. It can reduce error. It can produce efficiency. It

can enhance effectiveness. It can aid humans and lot more.

Automation can lead to productivity and efficiency both. Today businesses are getting

competitive advantage by applying technology. It can even help in making better decisions and


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better awareness of the environment. Our total capacity of energy is 19574MW which demand

other innovative technologies that are fuel efficient to fill the gap.

SWOT analysis

Strengths

Quality Design Innovation

Weakness

no sustainable competitive advantage lesser distribution points not well established brand name

Opportunities

Can expand market if idea clicks Can make our own production unit Can include our friends to broaden the business

Threats

Substitutable products Difficulty in acceptance by the market

Key Success Factors

1. Brand name2. Distribution channel3. Cheap raw material availability


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4. Technology5. Continuous innovation

Brand name

It is crucial in shoe industry of Pakistan because there is a trend towards branded products.

Brand reorganization and awareness is high. People that are sensitive and specially womens go

after the brand without checking their quality or any other variable which they had heard good

previously. An established brand name can make consumer not to switch to the other brand

and travel to search its outlets .Remember this is shopping product and customer is willing to

select among different alternatives. Brand name restricts him to switch and that is why

companies are thinking these days to treat brand name as assets which truly depicts its

significance.

People are crazy about the look of their accessories whatever they wear. Society is surrounded

by ostentation. People do not just compare price or quality variable before their purchases but

also out luck of their foot wear. Nice design can be a CA for firm in this industry.

Distribution channel

As we know that shoes are shopping products in which people compare different brands in

terms of quantity, price, comfort etc. so in this case distribution is very important. Consumer

may switch due to non availability of specific brand in major locations. Here if logistics system is

efficient than one can even create competitive advantage out of it.

Cheap raw material availability

This is another important factor because in shoe industry entry is very easy and in this situationthe key is to offer the required product on lower prices than others and this will lead to the vary

basic concept of marketing that value comes out of the value chain i.e. cheap availability of raw

material which leads to lower cost of production and ultimately provides value to the

customers.


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Statistical and economical survey suggests that 29% of our population is in upper middle class

and above and average shoe purchase rate per year is 2.1shoes.So market size is 0.29 *

170,000,000=49,300,000*2.1shoes/year=103,530,000shoes/year(gross in which all brands

included).

Growth potential

It can be achieved in two ways

a) Market penetration

b) Entering in new market or market expansion

In our case we can expand our market by offering new designs and varieties .We can even offer

customized products but it needs careful handling by the management otherwise it leads to

higher costs. When our business will expand and costs would be under our control we can even

further expands our market segments an increase sales but at the beginning it may not be that

applicable.

Barrier to growth

Since medicated shoes can be copied easily and it can leads to more competitors and eventually

smaller market shares for all. Some firms have competitive advantage in the form of rand

names which can be a barrier too. Other barriers include entry into the business by potential

investors which can invest if the idea is fruitful.


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Another basis of competition among different firms is the resources owned and

exploited by them. Elegant (Pvt.) limited was developed as a company to produce

leather shoes. Its machinery was fully imported from Italy, with Italian consultancies and

was one of the pioneer shoes manufacturing units in Pakistan. Its current production is

2000 pairs daily and the collection is updated every season. As a raw material, they use

real genuine leather and do not compromise on quality. They are regularly exporting to

European markets such as France, Greece, Italy, Belgium and others and are looking to

explore further markets

On the other hand we will have a look at the resources owned by one of its major

competitors i.e., Urban sole. These shoes are manufactured by Siddiq leather works

private limited. SLW is a generational extension of the Shafi Group, the biggest group

known as the industry leader in leather, leather garments, and leather chemicals in

Pakistan. Their state-of-the-art facility includes the latest equipment, effective quality

assurance standards and the most innovative production processes in the leather

industry e.g. measurement, toggle, hydraulic press, roeo press, fleshing etc. They use

top quality cow and buffalo leathers in producing high-class leather shoes for men and

women. It maintains a Research and Development activity aimed at evaluation and

developing more efficient and more environmentally acceptable technology. Elegant

shoes are facing strong competition from Urban sole because of their huge production

capacity.

Whereas the second biggest competitor is Prime Nalaain. These shoes are manufactured

by Prime industries. It has a production capacity of 2000 pairs per day and exporting

shoes all over America, Europe and many other countries. It also has a big network in

local market with many retail outlets, wholesale and working with some big brands in

local market. Prime produces its different products in cow and buffalo leather from the

material available in domestic market. It also imports raw material from other countries,

depending on customers requirement. Prime has big range of cow and buffalo articles.

Its main focus is on quality and comfort rather than style, while Urban sole and elegant


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shoes believe in innovations and latest styles. In the short term these companies are

focusing on meeting their demand but in the long run they want to be pioneers of the

industry.

Substitute Competitors

Medicines Medical tools Hakeems

Market segmentation:

On the basis of questionnaire and SPSS results we conclude that 4 major segments exist. Cross

tabs observations showed that 27% people are quality conscious,67% are price sencitive,34%

are brand conscious and 74% are outlook conscious. From the following we can select our area

of interest.

Target market selection and description:

While studying the demographics of Pakistani people we came to know that six social classes

exist here .Our target market is those people who earn monthly income RS 40000 and above

(supported by SPSS analysis as well as demographic and psychographic studies). This gives us

market of upper middle, lower upper and upper upper class. The description of upper middle is

that these are involved in successful businesses and other professional fields. Lower upper class

consists of nouveau riche, highly successful business and professional and those who had

acquired these positions through wealth. Upper upper class consists of elite social class with

inherited social position. All these peoples buying behavior shows that they can buy shoe

costs3000 and above. So, that the companys demographically target main area of Gulberg,

Defence, Model town because the upper middle and upper-upper class lives in these areas. And

the major age group we target is of age 30 or above. Because the problems like sugar, blood

pressure and joint problems are the problems started after that age.


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Product Description

Value Proposition

Company will give value to the customers by fulfilling their physical, social and psychological

needs. Company has coated its price with special consideration regarding value. The social class

we are targeting will consider companies product as of great value to them when they will

compare its cost against benefits. The basic formula for value is given below

Value= Benefits- Cost.

USP

The Unique selling proposition of the company is that the company uses the innovative

technique of selling through pharmaceuticals. There is not any single company who is using that

channel of distribution for selling the product.

PRICING STRATEGY:

We are introducing a new product in the market so we will skim the market by setting high

prices. In this area we concluded by our calculations that we can charge Rs.3000 to Rs.5000 for

each pair of shoes and these would be of course for the innovators of the product life cycle

which are 2.5% typically. Then we have to lower our prices because other competitors would

come into the business and higher prices would lasts longer. In that phase of our business when

our product will move towards growth stage we will reduce price relatively and in maturity

stage we will try to differentiate our product and set price that is lower enough to give us

reasonable profits and value to our customers.

The company uses the psychological pricing method. That the company will charge 2995

instead of 3000 and the other shoes will priced on 4695. The logic behind is that the customershave a psychological price threshold and will group prices in broad brands for comparison

purpose. The company will also offer sale prices according to company policy on special events

like eid, ramzan etc.


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Sale and distribution strategy:

Company has a unique idea to sell its product. The company selects different pharmaceuticals

stores to sale its products. In the first year the companys partners supply its products to the

pharmaceuticals through their own vehicles because company have not enough funds at the

initial level to hire some employees. The company can market its products at pharmaceutical

shop. And in the second year the company hires some sales staff which can distribute the shoes

on different pharmaceuticals. In the third year the company opens its own shoe store and

purchases a pickup to make its distribution channel efficient. The company receives the shoes

from k-shoes on its pickup and distributes them in the market and manages the inventory on its

own shop. In the fourth year the company purchases one more pickup to make the distribution

channel and manage routes for quick supply. And in the fifth year the company opens its 2 new

shops and hires more sales staff. Company will supply its products through own company

vehicles then.

Advertising strategy & Promotional Strategies

Below the line (BTL) that believes in unconventional brand-building strategies such as direct

mail and printed media (usually involve no motion graphics).

So theCompany will adopt below the line strategy.

Display stands Flex stands Broachers

The company uses these materials for the advertising and promotion to tell the customers

about the product because in the begging the company doesnt have much budget for the

promotion. But after two years of operation the company uses the motion graphics (busses and

cars) as the promotional strategies with the previous ones.


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Operations Details:

As the company is not the manufacturing entity. So the companys operations are to manage

inventory and make the distribution channel efficient.

Capacity Management:

As the company is not the production company. It is only a trading company of shoes. So there

is no proper production capacity used. The capacity of the company relates only to sales. And

the sales capacity of the company is 150 shoes at the initial month according to the investment

which is Rs.500,000 at the beginning.

Inventory management

Quarter 1:

The Sale of the company in 1st

month is 3-4 shoes daily or 100 shoes in that month and the

order quantity (Q) for the first month is 154 units, in the 2nd

and 3rd

month the demand

increases to 150 shoes per month and the order quantity (Q*) for the second and third month is

168 and 188 units respectively. The lead time for the order is 7 days. So, the Re -Order point

for the 1st

quarter is 35 shoes (Annexure 1).

Month 1 Quarter 1

d=100 S=700 I=0.92% C=650 ROP= d*LT

Q*= 2dS/IC = 5*7

= 153.0077 = 35

Month 2

d=120 S=700 I=0.92% C=650

Q*= 2dS/IC

= 167.6116

Month 3

d=150 S=700 I=0.92% C=650

Q*= 2dS/IC

= 187.3955


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Quarter 2:

In the quarter 2 the sales exceeds from 150 to 240 per month. The lead time remains the same.

Then the Re-order point will be 56 shoes and the order quantity (Q) for that quarter is 238units (Annexure 2).

Annexure 2

Quarter 2

ROP= d*LT d=240 S=700 I=0.92% C=650

= 8*7 Q*= 2dS/IC

= 56 = 237.0386

Quarter 3:

In the 3rd

quarter the demand exceeds from 240 shoes per month to 300 shoes per month. The

lead time remains the same. The Re-order point will be 70 shoes and the order quantity (Q*)

for that quarter is 266 units (Annexure 3).

Annexure 3

Quarter 3

ROP= d*LT d=300 S=700 I=0.92% C=650= 10*7 Q*= 2dS/IC

= 70 = 265.0172

Quarter 4:

In that quarter the sales increase from 300 shoes to 390 shoes per month. The lead time

remains the same. The Re-order point will be 91 shoes and the order quantity (Q*) for that

quarter is 303 units (Annexure 4).


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Annexure 4

Quarter 4

ROP= d*LT d=390 S=700 I=0.92%

= 13*7 Q*= 2dS/IC

= 91 = 302.1661

Inventory management for 2nd

Year:

Semi Annually:

In the first six months the demand forecast is 390 to 600 shoes per month. The lead time

remains the same. The Re-order point will be 140 shoes and the order quantity (Q*) for that six

months is 375 units (Annexure 5).

Annexure 5

Semi Annually

ROP= d*LT d=600 S=700 I=0.92%

= 20*7 Q*= 2dS/IC

= 140 = 374.7909

Last Six Months:

The demand forecast for these six months exceeds from 600 shoes to 780 shoes per month.

The lead time is 7 days. The Re-order point will be 182 shoes and the order quantity (Q*) for

that six months is 428 units (Annexure 6).

Annexure 6

last six months

ROP= d*LT d=780 S=700 I=0.92%

= 26*7 Q*= 2dS/IC

= 182 = 427.3274


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Inventory management for 3rd

Year:

The demand for the third year exceeds from 780 shoes to 1200 shoes per month. The Lead time

also exceeds from 7 days to 10 days. The Re-order point will be 400 shoes and the order

quantity (Q) for that year is 531 units (Annexure 7).

Annexure 7

Year 3rd

ROP= d*LT d=1200 S=700 I=0.92%

= 40*10 Q*= 2dS/IC

= 400 = 530.0344

Inventory management for 4th

Year:

The demand forecast for that year is 1200 to 1500 shoes per month. The lead time is 10 days.

The Re-order point will be 500 shoes and the order quantity (Q) for that year is 531 units

(Annexure 8).

Annexure 8Year 4th

ROP= d*LT d=1500 S=700 I=0.92%

= 50*10 Q*= 2dS/IC

= 500 = 592.5965


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Inventory management for 5th

Year:

The demand forecast for that year is 1500 to 1950 shoes per month. The lead time is 10 days.

The Re-order point will be 650 shoes and the order quantity (Q) for that year is 676 units

(Annexure 9).

Annexure 9

Year 5th

ROP= d*LT d=1950 S=700 I=0.92%

= 65*10 Q*= 2dS/IC

= 650 = 675.6639

Suppliers:

The supplier for our shoes is k-shoes, which provide us the complete shoe to sale in the market. K-Shoes

(Pvt.) Ltd situated 1-KM Defense Road off Rewind Road, Lahore. It is one of the latest and most modern

shoe making units in Pakistan. It has distinction to be the first ever unit in Pakistan which produced such

a large Varity of products under one roof. The k-shoes is capable of fulfilling Local and Export order as

per the client requirements.

Location:

Century tower kalma chowk will be our main office. Our first shop will be on MM alam road, 2nd

at liberty market, 3rd

and 4th

will be at Model town link road and defence Y Block.

We are targeting the upper middle and higher classes, that why our own outlets will be on posh

areas.

Our significant distributor will be Fazal deans, guardian, clinix, servaid and all big

pharmaceuticals.


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Logistics

In the first two years the company will receive the ordered shoes from k-shoes factory at the rental

pickup, and distribute to the dealers in the market through the sales assistants with their motor bikes.

But in the third year the company will purchase 1 pickup which will receive the ordered shoes from k-

shoes and distribute to the dealers. And in the fourth year the company will purchase the 2ndpickup, to

make its distribution channel quick.

A

Total per-case cost (Transport +

Inventory + order processing

and handling cost)

B

C

Per case Inventory

carr in cast

Transport Cost

Per-case order

processing and handling

Inventory

less than a

Inventory

equals

Inventorymore than

10

20

30

40

Log

isticalcost

Quantity Purchased (cases)


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3rd will be Marketing Manager,4

thwill be MIS Manager and 5

thwill be Manager Operations and

they will handle all the related staff in the diagram.

Staffing1stYear:

In the First year company only hire an office on rent, where the company manages its

inventory. The partners will manage the inventory and handle the supplies from there. No, staff

should the company require at this year.

2nd

Year:

In the Second Year Company hires 4 sales persons for its products distribution in the market

which supply the shoes to different pharmaceutical shops. The company hires one accountant

which can handle all the operations related to accounts. The company also hires an office boy

and a guard for the office in that year.

3rdYear:

In the third year the company hires a shop on rent to expand its business and purchase a pickup

to reduce the cost of logistics. In this year the company hires 2 sales men, 1 accountant, 1 officeboy, 1 guard, 1 auditor, and a driver because of the expansion of the sale points.

4thYear:

In the fourth year the company only hires 1 driver to improve its distribution network of

logistics.

5thYear:

In the fifth year the company opens its 2 new branches and also purchases a pickup to improve

its distribution network of logistics. For that, the company hires 4 sales persons, 2 accountants,

2 office boy, 2 guards and a driver because of the expansion of the business.


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proven experience in customer and market research relevant product and industry knowledge excellent written and verbal communication skills organization and planning formal presentation skills decision-making stress tolerance

Finance Manager:

Job Descriptions:

Establish procedures for custody and control of assets, records, loan collateral, andsecurities, in order to ensure safekeeping.

Evaluate data pertaining to costs in order to plan budgets. Evaluate financial reporting systems, accounting and collection procedures, and

investment activities, and make recommendations for changes to procedures, operating

systems, budgets, and other financial control functions.

Oversee the flow of cash and financial instruments. Plan, direct, and coordinate the activities of workers in branches, offices, or

departments.

Prepare financial and regulatory reports required by laws, regulations. Review collection reports to determine the status of collections and the amounts of

outstanding balances.

Job Specifications:

Ability to devise and implement strategic development and resource plans, particularlyin the areas of service development, staff development and the management of change.

Ability to work on own initiative, priorities work, handle pressure and take day-to-daydecisions on the running of the organization.

Experience of financial responsibility for a budget.


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Ability to communicate effectively in person, in writing and over the telephone withindividuals and with a wide variety of organizations and audiences and to research.

Operations Manager:

Job Descriptions:

Coordination and Supervision - Coordinate, manage and monitor the workings ofvarious departments.

Financial - Review financial statements and data. Utilize financial data to improveprofitability & Inventory Control.

Production - Coordinate and monitor the work of various departments involved inproduction, warehousing, pricing and distribution of goods. Monitor performance and

implement improvements. Ensure quality of products. Manage quality and quantity of

employee productivity. Manage maintenance of equipment and machinery. Provide

technical support where necessary.

Strategic Input - Liaison with top management. Assist in the development of strategicplans for operational activity. Implement and manage operational plans.

Job Specifications:

College degree in business administration, commerce, management, industrialtechnology or industrial engineering.

Industry relevant production experience Knowledge and experience in organizational effectiveness and operations management Knowledge of project management principles and practices Information technology skills critical thinking and problem solving skills planning and organizing decision-making communication skills team work


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stress toleranceMIS Manager:

Job Descriptions:

An MIS Manager oversees an IT department, which includes network management,software development, and network security.

They plan computer-related work for firms and research software and new technologieswhich make job processes more efficient and are beneficial to the end-user.

Planning and managing large IT projects are typical, with team members who consist ofoutside vendors and employees from different departments with the organization.

Job Specifications:

MIS managers need a bachelor's degree in information technology or other computer-related area.

MIS managers must have a strong computer and technical background in addition tomanagement training and experience.

Successful MIS managers require analytical, organizational, business management andcommunication skills.

Accountant:

Job Descriptions:

Reconcile and maintain balance sheet accounts General ledger operations Prepare journal entries Prepare monthly closings and preparation of monthly financial statements Preparation of monthly financial reports Maintain with accounts receivable and accounts payable Tax computations and returns filings


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Assist in budgets and forecasts Assist with payroll administration Account/bank reconciliation

Job Specifications:

College degree or equivalent knowledge of accounting principles and practices knowledge of finance principles knowledge of financial reporting technical accounting skills previous experience of general accounting proficiency in relevant accounting software communication skills problem analysis and problem-solving skills

Security Guard:

Job Descriptions:

Enforces procedural rules and regulations. Ensures the personal safety of staff and property. Maintains security and safety for assigned area. Maintains working knowledge of the locations of various departments, buildings, access

routes and admitting requirements.

Patrols assigned area including garages and other parking areas. Checks for suspicious occurrences, and enforces parking rules and regulations

Job Specifications:

General knowledge, high school level; detailed but narrow work-related knowledge.


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Good communication skills. Must be able to stand for long periods of time. Ability to respond quickly in an emergency. Operation of various security equipments. Must successfully complete a physical examination.

Sales Person:

Job Descriptions:

Would be responsible for sales activities. Have a proven track record in sales. Reach annual sales goals. Communicate Team status to company retail reps. Have to handle customer queries & complaints. Increasing sales and keeping tack of competitors would be an important part of the job. Can explain product features and benefits.

Job Specifications:

Must have minimum of 1 to 4 years experience in the same field. Preferably from shoe industry, good negotiation skills. Relevant experience in shoe industry will be an advantage. Pleasing personality, highly ambitious, good communication skill. Interpersonal skills are must.

Auditor:

Job Descriptions:

Conduct risk assessment of assigned department or functional area inestablished/required timeline

Establish risk-based audit programs


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Review the suitability of internal control design Conduct audit testing of specified area and identify reportable issues and dimension of

risk

Determine compliance with policies and procedures. Verbally communicate findings to senior management and draft comprehensive and

complete report of audit area.

Job Specifications:

Bachelors degree in Accounting or Finance is essential. 2 to 4 years financial experience, through public accounting/auditing and/or industry

experience.

Strong analytical, written/verbal communication, interpersonal, and relationshipbuilding skills

Systems knowledge and familiarity

Ability to adapt to change quickly and multi-task. Working Conditions: Normal office environment; approximately 50% travel.

CRITICAL RISKS AND PROBLEMS

Growth potential problem

There are risks inherent with any business. However, in the shoes business, it carries very unique risks.

Most critical is the customers' liking and disliking. Another is the economy. Medicated shoes rely heavily

on serving persons who have expendable income. When the economy takes a down turn, people change

their spending priorities. There are less trips to buy expensive shoes.

A problem also in medicated shoes is finding dependable help who will stay with the business. Many

employees tend to be younger and are attempting to move into a career. When either their schooling

ends or they find their "dream job," they move on. Often servers filling the positions are non-skilled, and


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tend to be single mothers or lower educated persons. These persons come with specific circumstances

which must be accounted for by management.

Obstacles and risk

Navigate the rivers of cash Release that death grip on equity Hire the right people Pay attention to details of business

Risks of business

Regulation and compliance Access to credit Slow recovery/double-dip recession Managing talent Emerging markets

Contingency plan

A contingency plan is a plan devised for a specific situation when things could go wrong. Contingency

plans are often devised by governments or businesses who want to be prepared for anything that could

happen.

Business and government contingency plans need to include planning for marketing to gain stakeholder

support and understanding. Stakeholders need to be kept informed of the reasons for any changes, the

vision of the end result and the proposed plan for getting there. The level of stakeholders' importance

and influence should be considered when determining the amount of marketing required, the

timescales for implementation and completion, and the overall effectiveness of the plan. If time permits,

input and consultation from the most influential stakeholders should be incorporated into the building

of any contingency plan as without acceptance from these people any plan will at best encounter limited

success.


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Financial Analysis


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Balance Sheet

Balance sheet as at Year Ended

2011 2012 2013 2014 2015PKR PKR PKR PKR PKR

LiabilitiesNON-CURRENT

LIABILITIES

Partner's Equity (153,555) 994,329 1,194,950 2,472,379 3,747,581

Total non-current liabilities (153,555) 994,329 1,194,950 2,472,379 3,747,581

CURRENT LIABILITIES

Accounts payables 210,643 394,956 907,479 1,123,390 1,419,908

Rent Payable 15,000 40,000 68,500 73,850 133,850Salaries Payable 175,000 239,200 303,800 310,800 408,000

Total Current Liabilities 400,643 1,389,285 2,102,429 3,595,769 5,167,488

Total Liabilities 247,088 2,383,613 3,297,379 6,068,148 8,915,069

ASSETSNON-CURRENT ASSETS

Carriage van 507,000 1,001,650 1,500,300

Depreciation - - (25,350) (51,350) (78,850)

Net Value - - 481,650 950,300 1,421,450Furniture 50,000 48,500 47,045 45,634 44,265

Advances 45,000 95,000 145,000 145,000 195,000

Total non-current assets 95,000 143,500 673,695 1,140,934 1,660,715

CURRENT ASSETS

Account receivable 346,050 1,142,648 1,293,317 1,790,809 5,190,750

Inventory 79,869 159,738 351,072 438,840 570,492

Cash at Bank (273,831) 937,727 979,295 2,697,565 1,493,112

Total Current Assets 152,088 2,240,113 2,623,684 4,927,214 7,254,354

Total Assets 247,088 2,383,613 3,297,379 6,068,148 8,915,069


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Liabilities

This venture is in growth stages thats why partners have decided to not distribute profit. They

will only pay salary. First year business got loss of PKR 153555 thats why first years equity have

negative balance. Another tactic is that reinvest equity. It means whatever business will earn,

reinvest it in the business. Retained earnings balance is half of net profit.

K shoes allowed us 90 days credit but business has policy to pay within 60 days, thats why

balance sheet showing account payable amount of 2 months CGS.

Date of payment of salary is 5-7 of every month. According to accrual base accounting, we have

to record transaction as it happen, whether cash paid or not paid. Thats why one months

salaries are payable due to cut off period. Business have financial year of JULY-JUNE. Same

principle has fallowed for rent payable. Business pays rent every months 10th

date, rent also

came in cutoff period. Thats why we made this adjustment as well.

Assets

In the beginning business have only furniture and long term advances in non-current assets. In

the 3rd

, 4th

and 5th

, business will have bought 3 carriage vans. Straight line depreciation charged

for furniture and carriage vans. Details of carriage van are provided in spread sheet file in

Rent&Dep.Tab.We have allowed 60 days outstanding period to distributors. Normally in shoe

industry in Pakistan outstanding period is 3 months, and big brands like hushpuppies allow 2

months. We are targeting upper class thats why our allowed maximum outstanding period i s

60 days. Inventory is calculated as per minimum stock should we carry to run business

smoothly. Detailed calculations are provided in supply chain head of this document.


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Profit and Loss Account

Year Year Year Year Year

2010-11 2011-12 2012-13 2013-14 2014-15

PKR PKR PKR PKR PKR

Sales 2,768,400 18,386,550 25,229,059 35,934,199 48,447,000

Cost of sale (631,930) (4,423,510) (6,579,225) (8,571,957) (10,436,321)

Gross Profit 2,136,470 13,963,040 18,649,833 27,362,242 38,010,679

Selling and distribution

Expenses(1,167,360) (7,482,664) (10,362,124) (14,750,340) (19,798,800)

Administrative Expenses (1,205,349) (3,420,904) (4,585,591) (4,953,233) (6,602,011)

Others Expenses - - (25,350) (51,350) (78,850)

EBIT (236,239) 3,059,473 3,676,769 7,607,319 11,531,017

Interest - - - - -

EBT (236,239) 3,059,473 3,676,769 7,607,319 11,531,017

Tax (35%) 82,684 (1,070,815) (1,286,869) (2,662,562) (4,035,856)

Net Income/(Loss) (153,555) 1,988,657 2,389,900 4,944,757 7,495,161


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Income statement

First two quarters have been passed away so thats why we took only remaining 2 quarters for

first year. In the first year we have predicted 4 units sales per day in first quarter, and same in

2ndquarter. Cost of sales for article 1 is PKR 646and article 2 PKR 1109 in first year detail is

given in spread sheet file under CGS tab. In the second year of second quarter we predict 25

units per day, it is because of two consecutive eid occasions and wedding season. In the trend

analysis we have noticed that sales of footwear boost up in these quarters, like hush puppies

average sale per day from single out let in this quarter was 100 to 150 pairs of shoe. Here you

will find only one example, rest of the example are given in trend analysis portion. After

Immediate quarter sales declined. In Pakistan it is normal trend, in these quarters normally

every business reduce turnover.

Sales price we are charging PKR 2995 and PKR 4695 for article 1 and 2 respectively. We have

allowed 40% commission on sale price to distributors. Gasoline charges have been charged as

per vehicle. Details are provided in spread sheet file under head of Selling and Distribution

Expensesin note tab.

This business is and will be in introductory and growth stages for next some years, so partners

have decided and have mutual understanding on to pay every partner PKR 30,000 salary

instead of profit distribution. Other workers pay details are given in HR section and in spread

sheet file under Administration expenses. Partners have decided to not take loan from bank

thats why there are no interest expenses. In the first year business have beard loss thats why

we have positive tax in first year. This means tax will be paid in the next year; for the first year

there will be no tax.


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Cash Flow Statement

For the Year Ended June

2011 2012 2013 2014 2015

PKR PKR PKR PKR PKR

Cash flow from operating activities

Cash generated from operations (236,239) 3,059,473 3,676,769 7,607,319 11,531,017

Add: Depreciation - - 25,350 51,350 78,850

Increase / (decrease)Account Payable 210,643 184,313 512,523 215,911 296,517

Increase / (decrease)Account receivable (346,050) (796,598) (150,668) (497,492) (3,399,941)

Increase/ (decrease) Inventories (79,869) 79,869 191,334 87,768 131,652

Rent Payable 15,000 25,000 28,500 5,350 60,000

Salaries Payable 175,000 64,200 64,600 7,000 97,200

Net Cash Provided by operating activities (261,515) 2,527,056 4,255,308 7,464,856 8,638,096

Cash flow from Investing activities

Cash used to acquire Carriage van - - (507,000) (520,000) (550,000)

Cash Flow from Financing activities

- - - - - -

Net cash (used in) financing activities - - - - -

Net increase / (decrease) in cash 226,169 1,211,558 41,568 1,692,920 (1,255,803)

Cash at beginning of the year 500,000 937,727 937,727 979,295 2,672,215

Cash at end of the year 726,169 2,149,285 979,295 2,672,215 1,416,412


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Sensitivity analysis


For the Year Ended 2012

Sensitivity Year Sensitivityw.r.t Admin 2010-11 w.r.t CGS&Sell.exp

PKR

Sales 21,801,150 21,801,150 21,801,150

Cost of sale (4,976,448) (4,976,448) (6,469,383)

Gross Profit 16,824,702 16,824,702 15,331,767

Selling Expenses (8,767,504) (8,767,504) (8,767,503)

Administrative Expenses (4,128,682) (3,440,568) (3,440,568)

Depreciation - - -

EBIT 3,928,516 4,616,629 3,123,696

Interest - - -

EBT 3,928,516 4,616,629 3,123,696

Tax (35%) (1,374,980) (1,615,820) (1,093,294)

Net Income/(Loss) 2,553,535 3,000,809 2,030,402

Sensitivity = Change in N.I Change in N.I

Change in Admin Change in VC

= (447,274) = (970,407)

688,114 1,492,933

=-0.65 =-0.65If F.C and V.C increase by 1 PKR,

N.I will decrease by 0.65 PKR


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Sensitivity analysis (Cont.)


For the Year Ended 2013

Worse Normal Best

Year Year Year

2012-13 2012-13 2012-13

PKR PKR PKR

Sales 22,706,153 25,229,059 27,751,965

Cost of sale (7,237,148) (6,579,225) (5,921,303)

Gross Profit 15,469,005 18,649,833 21,830,662

Selling Expenses (10,569,366) (10,362,124) (10,154,881)

Administrative Expenses (4,677,302) (4,585,591) (4,493,879)

Depreciation (25,350) (25,350) (25,350)

EBIT 196,986 3,676,769 7,156,552

Interest -

EBT 196,986 3,676,769 7,156,552

Tax (45% or 35%) (88,644) (1,286,869) (450,404)

Net Income/(Loss) 108,343 2,389,900 6,706,148

This business is too much risky, even a single mistake can leads towards failure. Keep eye open

and analyzing key success factor is mandatory. Assumption were taken as if sale declines 10

percent throughout the year and cost of sale increase by 10% for worse case and for best case

sale increase by 10% and cost decrease by 10%, throughout the year. For tax we assume that if

Tax percentage increases by 10% and reach 45% for worse case and same 35% for best case.

We have seen that net profit decreases by 95% in worse case, and 64% increases in best case.


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It means we have to be too much conscious while setting price, developing new strategy,

implementing and other decisions.

Project Startup cost

Budget 500,000

Office Setup

Furniture 50,000

Computer x1 21,000

Carpeting 12,000

Decoration 13,000

White Wash 7,000

Certain 12,000

Stationary 1,000

116,000

Patent registration 2,250

First Month Promotional Expense 50,000

First month Rent 15,000

183,250

Startup

Net in hand for Procurement 316,750


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Price per shoe

Price per Shoe (article)Article 1 Article 2

Details PKR PKR

Thread cream 10 11

Thread 30 32

Sole 100 200

Foam 14 23

Inner sole pad 25 50

Sheet 20 40

Buckle 30

Banwer (0.3mm) 25 45

EVA sheet 14 23

Cloth 11 21

Leather

Cow leather 200 363

Sheep leather 105 133

Total Material Cost 554 971

Overhead 10% 55 97

Total Cost of Shoe 609 1,068

Inward carriage cost 6 10

Shoe Box 31 31

Cost of Shoe sold 646 1,109

Manufactured by K-Shoes (Pvt.) Ltd, so transferring cost of shoe sold

Manufactures of shoe is K shoe, the motive was to show here breakup of the cost is know whether he is

charging correct price or not. We cannot bargain on price if we dont know the exact price.We can even

set our strategies.


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Packaging cost

Packaging cost

PKR Per Shoe

Positive 3.5/inch 828

Plate 600/p 2,400

Printing 800/p 3,200

Total Fix Cost 6,428 3

Art card 23x36 20/sheet 20

Lamination 1.5/ft 6

Box maker 2/box 2

Variable cost per Box 28

Total Cost/box 31

Minimum Printing 2,000


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Experience curve

In earlier quarters, we have to bear high cost. As per increase in production, we can see variable cost is

declining. We have higher per unit cost in earlier quarters. There are two major reasons for that. First,

we dont have production unit, production is being done by K shoes, and second reason is order size. As

we increase order size, per unit cost is declining. Here question arrases that why price will not as per

competitors price that he is costing now in fifth year? Answer is simple due to inflation, higher prices of

raw material even in 5thyear average cost of shoe is about PKR 789.

Break Even Analysis

The break-even point (BEP) is the point at which cost or

expenses and revenue are equal: there is no net loss or

gain, and one has "broken even. Number of units that must

be sold in order to produce a profit of zero. There are two

cases in which we calculate break even. First one is single

product, and other one is multiple. In this case, there are

two products, both have different variable costs. Break

Even calculation is given below.

740

760

780

800

820

840

860

880900

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Cost per unit

Cost per unit


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