Post on 02-Jun-2018
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1. Executive Summary
Money & Market is a weekly business magazine. It will be published on every week‘s Thursday.
There will be also an online business available for our tabloid. Our printing press factory will
consist of different printing equipment. As we are going to produce 50,000 copies of magazine in
every week initially, we will require high-end equipment for Pre-press, Press & Post-press
activities. The publication is one of the major leaders in the industry and serves a highly targeted
niche. It has been reported to grab 30% of the market place within first two years of
commencement. The publication is considered for quality rather than quantity reached and is
positioned specifically in the upper class segment of the market. Throughout this business planwe tried to compile all the elements that are needed to be forecasted and planned accordingly.
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2. Profile of the Team
Figure: Company Profile
This will be our initial chain of command. As our business will go forth, capacity will increase
and thus we hope to include more employees in the future.
3. Industry overview
Bangladesh is a land of opportunity.About 150 million peoples are the bases of investment in any
commercial sector. Due to low readership and lower GDP there is massive challenge to establish
Newspaper Company but enormous peoples and 201 daily newspapers showing the positive sign
for gaining the success in this regards. The private sector is playing a gradually more active role
in the economic life of the country that will be a positive sign for the newspaper industry. In
short a solid average yearly GDP expansion of 5% over the last decade and exports have been
gradually shifted from usual goods to more value added items indicate the improvement of the
economy which ultimately increase the purchasing power of the peoples. Readership is the main
way of measuring success in the newspaper industry. Several editors agreed that readership is
one of the most important and vital points for newspaper industry. As the readership increases,
advertisers view the paper as an increasingly attractive spot and it increases the revenue of the
paper. (―Trends in Bangladesh Media‖, n.d.)
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4. Company Overview
The Business
Our plan is to publish a weekly business newspaper. We have given it a name-‗Money &
Market.‘ It will be published on every week‘s Thursday. Moreover, there will be also an online
business available for our tabloid. It is the first business related newspaper in Bangladesh.
4.1 Mission Statement
We will publish business magazine weekly. Our aim is to give latest information about the
business world to the readers.-they will be informed about latest market and economic condition
worldwide and Bangladesh-which will be very essential to them; to provide business school
students with vast resources for their projects, cases and preparing for admission to B-schools
and MBA programs. To make our aim successful we will employ highly skilled journalists and
business executives. Beside we will also earn a healthy amount of profit
4.2 Vision Statement:-
To make ‗Money & Market the most circulated business tabloid in world; the tabloid will
potential source of information for billions of business executives, business women/men and
business students around the world.
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4.3 Key Products/services:-
Initially, we will publish our magazine every week‘s Thursday. It will be available all around
Bangladesh. There will also be an online version available for our foreign customers. If we see
positive results from this we will sell a CD with our magazine. The CD will contain many
eBooks and business games which will be a great source of essential resources for B-Schools
students
Product : Magazine Cover Page Sample
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4.4 Overall Strategy
Objective:-Locally and internationally all daily newspapers are our indirect competitors. Only
internationally, business newspaper and magazines like the economist, Wall Street journal,
Bloomberg Business week etc. However, we have to grab at least 70% of the market share within
the first two years of our commencement.
Short-term goals:-
Create an excellent brand image locally. By local we mean our market is inside
Bangladesh. We will provide our customers with latest news about business news.
Corporate personalities will be greatly benefitted by this. Moreover we will provide manyguidelines for B-schools students about how to be successful in career, getting in to good
MBA schools in abroad etc. Thus, how we will create an excellent brand locality.
Gain consumer‘s trust by giving up to date business news about Bangladesh and the rest
of the world. we will provide many guidelines for B-schools students about how to be
successful in career, getting in to good MBA schools in abroad etc. Thus, how we will
create an excellent brand locality. All b this will definitely earn the trust of customers
and we will eventually become the no.1 business magazine in Bangladesh.
Become no.1 weekly business magazine of Bangladesh. We will provide our customers
with latest news about business news. Corporate personalities will be greatly benefitted
by this. Moreover we will provide many guidelines for B-schools students about how to
be successful in career, getting in to good MBA schools in abroad etc. Thus, how we will
create an excellent brand locality. All of this will definitely earn the trust of customers
and we will eventually become the no.1 business magazine in Bangladesh.
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Long term goals:-
Create an excellent brand image globally. When we will go global, we will provide extra
products like CD with our magazine. Our CD will contain games for training MBA
students. We will also sell an online version of our magazine. Thus we will create an
excellent global brand image. All of this will definitely earn the trust of customers and
we will eventually become the no.1 business magazine in world wide
When any business executive will think about getting information about any company
he/she will confidently search through our online magazine database. On the other hand,
our business magazine will become the best guide to getting admission into excellent B-
schools.
5. Industry overview and analysis
5.1 PEST
Every firm is affected by some external macro-environment. A PEST analysis is the analysis of
such macro-environment.P.E.S.T. is an acronym for the Political, Economic, Social, and
Technological factors of the external macro-environment. These external factors can be a threat
to a company and usually they are beyond firm‘s control. However, changes in the external
environment also create new opportunities-(Net MBA, 2002).
Below is the PEST analysis on the basis of our company.
Political Analysis:-
Our country is politically instable. Now and then there are political instability like strikes
in our country, which may greatly hamper our business. Moreover, we have to build
some political connections to run our business effectively.
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All companies in Bangladesh are subjected to a corporate tax. Accordingly, our company
is also subjected to a corporate tax rate of 37.5%.This corporate tax eventually effects our
net profit negatively. A corporate tax of 37.5% is high for a new business like ours.
There is no strict environment regulation. Well from business perspective this is a good
news for us. Because we don‘t have to think about recycling .As paper comes from wood,
so there is already a criticism going on against using paper. But we don‘t have to face any
kind of hassle due to weak environment regulation in Bangladesh.
There are some trade regulations that will not hamper our business. Like for starting up a
new business in Bangladesh, we have to obtain license from the government, which may
be lengthy. This may delay the starting of our business.
Economic Analysis:-
Bangladesh‘s GDP is rising which is positive for our business. A healthy GDP shows a
good sign of the economic condition of the country. This means the purchasing power of
consumers are increasing, which good for all business.
Inflation rate in Bangladesh is currently 10.43%.And it has a tendency to rise, which
may have negative impact on our sales.
The benchmark interest rate was last reported to be 7.75% for deposit and 13% for loan.
This means if we borrow from bank we have to pay a high interest to them in return.
Therefore, it‘s good to avoid bank loan as far as possible.
Social Analysis:-
Literacy rate is increasing. People are now more interested in achieving knowledge.
English proficiency in rising. This is obviously good for our business. Higher education
rate means, there are more customers for our product.
Population is high and increasing. So we will have a large sample of targeted customers.
This will help us in making a better and effective marketing research.Eventually,our
forecasting will be effective. This is obviously good for our business.
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Readers of magazine will be usually from age 18-60.We have many people in our
country within the age range of 18-29 but after within the age range of 30-60 population
is less. This data will help us in forecasting feasibility.
People who are somehow related to business are very much eager to increase their
knowledge of business world. They won‘t mind buying a business tabloid from their
monthly income. This is a great for our business.
Initially, our business magazine will be in English. But the lack of proficiency.In English
language may make our tabloid hard to capture market in many parts of Bangladesh. This
is a great for our business. This is obviously good for our business.
Technology analysis:-
Fast internet available in many parts of Bangladesh. Both we and our customers will be
benefited from this. We can get latest business news around the globe and or customers
can get business news updates from our websites.
5.2 Five forces
Figure:- The diagram above illustrates the
Porters Five Forces Model in general. It is used
to assess the nature of competition within an industry.
RIVALRY
Supplier power
Threat of
substitutes
Barriers to
entry
Buyer power
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Force 1-Degree of rivalry:- We don‘t have any direct competitors, as there are no other
business magazines available in our country. However, there are many newspapers circulating in
our country. They also publish business news. So they are our indirect competitors. Moreover,
much other business news providing websites ran by foreign companies is available. They are
also our indirect competitors. Switching costs for customers is moderate; as there is no tabloid
which will provide detailed business news and analysis with B-schools guidance with such low
cost compared to other business newspapers like Economist or the Wall Street journal which are
costly.
Force 2-Threat of new entrants: The threat of new entrants in this industry is high. By seeing
our success many other companies may start penetrate into such business.
Force 3-Bargaining power of buyers: Buyers are the people who create demand in the
industry. In our business, bargaining power of buyer is moderate. This is because buyers have
few options rather than our tabloid and we will also offer a standard price.
Force 4-Bargaining power of suppliers: In this industry, suppliers power is low. Our suppliers
are mainly paper industry. They will provide us with paper necessary to print our magazines.
There are many paper suppliers in Dhaka from where we can buy paper at low price.
Force 5-Threat of substitutes: The presence of substitute products can lower industry
attractiveness and profitability because they limit price levels. First of all it depends on the
buyers‘ willingness to substitute. If she/he happy with our tabloid, she won‘t switch easily. The
relative price and performance of substitutes (depends on the tabloid‘s quality) and the costs of
switching to substitutes(depends on the tabloid‘s quality) also influence the threat.
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5.3 Industries SWOT
It is a tool that identifies the strengths, weaknesses, o pportunities and threats of an organization.
Specifically, SWOT is a basic, straightforward model that assesses what an organization can and
cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to
take the information from an environmental analysis and separate it into internal (strengths and
weaknesses) and external issues (opportunities and threats). Once this is completed,
SWOT analysis determines what may assist the firm in accomplishing its objectives, and what
obstacles must be overcome or minimized to achieve desired results.-(I nvestopedia ,n .d.)
The SWOT analysis is shown below on the basis of external and internal analysis.
SWOT analysis
Strengths:
We will patent our brand name. It is very important that we patent our brand name.‖
Money and Market‖ will be the only business tabloid all over the world. By patent we
will ensure that our business projects, brand name everything remains safe from fraud.
Favorable access to distribution networks. Our distribution networks involve circulation
department to production department to agent, then to hawker and finally to readers.
Accessing to such distribution networks in flexible.
Skilled and cost effective labor force. In Bangladesh we have highly skilled workers from
many reputed universities. They are efficient enough to run our business most effectively.
Moreover we can hire those workers at a lower rate too, which is great for our business.
Weaknesses:
Initially we have a weak brand name. As our business is just going to start, so our brand
is not popular among customers. Our customers don‘t know whether our tabloid is
effective enough to fulfill their wants.
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High cost structure. It is very costly to start up a new business. High cost is associated
with the buying of a new factory, equipment and machinery. Therefore the ratio of fixed
assets to variable cost is obviously hu\igh.
Opportunities:
Our product will fulfill an unfulfilled customer need. Business is good way earning
money. And our customers know it very well. Our tabloid will provide the best processes
that can make a business very successful. Therefore it will fulfill customers wants.
Students are more interested in pursuing their business studies in reputed universities.Our tabloid will give invaluable knowledge about getting in to top business schools. So
we can target a huge base of customers who are mainly students
Threats:-
Penetration of new business magazine in the market. Already there are some business
magazines available in the market. They are our direct customers. Moreover, all the daily
newspapers are also providing business news weekly. We have to compete them too.
Finally, there is also chance of entry of new business tabloids in the market.
There are also many blogs were business news are published briefly.If people prefer
reading business news from blog/internet then our tabloid will not capture market
successfully. The threat of new entrants in this industry is high. By seeing our success
many other companies may start penetrate into such business.
The presence of substitute products can lower industry attractiveness and profitability
because they limit price levels. First of all it depends on the buyers‘ willingness to
substitute. If she/he happy with our tabloid, she won‘t switch easily. The relative price
and performance of substitutes (depends on the tabloid‘s quality) and the costs of
switching to substitutes(depends on the tabloid‘s quality) also influence the threat.
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5.4 Industry life cycle of our Tabloid
Figure:- The diagram above shows the industry life cycle of a product in general.
Industry life cycle is generally defined as the concept relating to the different stages an
industry will go through, from the first product entry to its eventual decline. There are
typically five stages in the industry lifecycle. Let‘s discuss the industr y life cycle of a Tabloid
that we are going to set-up.
We arecurrently
here
Our direct competitors areapproximately here - Locally:-Bangladesh Economic Digest&online business blogs like businessnews-bd.com
Our indirect competitors such as the Daily newspapers are here. Also,when we go international, we will have to face fierce competition fromdirect competitors like – The Economist, Bloomberg etc.-they are also at
Maturity stage.)
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1. Embryonic/Introduction Stage: At the embryonic stage, industry output will increase
gradually. High investment is needed. Profit will be less or there might be loss.
2. Growth: The TV channel gains popularity and grows. Proper advertising and marketing
plan is necessary for this.
3. Industry Shakeout: The Company settles on the "dominant design"; economies of scale
are achieved, forcing smaller players to be acquired or exit altogether. Barriers to entry
become very high, as large-scale consolidation occurs. Need to invest to attract customer
from weak companies to get market share.
4. Mature: Growth is no longer the main focus, market share and cash flow become the
primary goals of the companies left in the space. Reap rewards from previous investment
5. Decline: Usually, at this stage Revenues declining; the industry as a whole may be
supplanted by a new one. But if we maintain our quality thane new entrants won‘t be able to
compete with us and we will maintain a healthy market share.
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5.5 Strategic group analysis
The strategic group analysis according to PEST and 5 forces are as follows:-
Strengths:-
We will patent our brand
name.
Favorable access to
distribution networks. Skilled labor force.
Weaknesses:-
Initially we have a weak brand name.
High cost structure.
Opportunities:-
Our product will fulfill an
unfulfilled customer need
People are more interested
in keeping up-to-date
information about the
business world, so our
tabloid will be a good option
for them.
Threats:-
Penetration of new business magazine in the
market.
If people prefer reading business news from
blog/internet then our tabloid will not capture
market successfully.
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6. Internal Analysis
6.1 Company Value Chain Analysis
Our business will have a defined chain of activities that will help to produce one of the best
business weekly magazines in the world. The primary activities of our company will definitely
be human resources (HR), because we will collect the business news of the world from our
senior staff reporters. We may also publish works originally created by others for which we will
obtain the rights, and for this we also need our legal department as a primary activity. One of our
other primary activities will include technological assistance because our weekly business
magazines will be both printed and online media. We will store archives of our magazines online
and will also create a Smart Phone application which will give registered users continuous
updates of the business world. Our secondary activities will include finance and administration
department to oversee the business; we will also need building security to secure our sensitive
materials.
Primary activities (HR, legal, marketing, Finance, and technology)
Input Output
Secondary activities (Admin, security and machines operator)
FIG: A pictorial representation of value chain analysis:
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Operations Plan
The operations plan will be divided in to a series of activities and each individual will get a
distinct job for which he/she will be responsible. The first job is to collect business news around
the world, which will be done by various journalists and senior staff reporters. We will divide
this task into two parts namely: foreign business and local business news. All these news reports
are ultimately responsible to editors. Our magazines will have numerous editors, beginning with
an executive editor responsible for the news division. Immediately below the executive editor
will be the managing editor, the person who will oversee the day-to-day work of the news
division. Other editors -- sports, photo, state, national, features and obituary, for example -- will
also report to the managing editor. The copy editors will then be responsible for spell check,
errors of usage. They may also look for "holes" in the story that would confuse readers or leave
their questions unanswered.
While news is being collected on one hand, on the other hand the operation level workers will be
given raw materials to produce the sizable newspapers where the news is to be printed on. After
attaching all the news, photos and ads, the newspapers will be mass printed. This business
magazines will then be distributed to the local news-stands and then to the final customer.
6.2 Existing Core Competencies and Future Core Competencies
Our business will have some capabilities that will be critical in achieving competitive advantage
over other companies in the magazines publishing business. Firstly we will be the first to
introduce a ―scholar‘s analysis section‖ where different noted intellectuals in the business world
will be giving their opinion, analysis and research about our news reports. This will help
individuals to not only understand the news but also know how it affects the business world and
global trade economy. Secondly, we will create a Smart Phone application that will give
registered uses continuous news updates of the business world.
To show that we are ecologically aware we will initiate ―go green‖ policy which will be our
future competency. We will make sure that our news papers are made from recycled papers; this
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will give an insight to the people about our respect and love for Mother Nature. We are hoping
this will create more value to our brand image.
P↑ Qd↑
FIG: A pictorial representation of our existing core competencies
Efficiency Low
Quality High
Innovations High
Customer res High
Differentiation & high cost
Resource(capital,
technology)
Capabilities(Scholars,noted
Match To create
Core
Competencies (scholar‘s analysis
section, new
technology)
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6.3 Performance Based Analysis
Return on equity (ROE) focuses on the return to the shareholders. We are required to maintain a
steady Return on equity (ROE) in order to keep the investors happy. We look to increase our
debt leverage to make our ROE ratio look attractive. On the other hand, ROA explicitly takes
into account the assets used to support business activities. It determines whether the company is
able to generate an adequate return on these assets rather than simply showing robust return on
sales. Our company is an asset-heavy company which will need a higher level of net income to
support the business and show a healthy ROA ratio. So in order to increase our performance we
need to increase our net income. Also we will analyze our performance through Return on
invested capital (ROIC). If we can utilize our invested capital in the right areas then we can showa striking ROIC ratio which will help increase performance.
2012 2013 2014 2015 2016
ROA -8.16% -2.67% 1.00% 3.09% 4.75%
ROE -10.71% -3.22% 1.13% 3.36% 5.02%
ROIC -9.14% -2.93% 1.73% 5.26% 8.04%
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Graphical representation:
ROA is a measure of how much return we are getting by utilizing our assets. ROE is a measure
of how much we are earning by utilizing our equity money. And ROIC is the return that we get
by investing capital before tax level. Here we can see that our profitability ratios are suffering in
the initial stages but then after 2013, we have a gradual increase in the ratios which is good sign.
It shows that the company is utilizing its assets efficiently and making good investment choices
in the future.
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
2012 2013 2014 2015 2016
ROA
ROE
ROIC
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A pictorial representation of our performance based analysis is given below:
FIG: Performance based analysis
PERFORMANCE(negative at first)
OUR FOCUS
INCREASE ROE RATIO INCREASE ROA RATIO INCREASE ROIC RATIO
HOW TOINCREASE
INCREASE DEBT
LEVERAGE
INCREASE NET
INCOME
PROFITABLE
INVESVESTMENTS
HOW TOINCREASE
HOW TOINCREASE
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7. Market overview
7.1 Potential customers
Since our tabloid will contain information about the business news, so our potential customers
are categorized in to two segments:
Readers: who will buy the products for their personal information i.e. businessmenand
women, corporate executives, business school student and also for candidates looking
forward for admission in business school.
Advertiser: who will buy advertising space for their business use i.e. business buyers.
Our survey research is given in the appendix.
7.2 Size and growth of the market
There is a huge opportunity for tabloid in Bangladesh. According to India media entertainment,
at present Bangladesh print media markets already account for the entire State printing industry
60% market share. Advertising industry contribute to Bangladesh newspaper industry revenue
73%, contribution to turnover of the English-language newspaper 86%.(―Bangladesh Print
Media,‖n.d.). Also, although over 1,800 dailies and periodicals are published in the country, only
about 15% of the population read a newspaper/periodical once a week. The readership in the
urban areas is comparatively higher at about 32%, while the rate in the rural areas, especially
among rural women, is very low - only about 2%. (Rahman& Ahmed, n.d.). Therefore, utilizing
these market opportunity we have to grab 30% of the market within the first two years of our
commencement.
Forecasting the sales growth
A sales forecast is an essential tool for managing a business of any size. Most businesses draw up
a sales forecast once a year and include it in their business plan. A well-constructed sales plan,
combined with accurate sales forecasting, can allow us to spend more time developing our
business rather than responding to day-to-day developments in sales and marketing.
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Our market research and survey findings regarding sales growth: (Total sample size was
30).
1) Most of the populations are eager to go for a business tabloid for research rather than a
newspaper.
2) 80% of the population would like to advertise in our media.
3) Saptahik2000 is our closest competitor and one of the most successful magazines in
Bangladesh.
4) Our market research (appendix) shows that the Saptahik2000 circulated 3000 copies in
2009 and 5500 copies in 2012(the only two data we could find ).
5)
The price of the magazine of our closest competitor Shaptahik2000 is 65 taka.
Assumptions based on our findings:
1) We think that our business will show a similar trend of growth in sales like Saptahik2000.
2) Since our business is all over Bangladesh so we will produce a lot more units than
Shaptahik2000. We will produce 50000 units in the first year.
3) Since we are only focusing on business news and there are not many ‗business
magazines‘ in Bangladesh, ours will show a positive growth trend very quickly.
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Calculations for forecasted sales growth:
If we calculate the growth trend of our closest competitor Shaptahik2000 then we can have an
idea of our forecasted growth gate and the market:
Sales in the year 2009(appendix): 3000
Sales in the year 2012(appendix): 5500
By the formula of time value of money, we can find the rate. Here,
FV= 5500 PV=3000
N= 3,
Therefore, FV=PV(1+i)n
5500=3000(1+i)3
if we solve for i, we get i = 22.4%.
Final forecasted Sales growth rate of our business:
Since we having more capacity and more human resources than Shaptahik2000, so our business
should grow at a slightly higher than Shaptahik2000. Therefore our forecasted sales growth rate
each year will be 25%.
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7.3 Market segmentation
We will segment our market for two types of customers.
Readers, &
Advertisers
7.4 Marketing plan
Marketing Budget:
Start up:
Our start up marketing budget will be:
Newspaper Tk. 60,00,000
Radio 3,00,000
Direct mail 1,00,000
Total 64,00,000
Marketing Budget for year 2012:
Months
July (Tk.) August
(Tk.)
September
(Tk.)
October
(Tk.)
November
(Tk.)
December
(Tk.)
Newspaper 60,00,000 - 60,00,000 - 60,00,000 -
Television - 80,00,000 - 80,00,000 - 80,00,000
Renowned
corporate
executives
50,00,000 50,00,000 50,00,000 50,00,000 50,00,000 50,00,000
Radio 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000
Total 11,300,000 13,300,000 11,300,000 13,300,000 11,300,000 13,300,000
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Marketing Mix
Marketing mix is the set of controllable variables of marketing. In general it is expressed in 4 Ps:
product, price, place and promotion of a particular company (Kotler, 2003). The marketing mix
of our Tabloid, ―Money and Market‖ is described below:
Product
In a narrow sense, a product is a set of attributes assembled in an identifiable form. In marketing,
we need a broader definition of product to indicate that consumers are not really buying a set of
attributes, but rather benefits that satisfy their needs. Product is an umbrella term that covers
goods, services, places, persons, and ideas (Stanton 1994). Marketing offer is some combination
of products, services, information, or experiences offered to market to satisfy a need or want
(Kotler, 2003).
Level of products
A product planner must think about three levels of products and services (Kotler, 2003). Each
level adds more customer value. The most basic level is the core benefit that addresses the
problem solving benefit of the marketing offer. For ―Money and Market‖, the basic product is
information i. e. news & views. At the second level, marketers turn the core benefit into an
actual product. In this stage product features, design, quality level, brand name, and packaging
are developed. The actual product of ―Money and Market‖is the newspaper itself. In the third
stage, to differentiate their offers from competitors‘ a marketer offers some additional benefits
with core benefit and actual product, which is referred as the augmented product. ―Money and
Market‖offers different supplementary i.e. eBook in CDs as its augmented product.
Price
Price is the exchange value of product. Price is the amount of money and/or other items with
utility needed to acquire a product (Stanton 1994). Kotler (2003) explained price as the amount
of money charged for a product or services, or the sum of the values that consumers exchange for
the benefits of having or using the product or service. Pricing is a critical factor in the successful
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operation of for-profit and not-for-profit organizations. Setting prices for new and existing
products appears simple enough. To find out the selling price of a product, a marketer apparently
has to estimate the costs, add a margin for overhead and profit. Price is the primary element of
the marketing mix that generates revenue.The pricing strategy for newspaper industry is different
from other consumer products. ―Money and Market‖is following a special type of competition
based pricing approach to determine of the price of its product. The details of per unit production
cost of ―Money and Market‖are as follows:
(* sell ing 50000 units in the fi rst year)
Per unit production cost
Printing paper Tk. 15
Printing 5
Labor cost 10
Factory overhead 10
40
Indirect overhead 5
45
Per unit sales Revenue
Per unit sales price Tk. 50
Agent‘s commission (5)
(10%)
Total per unit sales revenue 45
Per unit marketing cost
Promotional expenditure Tk. 10,000,000Incentive to hawker 50,000
Trade promotion 5,000,000
170,000,000
Distribution cost 2,500,000
Production cost 2,000,000
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Total marketing cost 174,500,000
Per unit marketing cost 3,490 (yearly)
Per unit target for advertisement revenue
Per unit Cost of marketing Tk. 3490
Sales revenue per unit ( 45)
Advertisement target per unit 3,445
Place
A critical task for marketers in the new millennium is the efficient movement of goods and
services from the point of production to the points of consumption. There are hundreds of ways
in which goods and services can be distributed to consumers. There is no standard distribution
system that can satisfy the needs of every firm. Many organizations use several distribution
channels to reach different market segments. A distribution channel consists of the set of people
and firms involved in the transfer of title to a product as the products move from producer to
ultimate consumer or business user (Stanton 1994). In other words, channel of distribution is a
set of interdependent organizations involved in the process of making a product or service
available for use or consumption by the consumer and business user (Kotler, 2003).
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Money and Market’s channel of distribution
Circulation Department
Production Department
Distribution Department
Agent
Hawker
Reader
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8. Infrastructure
8.1 Facilities
Our printing press factory will consist of different printing equipments. As we are going to
produce 50,000 copies of magazine in every week initially, we will require high end equipments
for Pre-press, Press & Post-press activities. Our printing press factory will be the final place of
the output; the technical parts of this business will be here at the press.
8.2 Machineries and Equipments
Equipments are divided into three categories: Pre-press, Press & Post-press.
We plan to buy machineries in the third year of the business from which we expect to have the
potential to increase our capacity.
Pre-press Equipments
Equipments No.
Y1
No.
Y3
Price (BDT) Model Size
High-End Computer to Plate (CTP) Image
Plotter for Output of Digital Files Directly on
Offset Plates at 3600 DPI Laser Ready for Printing
with FM and Spekta Screening.
1 2 70,000 (Y1)
+ 70,000 (Y3)
PTR 8100 28" x 40"
Apple I Mac Computers for Digital Photo-
Retouching/Finishing.
2 3 3,00,000(Y1)
+ 1,50,000(Y3)
I Mac
High-End IBM Computers with Intel Core i5
Processor (3.2 GHz), 8 GB RAM with 22" Col.
Corrected LCD Monitor, DVD RW Drive and 1 GB
Graphic Card.
4 6 2,80,000(Y1)
+ 1,20,000(Y3)
IBMPC
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High-End Colour Proofing System compatible
with CtP as above
1 1 1,00,000 9600 Pro 44" Width
Laser Printers for Text Print-Outs 1200 DPI 1 3 25,000(Y1)
+ 50,000(Y3)
Therefore, initial budget for our Pre-press equipments = BDT 7,75,000
As we will increase our capacity, budget for our new equipments on third year = BDT 3,90,000
Total = BDT 11,65,000
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Press Equipment
Kodak NexPress SX3300 Digital Production Color Press
SRP:INA/
Domestic Intro Date: June 2011
Maximum Monthly Duty Cycle: 3,700,000 impressions
Standard/Maximum Paper Source(s):4/5
Standard/Maximum Paper Capacity: 11,000 sheets/17,350 sheets
Maximum Paper Size (W x L):14" x 36"
Paper Weights: 16-lb bond to 130-lb cover
Bypass (Capacity/Weights): Not applicable
Automatic Duplexing
Standard Networks Supported: Windows, Mac, TCP/IP
Printer Language: Adobe PostScript 3
Standard Interface(s):10/100/1000 M bit/sec
Ethernet Optional Interface(s):None Color
Capable: 5-color (retrieved from http://www.buyerslab.com/Advisor/Products/56451/Kodak/NexPress-SX3300-Digital-Production-Color-
Press)
This industrial printing machine will cost BDT 1,50,00,000 and as its maximum capacity reaches
our future expectation, within 5 years we will not be needing to buy a new one.
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Post-press Equipments
Equipments No.
Y1
No.
Y3
Price (BDT) Model Size
Paper Cutting Machines 1 2 1,00,000(Y1)
+ 1,00,000(Y1)
Wire Stitching Machines 2 3 8,00,000(Y1)
+ 4,00,000(Y3)
Nipping Machine 1 2 1,00,000(Y1)
+ 1,00,000(Y3)
Fully Automatic Folding Machine 1 2 70,000(Y1)
+ 70,000(Y3)
STAHL 20 x 30 (4
Fold)
Paper Back Cover Perfect Binding Machine 1 2 50,000(Y1)
+ 50,000(Y3)
WELBOUN
D
17"
Sewing Machine 1 2 40,000(Y1)
+ 40,000(Y3)
12‖ x
12‖
Therefore, initial budget for our post-press equipments = BDT 11,50,000
As we will increase our capacity, budget for our new equipments on third year = BDT 7,50,000
Total = BDT 19,00,000
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The Production and Manufacturing Process (simple flow chart)
Research
Team
Collect newsand Make
Draft
To theeditors
Approval ofeditors
GraphicDesign
DesignApproval
Send forOutput
Evaluate
Distribution
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The Production Calendar
We plan to produce 50,000 copies per week. An
informal calendar will be maintained to ensure the
production is happening by the deadlines. The purpose
of the production calendar is to provide individual
deadlines for each phase of production.
The article tracking form/folder
The article tracking form and folder will ensure that
each phase of production is completed. It also provides
a means of communication between designers and
editors and a central place to keep production
documents.
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Program Evaluation and Review Technique (PERT)
In order to maintain a proper flow of work we plan to use Program Evaluation and Review
Technique or PERT. To prepare a PERT chart for our production and manufacturing process, we
prepared a list of works that need to be done in one week in order to complete the production.
Event Activity Estimated Time in
Hours
Preceding Event
A Plan the stories 10 None
B Collect
news/photos/advertisements
96 A
C Assign full timer writers/find
freelance writers
5 B
D Write article draft 18 C
E Proof read 5 D
F Assign full time graphicdesigners/find freelance graphic
designers
3 A
G Graphic Design 10 F
H Track article 5 E, G
I Design approval/change 5 G, H
J Test print 1 I
K Final output 22 J
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PERT Network
The following figure is the PERT network of all of our activities. As the previous list of works
shows the activities that has to be done to complete a week‘s production, this figure depicts the
proper sequence of the listed works. The critical paths are showing that those particular activities
will take longer time than others.
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The Production Chart
The purpose of the production chart is to
provide an overview of where each article
stands in the production process for an entire
issue.
Use of Production Chart:
1. The managing editor writes the article
names into the template at the beginning of the
cycle.
2.
The managing editor writes the date in
the appropriate box as each stage of the
process is completed.
3. If work on an article is falling behind,
the managing editor checks to see what is
happening.
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8.3 Research and Development
There will be editors and sub-editors with good experience in business related fields. Under their
guideline both full timer and freelancer will work. There will also be a head of graphic designers
and under his/her guideline freelancers and full timer will work.
After brainstorming a number of article ideas, designed a chart for the newspaper, and plugged
some of the ideas into a chart we will get it from planning to production. The newspaper will be
ready to send out for printing — by the deadline. There are two stages in this process — article
acquisition and production.
Article acquisition is the part of the process we will assign and collect articles. There will be a
system to assign, have already assigned, and have received. In addition, we will track the articles
that need to be rewritten, are in the process of being rewritten, or are ready to edit.
The production process will be a series of stages in which different steps are carried out at each
stage. In this way, responsibility for different stages can be assigned to different staff members
and deadlines can be given. As a result, the entire staff will be aware of the status of production
of any given article or newspaper issue.
The article acquisition process
Magazine Chart
1. The final deadline will be fixed.
2. The editors will give a deadline for the articles to be ready to edit.
3. Therefore, the writers‘ deadline for this issue will be before that, in order to allow for late
manuscripts, article approval, and rewrites.
Article status chart
1. Keep it in computer and update it daily.
2. Making it available to all of the editors through networked computers.
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3. Watch for missed deadlines; in which case there will be a need to contact authors.
4. Watch for articles that have been stayed for several weeks that no one has read or
approved.
5. Continue to modify the format to meet the needs.
8.4 Quality Assurance
To ensure the quality of the content and the product itself there will be several people working.
Editors will be the ones who will ensure the contents of the newspaper are up to the standard. On
the other hand, the head of graphic designers will ensure whether the printing is being done in
proper manner or not.
9. Human resource strategy and planning of “Money & Market”
9.1 Key issues
Human resource management deals with the availability of human resources and the efficiency
of the personnel placement. There are several functional areas being associated with effective
human resource management:-Job analysis, HR planning, Recruitment and selection, Human
resource development, Compensation and benefits and downsizing.
The main purpose of human resource management is to create and to keep the balance between
the firm‘s goals and the interest of the employees.
HR planning is the process of systematically reviewing human resource requirements to ensure
that the required numbers of employees with the required skills are available when needed
(Skript Human Resource Management, n.d.)
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9.2 Staff Requirements
Our staff requirement for the first year is as follows:-
Designation No Qualification Job responsibility
CEO 1 MBA graduate from IBA
with at least 10 years of
experience as a CEO in a
media firm is a must.
Strategic planning and control.
Senior and Junior
Journalists
5
and
10resp
ectiv
ely.
All employees working as
a journalist in our company
should possess a Masters inJournalism with a good
CGPA from a reputed
university. The candidate
must also be very fluent in
English and have excellent
knowledge about business.
The employees primary responsibility is to
gather and write about all the ongoing
business situations going aroundBangladesh. Besides they have to edit the
business news from other sources. Most
importantly these employees should also
be able to perform a good analysis of every
business situation.
Website
programmer/Desi
gner
1 Masters in Computer
Science preferably from
BUET. Candidates must beexpert in web
programming languages.
Create and maintain our webpage
efficiently.
Marketing
Executives
2 MBA from well reputed
university with major in
marketing. Experienced
Candidates are preferred.
Help the business level manager(CEO) in
marketing plan and execution.
General
Accountant
1 ACCA part 2 qualified
accountants with at least
3years of experience.
Responsible for creating all the necessary
accounting related documents.
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Human Resource
manager and 2
Trainee.
1+2 MBA from well reputed
university with major in
HRM. Experienced
Candidates are preferred;
The trainee has to be a
Fresh BBA(HR) graduate
from a reputed university.
Manager is responsible for HR planning
and strategy.
The trainee is hired on contract of 1 year.
She/he is responsible for assisting the
manager with HR planning. If she/he can
show good performance, job will be made
permanent.
Front-Desk
Executive
1 A female candidate who is
smart and good looking.
She must be fluent in
English. The candidate is preferable A ‗level passed.
Welcome guests and hold inquires via
phone.
Factory
Supervisors
5 BBA from a reputed
university with at least 2
years of experience as a
production level managers.
-Work in the factory. Supervise and
control the publishing of our tabloid.
Workers 15 No educational
qualification. Must be at
least 21 years of age.
Run the factory equipment used for
publishing magazines.
Drivers 3 Must possess driving
experience of at least 10
years.
Undertake long journeys.
Hard working.
Guards 5 We will recruit guards
from external sources like
any Security company.
Security purpose.
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Forecasted no. of Employees and their salary structure for the first 5 years(g=25%)
Designation Year 1 Year 2 Year 3 Year 4 Year 5
CEO(1) Annual Basic
salary=Tk.960,
000 Festival
bonus=Tk.10,0
00
Total annual
salary=970,000
New annual
basic
salary=Tk.1,2
00,000. New
Festival
bonus=Tk.12,
500
Total annual
salary=121250
0
New annual
basic
salary=Tk.
1500,000. New
Festival
bonus=Tk.15,6
25
Total annual
salary=1151562
5
New annual
basic salary=Tk..
1875000.New
Festival
bonus=Tk.19532
Total annual
salary=1894532
New annual
basic
salary=Tk..
2343750.New
Festival
bonus=24415
Total annual
salary=236816
5
Senior Journalists Number=2
Total annual
basic salary of
both=1,200,00
0 .Total
Festival bonus
for
both=Tk.20,00
0
Total annual
salary=12,020,
000
Number=2
Total annual
basic salary of
both=1,500,00
0 .Total
Festival bonus
for
both=Tk.25,00
0
Total annual
salary=152500
0
Number=2
Total annual
basic salary of
both=1,875,000
.Total Festival
bonus for
both=Tk.31250
Total annual
salary=1906250
No.=2,Total
annual basic
salary of
both=2,343,750.
Total Festival
bonus for
both=Tk39,063
Total annual
salary=382,813
No.=2,Total
annual basic
salary of
both=2929688
.Total Festival
bonus for
both=Tk48829
Total annual
salary=297851
6
Junior journalists Number=4,
Total annual
basic salary of
the
4=1,200,000
Festival bonus
for the 4
journalists=Tk.
20,000.
Number=4,
Total annual
basic salary of
the 4=1,500,00
Festival bonus
for the 4
journalists=Tk
.25,000
Number=4,
Total annual
basic salary of
the 4=1,875,00
0.Festival
bonus for the 4
journalists=Tk.
31,250
Number=4, Total
annual basic
salary of the
4=2,343,750.Fest
ival bonus for
the 4
journalists=Tk.3
9,063
Number=4,
Total annual
basic salary of
the
4=2,929,687.F
estival bonus
for the 4
journalists=Tk
.48,828
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Total annual
salary for the
junior
journalists=1,2
20,000
Total annual
salary for the
junior
journalists=1,5
25,000
Total annual
salary for the
junior
journalists=1,1,
906,250
Total annual
salary for the
junior
journalists=1,1,2,
382,813
Total annual
salary for the
junior
journalists=2,9
78,515
Website
programmer/Designer
Number=1.T\a
nnual basic
salary=300,000
. Festival
bonus=Tk.5,00
0.Total annual
salary=305,000
Number=1.T\a
nnual basic
salary=375,00
0. Festival
bonus=Tk625
0Total annual
salary=381,25
0
Number=1.T\an
nual basic
salary=375,000.
Festival
bonus=Tk.5,00
0.Total annual
salary=476562
Number=1.T\ann
ual basic
salary=585,937.
Festival
bonus=Tk.9766.
Total annualsalary=595703.
Number=1.T\a
nnual basic
salary=732422
Festival
bonus=Tk.122
07Total annual
salary=732422
Marketing Executives Two marketing
executives
each receiving
a salary of
Tk.25,000/mon
th. The totalannual salary
is subjected to
a tax rate of
15%. Festival
bonus=Tk.5,00
0.
Same as year
1. The total
annual salary
is subjected to
a tax rate of
15%. Festival bonus=Tk.5,0
00.
Upon good
performance
,Increase salary
to 30,000. The
total annual
salary issubjected to a
tax rate of 15%.
Festival
bonus=Tk.5,00
0.
Same as year 3.
The total annual
salary is
subjected to a tax
rate of 15%.
Festival bonus=Tk.5,000.
Hire 2 more
marketing
executives.
Increase salary
to Tk.40,000.
The totalannual salary
is subjected to
a tax rate of
25%.Festival
bonus =
Tk.15,000
General Accountant(1) Number=1.Tot
al annual basic
salary=600,000
. Festival
bonus=Tk.100
00
Total=610,00
Total=381,250 Total=476562.5 Total=595703 Total=595703
Human Resource Number=1.tota Total=612500 Total=765,625 Total=957,031 Total=119628
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manager l basic
salary=480,000
0. Festival
bonus=Tk.100
00
Total=490000
9
Management trainee Number=2
Total basic
salry annually
for
both=408,000
Total basic
salry annually
for
both=510,000
Total basic
salry annually
for
both=637,500
Total basic
salary annually
for
both=637,500.
Total basic
salary
annually for
both=637,500
Factory Supervisor Number=1
supervisors ,
total basic
salary=
Tk.240,000.
Festival
bonus=Tk.5,00
0.
Total salary
annualy=245,0
0
Total salary
annualy=306,2
50.
Total salary
annualy=306,25
0.
Total salary
annualy=382812
Total salary
annualy=4785
16
Gaurds(5),Drivers(3),
Workers(15).
Total basic
salary=276000
0. Festival
bonus=Tk.552,
000
Total salary
annualy for
all=3312000
Total salary
annualy for
all=4140000
Total salary
annualy for
all=5175000
Total salary
annualy for
all=6468750
Total salary
annualy for
all=8085937.5
Front Desk Executive Number=1.
Total basic
Total=302500 Total=375125 Total=472656 Total=590820
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salary=240,000
Bonus=2000
Total=242000
Recruitment :-
Recruitment is the process of attracting sufficient individuals just in time with appropriate
qualification and encouraging them to apply for jobs. (Skript Human Resource Management,
n.d.)
Identifying productive sources of applicants and using suitable recruitments methods are
essentials to maximize recruiting effectiveness and efficiency. (Skript Human Resource
Management, n.d.)
There are alternatives to recruiting such as outsourcing but we will not go for it.
Recruitment sources:-
Initially we go for some internal recruitment sources. Internal recruitment sources consist of a
recommendation from a current employee regarding a job applicant. As we are five partners
from a good background each of us will recruit some potential employees by referrals.
If or internal search is not enough we will go for external searches. These efforts include:-
Advertisements:-We will advertise the search for our white collar employees in newspaper such
as The Daily Star, The Independent and all other English newspapers in Bangladesh. Such
newspaper is mainly read by educated persons. So we hope to get a good feedback from it.
Universities and colleges:-Universities are an excellent source of potential employees.Universities offer opportunities for recruiting recent graduates. We will hire fresh MBA and
Journalism graduates from reputed universities like NSU,IBA and DU.
Cyberspace Recruiting:-Now-a-days this is very important form of recruiting. People are
spending more time over the internet. Many potential candidates rely on internet job sites for
searching for their desired jobs. Facebook is also an essential source for adverting our job
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vacancy over the internet. Therefore we will publish our vacant post over some reputed job
searching websites and also advertise via Facebook.
Selection:-
The purpose of the selection is to identify and employ the best qualified individuals.Selection is
the process of choosing from a group of applicants the individual best suited for a particular
position.
Figure:- The Selection Process. From:DeCenzo D.,Robins S.(2005). Fundamentals Of Human Resource
Management.
Initial
Completed
Em lo ment test
Comprehensive
Interview
Conditional job
offer
Background information ifrequired required
Medicalexamination(conditional
job offer made)
Permanent job offer
Reject Applicant
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9.3 Organizational Structure
The pyramid above shows three levels of managers in our company.
The bottom line managers are the operational level managers. Their main purpose is to mainly
execute strategy. In our business operational level managers are front desk officer, factory
supervisors, junior journalists, & website programmer are the operational level managers.
Functional level managers are responsible for implementing the strategy in their own individual
units. In our business the functional level managers are the Marketing executives, General
accountant, Website programmer and HR manager.
The business level managers are the CEO‘s/president of the company. They are responsible for
strategy formulation. We won‘t hire any CEO for our business. As all of our partners have
excellent knowledge of business, so we will be working as the president of the company.
1. Business Level managers(strategy formulation)2.Functional level (strategy implement by individual
units)
3. Operational level(execution)
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9.4 Compensation and benefits
Compensation is the total of all rewards which employees get in return for their services.
Direct financial compensation consists of the pay that a person receives in the form of wages,
salary, bonuses and commissions.
Indirect financial commissions are all financial rewards that are not included in direct
compensation. These are for example insurance and other programs for health,safety,security and
general welfare.
Nonfinancial compensation consists of the satisfaction that a person receives from the job itself
or from the psychological or physical environment in which the person works.
Figure:- The figure below illustrates the compensation and benefits process for our company.
Direct Financial compensation from our company includes wages, salaries and bonuses.
Indirect financial compensation from our company includes Health benefits.
Non-financial compensation in the job environment includes Appropriate Status, Comfortable
Working Conditions.
Com ensation
Financial Non-financial
Direct Indirect Job Environment
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10. Risk analysis
Risk analysis helps to identify and manage potential problems that could undermine a business
project(Mind tools,n.d.).
Risk is made up of two things: the probability of something going wrong, and the negative
consequences that will happen if it does(Mind tools,n.d.).
The foreseeable barriers are:-
Financial – There might be stock market fluctuations, business failure interest rate
changes that will disrupt or business.
Project – Though we have forecasted our budget, yet we may go over it.Tasks may be
taken too long to complete, or we may experience issues with product or service quality.
Operational – A disruption to supplies and operations, loss of access to essential assets,or
failure in distribution may result in disruption in our project.
Reputational – Potential threat from loss of customer or employee confidence, or damage
to market reputation.
The unforeseeable barriers are:-
Political – Bangladesh is a politically unstable country. So a new government in the next
election can result in a change in tax rate and foreign influence, which may undermine
our project.
Technical – Technology is advancing fast. So a new emerge of technology may make us
behind competition. Moreover,cybercrimes are increasing in Bangladesh. Acyber-attack
in our computer systems may result in huge damage.
Natural - from weather, natural disasters, or disease.
Procedural - from failures of accountability, internal systems and controls; or from fraud.
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Estimating risks:-
Once we have identified the risks we can calculate the estimated risk value by using the
following formula:-
Risk Value = Probability of Event x Cost of Event
Suppose the probability of high rate of strikes in year 2 is 0.70.And due to strikes the
estimated cost is Tk.1,000,000.
Therefore,
Risk value=0.70*1,000,000
=Tk.700,000
Managing risks:-
Once the risks are estimated, it is to be managed cost effectively. Sometimes it is sensible to
accept risks rather than using too many resources to eliminate it.
Risks can be managed in many ways. Some of the ways are mentioned below:-
According to the risk analysis, bring new resources to business if necessary.
If necessary reuse or deploy existing, improve existing methods and systems, changing
people's responsibilities, improving accountability and internal controls, , by improving
safety procedures or safety gear, or by adding a layer of security to your organization's IT
systems.
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11. Financial Management Plan
11.1 Assumptions:
Assumptions regarding sales and costs:
1) The growth of the sales was assumed to be 25% from the year 2013.
2) We will be selling 50000 units @ 50 taka selling price per year
3) We have assumed 7% inflation in the years 2013, 2014, 2015, 2016.
4) The office rent will increase by 50,000 taka from the year 2014.
5)
We will increase our promotional expenditure 10% in each year.
6)
The hawker‘s incentive will be increased 5000 taka each year.
7) Trade promotion and distribution costs will be increased to 25000taka and 35000 taka
respectively in each year.
8) The agents‘ commission will be increased to 5000 taka each year.
Assumption regarding depreciation:
1) Depreciation is calculated on a straight line basis.
2) Depreciable life for office equipments is 5 years.
3) Depreciable life for printing press is 8 years
4) Depreciable life for factory is 50 years
Assumption regarding loan:
1) The amount of loan that will be taken is 3,802,500 (which is excess of our financing)
2) The interest rate charged will be 12%.
3) The loan will redeem in 5 years
4) Loan will be amortized in a straight line basis.
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Assumption regarding initial investments:
1) Each partner will invest an amount of 8,000,000
2)
From the year 2014 the investors will receive some return based on the retained earnings.
11.2 The Financial Plan:
Our business will incur huge startup cost in the beginning for this reason it is better to safeguard
against all sorts of risks. The fixed assets like machinery and equipments will be the costliest and
we will make sure it is used effectively. Our main goal is to break even in at least 3 years. To
achieve this we will increase our sales to the maximum and we will promote our magazine
heavily in the beginning stages of the life cycle. Because we will incur huge costs in the
beginning year, we will not take a huge loan. We will take an optimal amount to finance our day
to day activities and we will keep some buffer cash at hand in case there is an emergency.
Though we do not have any eminent threat as our competitor in the local market; our main worry
is competitor threat in the international market, if we want to venture there. In order to sustain in
the long run we may strategically ally with other partners. We think that our ROA in the first two
years will not be very that attractive because of our staggering costs of assets; however in thelong run we are sure to be fruitful as our analysis shows that it is cash enriching investment
venture.
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11.3 The Forecasted income Statement
Money & Market pro forma Income Statement
for the year ended Dec 31st 2012, 2013, 2014, 2015 Items 2012 2013 2014 2015 20
Sales revenue:
*Magazine sales 2,500,000 3125000 3906250 4882813 61035
Advertisement revenue (print media) 17,684,000 22105000 27631250 34539062.5 4317382
Advertisement revenue (online media) 1,300,000 1625000 2031250 2539063 31738
*Mobile subscription revenue (20tk weekly) 10,400,000 13000000 16250000 20312500 253906
Total Revenue: 31,884,000 39855000 49818750 62273438 778417
Cost Of Goods Sold (6.27%): 2,000,000 2498909 3123636 3904545 48806
Direct labor (1.57%) 500,000 625,724 782,154 977,693 1,222,1Direct material (3.13%) 1,000,000 1,247,462 1,559,327 1,949,159 2,436,4
Overhead (1.57%) 500,000 625,724 782,154 977,693 1,222,1
Gross Profit: 29,884,000 37,356,092 46,695,114 58,368,893 72,961,1
Operating expenses:
Administrating/salaries expenses (26.8%) 8546500 10681140 13351425 16689281.3 2086160
Office rent (3.8%) 1200000 1514490 1893112.5 2366391 29579
Promotional expenditure (31.4%) 10,000,000 12514470 15643088 19553859 244423
Incentive to Hawker (.157%) 50,000 62,572 78,215 97,769 122,2
Utility Expenses (16.3%) 5,200,000 6496365 8120456.25 10150570 126882
Trade Promotion 500,000 500,000 525,000 550,000 575,0
Distribution Cost 2,500,000 2,535,000 2,570,000 2,605,000 2,640,0
Agent Commission 260,000 265,000 270,000 275,000 280,0
*Depreciation Exp (machinery, equip.) 2,075,000 2,075,000 2,075,000 2,075,000 2,075,0
*Depreciation Exp(factory) 200,000 200,000 200,000 200,000 200,0
Total operating expense: 30,531,500 36,844,037 44,726,297 54,562,871 66,842,3
profit/loss from operations: -647,500 512,054 1,968,818 3,806,022 6,118,7
Interest expense (Loan Payment) 1340261 1340261 1340261 1340261 13402
Net profit/loss before tax -1,987,761 -828,207 628,557 2,465,761 4,778,5
Tax expense (37.5%) 0 0 235709 924660 17919
Net Profit After Tax -1,987,761 -828,207 392,848 1,541,101 2,986,5
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Operating Profit Margin:
The percentage of sales revenue that gets 'returned' to the company as net profits after all the
related costs of the activity are deducted is called operating profit margin. In our case, we are
having a negative OPM in the first year. because we have incurred some huge startup costs. If we
see the OPM from 2014 we can see a positive growth in the future which tells us that we have
successfully increased sales while increasing our gross profit as well.
Net Profit along the years:
Net profit margin is mostly used for internal comparison. Individual businesses' operating and
financing arrangements vary so much that different entities are bound to have different levels of
expenditure, so that comparison of one with another can have little meaning. A low profit margin
indicates a low margin of safety, higher risk that a decline in sales will erase profits and result ina net loss, or a negative margin. Profit margin is an indicator of a company's pricing strategies
and how well it controls costs. Due to our beginning years losses we are having a negative NPM,
which is not uncommon for business that are at first stage. We have successfully increased our
NPM from year 2014 showing that we are controlling our costs more efficiently.
-3000000
-2000000
-1000000
0
1000000
2000000
3000000
4000000
2012 2013 2014 2015 2016
Net profit
Net profit
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11.4 Our Forecasted Cash Flow Statements Money & market pro forma cash flow statement
For the year ended 2012, 2013, 2014, 2015
2012 2013 2014 2015
cash flow from operating activities
net profit -12458761 -485335 12349027 33116099 6699
add: depreciation 2275000 2275000 2275000 2275000 227
accrued expenses 223188 55797 69746 87183 10
accounts payable 159420 39855 49819 62273 7
wages payable 207246 51812 64764 80955 10
less: changes in inventory -398,550 -99638 -124547 -155684 -19
less: changes in A/R -3,188,400 -797,100 -996,375 -1,245,469 -1,55
Net cash form operating act -13,180,857 1,040,391 13,687,434 34,220,359 67,80
cash flow from investing activities
investment in fixed asset -23,000,000 -500,000 -500,000 -500,000 -50
Net cash provided by investing activities -23,000,000 -500,000 -500,000 -500,000 -50
cash flow from financing activities 10554790 17727619 15419999 12426094 1753
net increase or decrease in cash -25,626,067 18,268,010 28,607,433 46,146,453 84,83
cash at beginning period 0 56000 58000 65000 6
cash at end of period -25,626,067 18,324,010 28,665,433 46,211,453 84,90
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Yearly Cash outflow/inflow:
In year 1 we have cash out flow, due to plans for company growth or due to a planned increase in
receivables or inventories. In year 2, cash inflow is seen. Cash inflow rose gradually in year 3,4
and 5.In year 5 we see a healthy cash inflow-which shows positive trend. Positive trends in cash
flow may encourage owners to consider long-term financing as an aid to growth and increase
their comfort level concerning the company‘s ability to generate cash for repayment. Strong cash
flow will also make it easier to acquire financing and to negotiate with lenders from a position ofstrength.
-40,000,000
-20,000,000
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
2012 2013 2014 2015 2016
Cash flow
Cash flow
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11.5 Our Forecasted Balance Sheet
Money & market proforma balance sheet
for the year ended Dec 31st 2012, 2013, 2014, 2015, 2016
ASSETS 2012 2013 2014 2015 2016
Fixed Assets:
Factory (31.4%) 10,000,000 12,514,470 15,643,088 19,553,859 24,442,324
machinery (22%) 7000000 8768100 10960125 13700156.25 17125195.31
office equipment(18.81) 6000000 7496726 9370907 11713634 14642042
Less: accumulated depreciation 2,275,000 2,275,000 2,275,000 2,275,000 2,275,000
Total fixed assets 20,725,000 26,504,296 33,699,119 42,692,649 53,934,562
Current Assets:
Cash & cash equivalents (.175%) 56000 69746 87183 108979 136223
Accounts Receivables (10%) 3188400 3985500 4981875 6227344 7784180
Inventories (1.25%) 398550 498188 622734 778418 973022
total current assets: 3642950 4553434 5691792 7114740 8893425
Total Assets: 24,367,950 31,057,729 39,390,912 49,807,389 62,827,987
Liabilities & Owners equity: 1033739 1756896.25 2727656.313 4162681.641 5506778
current liabilities:A/P (.5%) 159420 199275 249094 311367 389209
Accrued expenses (.7%) 223188 278985 348731 435914 544893
Wages payable (.65%) 207246 259058 323822 404777 505972
Other liabilities 2019357 2059220 2042489 1800000 1946574
Total current Liabilities: 2609211 2796538 2964136 2952059 3386647
Long term Liabilities:
loan payable 3203949 2533572 1782750 941829 1345
Notes payable
Total Liabilities: 5813160 5330110 4746886 3893888 3387992
Owner's Equity:Share holder capital 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000
investment 10554790 17727619 15419999 12426094 17532448
retained earnings 0 0 11,224,027 25,487,407 33,908,892
Total Equity: 18,554,790 25,727,619 34,644,026 45,913,501 59,441,340
Total liabilities and owner's equity: 24,367,950 31,057,729 39,390,912 49,807,389 62,829,332
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Net Working Capital:
NWC is a measure of both a company's efficiency and its short-term financial health. Positive
working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash, accounts receivable and inventory). In our case we
see a gradual growth of NWC which means that our business is highly solvent and aggressive in
the future.
-40,000,000
-20,000,000
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
2012 2013 2014 2015 2016
Cash flow
Cash flow
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11.6 Capital Budgeting Techniques for Feasibility
For any investment project the capital budgeting techniques ensures that the project we are doing
is feasible or not. We have calculated NPV, IRR and Profitability Index (PI) to make sure of our
feasibility.
WACC calculation:
WACC calculation:
2012 2013 2014 2015 2016
weight of debt(Wd) 0.13148209 0.081576 0.045258 0.018909 2.141E-05
cost of debt (Kd) 0.418315335 0.529001 0.751794 1.423041 996.47658
(1-T) 0.65 0.65 0.65 0.65 0.65
weight of equity (Wc) 0.86851791 0.918424 0.954742 0.981091 0.9999786
*cost of equity (Kc) 0.1485 0.1555 0.1625 0.1695 0.1765
WACC 0.164725543 0.170865 0.177262 0.183786 0.1903619
Average WACC value 18%
*cost of equity calculation
Kc=Rf+ B(Rm-Rf) Rf=.075 Rm=.18 B=.70
Kc 0.1485 0.1555 0.1625 0.1695 0.1765
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Free Cash flow Calculation:
FCF calculation:
2012 2013 2014 2015 20
EBIT 30,531,500 36,844,037 44,726,297 54,562,871 66,842,3
(1-.375) 0.625 0.625 0.625 0.625 0.6
EBIT(1-T) 19082187.5 23027523.34 27953935.43 34101794.29 41776461
add: Depreciation 2,275,000 2,275,000 2,275,000 2,275,000 2,275,0
less: capital
expenditure:
-23,000,000 -500,000 -500,000 -500,000 -500,0
less:changes in working
capital
0 -723157.25 -970760.0625 -1435025.328 -1344096
FCF -1,642,813 24,079,366 28,758,175 34,441,769 42,207,3
NPV calculation:
The difference between the present value of cash inflows and the present value of cash outflows.
NPV is used in capital budgeting to analyze the profitability of an investment or project. If the
NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the
project should probably be rejected because cash flows will also be negative
Initial Investment = 23,000,000 WACC: 18%
FCF1 -1,642,813
FCF2 24,079,366
FCF3 28,758,175
FCF4 34,441,769
FCF5 42,207,365
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PV of all cash flows are calculated as: 69,618,235
Therefore, NPV = PV of all cash flows- Initial Investment
= 69,618,235 – 23,000,000
= 46,618,235
Since the NPV is positive so the investment should be undertaken.
IRR calculation:
The discount rate often used in capital budgeting that makes the net present value of all cash
flows from a particular project equal to zero. IRR when greater than the opportunity cost of
investment (WACC), then the project should be undertaken.
Here, NPV = 0 = Ʃ cash flows/(1-IRR)n - initial cash outflow
Using EXCEL we have found out that the IRR is equal to 64%.
Since IRR 64%) is greater that WACC (18%) so the project is acceptable.
Profitability Index calculation:It is an important measure in determining the profitability of an investment.
PI = 69,618,235 / 23,000,000
= 3.02
Since PI is greater than 1, so we should accept this project
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Economic Value Added (EVA):
A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis).
The formula for calculating EVA is as follows:
= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
Economic value added(EVA)
2012 2013 2014 2015 2016
NOPAT -1987761 -828207 392847.9 1541101 2986572.9
invested capital 10554790 17727619 15419999 12426094 17532448
WACC 0.164725543 0.170865 0.177262 0.183786 0.1903619
EVA -3726405 -3857235 -2340526 -742637 -350937
Market Value Added (MVA):
A calculation that shows the difference between the market value of a company and the capital
contributed by investors (both bondholders and shareholders) is called MVA. In other words, it is
the sum of all capital claims held against the company plus the market value of debt and equity.
Calculated as: MVA = (Market Value of LT Debt + Market Value of Equity) - Invested Capital
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Breakeven Analysis:
An analysis to determine the point at which revenue received equals the costs associated with
receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the
amount that revenues exceed the break-even point. This is the amount that revenues can fall
while still staying above the break-even point.
This graph was formed using a break even calculator. (http://fast4cast.com/break-even-
calculator.aspx)
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12. Long Term Sustainability
Corporate sustainability is a business approach that creates long-term consumer and employee
value by not only creating a "green" strategy aimed towards the natural environment, but also
taking into consideration every dimension of how a business operates in the social, cultural, and
economic environment. Also formulating strategies to build a company that fosters longevity
through transparency and proper employee development.
Corporate sustainability is an evolution on more traditional phrases describing ethical corporate
practice. Phrases such as corporate social responsibility (CSR) or corporate citizenship continue
to be used but are increasingly superseded by the broader term, corporate sustainability. Unlike
the other phrases that focus on "added-on" policies, corporate sustainability describes business
practices built around social and environmental considerations. (Wikipedia, 2012)
Strategic Principles For Corporate Sustainable Development:
Transparency:
Deals with the idea that by having an engaging and open environment within the company as
well as the community will improve performance and increase profits. It is an open culture that
promotes employee involvement in regards to the innovation and creative processes. Reaching
out to the community creates a much bigger team, is extremely cheap, and provides evaluation
from all angles. We are looking inward and realizing changes that must be made to fulfill
environment needs such as energy efficiency, limiting product waste, and designing innovative
products.
Employee Development
People are the most important renewable resource and therefore, are the strongest asset to our
organization. A strong development program could be the underlying factor for a company's
success or failure. Employees are the concrete foundation for the company and must be
thoroughly analyzed and evaluated to tap into their true motivations and desires. Employees must
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work towards improvement rather than perfection. Programs should be implemented that rewards
star performers, fosters the creative learning process, and provides comprehensive training and
evaluating.
Resource Efficiency
We must adapt to this rapidly changing environment by being prepared to change and implement
new creative ideas related to sustainability. We should not throw away old products and
materials, but rather be prepared with upgraded technology that can transform the product. New
solutions that improve recycling and waste redirecting can ultimately reduce costs and increase
profits.
13. CONCLUSION
Money & Market is one of the few business related newspapers in Bangladesh with its facilities
in Ganderia. We will produce 50,000 copies of magazine in every week initially. To meet our
project we will have Tk. 40,000,000 as our capital. Which was contributed by five partners with
Tk. 80,00,000 each. However, due to the purchase of factory and machinery we will incur loss in
the first two years of our commencement but we will eventually overcome this loss from the
third year as we will increase our revenue by 30%. we will tend to grab 30% of the market share
within two years of our commencing. Our startup-marketing budget is Tk. 64,00,000. Our ROA
ratio shows -55%, -1.9%, 41%, 90%, and 144%. In the first year we purchased machinery and
factory premises so the figure shows a drastic negative figure. However, this trends to a positive
figure in the following year. Our ROE ratio is -67%, -2.3%, 48%, 99%, and 158% in the
respective year. ROE ratio suggested that we could not generate profit in the first year and
second from the money shareholders have invested. However, from the third year we were able
to earn satisfactory profit. Our ROI ratio is -57%, -2.02%, 71%, 154%, and 253% respectively.
The ROI ratio suggested that the efficiency of our investment in the first year was not
satisfactory. However, we could overcome it in the following years. Since, we have very high
ROI from the third year we have considered this project to be successful.
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