Introduction Fin 234567

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EXECUTIVE SUMMARY

We are launching our product a cigarette named Elegant in Karachi an urban metro city

of Pakistan. The idea behind our product is non smoking factor of our cigarette. The

finely tuned promotion of Elegant will assure long-lasting profitable customer

relationships. Elegants aim is to provide greater satisfaction and value added aspect thanits competitors in Karachi like Benson, Gold Leaf and Marlboro. These local and some

foreign brands are having strong loyalty and image among people. Penetrating and

getting a deserved slice will be challenging for Elegant. That is why we have planned toapply most of the marketing tactics like campaigns, TV and Radio advertisements,

Internet advertisement, free sampling, seminars and awareness programs, selling teams

directly communicating to target audiences and market.Further in the report a proper distribution channel is comprehensively described about the

company. A Feasibility report is also enclosed so to show the estimated equity standing

and profitability of the company.

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INTRODUCTION:This project is to expose us the traits and techniques of marketing a product or a service.How as future Marketers we will Market our product, use proper intermediaries and

promotional techniques to make our product the next wonder.

Mission Statement:

We shall continue to deliver best value to our Customers and employees by providing

superior offerings to our customers, maintaining our high financial performance andimproving our standing as a good corporate citizen of Pakistan by aligning our direction

in long-term sustainable fashion.

METHODOLOGY

Following procedures would be used by our group to complete this product.

1. Market Research:

To execute the project, First what we have to do is a comprehensive Market Research,keeping in mind the Micro and Macro environments, analyze the product need (or create

the need if so), select a target market, and make the product available to those target

market by using proper distribution channels. Besides the customer point of view, we alsohave to analyze the competitors and threats to our product.

2. SWOT Analysis:

A comprehensive S.W.O.T analysis would be conducted on the product. We will allocate

the Strength, Eliminate the Weaknesses, avail the opportunities and Eradicate the threatsof our product as so our product could domestically be accepted.

3. Target Market Analysis:

We will analyze the target market through the Market Research. Although (for the

proposal sake) our product would be launched in Karachi first, then it would be promoted

in all corners of the Country. There would not be any age restrictions but the limitallocated by the government to use nicotine (Cigarette) would be affianced. No

segmentations would be made in gender regards.

4. Analysis of Marketing Mix:

A comprehensive analysis would be carried out on the Marketing Mix. All the major

aspects of marketing mix would be discussed thoroughly and presented in the samemanner.

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Marketing Mix

Product

Production

The cigarette would be produced under supervision of PBT a subsidiary of BritishAmerican Tobacco. Most of the raw material would be obtained by PBT as well.

Reference the production costing.

AppearanceElegant Smokeless Cigarette comes in the shape and size of a cigarette. It is pure white in

color, with initials and logo drawn upon it. It would not be a paper coated cigarette ratherplastic coated one.

PackagingElegant would come in a very attractive package, It would be sleek and smart, Black in

color with a little red and orange blend in between. It would be of a shape and size of a

classical cigarette pack with initials, logo, company information and product contactnumber on it. The Packaging would be done in contract with Plastechnique located in

Landhi Site area.

CharacteristicsThe characteristics of Elegant are: -

1. Environment Friendly: The Elegant Brands best feature is that it is

environmental friendly which we dont see in other smoking brands. It keeps

environment secure and safe.

2. Premium Quality : There is no compromise in the quality of Elegant because it isthe quality for which our product exist and it is our first priority

3. Smokeless: As we mentioned earlier that our brand is environment friendly, the

main reason for this is that our cigarette is smokeless which does not release any

hazardous substance that is dangerous for the environment.

4. Stylish and Unique: The look and packaging of Elegant is quite stylish and

unique that it differentiates from other brands in the market. Therefore it gives a

separate brand identity and image because of its unique style.

5. Health Oriented: Elegant is 80% healthier then a cigarette because it does not

have the chemical Carbon monoxide which is substance while the process of

lighting a cigarette saves from many diseases i.e., - lung cancer, cardiovascular

disease etc. Therefore a consumer wont be having a concern about health while

using this brand as compare to other tobacco related brands.

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Market Research

In Pakistan we have focused Karachi where ELEGANT will be marketed, but views on

national level are also given importance as much as our business needed.

Our direct competitors are nicotine gums and cigarettes, cigarettes are produced locally

by Pakistan Tobacco, Khyber Tobacco & Lakson Tobacco while some cigarettes brands

and nicotine gums are imported also. Here from upper classes and middle classes peoplespend their 20% income on smoking cigarettes & sheesha. And 96% of smokers use

cigarettes while other 4% uses other narcotics like sheesha and nicotine gums.

Market share Income spending Social class loyalty

Cigarettes 92% 20% All strong

Nicotine gums 4% 4% Upper weak

Sheesha 4% 15% Upper, middle weak

Competitors:(1)Cigarettes. (2) Nicotine gums

In Karachi Cigarette smokers are not easily switched to other brands, because of taste

specially, to some extent cost also play a role, according to an estimate 68% percentsmokers never switch, while other 32% switch due to price or unavailability. Which

means that our competitors could give us tough time in the Market. Thats why, we have

a better taste and price to attract our target market so that they can switch and take upon abetter and more healthier alternative.

Pricing & Costing:Our competitors (Pak. & Lakson Tobacco) cigarettes are having local labor at low wage,

from tobacco to cigarette filters cotton are purchased locally, packaging is done

internally, they got wholesalers and retailers as primary customers. Some haveoutsourced packaging work like Khyber tobacco does. The labor is working at nominal

salary of 3000 per month in interior areas where our major competitors are

manufacturing. Upper management costs them from Rs. 35000 to 75000. For outsourcingour Packaging we have enough finance up to Millions (yearly Budget), we also are self-

sufficient in producing, we manage manufacturing to printing process with feasible cost,

we are investing in industrial area Landhi, for managing factors of production we will

employ skillful employees at moderate salaries.

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Market

share

Operating

cost

Promotion

Expenses

Price per

unit

Distribution

cost

Raw

material

PakistanTobacco

33% Above 20Million.

Above 5Million

BetweenPKR 1 - 5

N/A Above 5Million

Lakson Tobacco 47%

Above 20

Million.

Above 5

Million

Between

PKR 1 - 7

N/A Above 5

Million

Foreign

cigarettes 22%

Above 10

Million.

Above 5

Million

Between

PKR 5 -15

N/A N/A

Nicotine gum

(vs. cigarettes) 2%

Below 8

Million

N/A Above

PKR 10per unit

N/A N/A

Consumption & Consumer Behavior:Cigarette consumption is almost equal in posh and middle-level areas or slightly higher

and lower sometimes, while it is comparatively high in underprivileged areas. Smokersare strong loyal to their brands having personality like achievers and strugglers and

smokes one regular bases. People in Karachi like smoking when they are outside home,

the brands are positioned to young and middle-aged people. Young and middle-aged

people contribute 85% to market share of cigarettes. Their advertisement includeoutrageous and adventure themes. Smokers in Karachi like smoking any time any where

whenever they want.

Vacant room in market:

The advantage we can take here is to introduce and shift public towards a better idea ofnon smoking, health conscious and innocent cigarette with same pleasure and relief. Herewe have to focus on image of elegant and to shift peoples mind towards entirely different

idea of having a cigarette in formal gathering, or having it instead of nicotine gum.

Changing minds in Karachi is not a big issue if your positioning is smart.We have to remind and influence public abundantly and on continuous basis as according

to a research 80% of billboards advertisement is forgotten by individual at the end of day,

with these strong competitors which already have loyal customers we have to struggle by

our campaigns based on our strategies widespread through all advertisement tools.

Target audience Health

ConsciousElegant Parents, professionals, students, Young,

elderly, medicated.(Both Male & Female).High

Pak. Tobacco Young, elderly Low

Local cigarettes Young, elderly Low

Foreign cigarettes Young, elderly Low

Nicotine gum Young, elderly Highest

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Marketing tactics in market:Elegant might remain in introduction stage for long time, during this period we shouldhave effective strategies and resources to communicate our brand. We are considering to

promote Elegant by using tactics like providing stands, pamphlets containing information

about harm from smoking and its solution, assistants on big retailers which will guide

customers, selling teams which will communicate about the product in variousexhibitions, conducing seminars and workshops in different universities and

organizations about the harmful effects of smoking and guide medical sector towards

health conscious product and providing free samples.

Advertisement tools Tactics

Elegant

Billboard, TV-ads,

pamphlets, Mobile ads,

hoardings

Free sampling, selling teams,

Customer assistants, awareness

camps and Seminars.

Pak. Tobacco Traditional Traditional

Lakson Tobacco Traditional Traditional

Foreign cigarettes Traditional Traditional

Elegant tactics are far better than its rivals as they are market leader now they dont feelthese are necessary, but we initiate by these tactics.

Threats in market:The biggest threat for us is political and economic situations, for these contingencies we

have planned by sufficient finance and legal support. Government policies and political

situations some times becomes unavoidable suffering in Pakistan through which weshould pass and that can be done only by means of following govt. laws at any cost and

baring unfavorable with help of insurance and other financing activities. While handling

stakeholders like public and environment is also vital, for which we have great concernswhich are assured by our latest ISO certification and which are clear through our fine

manner of conducting our business activities.

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Micro Environmental

Analysis

Micro Environmental Factors

The internal factors close to the product and that will have a direct impact on the product

strategy. These factors include:

Customer

Elegant cigarette survive on the basis of health, taste, providing friendly environment &

cost benefits for their customers. Failure to do so will result in a failed business strategy.

Employees

Employing the correct staff and keeping these staff motivated is an essential part of the

strategic planning process of an organization. Training and development plays anessential role particular in service and production sector marketing in-order to gaina competitive edge. This is one of our pioneer techniques in increasing production and

sales.

Suppliers

The supplier is Pakistan Tobacco a subsidiary of British American Tobacco. Besides this

we will also use the services of Plastechnique ltd. for our Packaging.

Media

Though we believe it will be hard for Elegant to capture market Thats why it will be

spending a lot on advertisement or awareness Consumer programmers on TV like theGEO etc., the local channels with an organizing public shows for making them awareabout the reality of our product and how its different from other products a wider and

more direct audience can also have a very powerful and positive impact towards our

product.

Competitors

The competitors of the smokeless cigarettes are nicotine chewing gums and the normalcigarettes. Although Shesha, Tobacco and pipe can be the competitors as well but our

primary competitor is the portable smoking and Nicotine products

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Macro Environmental

Analysis

Micro Environmental Factors

The external factors that change the Micro Environment and that will have an indirectimpact on the product strategy. These factors include:

Economy

One of the most influential factor. Economic Instability and Inflation are the majorfactors in the up rise and downfall of prices of any product; we will also keep in vision

the economical condition while determining the price of Elegant.

Government

The Government is the authority body we will be answerable to. The government wouldsetup policies and regulations which we have to follow; Different Taxes and Dues would

be charged so our price will also be affected by the government policies.

Technological

If the Technology changes with in 5 years then we will have to change all of our front

line Production Machinery. This would cause us heavy loss

Cultural

The product Elegant is a narcotic product that is not accepted in our culture. Further morethe cigarette is more part of the youth culture and it is difficult to change that culture and

penetrate the smokeless cigarette into this culture.

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List of CompetitorsBrand Name Nature Brands Product

Benson Smok e Cigarette

Marlboro Smoke Cigarette

L&M Smoke Cigarette

Dunhill Smoke Cigarette

Gold Leaf Smoke Cigarette

Fire Break Nicotine Chewing

Gum

Fe.rO Pipe

BACCRAT Cigar

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SWOT ANALYSIS

Elegant Vs. CompetitorsStrengths Weakness

Monopoly in the Market.

No direct competitor.

80% less side effects.

Cheapest as it can be.

Premium Quality.

No area restrictions. No 2nd hand smoke.

Environment Friendly.

Less awareness.

Initial stage.

Distribution channel setup.

(Less outlets)

Taste not like cigarette.

Less production. Limited Market Segmentation.

Confusion as a medical product.

Opportunities Threats New undiscovered Market,

absolute advantage. (being the

1st one advantage)

More profit and higher market

share. (estimate)

More chances of growth.

No Govt. Tobacco Tax

Advertisement on TV.

Indirect competitor, i.e., the

cigarette (huge Market)

High taxes.

Unstable City conditions

(political and economical)

Difficult to switch a cigarette

user. (loyal)

Bad attitude of society towards

narcotic.

Nicotine chewing gum, a

healthier alternative.


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Analytical SWOT analysis*

S. no.Key Factors Weighting

Smokeless

CigaretteCigarette

Nicotine

Chewing gum

1. Distribution (popularity) 10 5 10 2

2. Target Market

(segmentation)10 8 10 5

3. Health 10 9 2 10

4. Revolutionary (Life

Changing)10 10 7 6

5. Cost 10 10 9 8

6. Environment Friendly. 10 10 4 8

7. Advertisement 10 10 2 10

8. Taste 10 6 10 2

9. Culture (adaptability) 10 7 8 3

10. Loyalty 10 8 10 4

Totals 100 83 72 58

We have done a SWOT analysis in an Innovative form; the different factors that

might attract or repel customers are discussed and further are analyzed regarding

the product Elegant and its competitors.

We came up with a fruitful result that our product would do well in the market

after proper marketing and promotional activities.

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Target market analysis

Our potential customers will be male smokers (25-55) and female smokers (20-40)which are comparatively less but can increase our sales reasonably as they will tend to a

more health conscious cigarette. Since the place is Karachi which contain dozens of

marketing and sales opportunities for us, allocating Elegant to our desired marketingspots in Karachi will be very important. Our product is in introduction stage, we would

be looking for place where thousands of people will see Elegant daily such as big

retailers like and well known busy markets.

Malls

Macro

D-Mart

Aghas

Naheed Super Market

Imtiaz Stores

Markets

Bhadurabad

Tariq road

Hadri Market

Zamzama Market

Hasan Square

Geographic:Pakistans urban metro city Karachi where Elegant will be introduced and available.

Karachi is having amalgamation of different social classes and lifestyles, our target areconsumers from upper middle, middle and lower middle class. The density of population

in our desired areas in Karachi is urban. The climate is not cold, but also not severe hot,

and people like cigarettes here, size of the city is above 16,000,000 The value addedaspect which gives us edge on smoke-cigarettes is that Elegants consumer will not feel

guilty anywhere, and can consume it any time as it dont have that bothering smell and

smoke, a gentle man ready to join a meeting can use it just five minutes before meeting,

even it could be used in a gathering of friends, moreover one can use it on public non-Smoking places also. Thus its suitable and strongly attracts professionals, students and

sociable people who want cigarette but no guilt. For those people of upper and middle

classes of Karachi we have chosen areas like Gulistan, Gulshan, Defence, and NorthNazimabad with upper class urban density.

Country Pakistan

City Karachi

City size 16,000,000

Density Urban

Climate Hot

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Demographics:Our targets are males ranging from 25 to 55 years and females 20 to 40 years. As femalesare more sensitive to their health therefore our plan is to attract them by Elegants smoke-

less feature. Thats why females which have a comparatively less ratio of cigarette usage

in Pakistan are also included as our target. There is not much consideration to family size,

but our Target Customer will be more from males having families, as they are moreconscious to their health. From upper to middle class, Elegants consumers are likely to

have income from 20,000 and above. Elegant have considered to improving self-image,

which is convincingly present in educated people belonging to upper and middle classes.About religion and races our consumers can be from any, it also have room to attract non-

smokers who are worried just because of injurious smoke. The targeted generation is

generation Y and nationality can be any.

Age 20-45

Gender Male, Female

Family size ---Family Life cycle Married (preferred)

Occupation Professionals, students, managers, officials, operatives

Education College and above

Religion ---

Race ---

Generation Generation Y

Nationality ---

Income (Rs.) 20,000 and above

Psychographic:Elegants consumer will be from upper middle, middle and lower middle class. Life style

of our product consumer should be achievers. We have designed our product to be

suitable for authoritative and sociable personalities. The advantage we have on ourcompetitors is our fine image and product with care, quality and convenience, the social

class we have targeted take into account their looks, personality, lifestyle, character and

self-importance realistically when they buy and seek utility from a product. Considering

this behavior towards product, we have shaped Elegant as a product which ultimatelyprovides a functional and self-expressive benefit.

Social class Upper middle, middle and lower middle

Lifestyle Avant-garde and AchieversPersonality Authoritative, sociable.

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Behavioral:Our product will be for regular users, it is shaped according to desire of an individualwhich arises in timely manner. Benefits of Elegant which gave it edge on smoke-

cigarettes are quality and convenience, as a person not need to repel an odor after using

which bothers smokers in other cases often, as well as 2 nd hand smoke problem is also

solved here as Elegant does not expel any smoke which can bother neighboring personWe want our customers to be loyal and positive with us, so as our product image appeals

to them. The smoke less features of Elegant promises to capture positive attitude of not

only actual consumers but of their neighboring also, which shows that people will beinformed soon and loyalty will be strong.

Occasions Through out

Benefits Quality, convenience

User status Regular user or Loyal

User rates Heavy user

Loyalty status Strong

Readiness stage InformedAttitude towards product Positive

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Promotion

Promotion basically involves disseminating information about a product, product line,

brand, or company. It is one of the four key aspects of the marketing mix. So, the

promotion of Elegant will be divided in sub-parts that are: -

1) Above the line promotion

2) Below the line promotion

First we will implement the:

1. Above the line promotion: - The tools that we are going to use to promote ourbrand Elegant are: -

i. Audio / Video Media: Because it will cover the wide range of target audience asTelevisions can be found at every home. The TV channels that we will aim for

promotion are the news channel such Geo News, ARY one world, Dawn News etc aswell the entertainment channels such as Geo TV, Hum TV, Indus vision, ARY digital,HBO etc because they will cover our target market that is from age 28-50. So, in this

way the awareness about Elegant will be created in the minds of consumers.

ii. Print Media: This will be our second tool that we will employ to promote Elegant. Inthe print media we have the option of newspapers where we can place an add of our

brand to create awareness among the consumers and our target Market. The

newspapers in which we will advertise will be Dawn, Jung Akhbar, and The newsSecondly; we will advertise Elegant in different magazines in order to create wide

promotional campaign of our brand. The magazines in which we will advertise our

brand will be Herald, News line, spider, the Cricketer, the Economist, Financial times,and cosmopolitan.

iii. Internet: The internet will also be a very good to tool to advertise Elegant because

lots of people are having an access to the internet these days. The sites in which wecan promote our brand will be Pakistani entertainment sites, news sites and sports

sites and the international sites as well. Therefore, in this way our brand will get much

more awareness in the minds of consumers.

iv. Billboards: The billboards are even a better option for promoting a brand as we all

normally can see lots of billboards across Karachi. We can place different print

Advertisement of Elegant on billboards in various parts of the city, so that consumersare going to have a look on them and they will get to know about our brand.

All the tools that we have mentioned in the above line promotion will be enforced whenwe are going to pay the advertisement agencies to place our ads in these tools that we

have mentioned. We will contact various advertising agencies like Art Techniques, Brand

COM, Innovative Communications etc, and check out the costs, benefits, features foreach of the advertising agency and select any one best within them which will satisfy our

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needs that we will be looking for an advertising agency. We will try to run both

informative and persuasive advertisements for our brand so that it will satisfy the needs

of consumers as far as their need for advertisement is concerned.

Then comes the other form of promotion which will be implemented is:

1. Below the line promotion: The tools that we are going to use in this form ofpromotion after our brand Elegant will be well-established in the market are:

i. Sponsorship: We will sponsor our brand Elegant in various events whether it be any

music event, sports event, or any other event that will take place in the country. In this

way our brand will gain much more popularity that will help to enhance even higherimage in the market which will be beneficial for us as more consumers will be

attracted towards Elegant.

ii. Public Relation: In this scenario, we can have seminars, workshops arranged in

various universities, colleges, hotels etc so that we can create more awareness aboutour brand and inform them about its features, benefits etc. We can tell them about its

positive features such as they are environment friendly, not containing any hazardoussubstance etc which will not only commercialize our brand in the market but will also

enforce a good image in the minds of consumers.

iii. Sales Promotion: After achieving a good market share, we will use sales

promotion to further penetrate our product. There are various forms of sales

promotion techniques through which we can promote our products for e.g.

- Price deal in which we can temporarily reduce the price of our brand to create

more demand.- Free Coupons that are widely used in sales promotions.- Lucky Draws, Special Offers are all the types of sales promotion techniques that

we can use after our brand Elegant has been established in the market which helps

to reinforce the image of a brand amongst the target market.

So, these are they ways through which we will promote our brand through below the line

promotion as it will give us an opportunity to have a publicity about our brand with thehelp of these tools so that the our consumers will be constantly reminded about our brand

no matter how much it gets old and how well it gets established in the cigarette industry.

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Distribution

For a value delivery network Elegant will manage the whole community of suppliers,

resellers, and complementary who must work effectively together to make life easier for

Elegants customers.

Our criteria are not limited to building relationships with customers but also with keysuppliers and resellers in the companys supply chain. Naturally there are no such up

stream partners for us as we are importing the product, so our focus is on down stream

partners like wholesalers and retailers.Our aim is to deliver superior value to customers by managing our supply chain.

After the Elegant leaves our door, the dealers takeover. They are out there making sure

that when the product is delivered, its in the condition its supposed to be in. We designdistribution channels to make Elegant available to customers in different ways, as Elegant

is going to be launched in Karachi we will be designing the most convenient channel for

distribution.

The channel levelsThe channel level basically, are the layers of marketing intermediaries that will be

performing work to bring the product and its ownership closer to buyers that will beinvolving different middlemen, wholesalers and suppliers that will be delivering elegant

at the each corner of targeted areas like- Makro, D-mart, Mumtaz and well known busy

markets like Traiq Road, Hedri market, Zamzama. The channel levels are as follows

Direct Marketing Channel

Indirect Marketing Channel

Indirect Channel:-We prefer the indirect marketing channel for distributing Elegant it suits to the kind of product that we are offering in market of Karachi, indirect market channel has

intermediaries these intermediaries can be used to gain results from their greater

efficiency in making goods available to target markets like- Traiq Road, Hedri market,Zamzama. The intermediaries perform it through their contacts, experience,

specialization and scale of operation. The use of intermediaries is beneficial for us and

the consumer no doubt.

The indirect channel can provide economies it saves time because we will be only

concerned with the intermediaries not with customers; the intermediaries will meet the

demand of the population of Karachi specially, the target consumers from upper middle,

middle and lower middle class.

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Direct Marketing Channel is not Suitable:-Our product is of such nature that it cant be distributed directly to consumer thats whythis direct marketing channel will not be suitable for Elegant because it has no

intermediary level (suppliers and resellers), means it will be sold directly to consumers

due to which Elegant cant manage value delivery network. The direct marketing channel

can not reduce the number of channel transaction because it has no distributor it dealsdirectly to consumers

Factors of Distribution:-The factor that helps to finalize the process of distribution is physical distribution

The physical distribution:-Physical distribution refers to transporting or making the product available to the

intermediaries and distributors, the choice of transportation carries will be affecting our

product price, delivery performance, and the condition of goods when they arrive in thehands final consumers all will affect customer satisfaction, we will choose the best mode

for distribution that is trucks, thats why we have decided to contract with differentcarriages that will distribute Elegant to retailers or at the most convenient places as it mayreach easily to our final users.

Stores and Markets

Malls Markets

Makro Bhadurabad

D-Mart Tariq road

Pak Towers Hadri Market

Naheed Super Market Zamzama Market

Aghas Hasan Square

Forum (ebco) Do Talwar (Two Talwar)Millennium Mall CSD Market

Dolmen Mall Delton Mall

Shaaz Super Market Boat Baisin

Imtiaz Super Stores P.E.C.H.S Block 6 Market

Times Medico Defence Market

Hotels and Clubs

Hotels Clubs

Pearl Continental Creek Club

Marriot Karachi gym Khana

Sheraton Sindh Club

Avari Karachi Club

Carlton Marina Club

Beach Luxury DHA Golf Club

Mehran Hotel DHA Club

Grand Mercure Beach View

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PricingAs per the target Market, the price at which a pack of Elegant (containing 24 cigarettes)would be available for PKR 150/-, the cigarette would be individually available at a cost

of PKR 8/-. The product would not have Dynamic pricing, fixed prices would be allotted

all over the city.

Fixed Cost analysisAs Elegant is a product that is being produced in Pakistan, Elegant would have a higher

fixed cost because of the added machinery costs and the Factory cost.

Current Cost AnalysisElegant used raw material to be produced as a final product, there are different raw

material as direct current cost and Over head charges as indirect current cost.

Over head Expenses Yearly

Factor Cost Units /numbers Year Cost ProductionUnits per unitcost Unit perPack Per packcost

Front LineWage(PKR 7000Monthly)

84000 35 2940000 2400000 1.23 23 28.175

SupervisorWage(PKR 15000Monthly)

180000 10 1800000 2400000 0.75 24 18

Electricity Expenses 100000 12 1000000 2400000 0.50 24 12

Installment of Loan 255000 2400000 0.11 24 2.55

Total Over Head 364000 6195000 2.48 58.175

Yearly Costing Direct Cost (Cost in PKR)

Raw Material

PKRperunit

Units tobe bought

Cost peryear

(PKR)Numberof Units

Per unitCost

(PKR)Units per

Pack

Cost perBox

(PKR)

Tobacco Dark Air Cured(P Virginia (DAC). (PBT) 24 24000 576000 2400000 0.24 24 5.76

Plastic Sheets (610 x610mm) (500/sheet) 20 4800 96000 2400000 0.04 24 0.96

filters synthetic cottonFiber (Plastechnique) 0.2 2400000 480000 2400000 0.20 24 4.8

Packaging(Plastechnique) 5 100000 500000

100000pks - 1 5

Printing on Cigarette 0.15 2400000 360000 2400000 0.15 24 3.6

20

Yearly Costing Fixed (Cost in PKR)

Fixed Asset Total CostYears to

DepreciateCost/ year

PKR Units

Cost /unit

(PKR)Units /pack

Cost/Pack(PK

R)

Donglong J -160 PlasticMoldingMachine 5000000 20 250000 2400000 0.10 24 2.5

Donglong F -1820pCigarette Filler/ Filter attach 12000000 30 400000 2400000 0.17 24 4

HP high Defjet DJ - 2600

(Productionline) 1500000 10 150000 2400000 0.06 24 1.5

Building 18000000 50 360000 2400000 0.15 24 3.6

Total FixedCost 800000 0.33 8


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Total Variable Cost 2012000 0.63 20.12

Total CostTotal cost is basically the cost of a production including all of its fixed and Direct Currentcost. The costing will not include the over head expenses as they will go to the income

statement as then deducted over there. As we can see that the total reduction cost of aPack of Elegant is only PKR 36.46 but the mater of fact is when over head expenses isadded to the cost leaving it some what above PKR. 80. So to be on the safer hand we

have priced our product for PKR 150.

Calculation of Total Cost of Product (Value in PKR)

Total per year (2400000 Pcs) Per Pack Cost (24 Pcs)Per unit

Cost

FactorsVariableCost

FixedCost

TotalCost

VariableCost

FixedCost

TotalCost

TotalCost

Tobacco Nicotine 576000 576000 6 6 0.25

Plastic Sheets 96000 96000 0.96 0.96 0.04Filters 480000 480000 4 4 0.17

Packaging 500000 500000 5 5 0.00

Printing 360000 360000 6 6 0.25

Plastic Molding Machine 250000 250000 2.5 2.5 0.10

Cigarette Filler and FilterAttacher Machine 400000 400000 5 5 0.21

Production Line Printer 150000 150000 2 2 0.08

Building 360000 360000 3 3 1.08

Total Cost 2012000 1160000 3172000 21.96 12.5 34.46 2.19

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General pricing Approach

The pricing approach we will be adopting is Cost-Based Pricing, also known as CostLeadership in Management and Absolute Advantage in Economics and Finance. We will

place our price as our main objective and priority because of the following reasons

Being First one in the market advantage. Target market Middle, Upper Middle and Upper Class.

A health oriented product

An environmental friendly product.

High Government Taxes in the Market.

Increasing Variable cost.

Economic and Political instability.

No government restriction of narcotics and Smoking Cigarette.

Break Even AnalysisWe presently are selling at a quantity which is tremendously higher then the break evenpoint so to capture and create demand in the Market, as well as to attain the First movers

Advantage. Afterwards, we will increase the production and sales even more.

800000 = 7000 units per year.

150-22.12

Final Costing

Estimated

Factors YearlyTotal Cost Per PackTotal Cost Per UnitTotal Cost

Tobacco Nicotine 576000 6 0.25

Plastic Sheets 96000 0.96 0.04

Filters 480000 4 0.17

Packaging 500000 5 0.00

Printing 360000 6 0.25

Plastic Molding Machine 250000 2.5 0.10

Cigarette Filler and Filter Attaching Machine 400000 5 0.21

Production Line Printer 150000 2 0.08

Building 360000 3 1.08

Labor 2700000 22.5 0.94

Utility and Electricity 1000000 10 0.41Total Cost 7540000 68.96* 3.54*

So one pack of Cigarette costs us exactly PKR 69.96, where as one cigarette costs

us PKR 3.54.

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Profit and Loss Statement

Estimated

Profit and Loss Statements2008

PKR

Net Sales 19,200,000.00

Cost of goods sold 3,172,000.00

Gross Profit 16,028,000.00

Administrative Expences 2,250,000.00

Promotional Activities 3,540,000.00

Electricity Expences 1,000,000.00

Packaging 500,000.00Total Expences 7,290,000.00

Profit Before Interest and Taxation 8,738,000.00

Interest Expence 255,000.00

Profit Before Interest and Taxation 8,483,000.00

Provision for taxation (40%) 3,393,200.00

Profit after taxation 5,089,800.00

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Balance Sheet

Estimated

BALANCE SHEETAs at June 30, 2008

2008

PKR

Assets Non Current Assets

Office Building 15,000,000

Donglong J - 160 Plastic Molding 5,000,000

Donglong F - 1820p Filling and Filter 12,000,000

HP high Def jet DJ - 2600 (product print) 1,500,000

Current Assets

Tobacco Dark Air Cured (P Virginia (DAC). (PBT) 576,000

Plastic Sheets (610 x 610mm) (500/sheet) 96,000

filters synthetic cotton Fiber (Plastechnique) 480,000

Packaging (Plastechnique) 700,000

Printing on Cigarette 360,000

Cash and Bank Balances 1,000,000

Total Assets 35,560,000

Liabilities Current Liabilities

Short term Loan for Operating Activities 2,712,000

Interest Payable 500,000

Non - Current Liabilities

Long term loan for Financing Activities 10,000,000

Share owners Equity

Share Capital 10,000,000Capital Reserve 7,758,200

Net Profit 5,089,800

Total Equity 35,560,000

Introduction Fin 234567

Documents

Transcript of Introduction Fin 234567