Marketing plan 1

Luis Herrera

March 26, 2015

BUS485

Prof. Arnold

Business Plan for Skyson Industries

Executive Summary

The purpose of this report is to present a business plan for Skyson Industries’ initial market entry into the marching percussion arena. Recognizing that this is a market with many unmet needs, we have discovered the opportunity to offer innovative and beautifully designed products that meet those needs within the market. This initial market entry will begin with a line of innovative practice pads designed to meet the essential practice needs of consumers that are not currently being met by other practice pad manufacturers. With our strong sense of vision, knowledge of the percussive arts arena, and innovative design, we expect to be top contenders in the percussion equipment industry. Included in this report is a detailed analysis of the environment, a marketing plan that addresses our organizations strengths, weaknesses, opportunities, and threats, an organizational plan that discusses the structure of our organization and the strategies involved with organizational structure, an operational plan that discusses the logistics involved with our company, a financial plan, an assessment of critical risks, and an overview of leadership strategy. After reading this business plan, the reader should have a strong understanding the environmental situation, the opportunities at hand, and the obstacles and risks the organization anticipates. Readers should also understand the business strategies selected for initial market entry and how they will affect the organization. They should also have a good idea of where the company hopes to be in the near future, and how the leadership team intends on getting it there.

Overview

Context:

The world of marching percussion is a realm full of talent and passion. The individuals involved with the sport are incredibly artistic and have innovative mindsets that work toward optimal productivity and efficiency. As the marching percussion activity continues to develop,

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we believe that the equipment involved in the sport should also develop, reflecting the goals and attributes of the artists who use it. Skyson Industries is a percussion hardware company that believes in challenging the traditional take on marching percussion equipment, introducing a new line of innovative, convenient equipment to meet the needs of aspiring musicians. We will be entering the percussion equipment industry competing with other percussion equipment firms, specifically those who manufacture and distribute practice drum pads.

Mission/Vision:

Being that our target market consists of visionary and goal oriented individuals, we recognize the importance of effective mission and vision statements that are directed toward the success of the firm in order to most effectively meet the needs of our consumers.

Mission Statement: To provide passionate musicians with the innovative, high quality tools necessary for advancement in the percussive arts arena.

Vision Statement: Our vision is to be the number one distributor of percussion equipment in the United States while keeping our focus on meeting the needs of our consumers.

Competitive Advantage:

Our competitive advantage is our product design. We understand the importance of time and efficiency to modern percussionists and our beautifully designed products will eliminate the clutter of heavy traditional equipment that has been used for decades with little modification. Recognizing that the marching percussion activity involves fees and mainly consists of young adults between the ages of 15-24, we will also strive to keep our prices competitive with those of long time percussion equipment distributors.

Business Opportunity:

The marching percussion equipment industry has long been dominated by few firms. As a result, the marching percussion community has become complacent with the lack of technological and design advances in the past several years. Despite the facts that the industry is dominated by few competitors and barriers to entry are relatively high, we see great opportunity considering our competitive advantage. Recognizing that the activity is growing and developing rapidly, Skyson industries sees the opportunity to penetrate the U.S. marching percussion market beginning with a line of innovative, convenient, and high-quality percussion practice pads.


Traditional practice pads are bulky and are created for the single purpose of giving percussionists a surface to play on. Our design provides percussionists with all of the essentials needed for a successful practice environment including a built in sheet music clip, a built in metronome, and a convenient carrying case for travel purposes. Skyson industries intends to take full advantage of this opportunity to enter the growing marching percussion equipment market.

Environmental Scan

Five Forces:

Seeing as how this is a market with great potential for growth and success, competition among the industry is projected to be relatively high.

The threat of new entrants for the percussion equipment industry is low considering the high barriers to entry and the fact that the industry has long been dominated by few firms. Because predominant firms such as Pearl and Vic Firth have been competing in the industry for so long they have had the opportunity to maximize production efficiency and develop economies of scale. Capital requirements are also relatively high because start up costs would include the acquisition of new plants, manufacturing equipment, and labor costs. Product differentiation, however, is an area in which the competition lacks, offering extremely similar products that are easy to manufacture. Distribution channels are not much of a threat because the best opportunity for product exposure and sales would be merchant booths at percussion events and competitions which are not costly and easy to attain. The area of greatest concern is customer loyalty as it applies to switching costs. Customers in the industry have long used the predominant firms’ equipment and have developed some strong relationships. Many of the ensembles in the marching percussion arena have even gone so far as to attain sponsorships from these firms which can sometimes provide them with discounted or free merchandise. We expect the competition to retaliate aggressively with new pricing strategies to retain their loyal customers. We also anticipate the possibility of the competition imitating our products.

In order to better understand the percussion equipment industry and the industries involved with it, it is necessary to examine the bargaining power of suppliers and buyers. The industry of the suppliers of raw material needed for the percussion equipment industry is competitive but not very concentrated. Most of the raw material needed for production includes polymers such as plastic, rubber, and some metals. The raw materials needed are substitutable goods that can be attained from a number of companies. Thus, the bargaining power of suppliers does not pose a high threat. The bargaining power of buyers, on the other hand, is high because ensembles tend to buy in bulk from one company. The majority these firms’ revenues come from


ensemble sales in which loyalty plays a large role. However, the switching cost of buyers is low, which means they could easily decide to buy from another company.

Because percussion equipment is specifically created to fit the instruments, substitutable goods do not exist outside the industry. Thus, the threat of substitutable goods is very small.

As previously mentioned, competition is expected to increase as we enter the industry. Competitive rivalry is an area of concern because there are several strong competitors in the industry that are equally balanced. The low switching costs for buyers also increase rivalry among competitors because it can force them to use low prices to compete for customers. Overall rivalry among competitors is relatively high.

Global:

If market penetration is successful in the United States, Skyson industries has every intention of going international. The mode of entry we would choose to penetrate international markets would be exporting. While exporting our equipment will involve high costs, it will not be as expensive as licensing, acquisition, or new subsidiaries. Exporting will mean that we will not have much control over operations overseas, but considering that we are a product offering organization, having high control is not completely necessary.

Our first choice for global expansion would be China. Our decision is based upon the fact that the percussive arts population has been growing rapidly in China over the last several years. Cultural considerations for expansion to China include the growing percussion culture and strong sense of discipline that have potential to contribute to the acceptance and success of our products. While China’s economy is definitely to be taken into consideration, we recognize that our products are not so expensive as to be threatened by China’s economic state or that of the consumers. We do recognize that there will be a language barrier to overcome and in order to address it, special packaging considerations will have to be taken. While this may increase packaging costs, we do believe it is necessary for success in this market.

Outlook, Forecast, Trends:

Scanning: Early signals of cultural trends include an increase in the Chinese percussive arts arena, a considerable amount of Chinese percussionists traveling to the U.S. to join American Ensembles, rapid innovation in Chinese technology, and few domestic Chinese competitors in the percussion equipment industry.


Monitoring: An increase in the Chinese percussive arts arena means a growing market with more potential customers. Chinese percussionists traveling to the U.S. means that having strong brand recognition in the U.S. can aid our performance in China. Innovation in Chinese technology means that there is a definite possibility of Chinese competitors entering the industry.

Forecasting: We predict a wide market with many potential customers that recognize our brand and are willing to be on the front end of our innovative products. We anticipate product imitation, but do not believe any strong competitors will enter the Chinese domestic market.

Assessing: While global expansion does appear to be a great opportunity, we have concluded that the timing is not right for expansion in the near future. It is more important to develop a strong brand within the domestic U.S. market that we believe will aid our success in the Chinese market.

Marketing Plan

Target Market:

In order to be successful in the percussion equipment industry, it is essential to identify and cater to our target market.

To begin identifying our target market we must first identify the consumer needs that we are attempting to address. The marching percussion activity is extremely competitive, requiring individuals to audition for ensembles and compete with each other for an opportunity to then compete with other ensembles. Such competition requires many hours of effective and efficient practice. A successful practice session for the average percussionist requires four things: Drum sticks/mallets, a drum pad/surface to play on, a stand or similar item to place music sheets on, and a metronome. These items are illustrated below.

Traditionally, such a practice session requires sufficient space for all of these items and as a result, the ideal practice environment is not easily transportable. Skyson industries’ new line of innovative practice pads addresses the need of percussionists to easily take their practice


environment on-the-go without dealing with the clutter of the many tools needed for the traditional practice environment.

Now that we have identified what needs are being addressed, we can take a closer look at the individuals that have those needs. There are several characteristics of our target market that can be identified easily. Obviously, the market we are trying to reach consists of musicians, more specifically percussionists, within the marching percussion arena. While percussive arts have been gaining popularity in China, for the purpose of our initial market entry we are considering our target market to be within the United States. Considering that the marching percussion sport is not typically introduced to percussion students until high school and that the age limit for competing in marching percussion circuits is 22, we have identified the ideal age range of our target market to be 16-21. Being that the age range is quite low and that these young individuals are required to pay fees to participate, we recognize that family income level will require much consideration within our marketing plan. As of now, we are considering our target market to be in the middle class in regards to income. While the marching percussion activity has historically been male dominated, we recognize that over the last several years there has been a large increase in female participation and as a result we will sustain from marketing to a specific gender. Overall, our target market can be described as middle class individuals between the ages of 16 and 21 who live in the United States and are active percussionists within the marching percussion arena.

Market Size and Market Share Estimate

Identifying market size and share is important so that we know our market potential and can develop strategies for market entry. While the U.S. marching percussion arena consists of several circuits, the most popular and well established is Winter Guard International (WGI). WGI hosts many regional competitions around the U.S. and the Sport of the Arts World Championships in Dayton, Ohio every year. Most groups who compete in other circuits eventually end up competing in WGI competitions at some point. According to the WGI web site there were over 48,000 participants in the 2014 World Championships alone (this does not include the many groups that did not qualify to compete at the world level). If we were to include ensembles from other circuits and non-qualifying ensembles, we would arrive at a rough estimate of 150,000 individuals within our target market. This is a generous amount considering that the nature of our product is very specific.

While an exact market share cannot be calculated until after market entry, there are a few factors that we can consider to estimate market share. There are three leading producers and


distributors of drum pads in the percussion equipment industry. These three are Vic Firth, Offworld Percussion, and Pro-mark. If we were to split them equally among the market along with another share of “other competitors” each would have a market share of 25%. Competing with these firms at a market entry level will be difficult, but if everything goes to plan in terms of promotion and sales we estimate a market share of approximately 15% for the first year. While it may be optimistic, we believe that the fact that we are addressing customer needs will help us arrive at this point.

SWOT (use two by two table):

STRENGTHS Product differentiation from

competitors Unique and innovative product design Well constructed marketing plan for

market entry Knowledgeable workforce with

experience in the marching percussion arena

Pending patents for product design and components

WEAKNESSES Lack of funds for initial investment

required for market entry Potentially high production costs No established distribution channels Lack of manufacturing plants Narrow initial product line

OPPORTUNITIES Increasing population in U.S. marching

percussion arena. Increasing popularity in percussive arts

in China Lack of product innovation within

percussion equipment industry Unfulfilled customer needs for mobile

practice setup Complacency among domestic

competitors

THREATS Lack of brand name recognition Strong sense of customer loyalty to

established competitors High likelihood of product imitation High bargaining power of consumers Low bargaining power of us from raw

materials manufacturers

Four Ps/Four Is:

Product


As previously mentioned, Skyson industries intends to enter the market with a line of innovative, high quality practice pads that meet the need of our target market to have a portable practice environment. Our innovative design eliminates the clutter of a traditional practice environment and provides our consumers with a versatile, minimalist practice pad. Our design provides percussionists with all of the essentials needed for a successful practice environment. The practice pad itself will provide percussionists a surface to practice on. Two industrial strength clips will be built in toward the head of the pad in order to provide a place for music sheets. A micro metronome will be conveniently built in along the outer rim with only two buttons and a headphone jack so as not take up so much space. The bottom of the drum pad will contain two sleek industrial strength legs that fold out to stabilize the drum pad and give it more height. Every pad will come with a convenient traveling case made out of polyester material which includes a carrying strap and a sleeve for drumsticks. The product will come in a cardboard box with a sleek design on the front consisting of the Skyson logo and a single front image of the pad. The back of the box will contain images of certain product features and an attention getting phrase that is yet to be determined. The product will be offered in three different colors for the shell (White, Black, and Grey) and will all have a hard rubber surface.

Place

In regards to place, there are several factors that we need to consider including physical location, demographics, and distribution. After close examination of the marching percussive arts arena we discovered that the most popular and best developed circuit for marching percussion activity is Winter Guard International. While it is an international circuit, the great majority of its competitions and its world championships are held in the United States. After some examination of the circuit and other mentionable percussion circuits (Southern California Percussion Alliance, Percussive Arts Society, and Drum Corps International) we discovered that the state that seems to have the most marching percussion activity is California. Therefore it makes sense to focus most of our distribution (at least for the initial market entry) in California. We will begin our market entry with direct distribution, selling from our own web site and renting out booths at competitions and events to sell our drum pads at. We believe this is the best way to reach our target market. If popularity grows as expected we will consider distributing to retailers such as music stores and other web sites.

Price

When determining the price of our drum pads we decided to use a cost-plus pricing strategy. Considering the fact that our target market is young and isn’t expected to have a high income, we expect price to be a sensitive factor. Therefore, choosing a price that is just slightly above the break-even point for manufacturing seems to be a good way to appeal to our target


market while still making a profit. Considering that the average MSRP of a practice pad is about $45, (data collected from http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=snare+drum+practice+pad) the average price of a music stand is about $20, (http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=music+stand&rh=i%3Aaps%2Ck%3Amusic+stand) and the average price of a basic metronome is $20, (http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=metronome&rh=i%3Aaps%2Ck%3Ametronome) the overall value that one would be getting out of our practice pads is roughly $85. If we estimate production costs to be about $55 per unit (relatively high due to the technology costs required to input a micro metronome and additional costs of a carrying case) we would arrive at a sales price and MSRP $80. This price is only $20 higher that of the current leading drum pad in market “The Invader” by Offworld Percussion which does not include any of the innovative features that our line does (data collected from http://www.amazon.com/Offworld-Percussion-Invader-V3RED-Practice/dp/B007BN6IEG/ref=sr_1_2?ie=UTF8&qid=1424240487&sr=8-2&keywords=invader+pad). At this price, we believe that our target market will feel that they are getting a good value and that our competitors will find it tough to imitate and compete.

Promotion

As far as promotion goes, we would like to bring as much attention to our drum pads as possible for the initial product launch and market entry. This means having to sacrifice some units to increase popularity in sales. One of the most popular ideas for promotion includes contests on social media in which percussionists may submit videos for review. The contestant most impressive video as decided by a panel of judges will receive a free unit of choice. This contest can be held every week for the first few months of market entry. Another promotion strategy in mind is an e-drawing in which contestants “share” our product and website on social media in exchange for one entry in the e-drawing to win a unit. The most costly, but perhaps most rewarding, promotion strategy would be to create a sponsorship contract with one of the most popular and successful ensembles in the WGI unit and provide each member of the ensemble with a discounted or free unit with the condition that they use it generously in public and on social media to create awareness. All of these promotion strategies would greatly benefit Skyson industries and our entry into the percussion equipment industry.


http://www.amazon.com/Offworld-Percussion-Invader-V3RED-Practice/dp/B007BN6IEG/ref=sr_1_2?ie=UTF8&qid=1424240487&sr=8-2&keywords=invader+pad

http://www.amazon.com/Offworld-Percussion-Invader-V3RED-Practice/dp/B007BN6IEG/ref=sr_1_2?ie=UTF8&qid=1424240487&sr=8-2&keywords=invader+pad

http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=metronome&rh=i%3Aaps%2Ck%3Ametronome

http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=metronome&rh=i%3Aaps%2Ck%3Ametronome

http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=music+stand&rh=i%3Aaps%2Ck%3Amusic+stand

http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=music+stand&rh=i%3Aaps%2Ck%3Amusic+stand

http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=snare+drum+practice+pad

http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=snare+drum+practice+pad

Organizational Plan

Management Team (include organization chart):

Seeing as how the success of this product launch and ultimately the market entry for the firm depends on performance in several different areas, it is important to establish a clear organizational structure. Being that the firm is in its initial growth phase, the organizational structure as of now is a simple structure consisting of the owner/manager and four staff members. The owner/manager will be responsible for making important decisions regarding production, distribution, marketing, and sales. The four staff will consist of three sales people and an assistant manager. The sales people will be responsible for attending events and competitions at which they can set up booths and sell our merchandise. A sample of this simple organizational part is provided below.

As time progresses and the organization grows, eventually we would like to restructure into a functional structure. This structure would include a CEO, a production manager, a marketing manager, a sales manager, and a research and development (R&D) manager. The production manager would ensure that the manufacturing process is as efficient as possible. The marketing manager would handle all aspects of marketing including promotion and advertising. The sales manager would be in charge of upholding sales standards and improving sales performance. The research and development manager would be in charge of ongoing operations to discover consumer needs and development of technology to meet those needs. These managers would be responsible for their organizational areas and the employees within them. Ultimately, these managers would also report to the CEO. An organizational chart for this model is presented as follows.


Manager/owner

Assn. Manager

Sales Rep Sales Rep Sales Rep

McKinsey 7s Model (describe each):

Shared Values: Skyson Industries believes in constantly challenging the status quo in order to keep up with the evolving needs of our consumers. We believe that it is the power of music and the bond of musicianship that guides our passionate organizational cultre. We are strong advocates of the marching percussion arena and seek to provide percussionists with the proper tools for advancement; the tools they deserve.

Structure: Ideally, the structure of the organization will be a functional structure consisting of senior management such as a CEO, a production manager, a marketing manager, a sales manager, and a distribution manager. These managers are each responsible for a team of employees and ultimately report to the CEO. Decision making is centralized, however, certain decisions and responsibilities would be delegated to the management team. Communication throughout the structure would be encouraged to promote innovative ideas and a comfortable work place.

Systems: Systems would be strategically designed in order to make sure day to day operations are running smoothly and time is being used effectively. The CEO will examine the financial state of the firm daily. Managers would ensure that their team is operating according to our standards every day and report to the CEO.

Strategy: Skyson Industries’ vision is to be the number one distributor of percussion equipment in the United States while keeping our focus on meeting the needs of our consumers. We plan to do this by creating positive brand awareness as a result of consistently meeting consumer needs through innovative product design, competitive pricing, and effective promotion. Brand awareness will aid in building strong distribution channels and relationships with retailers all over the country.


Sales Team

Sales Manager

R&D Manager

Production Manager

Marketing Manager

CEO

Marketing Team

Production Team

R&D Team

Style: Because it is one of our goals to constantly keep up with the evolving needs of our consumers, we strive to build a creative and innovative environment in which our employees and our consumers can communicate their ideas freely and effectively. Communication between management is open and managers are encouraged to cooperate rather than compete. We are strong advocates of camaraderie and teamwork.

Staff: Our staff consists of passionate individuals who share our appreciation of the percussive arts. The majority of our employees have firsthand experience in the marching percussion arena. Our fun and passionate organizational culture along with generous benefits would be factors for attracting potential staff. All employees undergo comprehensive training which focuses on teamwork and building strong relationships with their team members. Team incentives will be provided as rewards for hard work and loyalty.

Skills: Placing a strong emphasis on meeting consumer needs is very important to us. Our sales associates will be skillfully trained to interact with our consumers in a friendly and approachable manner. The fact that the majority of our sales representatives have experience in the marching percussion arena provides an advantage because consumers can more easily relate to them. Another skill we would like to emphasize is our research and development. Bringing design and technical advances to an industry that has long been complacent with product quality will give us a competitive edge and a positive brand association in the minds of our consumers.

Business Level Strategy/Corporate Level Strategy:

The business levels strategy of Skyson Industries can be described as a focused differentiation strategy. We chose this strategy because the nature of our business opportunity is to provide consumers with products that meet needs that are not being met. This means providing consumers with products that are superior and different than those of the competition. This is a focused strategy because the scope of our target market is generally narrow. We hope to provide value with this strategy by emphasizing high quality standards, rewarding innovation and productivity, quickly and effectively responding to consumer input, and constantly seeking new ways to meet consumer needs through effective research and product development. This business strategy aligns well with our corporate level strategy which is a low diversification high value creating strategy. We state that our corporate level strategy is low in diversification because the vision for our organization lies solely within the percussion equipment industry. We do not have any desire to branch out and create a conglomeration of entities. Doing so would result in a stray from our mission and vision for the organization. However, our corporate level strategy is described as high value creating because if we were to slightly diversify within the industry


sometime in the future it would be for value creating reasons such as vertical integration for increased market power, or creation of economies of scope through shared resources.

Operational Plan

Supply Chain:

The supply chain for our new line of drum pads will involve gathering raw materials/materials from material suppliers, manufacturing, assembling and packaging, and distribution to the final consumer. We will collect raw materials needed for manufacturing from one major supplier of materials such as plastic and hard rubber. The acquiring of finished goods will involve receiving micro metronomes from an electronics hardware company and receiving steel clips and legs from a steel manufacturer. Also involved with receiving finished goods from suppliers will be the boxes that the pads will be packaged in; these will come from another company that specializes in box design and creation. Manufacturing will take place in house at our manufacturing plant. Manufacturing would include the shell of the drum pad, which will be made from the raw plastic and a mold, and the hard rubber playing surface which would be melted and cooled onto the shell. Assembly includes gathering all the little finished goods materials acquired from other companies and placing them into our shell. The steel clips would be attached to the head of the drum pad in order to hold music, and the steel legs would be attached to the bottom of the drum pad to work as an elevating mechanism. The micro metronomes would be securely inserted to the side of the shell and the product would then be ready for packaging. Packaging would involve taking the finished drum pad and placing it into the boxes that were created by the boxing company. The final product would be distributed to the final consumers by our own sales team using company owned vehicles.

Our supply chain will create value by establishing strong and positive relationships with our suppliers and assuring that we receive supplies from them that meet our standards. We will also monitor our ongoing operations to ensure that our manufacturing plant is operating effectively and efficiently. In order to create value for the consumer we will employ a highly skilled and personable sales team that can create positive relationships with our consumers and effectively receive feedback.

Partners/Suppliers:


Our main partners and suppliers will include those mentioned in the previous section of the operational plan. In order to assure high quality and top level performance, we will partner with top rated companies in their respective industries that are also located relatively near our manufacturing plant in Southern California. This will include Schuff Steel for our metal clips and legs, California Quality Plastics for the plastic and rubber, Roland for the micro metronome, and The Yebo Group for our packaging needs. Our goal is to maintain a strong relationship with a good flow of communication that both parties can benefit from. In the event that one or some of these partnerships fails, our contingency plan is to keep moving forward with the next best company in their industry. When our organization begins to expand, we may look at different potential partners that operate on a larger scale.

Optimize Organizational Effectiveness:

Several activities and practices will be put into place in order to optimize organizational effectiveness. First off, we will continuously work toward efficient productivity in the manufacturing plant assuring that all aspects are meeting production standards. Our strong relationships with suppliers will aid in optimizing efficiency in regards to inbound supplies. The sales team will be well trained and incentivized to increase sales. The management team will be responsible for many tasks in regards to their respective teams. Quality control programs will be created to ensure efficient and effective practices.

Primary and Support Activities:

Primary activities for our organization include: inbound logistics, operations, outbound logistics, marketing and sales, and service. Inbound logistics deal with getting all the supplies that we need for production, assembly, and packaging from the suppliers. In order to create value in regards to inbound logistics we will locate our facilities in a location central to those of our suppliers. This will hopefully minimize delivery costs and decrease delivery time. The primary activity of operations deals with the manufacturing and assembly of the drum pads. Quality control will play a main role in creating value through operations. Marketing in sales includes the four P’s that were discussed earlier in the marketing plan. Our well trained sales team will aid in creating value through the primary activity of marketing and sales. Outbound logistics includes the delivery of our final product to the consumer. By using company owned vehicles to transport our finished goods, we will ensure on-time delivery and minimize costs. Our sales team and management team will be responsible for taking care of service both internally and externally. As the company expands we may choose to establish a human resources department.

Support activities for Skyson Industries include: procurement, technological development, human resource management, and firm infrastructure. Procurement involves all the


activities included in obtaining the supplies needed to manufacture our product. In order to create value through procurement we will communicate well with our suppliers and keep our finances in order to assure we have enough money for the items. Technological development will be a strong focus in our support activities considering we are using a differentiation strategy in regards to our products. In order stay on the front end of the competition and use innovation as our competitive advantage, we will encourage all employees to submit ideas for research and product development. We will also heavily invest in our research and development department as we continue to expand. Human resource management and firm infrastructure will be overseen by management for the time being. As time passes and firm evolves, we will develop a human resourced department. Value will be created by assuring an accessible flow of communication and ongoing evaluation of the organization and the industry.

Financial Plan

Pro Forma:

Pro-Forma Income StatementSkyson Industries For 2015 through 2017

(all numbers in $000) REVENUE 2015 2016 2017 Gross sales $1,800 $2,400 $2,760 Less sales returns and allowances 180 240 276 Net Sales $1,620 $2,160 $2,484 COST OF SALES Beginning inventory $0 $28 $41

Plus goods purchased / manufactured 1,265 1,663 1,936

Total Goods Available $1,265 $1,691 $1,977 Less ending inventory 28 41 66 Total Cost of Goods Sold $1,238 $1,650 $1,911 Gross Profit (Loss) $383 $511 $573


OPERATING EXPENSES Selling Salaries and wages $92 $110 $121 Commissions 14 $17 $18 Advertising 30 $36 $40 Depreciation 6 $7 $8 Other 5 $6 $7 Total Selling Expenses $147 $176 $194 General/Administrative Salaries and wages $80 $96 $106 Employee benefits 18 $22 $24 Payroll taxes 10 $12 $13 Insurance 16 $19 $21 Rent 40 $48 $53 Utilities 10 $12 $13 Depreciation & amortization 6 $7 $8 Office supplies 7 $8 $9 Travel & entertainment 9 $11 $12 Postage 7 $8 $9 Equipment maintenance & rental 30 $36 $40 Interest 10 $12 $13 Furniture & equipment 16 $19 $21 Total General/Administrative Expenses $259 $311 $342 Total Operating Expenses $406 $487 $536 Net Income Before Taxes ($24) $23 $37 Taxes on income 8 13 Net Income After Taxes ($24) $15 $25 Extraordinary gain or loss $0 $0 $0 Income tax on extraordinary gain 0 0 0 NET INCOME (LOSS) ($24) $15 $25

Calculations:


The above table presents the official pro-forma income statement for Skyson industries 2015-2017. Sales were calculated projections were calculated using the estimated market share for each of the years provided. The equation is as follows: 150,000 (estimated market size) x .15 (15% of market) x 80 (selling price). Projections for the second and third years were done substituting the initial market share estimate with estimated market share for the following two years (2nd year- 20% market, 3rd year 23% market). Sales returns and allowances were estimated to be around 10% of sales. Goods purchased/manufactured were calculated by multiplying the units manufactured for the period by the unit variable cost [Goods manufactured in year 1 (23,000) x unit variable cost (55)]. All other information was sampled and gathered from other companies in the industry and scaled down as a percentage of sales.

The Pro-forma income statement shows a net loss for the first year. This is mostly due to the high costs involved with starting up. The loss can also be attributed to insufficient sales to break-even due to a lack of brand awareness. The Pro-forma for the following years takes into consideration the growth of the organization. Revenues were increased by 5% due to increased brand awareness. Costs were also increased 20% the second year signalizing tremendous growth and 10% the second year signalizing conservative practices in an attempt to slow down cost increase while still growing the company. Years 2 and 3 reveal a net profit for the organization.

Break-Even Point:

BEP= Fixed Costs/ (unit price – variable unit costs). FC:406,000/(80-55)=16,240 units

Break-Even Analysis [Skyson Industries][Practice Pad] [4/4/15]

For the Period: Year 1Selling Price (P): $80

Break-Even Units (X): 16,240 units

Break-Even Sales (S):

$ 1,299,200.00

[42]

Fixed Costs Advertising $ 30,000.00 Depreciation $ 12,000.00 Interest Expense $ 10,000.00 Insurance $ 16,000.00 Manufacturing $ 30,000.00


Payroll $ 214,000.00 Rent $ 40,000.00 Supplies $ 23,000.00 Taxes (real estate, etc.) $ - Utilities $ 10,000.00 Other (specify) $ 21,000.00

Total Fixed Costs (TFC) $ 406,000.00

Variable Costs Variables Costs based on Dollar Amount per Unit

Cost of Goods Sold $ 35.00 per unit

Direct Labor $ 10.00 per unit

Overhead $ 4.00 per unit

Other (specify) per unit

Sum: $ 49.00

Variables Costs based on PercentageCommissions 7.50% per unitOther (specify) per unit

Sum: 7.50%Total Variable Cost per Unit (V) $ 55.00

Contribution Margin per unit (CM) = P - V $ 25.00 Contribution Margin Ratio (CMR) = 1 - V / P = CM / P 31.3%

Break-Even Point Break-Even Units (X) X = TFC / (P - V) 16,240 unitsBreak-Even Sales (S) S = X * P = TFC / CMR $ 1,299,200.00


0 500 1,000 1,500 2,000 2,500 3,000

$(150,000)

$(100,000)

$(50,000)

$-

$50,000

$100,000

$150,000

$200,000

$250,000

BEP Profit (Loss)

Total Revenue

Total Cost

Break-Even Point

Total Cost

Total Revenue

Profit (Loss)

Units (X)

*One thing not mentioned in the break-even analysis that contributed to the net loss for the first year was sales returns and allowances.

Sources of Investment:

Looking at the pro-forma, it is evident that start-up costs for Skyson Industries are going to be fairly high including costs for a factory and manufacturing equipment. Our first attempt at acquiring investment capital would be an application for a “Real Estate & Equipment” loan through the U.S. Small Business Association. Another possible source of investment capital could be sponsorships from large corporations heavily invested in the music industry (Yamaha, Boss, etc.) who would be willing to invest in our organization. If needed, we can resort to private loans/lines of credit through banks.

Financial Information Use:

The financial information calculated here has made excellent contributions to the formation of our business strategy. By using this information and the financial information of our competitors we can compare practices and seek to identify and implement the most effective and


efficient business practices. By comparing year end results to our initial projections we can also identify areas that may need improvement and make adjustments accordingly.

Financial Ratios:

The core financial ratios that we will use in order to evaluate our performance are Gross Profit Margin, Operating Profit Margin, Return on Total Assets, Net Profit Margin, and Total Asset Turnover. We will also look at liquidity ratios such as the Current ratio and the Debt to Asset ratio to measure our ability to pay back the money borrowed as investment capital.

Critical Risks Assessment

Chart/Diagram/Task List

Begin manufacturing and selling drum pads

Launch company website

Announce partnership with national music

retailers

Expand production and distribution to Mid-

western United States

Extend product line to include new drum pad

designs

Expand production and distribution to Eastern

United States

Begin research and development for man-ufacturing marching percussion hardware

Begin manufacturing and selling drum pads

Launch company website

Announce partnership with national music

retailers

Expand production and distribution to Mid-

western United States

Extend product line to include new drum pad

designs

Expand production and distribution to Eastern

United States

Begin research and development for man-ufacturing marching percussion hardware

Milestone Chart


In January we hope to begin manufacturing drum pads in the one manufacturing facility that we own. The actual sale of drum pads will be scheduled to being shortly after manufacturing begins. By April, the company website will be completed and fully operational including access to an online shop. In July, the organization will finalize and announce a partnership with a national music retailer to display and sell our products in their stores. Shortly after, we will acquire a new manufacturing plant and establish distribution channels in the Midwestern United States. In November we hope to release a new line drum pads with new designs. By the beginning of the second year of production we hope to have acquired a third manufacturing plant and expanded production and distribution to the Eastern United States. In March of year two a new initiative will be launched to more closely discover consumer needs within the marching percussion market and begin developing the design of marching percussion equipment.

Contingency Plans:

Security Compromise: This contingency plan discusses the procedures to be followed in case of a security compromise involving important financial information of the organization and/or customers via the company website. The first step to take in the case of a technical emergency such as this is to temporarily shut down the company website and have technical support on staff ready to respond to customer concerns. A public announcement will be developed and emailed to our online shoppers informing them of the situation and assuring them that the situation is being dealt with quickly and carefully. Once the website is down it is essential to identify specifically which information was stolen and how exactly our system was compromised. A team of technical support staff should simultaneously be working on a solution to the system error. Once a solution is found it should immediately be implemented and tested for security flaws. If the solution passes testing the website is to be re-launched and an email will be sent to consumers informing them that the problem has been resolved and that we are prepared to assist them with any needs regarding financial security.

Natural Disaster: This contingency plan discusses the procedures to be followed in case of a natural disaster resulting in damages to a manufacturing plant. Prior to any other action being taken, the health and safety of our employees must be acknowledged and attended to. A public announcement will be made informing distributors, retailers, and consumers of the recent unfortunate events. Insurance agencies should be immediately notified and insurance procedures followed. The plant should be inspected and all losses including but not limited to inventory, supplies, and equipment should be accounted for and reported to management. Any equipment that can be salvaged and repaired will be conserved. Production in other plants will be increased to compensate for the plant being down. Employees will be put on leave until facilities are once again operational.


Leadership

Sphere of Influence:

Because this business plan is written for the initial launch of our drum pads during the early development stages of the organization, the organizational structure (as can be seen earlier in the report) is fairly simple. As a result, the sphere of influence for my role within the organization would be company-wide. As the company progresses, the organizational structure will become more complex so as to include marketing, sales, production, and research and development departments. These departments will report to the CEO and Board of Directors, both of which will have influential power within the organization. As CEO, I would play an important role in decision making for the organization and make an effort to implement and enforce company-wide policies that are consistent with our values, mission, and vision. I think this will have a good impact on the business plan, as I will be able to monitor our progress and lead us toward successful implementation.

Bias:

A personal bias of mine within the organization could be my tendency to take risks. I personally see risks as challenges and given the opportunity and the right information I will favor taking educated risks in order to invest in the company’s future. This could impact the development and progress of our organization in a number of ways. For starters, there is a great deal of responsibility when it comes to taking risks. High risks may have high returns, but it also means higher losses if the decision doesn’t work out in your favor. On the other hand, a favorable outcome of high risk decisions could potentially improve the state of our organization and speed our progress.

Hurdles:

There are several hurdles that we anticipate during our initial product launch and our market entry. First off, we anticipate several barriers to entry previously discussed in this report. These include name recognition, issues with brand loyalty, and large economies of scale within our competition. Other hurdles include potential issues with desired partnerships, achieving effective supply chain management, and lack of capital for expansion.


Style/Servant Leadership:

My style of leadership will definitely be more of a servant leadership style. I believe that true leaders inspire and strive to create an environment in which others can be successful. This means being able to lead by example and effectively communicate with your team. As a leader in my organization I will strive to live out the organization’s core values and exemplify what we expect out of all our employees. I will communicate effectively with our whole team and always keep an open mind for suggestions from employees at any level. With careful consideration, I will delegate authority in order to empower others to make important decisions for and bring value to the organization. After a close evaluation of my leadership skills I discovered that my weakest area of leadership was emotional intelligence. I will do my best to continually seek improvement in all areas of leadership for the benefit of my organization and our stakeholders.

Strengths and Weaknesses

I possess several strengths that can greatly benefit our organization. My greatest strength, as I see it, is my personal experience and wide knowledge of the marching percussion arena. As a former competitor/participant of the percussive arts, I have a large network within the market and I know first-hand the needs of our consumers. Other strengths include leadership experience, communication skills, and marketing experience. Weaknesses of mine that may affect the organization are my bias toward risk taking, and my tendency to avoid confrontation.

Influencing Others

I believe that the best way to influence others is to live up to your own standards. If I consistently exemplify the actions of an ideal employee, our employees will be more willing to uphold our expectations. My goal is to make sure all our employees are comfortable working for our organization. Surrounding our employees with satisfied, like-minded individuals who love their jobs will hopefully inspire them to be the best they can. Only then will they be able to deliver the results we expect.

Conclusion

Skyson Industries has a great opportunity to enter the market with a unique and creative offering. We have a strong understanding of the industry, the market, and the environment. An effective marketing plan was developed describing our plan for initial market entry. An organizational plan that outlines the structure and strategies for the organization has been developed. Plans for growth have been created, obstacles have been presented, and strengths and


weaknesses have been identified. A detailed plan for how operations and logistics will be carried out has been included with contingency plans for unanticipated events. The financial outline of the organization is favorable. Potential risks have been assessed and contingency plans created for unfavorable outcomes. A leadership model has been established and the organization’s intentions are very clear. The organization clearly has a good understanding of their current situation and a strong plan for market entry. Overall, this business plan has adequately prepared the organization to initiate market entry and initial product launch.


References

Gibson, C. H. (2013). Financial Statement Analysis, 13e. Stanford, CT: Cengage Learning.

Hitt, M. A., Hosskison, R. E., & Ireland, R.D. (2015). Strategic Management: Competitiveness and Globalization. Stanford, CT: Cengage Learning.

Kerin, R. A., & Perterson, R. A. (2013). Strategic Marketing Problems. Upper Saddle River, CA: Pearson.

Pricing Information retrieved from Amazon.com.


http://www.amazon.com/

Marketing plan 1

Documents

Transcript of Marketing plan 1