Business proposal

For Distribution Agency of

Shezan International

Contents
EXECUTIVE SUMMARY .................................................................................................................................. 3 BRIEF DESCRIPTION OF PROJECT .................................................................................................................. 3 CRITICAL FACTORS ........................................................................................................................................ 4 Products and Brand................................................................................................................................... 4 Background Experience............................................................................................................................. 4 SWOT ANALYSIS ............................................................................................................................................ 4 MARKETING STRATEGIES .............................................................................................................................. 5 Tools used for Integrated Marketing Communication: ............................................................................ 5 Skilled & Experienced Manpower ............................................................................................................. 6 INSTALLED AND OPERATIONAL CAPACITIES ................................................................................................. 6 GEOGRAPHICAL POTENTIAL FOR INVESTMENT ............................................................................................ 7 POTENTIAL TARGET MARKETS ...................................................................................................................... 7 DISTRIBUTION PROCESS FLOW ..................................................................................................................... 7 MANAGEMENT STRATEGIES ......................................................................................................................... 8 Human Resources ..................................................................................................................................... 8 Hierarchy: .................................................................................................................................................. 9 PROJECT COST SUMMARY ............................................................................................................................ 9 Project Financing....................................................................................................................................... 9 Project Cost ............................................................................................................................................. 10 Space Requirement ................................................................................................................................. 10 Human Resource Requirement ............................................................................................................... 11 Revenue Generation ............................................................................................................................... 11 Other Costs ............................................................................................................................................. 11 KEY ASSUMPTIONS...................................................................................................................................... 12

EXECUTIVE SUMMARY
Distribution Agency of Shezan is proposed to be located at Malikwal city to distribute Fast Moving Consumer Goods (FMCG) such as Fruit Juices Syrups & Squashes, Fruits & Vegetables Processed/Canned, Tomato Ketchup, Sauces & Pickles Etc. to the Local market. This proposed distribution agency will distribute around (quantity purchased terms) to the retailers. The assumed sales force has the capacity to distribute around (optimum capability) of products and initially they will be utilizing 67% of proposed capacity. Total Cost Estimate of the project is Rs. 3.35 million with Fixed Investment of Rs. 0.83million and Working Capital of Rs. 1.33 million and 1.19 million as security deposit for shezan. The most critical considerations or factors for success of the project are Product and Brands to be distributed Negotiation and Marketing Skills Credit Recovery

BRIEF DESCRIPTION OF PROJECT

Product: It has been suggested that for the proposed distribution business, the company would act as a main institutional distributor for Fast Moving Consumer Goods (FMCG) products. The business would distribute; Fruit Juices Syrups & Squashes , Fruits & Vegetables Processed/Canned, Tomato Ketchup, Sauces & Pickles Etc. to the Local market. Location: Distribution Agency in Malikwal city, District Mandi baha ud din. This distribution can also be expanded in all small second tier towns in addition to suburban towns of Malikwal. Target Market: The demand of distribution service providers is increasing which is directly proportionate to the increase in FMCG manufacturing companies which are expanding substantially with the current economic growth and consumerism. Therefore the potential target market for the shezan distribution agency setup is retail stores in Malikwal and all second and third tier towns of Malikwal. Employment Generation: The proposed project will provide direct employment to 15 people. Financial analysis shows the unit shall be profitable from the very first year of operation.

CRITICAL FACTORS
Critical success factors that affect the decision to invest in the proposed business are:

Products and Brand

Product and Brands to be distributed would act as a key success factor for the proposed distribution business. Greater the brand awareness in the market, higher would be the chances of business success. So I have chosen Shezan International because it has complete awareness in the market and demand is there as well. There is not even a single distributor in the area where the retailer could get shezan products, so they have to pay extra money and lose their profit by purchasing the products from Mandi baha ud din.

Background Experience
Background experience plays an important role in operating a small to medium scale Distribution Agency, especially when dealing with customers, deciding the business development activities to be carried out and negotiating on commercial terms and conditions. Experience is already inhouse for Me because my father is already running a distribution agency of COCA COLA very efficiently and successfully. Human force will be generated very easily through that source. Letter of shezan and coca colas distribution experience has been attached in annexure.

SWOT ANALYSIS
Strengths:
Shezan has a strong brand image so as a distributor of shezan our image will be strong as well. Customer loyalty graph is higher for shezan Efficient work force Owned vehicles High reputation and credibility in the area already because of distribution of coca cola Credit control

No direct competitor of shezan distribution who has all the three divisions of distribution

Weaknesses:
Insufficient funds availability Sometimes over-reliance

Opportunities:
Increased sales to existing customers, or new leads gained through them. Improved supply arrangements, such as just-in-time supply or outsourcing non-core activities. Minimum reliance over customer. Economic trends. o For example, falling interest rates reducing the cost of capital. Social developments. o For example, demographic changes or changing consumer requirements leading to an increase in demand for your products. New technology. o For example, new materials, processes and information technology.

Threats:
Easy entrance for the competitors Loss of a significant customer. Price rises from Shezan. Shezan reducing credit lines or increasing charges.

MARKETING STRATEGIES
The entrepreneur must have effective PR & marketing skills. These marketing skills should enable the entrepreneur to carryout business development activities to target potential customers and also to maintain existing client base.

Tools used for Integrated Marketing Communication:

Advertising Public relations Personal selling Sales promotion
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Sales & Distribution Network: Expert's advice and distribution agreements are required with distributors & retailers. Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never be allowed to compromise quality. Price during introductory phase may be lower and used as a promotional tool. Service cost estimates should be carefully documented before price setting. Government controlled prices should be displayed, where applicable.

Skilled & Experienced Manpower

The knowledge and experience of the entrepreneur is not sufficient to run the business smoothly. A major proportion of business development activities and accounts receivables are managed by sales personnel employed by the agency. Therefore, it is crucial for the distribution agency to hire experienced and skilled sales staff that can bring in new business and retain existing customer base. This part of the business will also be very easily for me because as described earlier I have the experience of my father who is already running the distribution agency of Coca Cola in malikwal since last 10 days.

INSTALLED AND OPERATIONAL CAPACITIES

For the proposed project it is assumed that various consumer goods of worth RS. 10,000,000/annum will be distributed across the city where the distribution company is set-up with 7% sales volume growth assumption. For this purpose a staff of total 15 persons will be justifying their job description in various capacities. It has been suggested that for the proposed distribution business, the company would act as a main institutional distributor for Fast Moving Consumer Goods (FMCG) products. The business would distribute; Fruit Juices Syrups & Squashes , Fruits & Vegetables Processed/Canned, Tomato Ketchup, Sauces & Pickles Etc. to the Local market. Products for distribution have been selected for the proposed business by foreseeing their high potential and anticipated expansion in the manufacturing of these products. However, as these products are perishable, efficient distribution operations would be necessary. In order to leverage the opportunity for further business expansion, intensive distribution practice would be followed which means that the business would place its products and services to as many retailers as possible, employing the First in First Out method. It is proposed that all perishable items cannot be stored for long period, so it is suggested that time for a product to leave the warehouse and be distributed should be as minimum as possible.

GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The growing trend of consumerism and increase in population has increased opportunities for the FMCG distribution business in Pakistan. So I have decided to start this distribution agency of shezan in malikwal city with proposed initial investment of 2 million estimated. No of retailers in malikwal and its suburbans are more than 500 so its very mind catching where you dont have even any competitor.

POTENTIAL TARGET MARKETS

Pakistan has a domestic market of above 185 million consumers with growing incomes & changing consumption habits. Population growth, increase in per capita income, and urbanization have led to demand of distribution agencies. Consumerism and introduction of new products have fuelled demand. The target market for the proposed set-up is retail stores in Malikwal city and its suburbans. Number of retailer (our customers) is more than 500 to whom we can provide with the distribution of shezan products at their door step.

DISTRIBUTION PROCESS FLOW

Shezan international dealing in consumer goods when interested in appointing a distributor for their products, advertise in newspapers and call for expression of interest from local companies interested in the distribution. Companies evaluate following capabilities of the interested distributors

Location of distributors business premises. Financial position and credit standing of the distributor. Knowledge and experience of the distributor. Storage and showroom facilities of the distributor. Ability of the distributor to secure adequate business and to cover the market. Capacity of the distributor to provide after sale service. General reputation of the distributor and his sales force. Willingness of the distributor to handle the entrepreneurs products. Degree of co-operation and promotion service he is willing to provide. Nature of other products, if any handled by the distributor.

In a country like Pakistan one needs an effective distribution system that provides market coverage and is economical. The choice of a channel by traders or manufacturers depends upon the nature of the product e.g. for low priced consumer products like soap, a vast network is needed and manufacturers prefer to hire the services of a independent distributor rather than having their own distribution set-up, which is a high cost option. For industrial goods, a direct
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channel or a very short channel is considered to be appropriate. The nature of the productwhether it is bulky or perishable, and the cost and efficiency of the distributors are some other factors that manufacturers and traders consider while selecting a distributor. Alhamdulillah I fulfill all of the terms and conditions put forward by the shezan international for giving us the distribution in Malikwal city. The only hurdle now is the investment of money which we have to submit them in the form of security. Contract has also been finalized with shezan international.

MANAGEMENT STRATEGIES
Human Resources
Owner Sales Staff / Outdoor Booking Store Keeper Billing Staff Cashier Deliveryman Driver / Loader Security Guard Adequacy & Competencies: Recruitment of skilled and experienced staff should be considered an investment. Performance Based Remuneration: Attempt to manage human resource cost should be focused through performance measurement and performance based compensation. Training & Skill Development: Encouraging training and skill of self & employees through experts and exposure to best practices is a route to success. Least cost options for Training and Skill Development (T&SD) may be linked with compensation benefits and awards.

Hierarchy:

Owner Distribution Manager Sales Man Sales Man Sales Man

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of Distribution Agency under the Prime Ministers Youth Business Loan. Various cost and revenue related assumptions along with results of the analysis are outlined in this section. The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as appendix.

Project Financing
Following table provides details of the equity required and variables related to bank loan:
Table 1 - Project Financing Description Details Total Equity (67%) Reserve Equity (33%)

3.35 million 1.65 million

Project Cost
Following requirements have been identified for operations of the proposed business:
Table 2: Capital Investment for the Project

Capital Investment Amount (Rs.) Furniture Delivery Vehicles 02 Nos. (Used) Office Equipment Total Capital Costs Working Capital Total Project Cost

50,000 700,000 82,000 832,000 1,338,200 2,170,200

Space Requirement
Space required for Distribution Agency is 2,000 Sq. ft. where 200 Sq. ft. will be used for Management Office and 1,800 Sq. ft. will be used as Godown.
Table 3: Space Requirement

Table 4: Office Equipment & Furniture Costs

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Human Resource Requirement

Table 5: Human Resource Requirement

The table above provides details of human resource required to run a Distribution Agency of Small and Medium Scale. Salaries of all employees are estimated to increase at 10% annually.

Revenue Generation
The revenues are based on assumption of monthly Sales Proceeds of Rs. 12.9 Million of as Fruit Juices Syrups & Squashes , Fruits & Vegetables Processed/Canned, Tomato Ketchup, Sauces & Pickles items with an annual sales volume growth rate of 5% and price growth rate of 10%. On an average distribution margin on bottles juices, squash and tetra pack and consumer product is 2%, 5% and 10% (aggregate) respectively of total sales proceeds.
Table 6 - Project Economics

Distribution of Items Bottled Juice Juices Consumer products Total Sales

Monthly Sales 5,000,000 5,000,000 1,300,000 11,300,000

Commission on Sales 100,000(2%) 250,000(5%) 130,000(10%) 480,000

Other Costs
An essential cost to be borne by the company is maintenance of vehicles as delivery vans have to cover a number of remote areas in different part of the city. On an average Rs. 15,000 is assumed to be monthly vehicle maintenance expense.
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Working Capital Requirements: It is estimated that an additional amount of approximately Rs. 688,200 will be required as cash in hand to meet the initial working capital requirements during operations. The requirement is based on the utilities, salaries, fuel, office rent, insurance expense, maintenance and miscellaneous expense for at least three months. The following table gives the break up.
Table 7 Working Capital Requirement

KEY ASSUMPTIONS
Sales Volume Increase 5% Sales Price Increase 10% Increase in Cost of Sales 10 % Increase in Staff Salaries 10 % per year Increase in Utilities 10 % per year Increase in Rent 10 % per year Increase in Office Expenses 10 % per year Debt / Equity Ratio 54 : 46 Depreciation: Premises Renovation 10 % per annum (Diminishing Balance) Furniture 10 % per annum (Diminishing Balance) Loa Period 8 Years, inclusive of 1 year grace period Loan Installments Monthly Financial Charges (Lease Rate) 8 % per annum Bad Debts 3% of Sales

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