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Garbles Cellular Phones, Inc. will offer its customers GSM cellular phones, and cellular phones accessories. GSM stands for "Global System for Mobile Communications." GSM is originally a European system and is largely being adopted today in the United States. Its greatest advantage, a technical one, is that the owner can use the phone all over the world since the system is used mostly anywhere. Market demand drives cell phone manufactures and service providers to offer new and improved services and functions in their cell phones. The demand for more visual interaction and entertainment with cell phones in the Japanese market, for instance, is great and as such, their phones are many years ahead of what we will see in the U.S.A. Phones have definitely become an important part of people's lives all over the world, whereas in North America many still view the cell phone as a tool and not as a entertainment device. The average phone in North America lasts 3-5 years before being replaced, in Japan it is a fraction of this time. We believe that, with our long and thorough experience in the EAIA, our store will be in the perfect location to start our operations in the U.S.A., and will start operating in the right time. Garbles Cellular Phones will provide its customers support and convenience second to none.
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Start-up Requirements Start-up Expenses Legal Insurance Rent Equipment Other Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements $2,000 $30,000 $0 $0 $32,000 $43,000 $5,000 $1,000 $2,000 $2,000 $1,000
Products
The following are the products that will be offered by Garbles Cellular Phones:
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GSM Cellular Phones: Motorola, Nokia, Sharp, Siemens, Samsung, Alcatel, Ericsson, Fujitsu, Hyundai, LG Electronics, and others. Fixed Wireless Phones Cellular Phone Accessories: antennas, batteries, belt clips, cables and adapters, cases, chargers, faceplates, and modems.
Most North American phones come with a few games to keep people entertained for a limited duration. Japanese phones come with two different types of games: built-in ones and Java application ones. The built-in ones are simple, but again the graphics are very important to the game value. Java application games are delivered via the network to the customer's phone and there is a charge for this service. These games are much more complex and require streaming data to access. New games come out monthly. You can even buy joysticks and navigation consoles that plug into your phone. One of the recent popular additions to many of the Japanese and Korean phone models is a CCD Camera that is mounted either on the outside of the clamshell or on the clamshell hinge. The camera lens is slightly smaller than a dime and takes 4x4 cm pictures to display on the phone's screen or to send to others. Not only can users take pictures, they can take video clips as well. Most phones take between 5-15 seconds of footage due to memory limitations, but they can send streaming video. Many of the advertisements for camera phones show people taking to each other and watching each other on the screen (both holding the phone and camera at arm's length and using a hands-free microphone and earpiece). The camera also has a couple of neat accessories including an external flash that pops into an accessory port and a miniature printer that will print out pictures. Our company will try to take advantage of these developments and serve its customers in all these new trends and developments.
Children in the age group of 10-17 years old Students General public Professionals Service organizations and companies that need to be in constant communication with their employees.
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Market Analysis Year 1 Potential Customers Children 10-17 years old Students Professionals General Public Operating Service Companies Other Total 3% 2% 2% 2% 4% 1% 2.29% Growth 90,000 50,000 40,000 250,000 40,000 30,000 500,000 92,700 51,000 40,800 255,000 41,600 30,300 511,400 95,481 52,020 41,616 260,100 43,264 30,603 523,084 98,345 53,060 42,448 265,302 44,995 30,909 535,059 101,295 54,121 43,297 270,608 46,795 31,218 547,334 Year 2 Year 3 Year 4 Year 5 CAGR 3.00% 2.00% 2.00% 2.00% 4.00% 1.00% 2.29%
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T-Mobile Wireless - owned by a subsidiary of Deutsche Telekom since May 31, 2001.
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Revenues:Exceeding $13.6 billion in 2001. Wireless Phone Service Subscribers: Cellular voice, messaging and high-speed wireless data services to more than 8 million customers. Cellular Phone Service and Technology: T-Mobile Wireless operates the largest all digital, wireless network based exclusively on GSM (Global System for Mobile Communications) technology. GSM is the most widely used digital standard worldwide, accounting for more than 70 percent of the total digital wireless market.
Cingular Wireless is the second largest wireless company in the U.S. A leader in mobile voice and data communications, Cingular is a wireless company determined to promote the individual to a new level.
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Ownership: Cingular Wireless is a joint venture between the domestic wireless divisions of SBC (NYSE:SBC) and BellSouth (NYSE: BLS). Headquarters in Atlanta, Georgia. SBC owns 60 percent of the company and BellSouth owns 40 percent, based on the value of the assets both contributed to the venture. Revenue on the cellular service in Year 2002 was more than $14.7 billion. Cellular Phone Service Subscribers: more than 22 million voice and data customers across the U.S.A. Cellular Phone Service and Technology: A leader in mobile voice and data communications, Cingular is the only U.S. wireless carrier to offer Rollover, the wireless plan that lets customers keep their unused monthly minutes. Cingular provides cellular/PCS service in 43 of the top 50 markets nationwide, and provides corporate email and other advanced data services through its GPRS and Mobitex packet data networks
Nextel Communications, based in Reston, VA, is a leading provider of fully integrated, wireless communications services on the largest guaranteed, all-digital, wireless network in the country.
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Ownership: Nextel Wireless is traded on the NASDAQ National Market under the symbol NXTL. Nextel Partners is a separate company traded on the NASDAQ National Market. Revenue on the cellular service $8.7 billion (2002). Cellular Phone Service Subscribers: 10.61 million (Q4 2002). Cellular Phone Service and Technology: Nextel uses a packet-based platform, the integrated Digital Enhanced Network (iDEN) technology, developed by Motorola. The Nextel 4-in-1 serviceNextel Digital Cellular, Direct ConnectSM, Nextel Mobile Messaging, and Nextel Onlinecovers thousands of communities across the United States. Nextel and Nextel Partners, Inc., currently serve 197 of the top 200 U.S. markets.
Garbles Cellular Phones is aiming to gather a share of the market from these three.
Brand names are of little, if any, importance. The key to the buying decision on the part of the consumer is the salesman and the cell phone being in front of them. As has been pointed out in the Competitive Analysis section there are other sellers with similar brand names as those supplied by Garbles Cellular Phones, Inc. which may even be less expensive. It is essential that the salesman point out the salient features and selling points favoring our products. Most importantly, our products must be available in the retail outlet, since whatever products our store carries are the ones that are going to be sold. The need to attract, acquire, leverage, and retain customers remains a primary concern to business. Revenue growth through customer acquisition and retention is as important a requirement in e-commerce as it is in other business. Customers, especially in the Western business culture, count speed of service as a key reason why they do business with a company. They resent delays and hate waiting for service. In the United States, almost 80% of the gross domestic product (GDP) is generated through different kinds of services, and speed of service no longer distinguishes an enterprise as providing superior value. Customers generally are not thrilled if they receive good service, but they are highly dissatisfied if they do not. Garbles Cellular will provide the necessary framework to cope with these demands by cutting the waiting time for a service. Customers also want consistent, reliable, and easy-to-use service. As the speed of service increases, customer expectations grow, making friendly, easy, and solution-oriented customer service an important business trend. Reflective shoppers get some support from e-commerce as well. They like to investigate products precisely and consciously. However, when browsing costs a lot because of on-line charges, they do less of it. Consequently, they do not get a holistic view of the available options, and their expectations often are not met. Reference-spending customers do not let themselves be hurried or forced. They use alternative offline sources to get information. They refuse aggressive marketing, which is accepted in Western e-commerce. Soon, shoppers will simply wave their cell phone over the item they want and the charge will automatically appear on their cell phone bill. Its happening in some cities overseas already. And right now, MasterCard and Motorola are testing out a similar program here in the States. Retailers have registers that will take the signal from the cell phone, and the purchase is automatically converted to a MasterCard charge. Buyers dont have to sign anything. The scary part is what could happen when people lose their cell phones or have them stolen. There are lots of technical and legal issues to work out here, but paying wirelessly is going to gain momentum quickly. Garbles Cellular is planning to take advantage of these trends of buying patterns. We shall also be very quick in establishing our own website to take advantage of E-trade.
Niceburg and its surroundings. The remainder are small firms that sell from kiosks in the surrounding malls. Garbles Cellular Phones current niche in its location, variety of products and expertise in serving the public will assure the projected sales. We expect to take full advantage of the trends described in the Market Analysis above, and try to penetrate the market with new innovations and gadgets mainly with the younger generation, using advertisements and demonstrations. We shall also try to lure independent small sellers to join our effort.
E-Commerce: The company will make an effort to enhance its sales through a serious and advantageous website in order to attract customers that are reluctant to do business with large companies.
Long-term marketing strategies are those that will bring us a steady stream of targeted traffic over time. These strategies will continue to produce results even years down the road. Long-term marketing strategies include:
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By creating and implementing a balanced marketing strategy, using both short-term and longterm strategies, Garbles Cellular will drive a steady stream of targeted traffic to our website. Using this simple formula when creating our Internet marketing strategy and excelling at all three, we hope to guarantee our success. Our short-term marketing strategy will focus heavily on sales promotion, niche positioning in the market and customer service with loyalty and retention in sales. Our promotions will always stay in tune with our company objectives and mission statement.
Develop Our Tactics - we shall receive guidance to develop a comprehensive tactical plan to achieve our success. Measure Our Success - we shall constantly develop key measurements that mark the progress of financial estimates that guide our growth. Employ An Action Plan for Success - we shall provide our sales force a clear tactical plan that is also aligned with management's strategic objectives. The sales strategy of Garbles Cellular Phones is simple. The key to customer satisfaction is having the product and services that meet the customer's needs. A crucial part of that is to also have knowledgeable employees to help customers quickly find what they want.
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Sales Forecast Year 1 Sales Cellular Phones Fixed Wireless Phones Other Sevices Total Sales Direct Cost of Sales Cellular Phones Fixed Wireless Phones Other Services Subtotal Direct Cost of Sales $138,000 $190,000 $270,000 $46,500 $46,500 Year 1 $31,650 $11,700 $11,710 $85,510 $60,000 $90,000 Year 2 $43,560 $41,500 $15,500 $23,300 $90,000 $150,000 Year 3 $61,900 $51,800 $23,300 $38,900 Cellular Phones Accessories $126,000 $160,000 $200,000 Year 2 Year 3
$123,860 $175,900
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5.4 Milestones
The Milestones table hereunder is destined to be a working plan for the formation of the new organization, including legal negotiations, hiring of personnel, rental of the facility, building of initial inventory, beginning of marketing and start of physical operation. The team to execute the chores will have to follow up on the timetable and make sure that everything falls in place to ensure smooth start of sales and success of the organization.
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Milestones Milestone Preview of Business Plan by Investor Concluding Legal Matters Hiring of Operators Conclussion of Rentals Preparation of Website Acquiring Initial Inventory Start of Marketing Start of Operation Totals 1/1/2005 1/10/2005 2/1/2005 1/15/2005 1/15/2005 2/15/2005 3/1/2005 4/1/2005 Start Date 1/15/2005 2/10/2005 3/1/2005 2/15/2005 3/1/2005 3/15/2005 4/1/2005 4/10/2005 End Date $1,000 $4,000 $500 $2,000 $2,500 $31,000 $0 $2,000 $43,000 Budget Manager CEO Owner CEO Owner Programmer Store Personnel Marketing Mgr. All Department Department Department Department Department Department Department Department Department
Management Summary
The management of Garbles Cellular Phones, Inc. is made up of the owner, a Marketing manager (Mr. Nomassu Perozia) and three other members who will be hired locally and will be added: a Programmer, and two store attendants with one serving at the beginning as secretary.
Personnel Plan Year 1 CEO Marketing Manager 2 Store Attendantds Other Total People $42,000 $26,400 $33,600 $0 0 Year 2 $48,000 $28,800 $22,200 $36,960 $0 0 Year 3 $54,000 $31,200 $23,400 $40,000 $0 0
Total Payroll
Financial Plan
It is assumed that the owner's private resources will be sufficient to finance any monthly cashflow shortage. However, it would be advisable to establish a bank relationship as soon as possible. Sales could very well increase at a much sharper rate than assumed in these conservative projections. Sharper sales will result in a greater need for funds in support of inventory and receivables. An over-draft line of credit with the bank will be an excellent cushion to fall back on. This is considered a very good time to start a new business. The economy is beginning its trek up, and consumer spending is up. The Commerce Department reported, "Consumers had increased their spending, the largest advance in nine months." A shorter learning curve will be brought to the business by the owner due to his extensive background and in-depth market knowledge. He has a clear understanding of the need to manage costs and forecast future needs so that the business is not "broadsided" by the unexpected. One other component on which the financial plan is based is wise purchases. Finding the right product, at the right price will enable the business to meet planned margins and maintain inventory at an attractive level with a high turn rate.
Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets $11,000 $32,000 $43,000
Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities
$0 $0
Accounts Payable (Outstanding Bills) $0 Other Current Liabilities (interest-free) $0 Total Liabilities Capital Planned Investment Owner Investor Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital Total Capital and Liabilities Total Funding $43,000 $0 $0 $43,000 ($11,000) $32,000 $32,000 $43,000 $0
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Break-even Analysis Monthly Revenue Break-even $17,916 Assumptions: Average Percent Variable Cost 24% Estimated Monthly Fixed Cost $13,625
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Pro Forma Profit and Loss Year 1 Sales Direct Cost of Sales Other Costs of Sales Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Marketing/Promotion Depreciation Rent Insurance Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales $123,000 $4,500 $0 $24,000 $12,000 $0 $0 $163,500 $81,166 $81,166 $0 $24,350 $56,816 15.91% $135,960 $10,000 $0 $24,000 $12,000 $0 $0 $181,960 $164,180 $164,180 $0 $49,254 $114,926 22.99% $148,600 $25,000 $0 $24,000 $12,000 $0 $0 $209,600 $279,500 $279,500 $0 $83,850 $195,650 27.56% $357,000 $85,510 $26,824 $112,334 $244,666 68.53% Year 2 $500,000 $123,860 $30,000 $153,860 $346,140 69.23% Year 3 $710,000 $175,900 $45,000 $220,900 $489,100 68.89%
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Pro Forma Cash Flow Year 1 Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 Principal Repayment of Current Borrowing $0 $123,000 $139,315 $262,315 $135,960 $247,800 $383,760 $148,600 $360,927 $509,527 $0 $0 $0 $0 $0 $0 $50,000 $407,000 Year 1 $0 $0 $0 $0 $0 $0 $0 $500,000 Year 2 $0 $0 $0 $0 $0 $0 $0 $710,000 Year 3 $357,000 $357,000 $500,000 $500,000 $710,000 $710,000 Year 2 Year 3
Other Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance
Pro Forma Balance Sheet Year 1 Assets Current Assets Cash Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Net Worth $15,869 $0 $0 $0 $15,869 $93,000 $56,816 $138,816 $138,816 $20,770 $0 $0 $20,770 $0 $20,770 $93,000 $114,926 $253,742 $274,512 $253,742 $30,462 $0 $0 $30,462 $0 $30,462 $93,000 $160,742 $195,650 $449,392 $479,854 $449,392 $0 $0 $0 $154,685 Year 1 $0 $0 $0 $274,512 Year 2 $0 $0 $0 $479,854 Year 3 $146,685 $8,000 $0 $154,685 $262,924 $11,588 $0 $274,512 $463,397 $16,457 $0 $479,854 Year 2 Year 3
($11,000) $45,816
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Ratio Analysis Year 1 Sales Growth Percent of Total Assets Inventory Other Current Assets Total Current Assets Long-term Assets Total Assets Current Liabilities Long-term Liabilities Total Liabilities Net Worth Percent of Sales Sales Gross Margin Advertising Expenses Profit Before Interest and Taxes Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets Additional Ratios Net Profit Margin Return on Equity Activity Ratios Inventory Turnover Accounts Payable Turnover Payment Days Total Asset Turnover Debt Ratios Debt to Net Worth Current Liab. to Liab. Liquidity Ratios Net Working Capital Interest Coverage Additional Ratios Assets to Sales Current Debt/Total Assets 0.43 10% 0.55 8% 0.68 6% n.a n.a $138,816 0.00 $253,742 0.00 $449,392 0.00 n.a n.a 0.11 1.00 0.08 1.00 0.07 1.00 n.a n.a 8.67 9.78 27 2.31 12.65 12.17 26 1.82 12.54 12.17 25 1.48 n.a n.a n.a n.a 15.91% 40.93% 9.75 9.24 10.26% 58.47% 52.47% Year 1 22.99% 45.29% 13.22 12.66 7.57% 64.70% 59.81% Year 2 27.56% 43.54% 15.75 15.21 6.35% 62.20% 58.25% Year 3 n.a n.a 1.73 0.79 58.93% 2.27% 5.54% 100.00% 68.53% 0.00% 22.74% 100.00% 69.23% 46.24% 0.00% 32.84% 100.00% 68.89% 41.33% 0.00% 39.37% 100.00% 32.59% 17.11% 2.28% 0.85% 5.17% 0.00% 100.00% 0.00% 100.00% 10.26% 0.00% 10.26% 89.74% 4.22% 0.00% 100.00% 0.00% 100.00% 7.57% 0.00% 7.57% 92.43% 3.43% 0.00% 100.00% 0.00% 100.00% 6.35% 0.00% 6.35% 93.65% 33.94% 26.57% 80.73% 19.27% 100.00% 41.85% 11.83% 53.68% 46.32% 0.00% 40.06% Year 2 42.00% Year 3 Industry Profile 5.90%