Base Scenario

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Cost structure: It refers to the relative parts of variable and fixed cost which business has to pay directly or indirectly. The cost structure looks to address the framework that is followed by the business in order to maintain their competitive edge.  

Fixed Cost: Fixed cost refers to that cost which remains unchanged throughout the year. Labour cost, manufacturing/administrative overheads are considered under this category.

Variable Cost: Variable cost refers to that expenses which business has to pay in variable amount which can increase or decrease over time and requirements.

Number of customers: Number of customers are those which will be interested to make actual purchases is considered from 8-50 age groups. Table below shows Edible flowers will be able to get 25,000 customers on annual basis. Changes in best, worst scenario will be due to decrease in the number of customers annually.

Revenue	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
Available market	100,000	103,000	106,090	109,273	112,551
Market captured (no of customers)	23,000	32,000	35,000	40,000	45,000
Additional market captured due to advertising impact	6,900	9,600	10,500	12,000	13,500
Total market captured	29,900	41,600	45,500	52,000	58,500
Revenue – total	$89,700	$124,800	$136,500	$156,000	$175,500

Revenue – total

$89,700

$124,800

$136,500

$156,000

$175,500

Break even (Revenue)

$77,586

Net present value:  Net present value is known to be the difference among the present value of the cash inflows and the present value of the outflow of cash over a specific time period. This process is used for the purpose of capital budgeting in order to assess the extent of profit of an investment or a project.  The net present value determines the profit for the company and therefore it is essential for the companies to evaluate the same in order to attain effective results in accordance to their operational activities.    

NPV (Discount Rate Assumed 25%)

-$36,151

NPV (Discount Rate Assumed 25%)

$43,605

NPV (Discount Rate Assumed 25%)

-$51,022

IRR( Internal Rate of Interest ):

IRR

3%

IRR

44%

IRR

-4%

Cash Flow: Cash flow is known to the net amount of the cash and the things equivalent to cash that is being transferred within and out of the business management. At the most fundamental extent, the ability of a firm to create value for the shareholders and this is determined by the capability to create a positive cash flow and thereby maximise the free cash flow that is long term in nature.    

Cash flow

$5,730

$2,320

$12,850

$21,400

$37,950

 

	Value	Rarity	Inimitability	Organisation	Competitive Advantage
Financial	Yes	No	No	No	No
Technology	Yes	Yes	Yes	No	Yes
Human	Yes	No	No	No	No
Organisation	Yes	No	No	No	No
Infrastructure	Yes	Yes	Yes	Yes	Yes
Intellectual	Yes	Yes	No	Yes	Yes
Experience	Yes	Yes	Yes	Yes	Yes
Product	Yes	Yes	Yes	Yes	Yes

The table that has been constructed explains the fact that value is existent in all the aspects that have been addressed in this table. The unavailability of rarity is observed in financial, human and organizational perspective of the company. The inimitability addresses the fact that inimitability is not seen in the financial, human, organization and intellectual perspective. By looking at the organizational aspect that is seen in the process it is seen that financial, technology, human and organizational perspective is not present. By looking at the competitive advantage, it is seen that the company lacks competitive edge in the financial, human and overall framework of the company. The assessment suggests that the company in the initial time period has been competent enough to attain value creation in most of the aspects.        

Best Scenario

The marketing objectives of the company is one of the essential function and  these  objectives  need to be constructed in order to understand the aspects in relation to which performance and activities would be performed in order to reach the ultimate goal for the company. The objectives of the company that need to be attained are as follows:

• Increase the market share of the company by 20%    
• To increase the sales of the company by 20% by taking assistance of the marketing process
• Undertake an initial penetration in the market by 10% every year
• Become of the leading cupcake manufacturing company in New Zealand within 7 years of time
• Increase the net profit of the business by 15% every year

The objectives that have been determined has been constructed based on the SMART strategy as the objectives are Specific, Measurable, Achievable, Real and within the Time Frame.

The company has an effective strategy in relation to marketing as it is seen that the company has a good relationship with an advertisement company and has gone into a contract with them with the help of which the advertisement agency would be promoting for the company for a value 3% commission on the overall profit of the company. The advertisement agency even would provide promotional opportunities in various events where the company would be able to provide their cupcakes and other range of products within the events by being a sponsor for the event. These strategies would play a significant role in the development of the company in the future course of time and would even influence the customers about the products and the services that are offered by them. It is known that Word-of-Mouth is one of the effective marketing and promotional strategy and therefore with the help of efficient and developed quality of the products and the services, we would be able to satisfy out existent customers who would be able to influence others and thereby increase the range of our potential customers.

The company offers quality products and therefore provides fresh product to their customers. They bake the cupcakes right in front of the customers and therefore the customers would be assured of the quality of the product they are consuming. One of the interesting features that have been developed by the company is that every day after 9 pm at night, the shop would be providing a 15% discount on all their products for their customers. This is an effective marketing strategy on the part of the shop as this would increase their extent of sales and accordingly would increase their market share as well. The other quality of this promotional offer is that their daily stocks would be cleared and therefore they would not have the burden of carrying forward any finished item in the next day and therefore would be able to offer fresh products to their customers each and every day.        

Worst Scenario

The marketing constitutes of the 4Ps and the company in order to well establish themselves in the economy plan their 4Ps in an effective manner. The marketing mix is given as follows:

Product: The products that would be offered by the shop would be of the finest quality and the unique product that would be sold by the shop would be their various flavours and kinds of cupcakes to the customers. There are several other products that would be offered for sale as well and it is seen that the other products include snack bites like various patties, croissants and other munchies and pastries and frappes. The shop would even provide coffees, hot drinks and cold drinks as well and thereby the shop is an ideal destination in order to sit down and relax and chat with the near and dear ones.

Price: This is a start up shop or a company and therefore in order to capture the market sales maximisation is the strategy that has been opted by the shop. It is due to this fact that the shop offers reasonable price to their products and their prices are lower than their competitors within the market where they operate.

Place: The shop is situated in the heart of Auckland city and therefore is linked to the business area as well as with the domestic area as well. This assists the shop in optimising their revenue as well as their sales in the market as well.

Promotion: The shop has effective and attractive promotional activities because of the fact that the management tries to increase the customer base as it is a new shop in the market. The shop therefore offers discounts on their best sellers and even provides flat discount on all their products after 9 pm every day.

The operational objectives of the company have been explained as follows:

• Make optimum utilisation of all the resources
• Provide proper training to their employees
• Provide the best quality products
• To make sure that fixed cost will not increase more than 20% revenue
• To make sure that variable cost will not increase more than the revenue of

15 %.

• Assess the competency of the company in accordance to the other rival companies
• Monitor their operational activities on a continuous basis  

The shop maintains an efficient operational plan as the shop being a new one does not look to increase the amount of waste created from their production. Therefore the shop optimises the use of their resources with the utilisation of new and improved techniques with the help of which better and cheaper products can be manufactured with minimum amount of waste. The shop even looks to train their employees effectively in accordance to their pre-constructed objectives so that the employees understand the need of the shop and accordingly give their best. The training that is given to them is helpful to the employees in understanding the use of the equipment and the tools and thereby they would be able to perform in a healthy and better working environment. The shop will be operational seven days a week and have their store timing from 8 am in the morning to 10 pm at night. The shop is even concerned about the global environment and therefore provides awareness to their customers with the help of several quotes and phrases that are posted within the shop itself. The maintenance of the quality control concepts are even helpful in the development of operational efficiency with the help of which quality of the product of the shop can be maintained.

Model Value for Value Creation

The table that is given below provides an extensive idea about the human resource and the staffing process.

To ensure that salary of staff will be $16.50 per hour

To get 85% output by the staff to deliver the best service

In the initial company will hire 2 persons

HR/Staffing Plan	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
Staff Num	1	2	3	4	5
Customers	28,600	57,200	114,400	228,800	457,600
Salary per staff / yr [Budget]	$70,000	$70,000	$105,000	$140,000	$175,000

The maintenance of a comprehensive salary for the employees would satisfy them as well and thereby they would motivate them in a better way. The staffing would be done in a specific guideline and course with the help of which the companies would be able to enhance their activities.      

The objectives are:

• To attain the break even within one year
• Be one the leading bakery shop in terms of profit in the country.

Cash flow	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
Cash flow per annum	$5,730	$2,320	$12,850	$21,400	$37,950
Cash flow cumulative (1-5 Year)					$80,250

Revenue	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
Available market	100,000	103,000	106,090	109,273	112,551
Market captured (no of customers)	23,000	32,000	35,000	40,000	45,000
Additional market captured due to advertising impact	6,900	9,600	10,500	12,000	13,500
Total market captured	29,900	41,600	45,500	52,000	58,500
Revenue – total	$89,700	$124,800	$136,500	$156,000	$175,500
Costs	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
Fixed cost
Start-up cost	$70,000	$0	$0	$0	$0
Salaries	$35,000	$70,000	$70,000	$79,000	$80,000
Platform Royalty (fixed)	$7,000	$7,000	$7,000	$7,000	$7,000
Annual maintenance	$15,000	$15,000	$15,000	$15,000	$15,000
Utility/bills (per annum)	$6,000	$6,000	$6,000	$6,000	$6,000
Accountant/lawyer (per annum)	$6,000	$6,000	$6,000	$6,000	$6,000
Other (per annum)	$6,000	$6,000	$6,000	$6,000	$6,000
Total fixed cost	$75,000	$110,000	$110,000	$119,000	$120,000
Fixed cost (per $ revenue)	$0.84	$0.88	$0.81	$0.76	$0.68
Variable cost
Advertising budget %age (against revenue)	$8,970	$12,480	$13,650	$15,600	$17,550
Variable cost (per $ revenue)	$0.10	$0.10	$0.10	$0.10	$0.10
Total cost (per $ revenue)	$0.94	$0.98	$0.91	$0.86	$0.78
Total cost	$83,970	$122,480	$123,650	$134,600	$137,550

Break even (Revenue)

$77,586

 

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