Business Environment

Mission:

The mission of fashion business is to offer the quality products to the consumers as per the brand name. The company will carry the assortment of styles and sizes of apparels which may accommodate the different tastes, sizes, and shapes.

The company vision is to set the aims and objectives which give the business a sense of direction and business. The company will start as the retailer of the fashion, with the achievement of the sufficient funding the potential future plan will be to expand as the physical store (Van?k, Mikoláš and Žváková, 2012).

The company’s goals and objective for the five years are to gain the significant share of the market within the fashion industry. To achieve the required profit targets in the first 2 years. Achieving the brand equity and providing the better services to the consumers which will help in adding value and will also be beneficial to the customers, manufacturing quality products that are within the reach of the consumer pocket.

The fashion house will focus on the wide range of the fashion and will include the basic fashion requirement to the trendy western wear styles. The fashion house will manufacture the bags, apparels, and fashion accessories in a variety of colors, sizes, and style for fitting the target market of the company (Van?k, Mikoláš and Žváková, 2012). The fashion house will be focused towards the youth and will closely follow the fashion trends and the purchasing preferences of the consumers. For this, the company will tailor the inventory accordingly for meeting the client’s needs.

Business will focus on the fashion industry and will expand the in the other parts with its focus in online retailing and will enter the e-commerce business in the coming 5 years.

The fashion house is a small business and hence a simple organization structure will work for the organization.  I will act as the general manager of the organization and will take decisions in line with the objectives of the company. The human resource requirement includes R&D managers, technical support staff, designers, operational managers, marketing manager, sales manager, accounting managers, quality control staff, and laborers (Van?k, Mikoláš and Žváková, 2012).

A business plan for five years takes into consideration the financial inputs for sustaining the business operations. Funds are required for the product development and covering the operational expenses. The fashion house will have to hire employees for different positions. Hiring skilled and experienced staff can help in acquiring an edge over the competitors in the fashion industry.

· Different varieties and collections of apparels, fashion accessories and bags suiting different categories of consumers ·  Free alteration services · Endorsements with the Celebrity · Brand recognition – Globally · Will open outlets in different locations (Van?k, Mikoláš and Žváková, 2012). · Quality products · Cater for different range of target consumers.	Weaknesses · As a store, their food market is associated with the brand more than their underwear collection · Company is not trading overseas. · Increased  carbon footprint, environmental issues and ethical issues (Van?k, Mikoláš and Žváková, 2012)
Opportunities · Gain larger recognition on  social media · To start the online purchasing · Produce stylish apparels and accessories lines that will adjust with different styles of countries for	Threats · Competition with the other major brand already existing in the market. · Ethics of manufacturing and trading overseas (Van?k, Mikoláš and Žváková, 2012)

Mission

The company will open as the sole proprietor firm and conduct the business of apparels, fashion accessories, and bags. The company premises will open in the heart of the city. The location will be the busiest market. All the shipments and the business delivers will be handled by the company The Equipment required for the apparel business are the stitching machines with the advanced features and the packaging machines (Cui and Choudhury, 2002). The company will be imperative that the latest technology and the programmers related to the point of sales will be utilized in maintaining the level of the stocks and tracking the sales.

The company will use such information system and telecommunication which will help in building the strong relationship between the consumers and business entity. The system which is easy to be accessible by the employees and the consumers of the fashion house

Intellectual property, licenses, and memberships insurance:

The fashion House will start as the sole trader.  With the company growth in the five years will turn the company to be the limited liability fashion house, this will easier the way of borrowing the money and selling the products.

The fashion house goals for the five years are to occupy the apparel market of the Australia and also expand its business in the overseas location. Manufacturing latest trends according to the different tastes of the individually (Cui and Choudhury, 2002). Achieving the profit margin of fifty percent; with the strong consumer base and mailing list; generate the repeat and referral sales.

One of the main and significant milestones related to the company is to secure the funds with the setting up of the business in the five years. .In the five years, the company will establish the retail business within the industry and community. Furthermore, the company growth can be seen with the increased product lines, further penetrating into the national market through the online sales and opening of the different branches in different strategic locations (Cui and Choudhury, 2002). The rest milestones of the company are discussed in the below-mentioned chart.

 

Marketing strategy focuses on sales promotion, customer service, and niche positioning

The marketing budget is not to exceed 5% of the fashion house gross annual sales.

Fashion house to maintain the flexible pricing strategy; with basing the product lines for carrying quality and reputation of products; with this utilizing the standard practice of key stoning.

The creative promotional plan of the fashion house will help in focusing directly on the target market. Press release strategy will also be adapted to the promotion. The banners and pictures of the fashion house in the prime locations. The charity programs will be organized. The best promotional strategy is the Word of mouth strategy; Social media; press release and the business cards.

Vision

The company will develop the ICE POS software with the sales transaction. The direct mailing strategy will focus on the priority consumers

The company will launch the loyalty and the referral programs which will help in the customer retention. The 14-day exchange policy will also be introduced for the retention of the consumers.

Fashion house core business strategy is combining the knowledgeable and exceptional consumer services with the stylish merchandise; enjoyable experience of shopping to the consumers.

Target market:

The fashion house is the business to the retail company and the fashion-oriented consumers with the young women’s and the female baby boomers are the main targeted consumers. The portion of the product will also capture the youngsters.

Female Baby boomers	10%	18,247	19,981	21,879	23,958	26,234	9.50%
Young boys and Girls	15 %	9,682	11,134	12,804	14,725	16,934	15.00%
Others	10 %	3,724	4,096	4,506	4,957	5,453	1.00%
Total	11.33 %	31,653	35,211	39,189	43,640	48,621	11.33%

The company will have the strong competition from the other fashion house brands in Australia will already have their place in the Australian Market. Piping Hot is one of the strongest retail fashions house in Australia. The brand Zara and other global brands of the apparel industry will give the strong competition from entering the Australian market.

 The threat of the New Entrants:

The Company will have the threat from the well-known brands entering into the fashion market. This will also raise the level of the competition with reducing the industry attractiveness (Upadhyay, 2014).

The threat of substitutes: The few areas to analyze the threat of substitutes are the comparable quality and the price of the products; switching costs, a willingness of the buyers for the substitutes, prime performance ratio (Upadhyay, 2014).

For the success of the company in the five-year plan will focus on the parameters such as the numerous Buyers and the minority Suppliers, supplier’s self-assured Integrate (manufacture the product buyer) trader Product Differentiation, and Switching Costs of supplier (Upadhyay, 2014).

This force will help the company focusing on a large number of the suppliers and fewer buyers. The company will manufacture the products as the buyer capacity and with the standardization of the product (Upadhyay, 2014).

The primary factor which will contribute to the analysis is the competition. Due to the presence of a large number of the companies in the fashion industry many rivals will be there with which the company has to compete (Upadhyay, 2014). For competing with the rivals fashion house will apply the innovative ideas for attracting the consumers. Will keep the cost of the product within the reach of the consumer pocket; with this, the latest trends will be launched on the special events to compete with the rivals and increasing the sale of the company.

Goals

Set-Up Costs

Huge financial investments are required for starting a business. Establishing a fashion house that manufactures apparels, bags and fashion accessories requires meticulous financial planning. Apart from retaining the employees, financial resources will be required for training the employees. The training cost for each year will be approximately 50,000 dollars (Sheikholeslami, 2011). The monthly salary for an R&D manager will be approximately 5,000 dollars. Thus, the salary of 2 R&D managers will cost 10,000 dollars. The per month salary of a technical support team-member will be approximately 3,000 dollars. Thus, the salary of 10 technical support team-members will be 30,000 dollars (Lowe and Tinker, 2015). The monthly salary of a marketing manager will be 5,000 dollars (approximately). The salary of accounting manager, operations manager, and the sales manager will be 3,000 dollars in a given month. The monthly salary of a designer will be approximately 3,000 dollars. The monthly salary of a quality control manager will be 3,500 dollars. Thus, the salary of 2 quality control manager will be 7,000 dollars for a given month. The monthly salary of a laborer will be 2,000 dollars (approximately). Thus, the salary of 15 quality control manager will be 30,000 dollars for a given month. The total expenditure on human resource for the first year will be approximately 1,178,000 dollars (Sheikholeslami, 2011).

Financial investment will also be required for setting up the required infrastructure, conducting external analysis, purchasing machinery for manufacturing of products and developing a promotional strategy. The budget for market research will be 10,000 dollars. The annual budget for promotional activities will be 60,000 dollars. Investment is required for creating awareness among the target customers. The main expenditure will be on advertising (Lowe and Tinker, 2015). Setting up of an appropriate distribution channel and transportation network will require an investment of 15,000 dollars. Establishing the manufacturing plant and purchasing new equipment/ machinery will cost approximately 150,000 dollars. The cost of developing an ERP (Enterprise Resource Planning) system will be 10,000 dollars approximately. Implementation of ERP system will help in inventory management (Lowe and Tinker, 2015). This system will capture real-time information about the manufacturing activities and store it in a database. Establishing and maintaining the retail outlets will cost approximately 35,000 dollars.

Pricing strategy plays an important role in determining the sales volume. All the products will be moderately priced for attracting the price-conscious consumers. Thus, the profit margins will not be very high. Due to the moderate pricing of products, profit or loss will depend upon the number units sold in a given period of time. The company may not be able to make profits in the initial few months due to low sales. But, gradually the company will start making profits once the sales increase. The sales revenue will depend upon the target market segment (Lowe and Tinker, 2015). Revenue generated by the fashion house will be calculated on the basis of sales volume and the price of each unit of product sold. Revenue= quantity of product sold* price of the unit product. According to the sales forecast, the fashion house will be able to sell more than 2,000 units in the first month. The average price of a single unit will be approximately 40 dollars. The fashion house will be able to generate revenue of 80,000 dollars (approximately) in the first month of business.

Product and services

The fashion house is estimated to start making profits after the third quarter. According to financial planning and demand forecasting, the fashion house is expected to earn a profit of more than 45,000 dollars at the end of the first year (Lowe and Tinker, 2015). The profit is expected to increase by 12% in the second year of business. The profit growth in the subsequent years is expected to rise by 10% in the next four years.

Cash inflow can be defined as the flow of cash into the organization. The revenue generated by the fashion house from the sale of products will be considered as the cash inflow. Delay in payments can disrupt the cash flow of fashion house. Cash outflow can be defined as the flow of cash out of the organization. The payment made to the suppliers of raw material depends upon the cash inflow (Micheaux, 2000). It comprises of all the expenses incurred by the fashion house. On the basis of cash flow forecasting, the organization should prepare a contingency plan by taking into consideration the unexpected costs. Since the fashion house is a start-up, the opening balance for 2017 will be zero. Net cash flow is the difference between the cash inflows and cash outflows.

CASH INFLOWS (DOLLARS)
Revenue from sales	1,570,000	1,341,240	1,347,000	1,353,400	1,360,500	6,972,140
Total inflow	1,570,000	1,341,240	1,347,000	1,353,400	1,360,500	6,972,140
CASH OUTFLOWS (DOLLARS)
Office material and bills	70,000	20,000	20,000	20,000	20,000	150,000
Market research	10,000	5,000	5,000	5,000	5,000	30,000
Promotional activities	60,000	60,000	60,000	60,000	60,000	300,000
Distribution and transportation of goods	15,000	15,000	15,000	15,000	15,000	75,000
Procurement of machinery and maintenance	150,000	10,000	10,000	10,000	10,000	190,000
Setting of ERP system	10,000	0	0	0	0	10,000
Establishing retail outlets and managing operations	35,000	5,000	5,000	5,000	5,000	55,000
Training and recruitment	20,000	20,000	20,000	20,000	20,000	100,000
Employee salaries	1,148,000	1,148,000	1,148,000	1,148,000	1,148,000	5740000
Total outflow	1,518,000	1,283,000	1,283,000	1,283,000	1,283,000	6,650,000
NET CASH FLOW (DOLLARS)	52,000	58,240	64,000	70,400	77,500	322,140
Opening balance	0	52,000	110,240	174,240	244,640
Closing balance	52,000	110,240	174,240	244,640	322,140

 Table 1: Cash flow forecasting for initial five years of business

A balance sheet helps to analyze the assets, liabilities, and equity. Current assets consist of cash in hand and the investment made by business owners. Fixed assets consist of buildings, furniture, machinery and transport vehicles. These assets cannot be easily converted into cash. Current liabilities include credit card payments, payroll expenses, taxes and lease payments. The long-term business liabilities include loan payments (Micheaux, 2000). It is the responsibility of the organization to settle the current liabilities within one year. These are the obligations that the organization has towards its suppliers and creditors. Long-term liabilities can be settled after one year. Clearly defined assets and liabilities in a balance sheet help to analyze the financial position of the organization. It also provides information regarding solvency and liquidity. Short-term solvency can be calculated by means of current ratio. Current ratio= (current assets/ current liabilities). This ratio provides insights about the ability of the organization to fulfill its obligations. Equity can be calculated by subtracting the liabilities from the assets. 

Current assets
	cash	125,000	170,000	190,000	210,000	225,000
	Stock in hand	80,000	95,000	110,000	135,000	160,000
Total current assets (A)		205,000	265,000	300,000	345,000	385,000
Fixed assets
	Building/ property	965,000	965,000	975,000	975,000	975,000
	Equipment	150,000	150,000	140,000	140,000	140,000
	Furniture	20,000	20,000	20,000	20,000	20,000
	Vehicles	45,000	45,000	45,000	45,000	45,000
Total fixed assets (B)		1,180,000	1,180,000	1,180,000	1,180,000	1,180,000
TOTAL ASSETS (A+B)		1,385,000	1,445,000	1,480,000	1,525,000	1,565,000
LIABILITIES
Current liabilities
	Credit card payment	0	0	0	0	0
	Lease payment	0	0	0	0	0
	Tax payable	35,000	35,000	35,000	35,000	35,000
	Payroll expenses	1,148,000	1,148,000	1,148,000	1,148,000	1,148,000
Total current liabilities (C)		1,183,000	1,183,000	1,183,000	1,183,000	1,183,000
Long-term liabilities
	loans	150,000	150,000	150,000	150,000	150,000
Total long-term liabilities (D)		150,000	150,000	150,000	150,000	150,000
TOTAL LIABILITIES (C+D)		1,333,000	1,333,000	1,333,000	1,333,000	1,333,000
EQUITY
	Retained earnings	30,000	45,000	60,000	75,000	90,000
TOTAL EQUITY		30,000	45,000	60,000	75,000	90,000

Table 2: Balance sheet forecasting for the initial five years of business

Conducting breakeven analysis before starting a business helps to estimate the level of sales volume that will help the company in covering the costs incurred for executing the business proposal. The breakeven analysis takes into account the fixed costs and variable costs incurred by the company. This analysis helps to identify the breakeven point where revenue is equal to the total cost. A breakeven point can be expressed in terms of sales volume (number of units sold) or sales revenue (dollars). At this point, the company makes no profit or loss (PENMAN, 2010).

The fashion house will start generating profits once it surpasses the breakeven point in terms of sales volume or sales revenue. Breakeven point can be calculated using the mathematical formula where BEP = Fixed costs/ (selling price per unit- variable cost per unit). The fixed cost for the fashion house on a monthly basis will be 126,000 dollars approximately. Per unit variable cost can be estimated at 8 dollars. On the basis of a mathematical formula, the breakeven point in terms of sales volume will be 3,405 units. This means that if the fashion house sells 3405 items, the profit or loss will be equal to zero. The fashion house can make profits only if it sells more than 3,405 units. Thus the sales target should be more than 3,405 units.

References

Cui, G. and Choudhury, P. (2002). Marketplace diversity and cost?effective marketing strategies. Journal of Consumer Marketing, 19(1), pp.54-73.

Lowe, T. and Tinker, T. (2015). Information content of financial statements, financial plans, and MCS: an integration. International Journal of Critical Accounting, 7(5/6), p.427.

Mauri, A., Lin, J. and Neiva De Figueiredo, J. (2013). The influence of strategic patterns of internationalization on the accuracy and bias of earnings forecasts by financial analysts. International Business Review, 22(4), pp.725-735.

Micheaux, A. (2000). New Marketing Strategies. Interactive Marketing, 1(3), pp.328-329.

PENMAN, S. (2010). Financial Forecasting, Risk and Valuation: Accounting for the Future. Abacus, 46(2), pp.211-228.

Sheikholeslami, M. (2011). The Importance Of Earnings Forecasts, Sales Forecasts, And Cash Flow Forecasts To Stock Price Forecasts. International Business & Economics Research Journal (IBER), 2(1).

Upadhyay, A. (2014). Social Concentration on Boards, Corporate Information Environment and Cost of Capital. Journal of Business Finance & Accounting, 41(7-8), pp.974-1001.

Van?k, M., Mikoláš, M. and Žváková, K. (2012). Evaluation Methods of Swot Analysis / Metody Vyhodnocení Swot Analýzy. GeoScience Engineering, 58(2).