XYZ Limited Specializes in Manufacturing and Marketing Essay

  • Length: 6 pages
  • Sources: 3
  • Subject: Business
  • Type: Essay
  • Paper: #42953466

Excerpt from Essay :

XYZ Limited specializes in manufacturing and marketing of Computer Laser Accessories, and the management of the company has decided to increase the sales within the next five fiscal years using aggressive marketing campaign, and supplier acquisition. Using this strategy, the company will achieve its sales objectives. The first part of the paper discuses the company sales forecast for the next five years. The second part discuses the strategy that the company will employ to achieve its sales objectives. The last part discusses the pro-formal financial statements of the company showing the company profit and loss statements and balance sheet.

Market Analysis

XYZ Limited will use the first three months to implement the following to achieve the sales objective:

Recruiting marketing, operations and sales professionals,

Design the company website, and Design marketing and sales campaigns.

To enhance effective the company sales forecast, it is critical to provide the market analysis. As being revealed in the Table 1, the company potential markets are in the following segments:

Business Presentation Systems,

Home Entertainment Systems,

Upgrade Kits

Based on the data in the table 1, the company will record higher sales in the Home Entertainment Systems than the Business Entertainment System and Upgrade Kits segment. However, the overall sale forecast will increase from 3 million products to more than 6 million products from the first year to the fifth year.

Table 1: Market Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers

Growth

CAGR

Business Presentation Systems

34%

1,400,000

1,876,000

2,513,840

3,368,546

4,513,852

34.00%

Home Entertainment Systems

80%

200,000

300,000

700,000

1,400,000

2,100,000

80.01%

Upgrade Kits

(40%)

1,400,000

840,000

504,000

302,400

181,440

(40%)

Total

74%

3,000,000

3,016,000

3,717,840

5,070,946

6,795,292

74.01%

Sales Strategy

XYZ Limited sale strategy is to fix the price that will make the company product be more attractive to consumer. The company will offer low price for its products and the pricing strategy will assist the company to rapidly penetrate the market. To boost sales, the company will use a business initiative through supplier acquisition, product marketing, and corporate expansion. One of the strategies that the company will employ to increase the sales years is to employ backward integration. The backward integration is the strategy that will be used to acquire profitable suppliers within the industry. Major objective for the acquisition is to provide the company with the economic of scale. More importantly the supplier acquisition will assist the XYZ Ltd. To become more efficient in its existing product line, The backward integration will also assist the company to enjoy cost saving and improve efficiency. For example, the backward integration will assist the company to reduce the transportation costs, improve profit margin as well as assisting the company to be more competitive. Thus, XYZ Company will be more efficient and decline the costs of operation if the company relies on suppliers that are more efficient. Typically, it will be profitable for the XYZ Ltd. To rely on suppliers for cheap materials to manufacture its goods. The strategy will assist the company to reduce the cost of operations, which will consequently assist the firm to offer its product at cheap prices thereby increase sales for the year. (Hunold, Roller, & Stahl, 2009).

The XYZ Company will also use bulk purchase of materials to enjoy the advantage of procuring materials at cheap price. Moreover, the company will a use a strong bargaining power to procure cheap materials. The strategy will assist the company to record higher profit margin and low cost of production. Based on the benefits that the company will derive from the business operation, the supplier acquisition will start at the beginning of the next fiscal year to assist the company to enjoy the sale's increase.

Marketing Strategy

The company will also use a marketing mix that comprises of combination of price, product, promotion, and place to boost sales. The company will use effective marketing strategy to enjoy short-term and long-term sales using sales promotion. Manuere, Edison, & Kudakwashe,(2012) argue that sale promotion is an effective marketing technique that enhances organizational performances and the use of efficient and effective sale promotion campaign can arouse consumer interest in product, which consequently enhance repeat purchase. Mark, (1992) also points out that sale promotion is different from personal selling, public relation and advertising, however, sale promotion is usually considered as a tactical activity deployed on a short-term basis. The best approach is to treat sale promotion as a strategy to sustain a competitive advantage.

Using the sale promotion, the XYZ Company will be able to stimulate and increase consumer demand for the product. Typically, sale promotion will be used to persuade, inform and remind customer about the company product. The company will use a combination of trade shows, premium, rebates, store display, coupons and in-store display for the sale promotion.

While the company will use sale promotion to achieve a short-term sale objective, the XYZ will use the advertising technique to notify consumer about price discount to attract consumer to the product. Moreover, the company will use a rebate promotion to encourage customer to purchase combination of two or more product. The rebate promotion will increase the frequency of purchase. (Mark, 1992).

The company will also use coupons to increase sales and coupons will be distributed through media magazines, newspaper, and freestanding insert and at the point of sale. The company will also use a premium to boost sales. A premium is a tangible compensation or incentive for performing a particular act. The company will reduce price for consumer as incentive to enhance a repeat purchase. Additionally, the company will use a premium to build awareness, and awareness is an overall strategy to build competitive advantages. The company will also use a premium to stimulate a deferred purchase, and the strategy will assist in sharpening the company brand name.

Despite the effectiveness of sale promotion in boosting sales, however, sales promotion is not effective to achieve a long-term sales objective. The competitors can easily clone sale promotion strategy adopted as each marketer will try to attract consumer attention. The best strategy to address this shortcoming is to use an online promotion. The online promotion is very effective marketing campaign due to its low costs of operation and its long-term effect. The company will use combination of web directory submission, SEO (Search Engine Optimization), banner exchange; Google Adwords sponsored links, and social networking to reach online customers thereby increase sales between the first and the fifth fiscal year. (Adrian-Gabriel, 2012, Changchien, Lee, & Hsu, 2004).

Sales Forecast

The table 2 reveals the sales forecast that the company will record between the first year and the fifth year. Based on the marketing campaign that will be adopted, the company expects to increase the total sales from $645,500 in the first year to over $16 million in the fifth year.

Table 2: Sales Forecast

Year 1

Year 2

Year 3

Year 4

Year 5

Sales

Upgrade Units

$12,910

$72,000

$96,000

$120,000

$150,000

Upgrade Kits

$632,590

$3,528,000

$4,704,000

$6,600,000

$8,800,000

Licensing Revenue

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

Total Sales

$645,500

$5,600,000

$8,800,000

$12,720,000

$16,950,000

Direct Cost of Sales

Year 1

Year 2

Year 3

Year 4

Year 5

Upgrade Units

$0

$0

$0

$0

$0

Upgrade Kits

$0

$0

$0

$0

$0

Licensing Revenue

$0

$0

$0

$0

$0

Subtotal Direct Cost of Sales

$0

$0

$0

$0

$0

The company will sell approximately 13,000 kits in the first year and the sales will increase to approximately 100,000 kits in the third year. However, the company expects to record the sales of over 200,000 kits in the fifth year. The paper provides the financial plan based on the sale forecast.

Short-term and Long-term Financing Needs

The short-term financial needs are to use the company working capital to stimulate sales campaign to generate sales. However, the long-term financial needs are to increase the company sales yearly from $600,000 in the first year to more than $16 million in the fifth year. The company will manage its working capital by reducing the costs of operation to increase yearly net profits. Based on the company pro-formal financial statements, the company has been able to achieve its both short-term and long-term financial needs.

Financial Plan

This section provides the financial plan for the XYZ Company and the financial plan comprises pro-forma profit and loss statements and the balance sheet for five-year projections. The pro-formal financial statements are based on the following important assumption.

Important Assumptions

Ability of the company to achieve the target financial objective is based on the following assumptions, which is influenced by the economic environment.

General Assumptions

Year 1

Year 2

Year 3

Year 4

Year 5

Plan Month

1

2

3

4

5

Current Interest Rate

8.00%

8.00%

8.00%

8.00%

8.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

Tax Rate

25.42%

25.00%

25.42%

25%

25.40%

Other

0

0

0

0

0

Projected Profit and Loss

The company projected Profit and Loss statements forecast expenses over the first five years. Some of…

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