Executive Summary
ForHome manufactures cooking mats that are fully compostable. The company is quite young, which is the reason why customers do not trust it. The organization needs to carry out several activities to gain market share. The market for cooking utensils is quite competitive, which can cause difficulties. Retail giants such as Panasonic, Phillips, and Groupe SEB are the main competitors of ForHome. The presented company differs from these giants in that it produces unique products. This can be used as a feature and strength of ForHome. The owners must develop their innovation activities to meet the market’s requirements.
The idea that the product is completely environmentally friendly will help it become competitive in the kitchenware market. In today’s world, where environmental concerns are topical, customers prefer the products that ForHome makes. Thus, this company has a very big potential to realize that it is necessary to follow the laid-out plan. It is necessary to attract investors to expand production and advertising campaigns and hire highly qualified employees who could develop new and innovative products. This will help achieve consumer recognition and establish the company as a unique, environmentally friendly product manufacturer.
Products & Services
The company’s ForHome products are cooking mats that help the hostess easily prepare delicious and healthy food. Since the mat’s surface consists of many small pyramids, air can circulate under the food during cooking. During cooking, the food does not have constant contact with fat because excess fat drains off the pyramids and does not come into contact with the food. In addition, the food will be cooked thanks to the constant air circulation between the pyramids evenly. Using the mat virtually eliminates the burning of food, and the food has no contact with the heated surface of the oven or baking tray.
ForHome also produces covers that are completely compostable, making them environmentally friendly. In today’s world, plastic waste production is about 9 billion tons per year, and this figure is increasing every year. Less than 10% of them are recycled, about the same amount is incinerated, and the rest are in the environment (Ekvall et al., 2021). The main “depot” of plastic waste is the World Ocean – there are whole garbage islands in the Atlantic, Pacific, and Indian Oceans. Circulating currents in the Pacific Ocean have created the Big Garbage Patch.
By drifting, plastic waste reaches the most remote corners of the planet. It has recently been found that garbage can sink due to bonding with organic matter – plastic bags can even be found at the bottom of the Mariana Trench. Thus, completely compostable products are an excellent substitute for plastic. This is what makes ForHome’s products stand out, making them competitive.
Market Analysis
The market for kitchen utensils is quite broad, competitive, and segmented. The main productions are located in North America (USA, Canada, Mexico), Europe (Germany, UK, France, Russia, Italy, and rest of Europe), Asia-Pacific (China, India, Japan, South Korea, South-East Asia, Australia, rest of Asia-Pacific). Also, some productions are segmented into South America (Brazil, Argentina, rest of South America), the Middle East, and Africa (GCC, North Africa, South Africa, rest of the Middle East, and Africa). The Kitchenware market is segmented based on type, end-use industry, and application. Based on product type, the Kitchenware market is segmented into baking, cookware, and cutlery.
Groupe SEB, Panasonic, Newell Brands, Arc International, Phillips, Libbey, Zwilling, and De’ Longhi are the major companies holding most of the market. The external and internal environment analysis is done to identify opportunities and dangers that the firm may encounter in expanding its production in the industry. For this purpose, it is necessary to consider the “Five Forces of Competition” model by M. Porter.
Porter’s Five Forces Analysis
The analysis considers the concepts used in the economy’s Industrial Organization (IO) to designate five forces determining competitiveness and, therefore, the market’s attractiveness. Attractiveness in this context means a highly profitable industry. An “Unattractive” industry is one where a combination of forces acts to reduce profitability.
A change in any forces usually requires a company to re-evaluate market opportunities. The higher the pressure of these forces, the less opportunity existing companies have to increase prices and profits. A weakening of the forces creates an opportunity for the company. By changing its strategy, the company can influence these forces in its favor. The intensity of each of these forces is determined by the industry’s structure or its economic and technical characteristics.
Threat of Substitution
The first factor is the threat of substitute products. This issue is relevant to ForHome. Other analogs can replace products like cooking carpets, but their specificity(environmental friendliness) is a decisive criterion. Thanks to this feature, the chance that the products will be replaced is greatly reduced.
Buyer Power
The next criterion is the strength of consumer influence. The main consumers are retail customers, so the price depends on the competitors. Buyer seeks to find the most profitable offer, which is why ForHome should provide quality products at an affordable price.
Supplier Power
The next criterion is pressure from suppliers. As for any other company, for the company ForHome, suppliers’ influence on business is significant, but the conclusion of long-term supply contracts with pre-agreed prices and quantities of delivered products compensates for it.
Competitive Rivalry
The next factor is the competition between existing companies in the industry. To date, the main competitors of the ForHome company in terms of sales are Groupe SEB and Panasonic. These companies are quite large and influential; customers trust them. The main strength is that production facilities are located almost worldwide. That is why ForHome must strive to promote its ideas, expand production, and implement new ideas for environmental products.
Threat of New Entry
The last criterion in the analysis is the threat of potential competitors. The degree of risk of entry of potential competitors for ForHome is minimal. This is due to the need for large one-time investments, a well-established technological chain, and a long period before the production payback.
Marketing & Sales
Target Audience
The products of the company ForHome are quite in demand. The main buyers are housewives between the ages of 25 and 50 with an average income (Das & Das, 2020). Also, the eco-friendliness of the food preparation mats attracts the younger generation, which seeks to solve the global problem of plastic waste. The advantages of this product are its innovation and focus on environmental issues, and the company can be considered quite competitive.
Marketing Strategy
The marketing strategy requires following a plan that includes expanding production. Such an event will help to occupy a large part of the kitchenware market and attract investors and highly skilled workers. The next step would be to develop new and innovative products with the same composting abilities. In this way, ForHome will be able to achieve popularity on the market and thus increase its profits. Next year, considering all the changes that will be made in production, it is planned to sell about 300,000 units of the product. Also, an excellent step can be the launch of quality advertising campaigns that will help attract customers. Quality advertising will also help the company make its intentions known and attract investors.
Consumer Behavior
Consumer behavior is the foundation on which the entire marketing concept is built. Deep knowledge of consumers is a prerequisite for successful marketing activities, the basis for selecting the target market to form the marketing complex. The success of the company’s strategic development depends on understanding the motives of potential consumers and the ability to competently analyze consumers’ decision-making process to purchase goods and services.
In the USA and Western Europe, the producers’ interest in the psychology of consumers’ behavior, their methods of goods evaluation, and selection procedures appeared in the period of intensified competition and market saturation with the same-type goods due to the wide use of mass marketing. This situation conditioned the demand for research in the field of consumer behavior, opportunities to influence their behavior or at least consider its features in their activities due to the understanding of external and internal factors that shape the behavioral response of consumers, both individual and organizational. The development of marketing as a science and a sphere of human activity led to the emergence of four approaches to modeling consumer behavior: microeconomic, psychological, sociological, and integrated.
Microeconomic Model
The microeconomic approach is based on the concept of rationality, which establishes the relationship between consumer demand and objective economic characteristics such as utility and price of goods. According to the microeconomic approach, consumers aim to maximize their satisfaction, considering the existing limitations of monetary resources and having sufficient information about alternative sources of satisfaction of needs; their behavior is evaluated as rational. Thus, customers are attracted by the price and quality of the ForHome products from a microeconomic point of view.
Psychological Model
The psychological approach to the study of consumer behavior is based on such basic theories as cognition theory and psychoanalytic theory of thought. The theory of cognition plays a decisive role in the behavior of knowledge – the consumer evaluates the factors that affect him based on existing experience and target settings. There can be difficulties with the genre factor because ForHome is a fairly new firm, to which trust has yet to be formed. However, as time passes, customers will remember that the quality of this company’s products is quite good about the price.
Sociological Model
Sociological approaches to the study of consumer behavior as the basis for forming their behavior distinguish a set of roles and statuses implemented within existing social institutions that organize people’s general activities to meet society’s certain needs. A strong influence on consumer behavior is exercised by social status. Buyers of the company’s products under consideration are people from the affluent class who seek to contribute to solving environmental problems.
Company Organization and Management Team
The company is a limited liability company. The company is a legal entity operating strictly with the adopted Charter and has authorized capital, production areas, and a balance sheet. The company is managed by a Board of Directors, whose members are responsible for determining the main directions of development, development, and implementation of plans.
The company’s profit is distributed between the founders in proportion to their shares. Today most of the company’s profits come from the production of kitchen utensils and its sales to buyers and retail customers. However, this project involves further developing the company and opening a ForHome brand store.
The activities are managed by the General Director, appointed by the Board of Directors. His responsibilities include:
- solving the main issues of the organization,
- signing official documents,
- disposal of company property,
- implementing the implementation of hiring and firing of staff and
- the appointment of a commercial director.
The director is also responsible for the accuracy of accounting data. The commercial director, in turn, performs the following functions: directs the organization of marketing research and advertising campaigns and the sale of goods. The accountant and chief accountant are responsible for settlements with suppliers, accounting of goods turnover, incoming profits, expenses, payment of salaries, and preparation of accounting reports. A total of 29 people are involved in the production of kitchen utensils. Expansion of the staff (hiring administrators, salespeople, and cashiers) is possible subject to opening ForHome stores.
Financial Projections
Financial projections in a business plan are based on aspects of operations such as:
- total assets required for the organization to continue operating;
- external sources of investment, direct funding from outside;
- analysis of the main sources of fixed costs. In general cases, they are the costs for equipment, staff salaries, rent, utility bills, taxes, advertising, and others;
- definition of comfortable conditions for maximum profits and maintaining proper financial stability;
- a set of measures and strategies to obtain the investment attractiveness of the company;
- final results and intermediate indicators of cash flow.
Thus, all financial expenditures and values are listed in Appendix A. ForHome needs to attract more investors to achieve profits in a comfortable environment. The company must keep up with the industry’s scientific and technological progress.
Innovations: Pros and Cons
However, innovations are fairly quickly updated, and the technology introduced today will no longer meet the market’s new requirements after some time. Striving for constant modernization and implementation of innovations in the technological process leads to replacing still quite viable existing equipment with updated ones, increasing enterprise expenses for technical re-equipment with possibly obsolete but not yet used equipment.
Thus, the market forces enterprises to depend on the level of innovative achievements, constantly balancing between reducing costs and producing modern products. On the one hand, all this gives special relevance to reducing production costs and minimizing the expenses of industrial enterprises. On the other hand – technological re-equipment and strategic management of enterprises’ investment attractiveness require additional funding.
Increasing Investment Attractiveness
For an enterprise to be able to attract external investors to finance its projects, it is necessary to implement an appropriate set of measures to increase the investment attractiveness of the enterprise. To increase the investment attractiveness of ForHome, it is necessary to constantly improve, and update technologies, modernize equipment, and implement new types of products.
For these purposes, additional investments are needed, which provide an opportunity to increase the competitiveness of an industrial enterprise. One of the key tasks of attracting investment is to increase the organization’s efficiency; the result of any investment project should be an increase in the value of the enterprise and other indicators of its activities.
Measures aimed at increasing investment attractiveness should be carried out constantly. Not only investors and potential owners but also buyers of enterprise products, suppliers (when deciding on cooperation and granting of commodity credits), competitors (when working out their strategic and tactical actions), and other participants of market relations pay attention to the financial condition and position of the enterprise in the market.
For the implementation of investment projects, the following types of external financing can be distinguished: investments in the equity capital of the enterprise and the provision of borrowed resources. Direct investment in the company’s share capital can be subdivided into financial and strategic investments.
Financial investment in the equity capital of the enterprise is regarded as the purchase of a package of shares of the enterprise in exchange for investment with return sale of such shares to owners after some time (term of investment granting), as a rule, in such case blocking share package can be acquired. However, not a control one, or as the free sale of enterprise shares to participants of the securities market – in this case, both additional share issue and realization of a part of the available package can be performed.
The main goal of a financial investor is to get a return on invested funds and additional income from the sale of its shares after a certain period when leaving the stock market. Thus, if all measures are taken to attract investment and increase popularity in the market, a turnover of $900,000 per year is expected. The expansion of production is expected to increase this amount to $ 1 million.
References
Das, A., & Das, D. (2020). Perception, adoption, and pattern of usage of FinTech services by bank customers: Evidences from Hojai District of Assam. Emerging Economy Studies, 6(1), 7-22. Web.
Ekvall, T., Gottfridsson, M., Nellström, M., Nilsson, J., Rydberg, M., & Rydberg, T. (2021). Modelling incineration for more accurate comparisons to recycling in PEF and LCA. Waste Management, 136, 153-161. Web.