The proposed Carrena Bakers Limited is an online-based business that aims at offering quality and unique baking services at competitive pricing for customers within the city of New York. The business will specialize is all types of baking for cakes, cones, and other wheat based products for different types of customers and events. There are few web-based baking businesses within the city of New York with ability to offer customized baking services at competitive price.
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The cost of capital is estimated at $534,000. The business owners will contribute 30% of the capital while the rest will be borrowed from financial institutions, repayable within three year. The expected return at the end of the third year is $1,445,850. Therefore, the return on investment will be 54.9%. Carrena Bakers Limited will be a full-service baking website committed to the provision of superior client contentment through offering quality products, tutorial on baking, and exceptional services to the consumers such as home delivery.
Excellent customer service through the proposed Bake-ology culture consisting of online baking tutorial videos, step-by-step baking manuals, professionally baked cakes, and baking environment for customers will be critical aspects that guarantee competitive advantage. The main goal of this marketing plan is to attract the youthful clients to the Carrena Bakers Limited through the company website, where customer will get baking services and skills all-under-one-roof just by a click of a button from the comfort of their homes.
Summary of Core Business
Nowadays, People are seeking healthier life style and food. However, the pace of modern life is becoming faster and faster. People are seeking high-quality life style and are willing to spend a little time to eat healthy. This means that there is need to create a business that can help such people to get good healthy bakery in a short period of time. The proposed Carrena Bakers Limited is an online-based baking website that aims at offering quality and unique baking services at competitive pricing for customers within the city of New York.
The business will specialize offering professional consultation through videos and baking manuals, different types of cakes, and free delivery to customers who place orders just by a click of a button. The business will be located in the city of New York and will serve clients within the region. The business will be owned by three partners with equal share. The company intends to control at least 10% of the online-based baking market in the next six year by offering quality services, affordable prices, and dynamic service platforms.
Products and Services
Carrena Bakers Limited will be a full-service website committed to the provision of superior client contentment through offering quality baking services and exceptional customer service. As such, the proposed business will provide a variety of excellent services and quality products that satisfy the needs of consumers by introducing the Bake-ology culture that is characterized by convenience, professionalism, and diversity of baking products to clients.
Bake-ology is targeting young professionals who want to leverage the quality of life and discover the joy of baking, eat healthy but have very little time for grocery shopping, and do not or only have little baking experience. Carrena Bakers Limited will provide customers with a relaxed and pleasant environment for baking through the online baking tutorial videos and manuals. Therefore, offering high and superior baking services as well as client fulfillment at apposite prices will be emphasized by the business. The products will come in basic menu (price: 15-25$ per box) and premium menu (price: 20-40$ per box).
The basic menu will consist of a box of accurately measured ingredients, baking tools for baking, and a free online baking instruction is in the form of a video. The premium menu product will consist of a box of accurately measured ingredients, baking tools for baking, organic/gourmet ingredients, free online baking instructions made by experienced Michelin pastry chef, and exclusively secret tips and secret ingredients. In Addition, the premium menu will come with a special menu featuring oriental bakery and a dessert of choice. The baking services will entail a mobile baking app, customized home delivery.
The mission of Carrena Bakers Limited is to attract and maintain customers through the provision of convenience and high quality online-based baking and pastry services that surpass the expectation of the clients.
Carrena Bakers Limited will function on the pillar of convenience, affordability, and friendly consultancy services that give insight to customers. Specifically, the proposed Carrena Bakers Limited will adopt a dynamic business model that incorporates value, web-based business platform, and cost efficiency. The model will also incorporate partnership with local establishments, updated menu, and hiring Michelin pastry chef.
Under the value component, the services of the Carrena Bakers Limited will get value when it helps customers to purchase and pack material, provide cooking instruction and, whole new cooking experience. The online business platform might help the business to start small and save expense through online ads, which are very easy to make and cost efficient. The partnership component will ensure that the business partners with local farms to get organic, fresh, and cheap material.
The professional aspect of the business model will encompass hiring a Michelin pastry chef every week to make videos for customers. Lastly, to remain competitive and relevant in the market, the business will carry out frequent research on the latest baking skills, products, and ingredients in the market to ensure that its menu is updated.
The Carrena Bakers Limited will form strategic partnership with pastry chefs, local farms, and retailers of different baking ingredients to ensure that there is flow in processing orders by customers. The business will also utilize exclusive and extraordinary ways in the provision of the pastry services through customization of each product, especially within the premium menu. In addition, when the number of orders increases, the business will hire the services of an independent entity to fasten the delivery process.
The exclusive and extraordinary procedures will add competitive advantage to the firm over its rivals. Through these partnerships, the Carrena Bakers Limited will offer a new pastry service line that will be the first of its kind in the targeted market. To create sustain market penetration, the Carrena Bakers Limited will offer free and extra services to devoted clients such as discounts, free samples, vouchers for corporate organizations, and flexible payment plan among others.
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There are various factors that affect the demand for pastry services in the region of New York. First, the average income of most people in this region is $4, 927.12 US dollars. Most people earn good salaries and can afford customized cakes on a regular basis (Kotler and Keller 18). The US food industry is as old as the economy. Baking cake is a culture among the American families. The cake and pastry sales were about $ 3 billion in 2015 in New York.
The industrial organization model for the pastry food industry consists of the basic conditions (food manufacturers’ supply and food consumers’ demand), the pastry food industry’s structure (behavior of the consumers and the industry), and the pastry food industry’s performance. In the case of the US pastry food industry, growth rate, methods of purchase and substitutes influence the consumer demand side.
On the other hand, the pastry food products durability, raw materials, and production efficiency influence the supply side. The elements that may influence the pastry food industry structure are the number of producers or stores selling pastry food, cost implications, and product differentiation. Advertising and pricing influence the conduct aspect of the model (Cheverton 39). Employment and profitability influence the performance aspect.
Industry Size and Market Growth
In the US food industry, consumers have several options to choose from since stores provide a variety of pastry foods products. Despite presence of many pastry food producers, the US pastry food industry operates as an oligopoly. The industry is dominated by a few pastry food makers. The companies which dominate this industry are the Wayman Cakes and Premium Cakes among others. These companies have traditional and online business models (Mariotti 27). Premium Cakes has the largest market control of 14% with the other companies sharing the rest of the market. The table below summarizes the performance of the top four pastry food businesses in the region of New York in the US in terms of revenues for the year 2015.
|Producer (Pet Food Producers)||Operating Revenue in 2015 (million)|
|Premium Cakes||$ 11.6|
|Wayman Cakes||$ 2.1|
|New Cake Bakers||$ 1.95|
|Jones Foods Limited||$ 1.84|
The Premium Cakes, which is the largest producer of pastry food in the region of New York, realized annual revenue of $11.6 million in the year 2015. Reflectively, the performance of the above company can be attributed to the changing demand.
The youthful professionals, especially between the ages of 25-50 will be major market target for Carrena Bakers Limited due to their elastic reactions to marketing. Additionally, Carrena Bakers Limited will target middle-income earners since these individuals can consume the cakes frequently. The market research on product preference revealed that customers demand for customize, convenient, and high quality baking services.
This means that the proposed business will have a good demand on its services. The adoption of efficient and reliable technology in the marketing of the pastry food products may positively skew the market to the advantage of the current businesses and the proposed Carrena Bakers Limited. Based on the annual growth and market share for the pastry food products is positioned to benefit in the future because the industry is highly attractive, especially in the customized brands.
The proposed business can use flexible sourcing, retail distribution, and product focused differentiation to survive the impact of the competitors. The demand for pastry food has been increasing dramatically with the regional population increase. The market for pastry and baked food is project to grow at double digit of 11.6% per annum for the foreseeable future.
Carrena Bakers Limited faces very strong competition from established baking service providers within the New York region since it operates in a market where few strong brands dominate. However, Carrena Bakers Limited has potential of surviving such competition and maintaining dominance through the proposed product diversification, online business platform, and customized menus to improve on the level of demand attached to these products by potential clients. For instance, the business will be renowned for diverse products, affordable prices, and household name as few strategies for sustaining dominance in the free market (Rhim and Lee 407). The main competitors for the Carrena Bakers Limited are summarized below.
The Wayman Cakes is the leader in the industry. In addition, Wayman Cakes has become tantamount with quality and unique baking services and cake brands. In fact, Wayman Cakes has seven branches within the New York region and beyond. The business has distinct trademark as well as efficient delivery personnel. Wayman Cakes’ product philosophy is centered on quality and consumer satisfaction thereby gaining competitive advantage over rivals.
The Premium Cakes has diversified its operations in over 5 branches within the New York region through its traditional business model consisting of bakeries. The business brilliance of the firm’s management has led to its rapid expansion. Further, the Premium Cakes’ low-price strategy has been vital in the attraction of consumers. The firm has also received various international quality accolades thereby amassing numerous consumers, especially in the celebrity, weeding, and special event segments. Moreover, the Premium Cakes has been experiencing an increasing trend in revenues leading to augmented levels of growth.
Five Forces Analysis
Population in the US is one of the fastest growing in the world (Osterman 171). Projections made by the United Nations show that population will increase by 6% in the next ten years. In terms of age, the young population exceeded the aged in the year 2014. Therefore, the demand for the Carrena Bakers Limited services exists and is sustainable in the US market. This population increase will create demand for the web-based pastry services offered by the Carrena Bakers Limited.
The US is amongst the commercial hubs in the world due to series of private and government expenditure projects. By combining the increase in government expenditure with a vibrant tourism, transport, and trade, the outcome is a favorable environment to conduct the web-based baking service business. For 12 months to May 2014, inflation rose by an average of 0.7%. An increase in government expenditure implies that there is more money in circulation and people can afford to buy the pastry services offered by the Carrena Bakers Limited (Bowden 69). It is expected that exchange rate will remain stable and so the need to introduce the proposed business within a year.
Heritage and culture are valued by the targeted market. The US is a diverse, multi-ethnic, and multicultural society, which makes it a perfect market for the proposed business. High number of people consuming pastry based products means that demand for a convenient and online-based baking service provider is on the rise. Besides, English is the main language being spoken in the US. This makes it easier to tailor a marketing language within the local market to guarantee success of the Carrena Bakers Limited (Rhim and Lee 172).
Social media such as Twitter and Facebook are currently the most utilized platforms and can be exploited positively to reach more customers in the US, since the business targets the youthful customer segment. This will not only control loses, but also give an accurate record of sales and projections. This will ensure strategic product positioning for the different services that the Carrena Bakers Limited will offer.
As a legal requirement, companies in the US are expected by the regulatory authorities to be tax compliant. The taxes are remitted directly to the government. In the US, laws on commerce, certificate of compliance to taxes are issued to businesses that remit their returns accurately form which taxes are deducted. The proposed business will comply with the above laws. This will create an easy environment for the introduction and marketing of the Carrena Bakers Limited.
The main strength of Carrena Bakers Limited is presence of a well established marketing network since it will be the only company that be fully online-based and only targeting the youthful customers. As a result, the Carrena Bakers Limited will be able to reduce cost of advertisement since it will depend on online adverts, app link-sharing, referrals from the satisfied customers, and free after sales services to widen its catchment. The threat faced by the Carrena Bakers Limited is stiff competition from businesses offering the same service, especially in the traditional baking service model since they are trusted more by customers.
The current opportunities for the Carrena Bakers Limited include advancement in technology and information in reaching the user market through Twitter, Facebook, link-referral, and mobile app (Bowden 69). As indicated in the SWOT analysis, the main impediment facing the Carrena Bakers Limited is the challenge of continuous expansion in the backdrop of customer concerns on efficiency of the services offered, especially when the business begins to face challenge of meeting customer delivery deadlines. The SWOT is summarized in the table below.
|Strategy||Customized pastry services||Small market niche||Changed preferences||Business expansion|
|Technology||Twitter, Facebook, mobile app, and social media is accessible||Target client relatively impatient and might overeact as a result of late delivery of an order||Changing media forms||Online marketing|
|Competitive advantage||Affordable prices||Sustainability of the entry pricing||Changing customer loyalty||Business expansion|
|Political and economic conformity||Free market||Unstable business model since perception of online-based business is poor due to trust issues||Economic swings||Establishment of a strategic delivery channels and patnerships with local farms|
|Legal conformity||Limited conformity requirements||Sensitive business environment||Tax regime||Structured operations|
|Cultural aspects||Conformity to local culture||Challenge of wining clients||Changed customer preferences||Opportunity for expansion|
|Process and systems||Simple but effective system||Limited scope of the system||Limited staff due to low business turnover||Opportunity for expansion|
The US market is open with very minimal government regulations. The only regulations that might affect the business are taxes, environmental sustainability, and ethical business practices. The Carrena Bakers Limited will adhere to these rules.
From the above analysis, the Carrena Bakers Limited is well positioned to gain maximum benefits of the current and future free market opportunities in the web-based pastry services within the region of New York. Besides, the company intends to have an active presence in all the regions through active online presence and offers very competitive prices for its high quality products, to ensure that it is well positioned to survive the demand related swings in the currently oligopolistic market.
As a strategy for maintaining dominance above other oligopolistic competitors, the company will introduce the above products as multiple services that are customized to meet the demand of each client. Despite competition from other brands, the above analysis indicates that the proposed Carrena Bakers Limited has potential of further growth and expansion in the New York pastry and baking sector.
The initial capital proposed to be introduced is set at $154,000 and the venture will try to arrange for a long-term loan of $534,000 with an interest rate of 10% payable quarterly. The repayment of the loan will take place in 5 years time. For calculating the cash flow, sales will be made both on cash and credit and there will be an accounts payable of 15 days outstanding. Similarly, for the supplies of materials, the venture will enjoy a credit period of 15 days. The venture will invest $348,000 in property, plant and equipments and this amount will include the cost of furniture, fittings and office equipments, since the company must establish a collection and delivery points. The operations will be carried out initially in rented premises. Rental advance of $99,600 being 12 months’ rent in advance is payable.
Cash Flow Budget Statement
Carrena Bakers Limited. Cash flow budget statement For the three year period ended 31st December.
|Particulars||Start up||Quarter 1||Quarter 2||Quarter 3||Quarter 4||2017||2018||2019|
|Estimated Sales Units||6000||11500||13000||19,500||50,000||52,500||56,700|
|Electricity and Utilities||4260||4260||4260||4,260||17,040||17,892||19,323|
|Other Admin expenses||3060||3060||3060||3,060||12,240||12,852||13,880|
|Property and Equipment||348,000||0||0||0||0||348,000||365,400||394,632|
|Net cash (A) – (B)||240,400||-1810||60060||68335||46,285||431,270||452,834||489,060|
Carrena Bakers Limited. Income statement For the three year period ended 31st December.
|Less: Cost of Sales||-522,000||(548,100)||(591,948)|
|Electricity and Other Utilities||17,040||17,892||19,323|
|Other Administrative Expenses||12,240||12,852||13,880|
|Interest and Depreciation||76,600||80,430||86,864|
|Profit for the year before tax||340,920||357,966||386,603|
|Less: Taxation (30%)||-102,276||(107,390)||(115,981)|
Balance Sheet Statement
Carrena Bakers Limited. Balance sheet statement As at 31st December.
|Property and Equipment||348,000||365,400||394632|
|Total Fixed Assets:||324,800||341,040||368,323|
|Total Current Assets||620,120||651,126||703,216|
|Total Current Liabilities||172,276||180,890||195,361|
|Net working capital||447,844||470,236||507,855|
|Source of Fund:|
|Net Profit for the year||238,644||250,576||270,622|
Breakeven point in units is computed by dividing fixed costs with contribution per unit. The calculation of breakeven point for the year ended 31st December 2017 is presented below.
- $498, 000
- Average contribution per menu $15.06
Breakeven point = Fixed costs/ Contribution per unit
- 33,068 units
This would imply for the costs and the revenues to match with the costs, the company will have to produce, 33,068 units. There would be no profits or losses at this point.
Breakeven point in sales value = BEP in Units x Sales price
- 33,068 × $25.1
Breakeven point as a percentage of capacity = BEP in Units x 100/Capacity in Units
- 33,068 × 100 / 50,000
The table below shows profit at different level of sales revenue and cost.
Break Even Table
The graph presented below shows the values of sales, revenue and break-even point.
The Carrena Bakers Limited will exist as a partnership venture controlled by three owners who have equal shares. The business will be organized into a formal venture that is based online with a logistics department to do collection and delivery of customer orders.
In the case of the Carrena Bakers Limited, the management will consist of a business manager, coordinator, logistics manager, and marketing manager. The business manager will be tasked with the duty of ensuring that the business guidelines are met within an efficient utilization of resources. Under the business manager will be the coordinator. The business coordinator will form the primary link between the manager and other units of the business. Under the coordinator will be the logistics officer and the marketing manager. The head of logistics and the marketing manager will ensure a smooth flow of the business activities in the company through constant coordination with the sales team consisting of 6 sales persons.
The board will consist of a president, vice president, and general manager who double up as the partners in the venture. The roles will be circulated after every two years since the partners will have equal shares.
The business will be duly registered as a partnership venture within the commercial laws in the US.
The business will be operated from a centralized location at the headquarters in New York with regional collection and destruction offices being opened annually in the downtown region. The company intends to enter the New York pastry and baking market at the beginning of the year 2017 and projects to grow at the rate of 10% for the next five years.
Accounting and Legal
The business will hire one qualified accountant on a fulltime basis and a company secretary on a contractual basis. The secretary will be a lawyer with qualification in the US commercial laws.
The business owners will take an insurance cover, especially covering the bank financing, business assets, and legal fees from customer complaints.
Risk Factors and Exit Strategy
Since the business will be online-based, the main threats that might affect it include regulatory, hacking, and virus risks. The business will adhere to legal and ethical practices besides hiring an administrator to monitor viruses and other unethical activities from third parties.
The business is projected to breakeven at the end of the second operation year. Should this fail, the management will give the business an additional year after which an exit strategy will be plotted. The exit strategy will involve either selling the establishment at its current value by the year 2020 or partnering with the most established business as a franchise.
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Cheverton, Philip. Key Marketing Skills: Strategies, Tools, and Techniques for Marketing Success, London, UK: Kogan Page, 2009. Print.
Kotler, Philip, and Kevin Keller. eMarketing Management, New Jersey, NJ: Pearson Prentice Hall. Print.
Mariotti, Steve. Entrepreneurship: Starting and Operating a Small Business, New York: Prentice Hall, 2007. Print.
Osterman, Paul. “Job Design in the Context of the Job Market.” Journal of Organizational Behavior 31.2 (2010): 401–411. Print.
Rhim, Hosus, and Chan Lee. “Assessing Potential Threats to Incumbent Brands: New Product Positioning Under Price Competition in a Multi Segmented Markets.” International Journal of Research in Marketing, 22.1 (2005): 159-182. Print.