Innovative Aluminum Closets will specialize in designing quality aluminum closets. The entrepreneur’s motivation to venture into the storage solutions market was spurred by identification of the high demand for creative storage solutions. The firm will not only ensure that its closet systems offer efficiency with reference to storage but also address the customers’ aesthetic needs. This goal will be achieved through the provision of high-quality aluminum closet designs.
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The firm intends to grow progressively by developing a strong customer base. This goal will be achieved by ensuring that the customers’ closet systems needs are duly addressed. Therefore, the firm’s will ensure that its closet systems are customized effectively to promote the rate of customer retention. Innovative Aluminum System will target the institutional and individual customers. A slim management team will facilitate the firm’s operations to minimize the overhead cost.
However, the firm will ensure that individuals in the management and operational levels are adequately qualified. The firm will market its products through traditional and conventional methods such as advertising through online and print media. The adoption of the direct and indirect sales strategy will enable the firm to generate high sales revenue and profit.
- Innovative Aluminum Closets intends to become the leading provider of innovative aluminum closet systems.
By venturing into the home storage solutions market, Innovative Aluminum Closets intends to achieve the following objectives.
- To grow the firm’s market share by 25% within the first year of its operation.
- To progressively attract and retain customers by offering customized closet systems in accordance with the customers’ quality and design specifications.
- To progressively grow the sales revenue by 30% annually to maximize the firm’s profitability.
Innovative Aluminum Closets is a small private limited company that is registered under the Company’s Act in the United Arab Emirates. The founder, Mr. Mohammed Bin Twafiq, will own the firm.
The firm is located in Abu Dhabi in the United Arab Emirates.
The firm intends to venture into the home organization market in the United Arab Emirates. The rationale of venturing into this market has arisen from identification of the high market opportunities. The firm’s core product will include offering customized aluminum closets. A human resource base of 40 employees will facilitate the firm’s operational activities. The firm will ensure that the employees possess different specialties to ensure effective and efficient operations.
The firm will deliver unique experiences to its customers through its customized aluminum closets. The unique experience will be attained by focusing on offering clients perfect aluminum closets designs and ensuring that the products are aligned to the customer’s needs. Innovative Aluminum Closets will be committed to maintaining a long-term relationship with its clients. This move will enable the firm to address the possible issues and complaints raised by customers. The timely response to customers’ problems will improve the level of customer satisfaction. The after sale service will be facilitated by a well-designed warranty. This approach will improve firm’s market reputation.
Market analysis summary
Innovative Aluminum Closets has an opportunity to attain a competitive position in the domestic and regional storage solutions market. The management team at Innovative Aluminum Closets is cognizant of the fact that the firm’s performance will be influenced by the prevailing market condition. Ferrell and Hartline support this perspective by affirming that the prevailing situation in a particular market influences the industry structure (136).
In turn, the nature of the industry determines the attractiveness of a particular market. However, to ensure that the market conditions do not negatively affect the firm’s performance, Innovative Aluminum Closets will ensure that its operations are aligned with the market needs. This outcome will be achieved through effective market segmentation. Therefore, the firm will subdivide the target market into homogeneous submarkets. The rationale of segmentation is to improve the ease and efficiency with which the firm undertakes the marketing activities such as marketing communication (Strydom 190). Moreover, it segmentation will improve the likelihood of the firm identifying potential market niches.
The firm will target the individual and institutional customers in the United Arab Emirates. The rationale for targeting the two customer groups is to increase the likelihood of achieving profit maximization.
Target market segmentation strategy
The firm’s market segmentation strategy will be based on two main market segmentation strategies that include behavioral segmentation and psychographic segmentation. Behavioral segmentation strategy will be implemented by focusing on the benefit sought. The benefit segmentation strategy will be actualized by taking into account two main behavioral segmentation variables that include benefit sought and price sensitivity.
Benefit sought segmentation will be achieved by taking into account the benefits that the customers intend to achieve by purchasing a particular product. The rationale for integrating the benefit segmentation strategy arises from identification of variation in the benefits that customers intend to achieve by purchasing a particular product. Strydom asserts that marketers continuously attempt to identify the most important benefit that customers seek in their marketing process (180).
The firm was motivated to offer innovative aluminum closets due to the recognition of the view that consumers appreciate aluminum closets because of their durability associated with aluminum closets. The motivation to introduce innovative aluminum closets has been stimulated by identification of the changing lifestyles with reference to storage. On the other hand, the price sensitivity variable will entail segmenting the market on the degree to which the target customers are price sensitive and value conscious (Ferrell and Hartline 136).
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Psychographic segmentation strategy will enable Innovative Aluminum Closets to address the target customers’ attitudes and opinion regarding storage. Moreover, the adoption of psychographic segmentation strategy will enable the firm to align its products with the customers’ values and lifestyle such as the need for safety and convenience (Ferrell and Hartline 136). The firm will ensure that the aluminum designs are movable hence increasing the level of convenience.
Service Business Analysis
The storage solutions market in the developed and developing economies such as the United Arab Emirates is undergoing remarkable growth. The demand will arise from the increase in need for an effective organization both at homes and within institutions. Moreover, the projection of the markets growth is expected to arise from growth in the real estate market. The markets growth will be accelerated by the increase in consumer spending arising from economic recovery within the country.
The consumer spending in the UAE has undergone remarkable increase in the level of disposable income because of the high oil reserves and economic diversification. Demographic change is another factor stimulating the demand for a closet storage system. Consumers in the United Arab Emirates are increasingly demanding effective organization, creation of spaces and personalized designs in their homes. The demand for storage solutions will not only be spurred by the need for effective organization within homes but also within garages.
A report released by the “Freedonia Group” in 2013 identifies the demand for storage solutions within garage to have overtaken that of homes (4). “Freedonia Group” further affirms that the demand for storage facility beyond the bedroom has increased substantially (4).
The market for the closet system is dominated by storage solutions made of different materials such as plastic, wood, and metal. Despite the availability of alternative storage solutions, the market for metallic storage solution is remarkably high because of the associated durability and safety. The growth in innovative closets in Dubai will be motivated by the emergence of professional organizing companies in the UAE. The UAE has experienced remarkable growth in home and office organizing companies over the recent past (“DeCluttr Me” par. 3).
Businesses cannot shield themselves from risks. Therefore, Innovative Aluminum Closets might encounter risks market and industry risks. The market risk that the firm is likely to encounter might arise because of adverse movement in market prices. The firm might encounter operational risk. According to Lore and Borodovsky (727), operational risks arise due to deviation from the projected outcome. One category of operational risk that the firm might encounter entails business risk.
For example, the firm might face risk due to product obsolescence, price competition, and high rate of product substitution. The existence of intense competition might also present a fundamental source of business risk. Innovative Aluminum Closet might also face event risk such as business interruption, because of technological failures and natural disasters. Changes in the regulatory environment such as an increase in the level of taxation and political changes might also increase the risk faced by the firm.
Strategy and implementation summary
The strategy of Innovative Aluminum Closet is to consolidate its skills in offering customized products. Thus, the firm will ensure that its customized aluminum closets are aligned with the customers’ needs and wants. To achieve this goal, the firm will ensure that a high level of expertise is integrated into designing the closets. Moreover, the firm will adopt a collaborative approach in developing the customized closet system. Therefore, the firm will collaborate with the customer in the designing process. Through this approach, the firm will succeed in improving the functionality and aesthetic specified by the client.
The implementation of the above strategy will be achieved by taking into consideration the following components –
Innovative Aluminum Closets is focused on meeting the storage solutions demand of the different customer categories that the firm has targeted. The firm will achieve this goal through the development of a comprehensive product portfolio. However, the product diversification process will strictly be limited to closets. This assertion means that that the firm will not diversify to other forms of storage solutions such as cabinets.
The firm will base its product portfolio development process on a comprehensive market research. The research will be aimed at identifying the customers’ needs and wants. Basing the product diversification process on the market research will improve the rate of the closets gaining high market acceptability. The product diversification strategy will enhance the capacity with which the firm develops a strong customer base. Subsequently, the likelihood of maximizing the sales revenue will be enhanced substantially.
The firm will derive competitive advantage from its expertise in designing and developing innovative aluminum closets. The firm will ensure that its closets are unique based on the customers’ needs. This aspect means that the firm will not design the custom cabinets based on a predetermined template. Additionally, the firm will ensure that the raw materials used in developing the closets are of high quality. One of the aspects that the firm will focus on ensuring that the aluminum closets entails adherence and exceeding the set industry standards in the designing and production process. The expertise and skills of the employees will enable the firm to succeed in delivering the customer promise.
Innovative Aluminum Closets will focus on maximizing its sales revenue. Thus, the firm will adopt two main sales strategies that include direct and indirect sales strategy. Direct sales strategy will involve marketing directly to the target customer through different channels such as email and telephone.
The direct sales strategy will also be implemented by conducting online marketing. To reach a large number of customers through online marketing, the firm will market the closets through well-established online marketing platforms such as Amazon. The rationale for integrating the direct sales strategy is to nurture a positive relationship with the customers.
The indirect sales strategy will involve the use of agents. Thus, the firm will enter into a contract with independent agents. The agents will be charged with the responsibility of selling and distributing the company’s closet at a commission.
The firm intends to generate a profit of $1,000,000 within the first year of its operation. The firm also intends to have attained a market share of 20% within six months of its operation.
A slim management team will facilitate the firm’s operation to minimize the cost of overhead. The key positions in the management team are outlined herein.
Founder [Chief Executive Officer]
Mohammed Bin Twafiq, the firm’s founder, will serve as the firm’s President and Chief Executive Officer. The founder will also ensure that the closets are developed in accordance with the customers’ needs and industry specifications.
The firm’s Vice President will be charged with the responsibility of overseeing the administrative functions of the different departments. The Vice President has expertise in designing metal products, management, and public relations.
A team of experienced designers will facilitate the production activities. This aspect will ensure that the final products meet the market specifications. To promote efficient production and marketing activities, the firm has formulated a comprehensive personnel management plan. The plan outlines the level employee compensation in the different levels of management. The firm intends to increase the level of employee compensation progressively to ensure a high level of employee satisfaction. The chart below illustrates the budget summary of the projected personnel plan. It is projected that the overall personnel management cost will range between $ 40,000 and $45,000 during the first year of operation.
|Level of management||Amount in US$|
|Chief Executive Officer||40,000||45,000||50,000|
|Total estimated payroll cost||183,000||220,000||227,000|
The firm’s operations will be guided by the philosophy of mutual respect and responsibility. The firm’s management team will ensure that the relationship between the employer and the employee is based on the employment contract. To promote an environment conducive for working, Innovative Aluminum Closets will adhere to the stipulated employment law. One of the critical aspects that the firm will focus on in developing the working environment entails adopting a flat organization structure. This will promote efficient communication and sharing of information both vertically and across the various departments. Therefore, the decision-making process will be fostered due to the elimination of bureaucracies.
Firms’ pro forma income statement
The table below illustrates a summary of the projected income statement for the first three years of operation. The firm intends to increase its level of profitability over the years.
|Items||Amount in US$|
|Direct sales cost||200,000||190,000||210,000|
|Other cost of sales||40,000||55,000||70,000|
|Sales total cost||240,000||245,000||280,000|
Cost of labor
|Cost of promotion||150,000||160,000||165,000|
|Cost of depreciation||40,000||45,000||50,000|
|Total operating expense||439,000||501,000||518,000|
|Profit before interest & tax||321,000||1,054,000||1,602,000|
Pro- forma balance sheet analysis
The table below illustrates Innovative Aluminum Closets pro-forma balance sheet for the period ranging between 2016 and 2018.
|Current assets |
|Other current assets||55,000||60,000||75,000|
|Fixed assets |
Long term assets (machinery)
|Total fixed assets||160,000||60,000||20,000|
|Capital and liabilities |
|Other current liabilities||40,000||50,000||150,000|
|Total current liabilities||75,000||95,000||200,000|
|Long term liabilities||95,000||70,000||45,000|
|Paid in capital||180,000||180,000||180,000|
|Total capital and liabilities||435,000||615,000||905,000|
Firms projected cash flow analysis
Innovative Aluminum Closets has projected a positive cash flow. The positive cash flow will enable the firm to meet the set milestones successfully. The firm expects the cash flow to grow progressively over the years in line with the projected level of profitability. The management intends to finance its first phase of its operation using credit finance. In the course of its operation, the firm intends to maintain a steady cash flow.
This aspect will arise from the integration of e-commerce in its marketing process. The use of e-commerce technology will enable the firm to acquire the full retail price hence maximizing the firm’s profit levels. Through the integration of the electronic fund transfer, Innovative Aluminum Solutions will succeed in increasing direct sales collection.
|Amount in US$|
|Cash from operation|
|Cash from receivables||150,000||200,000||250,000|
|Total from cash operations||550,000||800,000||900,000|
|Other cash received|
|Sales tax& VAT received||40,000||52,000||45,000|
|New long-term liabilities||0||0||0|
|Sale of other current asset||0||0||0|
|Sales of long term assets||0||0||0|
|Total cash received||597,000||852,000||945,000|
|Payment on bill||600,500||550,500||640,000|
|Total on operation||680,000||640,500||740,000|
|Other cash spending|
|Sales tax & VAT paid||0||0||0|
|Principal paid on current borrowing||7,000||0||0|
|Additional liabilities on principal payment||0||0||0|
|Principal payment –long term liabilities||25,000||24,000||20,000|
|Purchases on other |
|Purchase of other long term assets||0||0||0|
|Total cash spent||712,000||664,500||760,000|
|Net cash flow||115,000||187,500||185,000|
The break-even analysis chart below illustrates that the firm will achieve a breakeven point at the point when it generates sales worth $52,000. However, the firm will progressively evaluate changes in the break even depending on changes in business operations.
The entrepreneur recognizes that the likelihood of continued future ownership and management of the firm cannot be guaranteed. Therefore, the founder appreciates the importance of effective exiting from the business to receive a return of financial and personal investments made over the years. Nevertheless, the founder is committed to ensuring that the enterprise remains as a going concern entity. However, the certainty of the business gaining remarkable market performance is not guaranteed. Therefore, the firm will formulate different exit strategy depending on the prevailing outcome as expounded herein.
Company growth is in parallel with market share
In the event that the firm achieves extraordinary market performance as depicted by the movement in the price of its share in the stock market, the exit strategy will then be based on floating the company’s share through an Initial Public Offering [IPO]. Floating the company’s share in the stock market will enable the firm to venture into the national market for home organization solutions. Therefore, the likelihood of the firm generating high value from the market will be improved considerably.
Company growth as moderate with lukewarm response from the public
If the firm experienced moderate growth but yet to gain high recognition from the public, the firm will adopt the Employee Stock Ownership Plan [ESOP] as the exit strategy. This strategy entails selling the company’s shares to the employees (Hiduke and Ryan 338). The rationale of integrating this strategy is to preserve the firm’s operations. By selling the firm to the employees, the entrepreneur will be guaranteed of the firm attaining future success because of the extensive knowledge regarding the firm’s management and operations. The adoption of the ESOP as the will also enable the entrepreneur to benefit from the tax advantage. To implement the exit strategy successfully, the entrepreneur will seek the input of an experienced ESOP specialist.
Company fails to grow and market does not respond to our services
In this case, the firm’s exit strategy will entail selling the firm to the competitor. However, the choice of the competitor will be based on a comprehensive criterion such as the effectiveness in designing and maintaining the quality of aluminum closets. Subsequently, the firm will be certain that the new owner will be able to deliver the original customer promise intended by Innovative Aluminum Closet.
Ferrell, Charles, and Michael Hartline. Marketing strategy; text and cases, Mason: Cengage, 2014. Print.
Freedonia Group: Home organization product 2013. Web.
Hiduke, Gail, and John Ryan. Small business; an entrepreneur’s business plan, New York: Cengage Learning, 2013. Print.
Lore, Marc, and Lev Borodovsky. The professional’s handbook of financial risk Management, Oxford: Butterworth-Heinemann, 2000. Print.
DeCluttr Me: Are you feeling cluttered and disorganized 2016. Web.
Strydom, Johan. Introduction to marketing, Cape Town: Juta Academic, 2004. Print.