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Natural Fruit and Beverage Company and Italian Beverage Company Proposal

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Updated: Apr 26th, 2019

Background

The beverage industry in the United Kingdom is well developed. There are firms that have been in this industry for several years. They have taken a large share of the market. Companies such as Natural Fruit and Beverage Company and Italian Beverage Company are well developed in this market.

They have a deeper understanding of the market and therefore can manipulate market conditions to favor them. This makes the market very competitive. However, apart from all these, a clear gap ought to be filled through creative business idea (Ghemawat 1991, p. 47).

The consumers of fruit juice are not fully satisfied in most markets in the United Kingdom. Bigger companies produce their products in mass. However, fruit juices may not take this long. For this reason, these kinds of products have remained popular in the UK market.

It is upon this realization that the researcher decided to draw a report that would lead to the establishment of the firm that would operate in this market.

The business opportunity

Fruit juice is a snack that is very popular among the people of UK. From those on trips or tours to those from or to work, as well as school-going children, fruit juice is a common product. It is popular because it is easy to consume and it is refreshing.

A product has a ready market. Competition in the market is not very stiff because major beverage firms have not considered this type of product. Once introduced in the market, sales of the product are assured (Ghemawat 1999, p. 89)

The product

Description

Fruit juice, just as the name suggests, is a juice made from fruits. It is very natural, with no additives. The juices are squeezed from their fruits to make the beverage using a special machine called the blender. The juice is then stored in a cool place but not necessarily under refrigeration.

Customers would be served the product in plastic cups with a straw. No such additives as food color or sugar would be added. The product would be free of any industrial product. It is simple and natural.

Novel features and benefits for users

This product is pure and natural. It is the best product for anyone who feels thirsty. It is even better than water because it is as natural as water but on top of having 75% water content, it is also rich in vitamins and other nutrients. It does not have chemicals found in cola products or such other related drinks (Oster 1994, p. 67). It is of benefit to one’s health. Medics from all over the world recommend it.

Achievement to date

The project is yet to be enrolled in the market. However, the team has successfully identified the location where the project would be launched. All members have made their contributions. The team has drawn a proposal that would be presented to donors.

Technology development milestones

This product does not require sophisticated technology to be successful. It requires simple tools in order to accomplish its production. Although there are new blenders, which are bigger and more efficient, this has not brought a big shift from what has been in use.

However, refrigeration advancements have had positive impacts on it. The product is highly perishable and having storage facilities that lower its temperatures not only make the product more durable but also more refreshing.

Intellectual property

Although this project may not have much in terms of intellectual property, measures have been put in place to impede anyone from implementing its blue print before it enters the market. The business plan would remain an intellectual property of the firm.

Opportunities for further development/expansion

This project has the capability of advancing to cover other cities not covered in its first phase. The project would start with the London market. Because of the projected sale, it is planned that after one year, it would be rolled out to the city of Manchester.

The market for this product is big and the requirements needed are simple and readily available within the immediate environment.

The raw materials used are inexpensive and can be obtained from within the locality (Besanko & Dranove 1996, p. 67). To expand production, it may not need much effort. With the market readily available, the project would easily take off in other markets outside the initial one.

The Market

Market structure

The UK market targeted by this project is varied in terms of age, gender, and level of income. The product targets both male and female customers. It also cuts across ages as young, middle aged and the old would find it refreshing.

Market trends and drivers

The market driver for this product is, among other factors, weather. This market is easily affected by weather (Porter & McGahan 2007, p. 41). During hot seasons, the market for this product becomes very large. Many people become attracted to the product because of its refreshing nature.

During cold season, sales may drop, as many would prefer other beverages such as tea and coffee. However, health sensitive customers would still come for the product even during this period. The market is learning more on healthy food, a fact that boosts the sales of this product.

Market segmentation

According to Kanniainen & Keuschnigg (2005, p. 74), the easiest way to navigate the market is to segment it according to its similarities and differences. When segmenting the market for this product, demographical characteristics of the targeted market would be given emphasis.

Although the product is popular across ages, the level of consumption varies according to age. Teenagers and young adults constitute the most attractive segment. In terms of income, middle-income earners constitute the most attractive market segment.

Target markets

Key characteristics

As stated above, teenagers and young adults constitute the most attractive market segment. Some of the characteristics make the market attractive. One of it is that individuals in this group are spendthrifts. They love leisure and would go for it at all costs within their means.

Fruit juice offers them a relaxed feeling when out on a tour or travel. They rarely bargain and most of their payments are always made in cash. These groups like partying. During such parties, it would be easy for the marketing team to secure an order from them to supply the product in such parties.

Size and future growth estimates

The size of the target market is huge. Within the city of London alone, the number of teenagers and young adults is great.

The competition

Key competitors

Several competitors for this product in London exist. There is a direct and an indirect competition in this market. The indirect competitors are very advanced in this market. The Coca Cola Company offers a wide range of products that come as direct substitutes for fruit juice (Amable 2003, p. 56).

With brands such as fanta, sprite and cold tea, the company creates a very strong competition in the market. To the health sensitive individuals who want to quench their thirst, this Company comes with its bottled water that is, Dasani. There is also a direct competition from smaller firms offering fruit juices in the same market.

Barriers to entry

This market operates like a perfect competition market. The government has been keen on encouraging entrepreneurship in the country. Any barrier to new firms wanting to join this industry is eliminated. The only barrier that remains therefore is the market knowledge.

There are investors who are keen on entering this market. However, because they lack appropriate knowledge about the market, they prefer to stay away. Though not meant to be a barrier, some investors consider the registration process and charges concerning the same as a barrier.

Our competitive advantage

Our firm has a competitive advantage in the market (Porter 1990, p. 66). The product has been proven free of any industrial product. Furthermore, various physicians have recommended due to its health sensitivity policy.

To those offering similar products, the product packaging and pricing would be the cutting edge for our product. The product would be sold at a slightly lower price. Our customer care service would be responsive to the needs of customer. Communication would also be enhance to increase this satisfaction.

Commercialization Plan

Business objectives

The project is guided by well-laid objectives. The main objective is to turn the project into a powerhouse in the beverage industry in the UK. In so doing, we hope to be one of the major employers in the kingdom.

Overall Business Strategy

The project plans to employ an outward in approach in conducting its activities once the project becomes operational. Strategic goals would be laid after taking into consideration what the market wants (Casper & Matraves 2003, p. 1871).

Key commercialization milestones

The planners of this project have conducted market analysis and have successfully understood market requirements. For the commercialization process, the team has identified a suitable location where it would take place. All relevant stakeholders have been informed.

Marketing strategy

When introducing the product in the market, the team has planned to offer the product to the market at break-even prices for the first one week. This low price is meant to draw customers to the firm and create a name. After the first week, normal pricing, which would be market friendly, would be adopted. The business would also employ other customer attraction strategies.

Production and operations

The members will carry out production and general operation. The members would run the project during the initial years. As the firm grows, it is planned that relevant skills would be employed to manage production and operations of the firm.

Risk analysis

In every business venture, there are always some risks that would be faced in the market. One such risk is customer indifference. Because it is a new business unit, some customers may fail to identify it. Market competition in itself is a risk.

Management

The current members and their roles

This project was started by a group of ten high school graduates from different schools within the city of London (Hollingsworth 2000, p. 597). They were motivated by the need to have an income-generating project that would help them be self-reliant.

They elected project coordinator, who also doubled as the chairperson of the entire team. He was the team’s representative to the outside world. To help him lead this team, a secretary and a treasurer were also elected.

All members have the duty to ensure that activities of the group are operational. All the activities of the firm were to be conducted by members without hiring any individual.

Future management needs

As the project grows, the current members would consider hiring some external skills, especially in the management. Because the current team has no technical expertise on issues of strategic management, it plans to hire a few graduates in the field of management as the business grows (Porter 1980, p. 56).

There would also be the need to hire a few college graduates in food and beverages. They would be bringing their knowledge into the firm so that the firm would be in a position to not only respond to the changing needs of the market but also meet the regulatory procedures put in place by the concerned bodies.

Financial projections

At the inception level, the major source of finance is expected to be the contributions from the members in form of subscription fees. However, the project is expected to be self-supportive within the fourth month of operation. Further details about the financial projection are given in the appendix below.

Key revenue assumptions

There are some revenue assumptions that have been made in coming up with the plan for this project. The first assumption that was made was that the project would be self-supporting within its first four months of operations.

It is assumed that within this period, the project shall have overcome the initial challenges and would be in a position to break-even within the period (Hall & Soskice 2001, p. 35). It is assumed that after the fifth month, the firm would start registering positive returns in its revenues. It was also assumed that the project proposal would be considered for initial funding by the concerned donors.

Key expenditure assumptions

The team assumed that the expenditure of the project would be within its budget constrain. It is believed that the initial purchase, which would involve purchase of the machines and other required tools, as well as the raw materials to start the project, would take up about forty percent of the total amount that would be available for the project.

The project would use the remaining percentage to ensure that daily production needs are catered for (Gompers & Lerner 2004, p. 57). The amount that would be obtained from the daily operations would be ploughed back to the project.

Sources of finance

The sources of finance for this project are divided into three categories. The first category would be funding from the members of the project. From the subscriptions and annual payments, the project would have some amount to further the project.

The project hopes to obtain further funding from donors who would consider the project viable and worth investing. Their funding may come in form of grants or loans that would be refunded later (Peteraf 1993, p. 182). The last source of funds would be the proceeds from the business. This is expected to be the main source of finance for the organization in the end.

Exit for investors

Investors in this project would exit at their own pleasures. However, here are well laid procedures for such members to leave, especially when they need a refund. All the members are assigned a value of shares according to their contributions. This value would increase or decrease, depending on the growth of the firm. When leaving, the member would sell his or her shares to other members. If no member would be willing to buy the value, then the business fraternity would buy it and appropriately refund the leaving partner.

Cash Flow Forecast

Projected Cash Flow
2013
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Cash Flows from Operating Activity
Cash receipts from customers 15,300,000 16,500,000 17,400,000 18,300,000
Cash paid for raw materials -600,000 -620,000 -640,000 -700,000
Cash paid for Direct Labor -2,000,000 -23,000,000 -2,350,000 -2,370,000
Cash paid for Selling, Gen, Adm. Exp. -3,200,000 -3,400,000 -3,400,000 -3,600,000
Net Cash Flow from Operating Activities 9,500,000 -10,520,000 11,010,000 11,630,000
Cash flow Flows from Investing Activity
Equities issued 3,200,000 0 0 0
Bonds Issued 4,000,000
Equities purchased -1,000,000 0 0 0
Net Cash Flow from Investing Activities 6,200,000 0 0 0
Cash Flow from Financing Activity
Interest payments -300,000 -300,000 -300,000 -300,000
Dividends receipts 150,000 160,000 160,000 170,000
Dividends payment -250,000 -270,000 -280,000 -280,000
Net Cash Flow from Financing Activities -400,000 -410,000 -420,000 -410,000
Net Increase in Cash 15,300,000 10,930,000 10,590,000 11,220,000
Beginning of Year Cash Balance 9,200,000 24,500,000 13,570,000 24,160,000
End Year Cash Balance 24,500,000 13,570,000 24,160,000 35,380,000
2014
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
18,900,000 19,800,000 20,700,000 21,600,000
-710,000 -730,000 -760,000 -810,000
-2,400,000 -2,500,000 -3,670,000 -3,700,000
-3,500,000 -3,700,000 -4,200,000 -4,400,000
12,290,000 12,870,000 12,070,000 12,690,000
0 0 0 0
0
-4,000,000 0 0 0
-4,000,000 0 0 0
-300,000 -300,000 -300,000 -300,000
200,000 600,000 660,000 750,000
-300,000 (350,00) -350,000 -400,000
-400,000 300,000 10,000 50,000
7,890,000 13,170,000 12,080,000 12,740,000
35,380,000 43,270,000 56,440,000 68,520,000
43,270,000 56,440,000 68,520,000 81,260,000

List of References

Amable, B 2003, The Diversity of Modern Capitalism, Oxford University Press, Oxford.

Besanko, D & Dranove, D 1996, Economics of Strategy, John Willey & Sons, Nueva York.

Casper, S & Matraves, C 2003, “Institutional Frameworks and Innovation in the German and UK Pharmaceutical Industry”, Research Policy, Vol. 32, no. 1, pp 1865–1879.

Ghemawat, P 1991, Commitment, The Dynamic of Strategy, Free Press, New York.

Ghemawat, P 1999, Games Businesses Play: Cases and Models, MIT Press, Cambridge.

Gompers, P & Lerner, J 2004, The Venture Capital Cycle, MIT Press, Cambridge.

Hall, PA & Soskice, W 2001, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford University Press, Oxford.

Hollingsworth, RJ 2000, “Doing Institutional Analysis: Implications for the Study of Innovations”, Review of International Political Economy, Vol. 7, no. 1, pp 595–644.

Kanniainen, V & Keuschnigg, C 2005, Venture Capital, Entrepreneurship, and Public Policy, MIT Press, Cambridge.

Oster, SM 1994, Modern Competitive Analysis, Oxford University Press, Nueva

Peteraf, MA 1993, “The Cornerstone of Competitive Advantage: A Resource-Based View”, Strategic Management Journal, Issue.14, no.1, pp 179-191.

Porter, ME 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, London.

Porter, ME 1990, The Competitive Advantage of Nations, London, MacMillan Press. Porter, ME & McGahan, MA 2007, “An Interview with Michael Porter”, The Academy of Management Executive, Issue 16, no. 1, pp 2-44.

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