A Comprehensive Project

For

The partial fulfillment of degree course

Masters of Business Administration (MBA)

A Business Plan

Gud Bread
Project Guide- Dr. Sanjay Medhavi

Submitted to: - Submitted by:-

Dr. Sanjay Medhavi Atul Kumar
(Dept. of business Admn) Roll no. 901113017
MBA( E-Business)

Department of Business Administration

Lucknow University
Lucknow

Page no: 1
 Acknowledgement
I hereby take of Business Administration, Lucknow University, for
her guidance the opportunity to express my profound sense of great
reverence, awe and gratitude to all of them who have helped me in the
successful completion of this desertion project.
I wish to express my sincere gratitude to Mr. Sanjay Medhavi, and
his support rendered to me in solving my problems and difficulties that I
faced in completing this task on such a varied and vast subject.
I will be failing in my duty, if I do not acknowledge my heartfelt thanks
to Dr. J.K. Sharma (H.O.D) and all the teaching faculty of Department of
Business Administration, Lucknow University, for their esteem guidance
and support rendered to me.
Last but not the least I take this opportunity to express my heartfelt
appreciation for my colleagues for their support and encouragement.

Page no: 2
 Introduction
The proposed company plans to establish a project for baking the flavored
breads in different and unique shapes and sizes. Every bakery offers the bread,
which is milky or simple, or diet in only one usual flavor. No bakery offers the
flavored breads so far. This company’s main concern is the baking of that
bread. This company will helps in enjoying the people the different flavors in
different shapes. All the relevant data has been collected from the bakeries and
the market. Its baking process is almost identical to the baking process of the
simple bread. There’s no problem in getting the required equipment as well as
the material as it is all locally available.
The company “gud Bread” is the first company concerning with the
manufacturing of the flavored bread. It is the company, which don't only deals
with the different flavors of bread but also the shapes of the bread.

We are a full service providing bread bakers offering a wide variety of fresh
breads, which have unique flavors and shapes. We have that new world style
taste and freshness that is all but obsolete in today's society.

Nature of business
This business is owned by single owner. Nature of business of The Bread
Bakers is to carry out the breads such as: Flavored breads and multi –shaped
bread.

Mission Statement
To provide our customers with bread that actually looks and tastes good.

Vision
The building of a community within the baking industry who voluntarily come
together to meet common need and accomplish common goals.

Keys to Success:
• Providing best quality product
• Competitive Pricing
• Providing unique and innovative product

Page no: 3
Management Plan
gud bread pvt. Limited company is owned by single owner . To run this
organization successfully I need to have various department and well qualified
managers to run each of the department .this company includes various
department which are given below

• Production Department

• Purchasing Department

• Finance & Accounts Department

• Marketing Department

Start-up Summary:
Gud bread start-up costs will include all the equipment needed for the office,
machinery required to manufacture breads , the construction of the factory and
all the necessary equipment, and other essentials for making bread.

Manufacturing unit Location and company profile

Name: Gud Bread

Location: Ismailganj , chinat road , Lucknow

Status: Private Limited Company

Working days: 365 Production capacity: 20000(approx.)-breads

Our manufacturing unit is located in Ismailganj ,chinhat road, lucknow.

We have selected this place because land is cheaply available here, there are
economical rent charges and we have our own transportation facility so this is
very feasible for us.

Page no: 4
Raw Material
We procure our Raw material from that is flour , milk and eggs etc from open
market in bulk whick makes it coast effective as we get some discount from
open market .

Following are the main raw material for the proposed project:
• Flour
• Yeast
• Flavors
• Milk
• Eggs etc.
The entire raw material is locally available in abundance. There is no problem
in collecting the raw material from the local sources.

Characteristics of the project

The project, which is being initiated in response to the market demand, will
produce quality breads according to the customer’s needs. The product will be
a new product in the market. Presently there is no such brand, which produces
such flavored breads in unique shapes. The existing bakeries are producing the
simple breads but this unit will initiate a new trend in the market. These items
have a main emphasis on the morning time when the breads are mostly utilized.
It is basically for those persons who are taste conscious and look for some thing
new for their breakfast. This item will be distributed to all the exiting bakeries
where a separate shelve will be placed.

Distribution Channels
Bread is easily available in every bakery. As we are offering different flavors of
bread so we have decided that our distribution channels will be all existing
bakeries like yellow bakery, good bakery, Asim bakery, al-Meraj bakery, etc
and most of the departmental stores of Gomti Nagar , Indira Nagar nishatganj,
alambagh etc. We try to cover most of the stores of lucknow .We choose these
distribution channels because these bakeries already have a large number of
customers they daily visit these bakeries & when they will see our product over
there they would surely like to have these flavored bread, and each
departmental stores also have fixed number of regular customer so the reason
of choosing these bakeries and departmental stores is that we are new in the
market & we have no customer orientation. That’s why our distribution
sourcesare all these existing bakeries.

Page no: 5
Competition and Buying Patterns
Competition in the local area is very competence and does not provide this
innovative kind of bread in different flavor and size. Local customers are
looking for a unique and new high quality bread. They desire a unique, classy
experience.

Leading competitors such as Britannia bread , Gomti bread purchase high

quality raw materials such as eggs , flour , flavor , milk etc in abundance they
have large amount of market share. Their main competitive advantage is their
high quality bread and their brand image. they also have very effective
distribution network. But our main focus is to sell bread in unique flavor such
as chocolate, fruit nut etc and in different shapes to provide consumer
something new and better product. So because of our new product we have to
create our own market my communicating the uniqueness and the quality of the
product.

competitors like Britannia and gomti bread make fresh and high quality bread
and they have very effective distribution network too. Our main focus is that to
differentiate our product from the product offers by other competitors. Provide
unique and new kind of bread with high quality standards. Although my some
competitors sell their bread in all across the country and some cover most of the
area of Lucknow, and we initially focus on the some selected area of Lucknow.

MANAGEMENT’S ABILITY TO DELIVER THE PLAN

To extend the plan in the good manner we have a charted accountant which
deals with all kind of special financial decisions. We have different department
in our bakery which makes control over each and every activity of bakery.
Production department head has responsible for production of breads, financial
head is responsible for daily financial matters of bakery and marketing head
deals with all kind of selling and purchasing , marketing promotions and all
managements.

Page no: 6
Product Profile:
Main Products
As all the other existing bakeries are providing the three main types of bread so
with the flavored breads our main emphasis will be on the same three breads
which includes:
• Milky bread
• Simple bread
• Diet bread

These introduced flavors are available in each bakery.

Bread flavors
Our bread flavors along with our brands include the following flavors

• Chocolate flavored bread by Bread Bakers

• Strawberry flavored bread by Bread Bakers

• Vanilla flavored bread by Bread Bakers

• Mango flavored bread by Bread Bakers

• Pineapple flavored bread by Bread Bakers

• Banana Chip flavored bread by Bread Bakers

• Fruit Nut Breads by Bread Bakers

• Butter Top Bread by Bread Bakers

• Cheese flavored bread by Bread Bakers

• Garlic flavored bread by Bread Bakers

• Ginger flavored bread by Bread Bakers

Page no: 7
Bread shapes
Our bread is not only concern with the flavors but also with the shapes of the
bread, and there are different shapes which includes :

• Oval
• Round
• Square
• Triangle
• Rectangle
• Long-shaped
• Cone-shaped

Specialty
Most of the people don’t like corners of the bread. The Bread Baker’s is the
first who consider this need first and now introducing the corner less bread first
time in the area. Our specialty is in corner less bread in different sizes as well
as flavors.

Future Integration
In future we, The Bread Baker’s are panning to launch a new product…The
Stuffed Bread. It is new and different concept. Stuffed bread is a product in
which different material will be stuffed according to the choice of our
customers.

PRODUCTION PROCESS: CAPACITY IN VIEW OF

DEMAND TECHNOLOGY

We are in business of bread production organization. So it considers as a

continues process because it has made daily demand for production and also
consist as a daily meal for society. We are following the continues process for
production here due to fulfill the demand on the daily basis.
The way that businesses create products and services is known as the
production process.

Page no: 8
There are three main parts to the production process as can be seen
in the diagram below:

FACILITIES, EQUIPMENT AND MACHINERY

Our product line includes

• Bakery Machinery
• Bakery Oven
• Biscuit Making Machinery
• Bread Slicing Machine
• Food Processing Equipment
• Food Processing Mixers, Oil Dryer
• Rotatary Rack Ovens
• High Reliablity Rotatory Rack Ovens
• Oil-Gas Heated Deck Oven
• Electric Deck Oven

Page no: 9
Our infrastructure is equipped with following machines:

• Tig welding machine

• Sheet bending machine
• Welding machine
• Drilling machine
• Grinding machine
• Sheet cutting machine
• Sheet punching machine

Our team comprises following professionals:

• Machine operators
• Quality auditors
• Admin
• Skilled/Technical
• Semi skilled

The salient features of the products

• New and innovative kind of bread

• Available in many flavor
• Available in different shapes which makes it more attractive
• High quality bread

QUALITY CONTROL PLANS:

INSPECTION

we are specially take inspection for all the stages of production of all kind of
breads. These are the daily meals and people were consuming it upto large
scale. We have to check the bread at the time of baking to packaging and check
the each and every single unit of bread.
It is not done with census because we are in the business of daily meal so we
have to check all the units of the breads.

Page no: 10
Market Analysis
Bread comes under FMCG goods and it consume in huge amount as a
breakfast on daily basis. Therefore it has huge market and this market has so
much to attract new entrant if he/she provide something innovative and better
product.

Market Research
Before starting any business it is important to recognize the need of customer
that either there is demand of particular product exists or not.
The Bread Bakers conducted the research, which shows that the flavored bread
is one of the innovations and people are willing to use it.we use questionnaire
and personel interview method to conduct our research work.

TACTICS Segmentation Target Positioning

SBU’s
Geographic urban
Gud bread Application ,
Education literate
Quality and price
Income group middle & high

Target market
The Bread Baker’s are providing their products in different sizes in very
reasonable prices. Our main emphasis is on middle-income group and higher
income group.

Age Distribution
The Bread Bakers conducted the research on the basis of age sector to analyze
that which age sector will like our bread most.
According to our research:
o Children from age of 10 to 15 years will like it 38%.
o People from the age of 15 to 22 years will like it 25%.
o People from the age of 22 to 35 years will like it 23%.
o People from the age of 35 onwards will like it 14%
This research shows that younger are more willing to use our product.

Page no: 11
Market Distribution
The Bread Baker’s also conducted research on the basis that where they should
provide there product in which quantity
The research shows that we should provide our product in Gomti Nagar market
43% of our production. 23% in Indira nagar, 10 % in chinat area near colleges
hostel and personal hostel, 8% in Nishatganj area, 12% in alambagh area and
4% in rest of the area.

Strategies
As we are providing bread in different flavor and different shapes and no other
player providing this so we do not have any direct completion but our product
can be better substitute for regular bread . our main focus is on to provide
bread to middle and high income group people on daily basis.

PRICING STRATEGY

Penetration pricing
As we are in the initial stage so our main emphasis is to penetrate in the market
by capturing the market share.
There are many pricing strategies but we have to choose this penetration
pricing strategy because we are the new entrants & we want to capture a big
market share so we have chosen this type of strategy to penetrate in the market.

PRICES
All the existing bakeries are offering the following prices of the breads

Milky bread Rs 25
Simple bread Rs 20
Diet bread Rs 30

But we are providing the following prices of the flavored breads.

o Fruit Nut Breads Rs. 30/-

o Chocolate flavored bread Rs. 30/-
o 100% Whole Wheat Bread Rs. 30/-

Page no: 12
Entrance Strategy
The entry growth strategy for The Bread Bakers should be to focus initially and
more specially to youth and status-quo customers.

Marketing Strategy
The Bread Bakers needs a comprehensive marketing strategy based on
company’s philosophy, potential growth strategy and long-term objectives of
gaining a strong hold in the bread industry.

SWOT Analysis

Strengths
• New product innovation in local area. So it will attract the people of local
area.
• No specific competitor.
• Reasonable prices. Our bread will be easy available for lower income group
also.
• Easy availability. Our outlet is Meer and China and these bakeries have their
outlets in main parts of the city so the access to our product is very easy.

Weaknesses
o No brand recognition. Our name in baking industry is new so most of the
people are not familiar with bread bakers.
o No separate outlet. We don’t have enough finance to construct our separate
outlet.
o No customer orientation in local areas. As we are newly introduce in
Gujranwala so the customer is not oriented in the brand.

Opportunities
o First mover advantage. This product is introducing in Gujranwala for the very
first time so there is no specific competitor of bread bakers so this is an
opportunity. So the number of customers with us will be more than any other
competitor in flavored bread baking industry.

Threats
o New product, may people don’t accept the flavored bread
o Competitors working in Islamabad may enter in local market.
o Imitation by existing bakeries. May Meer and China try to copy it.

Page no: 13
 Financial Plan
Financial Plan

The following sections will outline important financial assumptions.

Basis and Presumptions:

1. The Project Profile has been prepared on the basis of Single Shift of 8 hours
a day and 25-working days in a month at 75% efficiency.
2. It is presumed that in the first year, the capacity utilization will be 70%
followed by 85% in the second year with 100% in the subsequent years.
3. The rate of salaries and wages for skilled workers and others are on the basis
of the minimum rates in the state of U.P.
4. Interest rate for the fixed and working capital has been taken @15% on an
average whether financed by the Bankers or Financial Institutions.
5. The margin money required is the minimum 30% of the total capital
investment.
6. The rental value for the accommodation of office, workshop and other
covered area has been taken @ Rs.20 per Sq.mtr.
7. The rates in respect of machinery, equipment and raw materials are those
prevailing at the time of preparation of the project profile and are likely to vary
from place to place and supplier to supplier. When a tailor made project profile
is prepared, necessary changes are to be made.
8. The pay back period may be 5-years after the initial gestation period.
9. The gestation period in implementation of the project may be to the tune of 6
to 9 months which include making all arrangements, completion of all
formalities, market surveys and tie-ups etc.

Page no: 14
Sales Forecast

Sales Foercast 2008-09 2009-10 2010-2011

SALES
Simple Breads 75,900 96,000 120,000
Milky breads 36,400 48,000 60,000
Diet breads 80,000 96,000 120,000
Flavor breads 59,400 84,000 100,000
Total Sales 251,700 324,000 400,000

Direct Cost of 2008-09 2009-10 2010-2011

Sales
Simple Breads 22,770 28,800 36,000
Milky breads 10,920 14,400 18,000
Diet breads 32,000 38,400 48,000
Flavor breads 23,760 33,600 40,000
Subtotal Direct
89,450 115,200 142,000
Cost of Sales

Page no: 15
 Financial Aspects

A. Fixed Capital

1. Land and Building

SI Description Amount (in Rs.)
No.
1. Land and Building (rented)
@Rs. 20 Sq. Meter (per month) 2,000
Covered Area 100 Sq. Meter

2. Machinery and Equipments

SI Description Qty. Amount (Rs.)
No.
1. Bakery Machinery
1 2,75,000

2. Bakery Oven
1 35,000

3. • Food Processing Mixers, Oil

Drye 1 35,000

4. • Rotatary Rack Ovens

1 45,000

5. • High Reliablity Rotatory

Rack Ovens 1 15,000

6. Bread Slicing Machine

2 5,000

7. Oil-Gas Heated Deck Oven

1 5,000

8. • Electric Deck Oven

- 10,000

Page no: 16
 9. Electrification and Installation
Charges - 42,000
@ 10% of cost of Plant and
Machinery
10. Cost of Office furniture and
Equipment etc. - 30,000
Total 4,97,000

3. Pre-Operative Expense 20,000

Total Fixed Capital (1+2+3) 5,17,000

Page no: 17
B. Working Capital (per month)
(i) Staff and Labour

SI. Designation No. Salary Amount

No. (in Rs.) (in Rs.)
(a) Administrative and Supervisory

1. Production Manager 1 5,000 5,000

2. Supervisor/Store-keeper 1 4,000 4,000
3. Accountant 1 3,000 3,000
4. Salesman 3 3,000 9,000
5. Peon/Watchman 1 2,000 2,000
6. Sweeper 1 1,500 1,500

(b) Technical, Skilled and Unskilled

1. Skilled Worker 3 3,000 9,000

2. Semi-skilled Worker 2 2,500 5,000
3. Helper 4 2,000 8,000

Total 46,500
Perquisite @ 15% 6,975
Total 53,475

(ii) Raw Material

SI Description Qty. Rate Amount
No. (in Rs.) (in Rs.)
1. Wheat Flour (Maida) 4000 8 per Kg. 32,000
Kg
2. Yeast , flavor , milk, eggs etc
1000 - 1,47,000
3. Packaging material - - 1,25000
Total 3,04,000

Page no: 18
(iii) Utilities
SI No. Utilities Amount
(in Rs.)
1. Electricity 5,000
2. Water 1,000
Total 6,000

(iv) Other Contingent Expenses

SI No. Description Amount (in
Rs.)
1. Rent 2,000
2. Postage and Stationery 500
3. Advertisement and Publicity, Legal Fee etc. 1,000
4. Telephone 500
5. Repair and Maintenance 500
6. Transportation 1,000
7. Consumables 500
8. Sales Expenses 3,000
9. Insurance 500
10. Miscellaneous Expenses 500
Total 10,000

(v) Total Recurring Expenditure (per month)

SI No. Description Amount (in
Rs)
1. Salaries and Wages 53,475
2. Raw material 3,04,000
3. Utilities 6,000
4. Other Contingent Expenses 10,000
Total 3,73,475

Working Capital (for 3 months) [3,73,475 x 3] Rs. 11,20,425

Page no: 19
C. Total Capital Investment
Particulars Amount (in
Rs.)
Fixed Capital 5,17,000
Working Capital (for 3 months) 11,20,425
Total 16,37,425

FINANCING OF THE PROJECT

The enterprise, gud bread is planning to procure its fund through two major
sources.
Source of finance (in INR lakhs) percentage
Owner’s capital 9.00 53
Loan from 8.00 47

sourcesof finance

owner's capital
loan

Financial Analysis

Page no: 20
1. Cost of Production (per annum)
SI No. Cost of Production Amount (in
Rs.)
1. Total Recurring Cost 44,81,700
2. Depreciation on Machinery and Equipment 46,700
@10%
3. Depreciation on Office Equipments 6,000
And Furniture @ 20%
4. Interest on Total Capital Investment 2,45,614
@15%
Total 47,80,014 ~
47,80,000

2. Turn over (per annum)

SI No. Description Qty. Rate Amount
(units.) (per Kg.) (in Rs.)
1. Milky bread
10000 25 2,50,000
2. Simple bread
5900 20 1,18,000
3. Diet bread
6000 30 1,80,000
4. Flavor bread
6000 30 1,80,000
Total 7,28,000
Less: Sales expenses@ 2,54,800
35%
Net Sales Realization (turn 4,73,200
over)
(per month)
Net Sales Realization 56,78,400
(turn over)
(per year)

3. Net Profit (per annum) (Before Income Tax)

Page no: 21
 Sales – Cost of Production = 56,78,400 – 47,80,000 = Rs. 8,98,400

Projected Profit and Loss

Page no: 22
The following table shows the projected profit and loss for gud bread.

Particulars 2010-11 2011-12 2012-13

Sales (A) 56,78,400 68,95,200 81,12,000
Less: -Direct cost of sales:
Wages & Salaries 6,41,700 7,79,207 9,16,714
Raw Materials 36,48,000 44,29,714 52,11,429
Utilities 72,000 87,429 1,02,857
Dep. on machinery & equipments 46,700 42,030 37,827
Cost of Good Sold (B) 44,08,400 53,38,380 62,68,827
Gross Profit (A – B) (C) 12,70,000 15,56,820 18,43,173

Less :–Indirect Exp.

Rent 24,000 24,000 24,000
Postage and Stationery 6,000 6,771 7,543
Advertisement and Publicity, 12,000 13,543 15,086
Legal Fee etc.
Telephone 6,000 6,771 7,543
Repair and Maintenance 6,000 6,771 7,543
Transportation 12,000 13,543 15,086
Consumables 6,000 6,771 7,543
Sales Expenses 36,000 40,629 45,258
Insurance 6,000 6,000 6,000
Dep. on office equipments & 6,000 4,800 3,840
furniture
Miscellaneous Expenses 6,000 6,771 7,543
Total Indirect Expenses (D) 1,26,000 1,36,370 1,46,985
Profit Before Interest & Tax(C – 11,44,000 14,20,450 16,96,188
D)
Less Interest 2,45,600 2,82,456 3,11,948
Profit Before Tax 8,98,400 11,37,994 13,84,240
Less Prov. for Tax 35% 3,14,440 3,98,298 4,84,484
Profit after Tax 5,83,960 7,39,696 8,99,756

Projected Balance Sheet

Page no: 23
The following table represents the financial position of the gud bread at the
end of each of the three upcoming fiscal years.

Particulars 2010-11 2011-12 2012-13

Liabilities:
Owner’s Fund 16,37,425 18,83,025 21,65,481
Retained Earnings 8,98,400 11,37,994 13,84,240
Sundry Creditors 1,25,000 1,45,000 1,75,000
Total Liabilities 17,62,425 31,66,019 37,24,721

Assets
Fixed Assets:
Machinery & Equipments 4,67,000 4,20,300 3,78,270
Office Furniture 30,000 24,000 19,200
Pre-operative Expenses 20,000 - -
Current Assets
Receivables 50,000 70,225 90,278
Stock in Hand 3,04,000 9,23,200 11,90,300
Cash at Bank 7,00,200 14,25,900 17,30,000
Cash in Hand 1,91,225 3,02,394 3,16,673
Total Assets 17,62,425 31,66,019 37,24,721

Business Ratios

Page no: 24
1. Gross Profit ratio
= (Gross Profit/Sales) * 100
= (12,70,000 / 56,78,400)*100
=22.37%

2. Net profit ratio

= (Profit after tax / Sales) * 100
= (5,83,960/ 56,78,400) * 100
= 10.28%

3. Return on total investment

= (EBIT / Total Investment)* 100

= (8,98,400 / 16,37,425) *100
= 54.87%

4. Fixed assets turnover ratio

= Sales / Fixed assets

= 56,78,400 / 5,17,000
= 10.98 time

5.Total asets turnover ratio

= Sales / Total assets

= 56,78,400 / 17,62,425
= 3.22 times

Page no: 25
 6.Stock turnover ratio

= Cost of goods sold / Stock

= 44,08,400/ 36,48,000
= 1.21 times

Break even analysis

Page no: 26
SI No. Fixed Cost (per annum) Amount (in
Rs.)
(a) Total Depreciation (on machine, equipment, tools
and furniture 52,700
(b) Rent 24,000
(c) Interest on borrowing 2,45,614
(Total Investment)
(d) Insurance 6,000
(e) 40% of Salary 2,56,680
(f) 40% of Utilities 28,800
(g) 40% of Other Contingent Expenses 36,000
(excluding rent and insurance)
Total 6,49,794

B.E.P = Fixed Cost X 100 / Fixed cost + Profit

= 6,49,794 X 100 / 6,49,794 + 8,98,400
= 42%

BEP (in Rs) =Sales * Fixed cost / Contribution

= 56,78,400*6,49,794/ 41,30,206
= Rs 8,90,217.78

BEP (in Months)

Monthly Sales = Sales / 12 months
= 56,78,400/12
BEP (in months) = Break even Sales / Monthly Sales
=8,90,218 / 4,73,200 = 1.88 months

Cash Flow Statement

Page no: 27
Calculation of Cash From Operation:
Particulars 2008-09 2009-10 2010-11
Net Profits 5,83,960 7,39,696 8,99,756
Add:
Interest 2,45,600 2,82,456 3,11,948
Tax 3,14,440 3,98,298 4,84,483
Depreciation 52,700 46,830 41,667
Total 11,96,700 14,67,280 17,37,855
Add: Decrease in Current - - -
Assets
Add: Increase in Current
Liabilities
i) Sundry Creditors - 20,000 30,000

Less: Increase in Current

Assets
i) Receivables 20,225 20,053
ii) Stock 6,19,200 2,67,100
Less: Decrease in Current - - -
Liabilities
Cash From Operation - 8,07,855 14,20,702

Cash Flow Statement:

Inflow 2009-10 2010-11 Outflow 2009-10 2010-11

Opening 9,20,439 17,28,29 - -
Balance 4
Cash from 8,07,855 14,20,70 Closing 17,28,29 31,48,996
operation 2 Balance 4
17,28,29 31,48,99 17,28,29 31,48,996
4 6 4

BIBLIOGRAPHY

Page no: 28
Links:
• http://www.businessplans.org

• http://www.morebusiness.com

• http://www.bplans.com

• http://www.businessplanarchive.org

Books:
• Marketing Management

By Philip Kotler & Keller

• Accounting for Managers

By N. shrinivasan

Page no: 29
 A Comprehensive Project
For

The partial fulfillment of degree course

Masters of Business Administration (MBA)

A Business Plan

Reader’s Choice Book Store

Project Guide- Dr. Ajai Prakash

Submitted to: - Submitted by:-

Dr. Ajai Prakash Prakhar Singh(61138)
Dept. Of Busi. Admn. MBA (E-business)

Department of Business Administration

Lucknow University
Lucknow

Page no: 30
 Acknowledgement
I hereby take the opportunity to express my
profound sense of great reverence, awe and
gratitude to all of them who have helped me in the
success completion of this desertion project.
I wish to express my sincere gratitude to
Dr.Ajai prakash,Department of Business
Administration, Lucknow University, for his guidance
and support rendered to me in solving my problems
and difficulties that I faced in completing this task on
such a varied and vast subject
I will be failing in my duty, if I do not acknowledge
my heartfelt thanks to Dr. J k Sharma (HoD), Mr.
Sanjay Medhavi, Department of Business
Administration, Lucknow University, for their
valuable guidance and support rendered to me.
Last but not the least I take this opportunity to
express my heartfelt appreciation for my colleagues
for their support and encouragement.

Prakhar Singh.

Page no: 31
 Declaration

This comprehensive project titled

Reader’s Choice Book
Store
Is my own piece of work and has been prepared for
the partial fulfillment of MBA(E-Business) Degree
(2005-7).

Also that this project is not submitted anywhere for

the award of any research work, degree, or diploma.

Prakhar Singh .
MBA (E-Business)
Roll No: 61138

Page no: 32
EXECUTIVE
SUMMARY

Page no: 33
 READER’S CHOICE BOOKS

INTRODUCTION

Company:
Reader’s Choice Books is a new retail business venture due to
begin operations on may 1, 2008 in the city of Varanasi. The
business is a book and magazine store. It is the goal of the
company owner to attract and retain customers with the habit of
book reading. This the owner tends to accomplish through low
price, a dominant selection of products, a competitive variety of
services including hard to find book search or on demand book
availability, plus a relaxing ,friendly environment that encourages
browsing and book reading.

Ownership:
Reader’s Choice Books will be a sole proprietorship business
venture in the city of Varanasi. The company will be owned by
Mr.Prakhar Singh who himself is a voracious book reader and
through this book store intends to convert his hobby into a
profitable business.

Page no: 34
Products/Services:
Reader’s Choice Books will offer a wide range of books and
magazines including just about every conceivable category namely
fiction , non-fiction, science, business, children’s, hobbies,
tourism and other types of books. In addition to bestsellers in both
fiction and nonfiction, the company will also offer a selection of
books pertaining to tourism,hobbies,religion etc.. A selection of
books written by nationally and internationally renowned authors
will also be made available. Part of the shelf space will be
allocated to children's books and related publications. Other types
of books will be added depending on customer demand. In addition
,we offer a search and order service for customer seekng to find
hard to get items. Reader’s Choice Books will also have a relaxed
reading room that we will encourage through the placement of
chairs,couches etc.

Production of Products and Services:

All book and magazine titles stocked in our store will be ordered
directly from the publisher or an approved representative. No
production will take place on site.

Future Products and Services:

We will continue to expand and diversify our book and magazine
content according to the wishes of our customers. Once we have
established a rapport with distributors and publishers, we will also
introduce a special order service for any books or magazines that
we do not have in stock.

Page no: 35
Key Product Segments:
Book sales can be segmented into three major segments: Pleasure
(mass market, mystery,
romance, humour, action, general non fiction), Educational
(textbooks and related material for elementary, secondary and post
secondary schools) and Professional and Reference (University
Press, subject specific, subscription reference). The pleasure
category can be broken down further into hard cover and
paperback sales.

Business Location:
The proposed book store will be situated in the city of Varanasi
which for hundreds of years has been designated as one of the
pioneer centres of learning. The presence of institutions like the
Banaras Hindu University in the city has helped, even in modern
times, to retain the same old fame as a distinguished centre to earn
knowledge.
The book store will be located just outside the vicinity of
the university in Lanka market.

Page no: 36
Target Market:

The customer base of the proposed business has been divided into
three parts:

1) Students of the University: The major customer base of the

book store will be in the form of the thousands of students of the
university, who reside and study in there. Banaras hindu university
is the largest residential university of Asia and so it will prove to
be the best market for the store with students coming in and
browsing and buying the books from the store.

2) School children: The location where the business is supposed

to be located also has 3-4 schools situated nearby. So these school
students will also form a large part of the supposed target market
of the business.

3) Tourists: Varanasi is a world famous tourist spot, famous as

the cultural capital of India and also for it’s rich culture and
heritage. Milions of tourist visit here every year.
And a lot among them are in search of proper books and reading
materials that could provide them information about the city or
India and it’s culture. The XYZ Book store will provide such
tourists relevant books and reading material as they need at
reasonable prices.

Page no: 37
Mission:
Reader’s Choice Book's mission is to provide quality literature of
all types at the lowest possible prices in Varanasi. The company
additionally seeks to provide a comfortable atmosphere for its
clients that promotes browsing, relaxation, and an enjoyable
environment to spend extend time in. Reader’s Choice attraction to
its customers will be our large selection of books, magazines, and
our purchasing/buyback option, which lower our book acquisition
costs and allows our customers to discard unwanted books.

Objectives:
Our primary objectives over the next year are:

1. Complete start up activities, acquire inventory and open the

business to our customers.

2. Secure agreements with major magazine and book distributors in

the country to secure uninteruupted supply of required books.

3. Attain and maintain a position as the leading retailer of books

and magazines in and around Varanasi City.

Page no: 38
Purchase Process and Buying Criteria:
A recent Consumer markets survey indicate that 40% of retail book
purchases and 70%
of retail magazine purchases are "impulse buys". This means that
the purchaser did not specifically intend to buy a specific book or
magazine when they entered the store. The purchase process is
straightforward in that a customer buys the book or magazine off
the shelves and takes it away. Customer buying criteria for books
and magazines depends on a number of standard variables
including price, visual appeal, relevance of subject matter and the
customer's reading ability.
From the store's perspective, those books and magazines in
demand by our customers will be ordered for the store. If a
magazine or type of book is not selling adequately enough, we will
not continue to stock it.

Pricing Strategy:

With the exception of sales events and clearances of stock that is

not moving of the shelves, books and magazines will be sold for
the amount listed on the cover. Depending on the distributor, the
store will receive a 25% to 35% discount off of the cover prices.
For specialty orders, a fee to cover postage and handling costs will
be added to the cover price.

Page no: 39
Sales Strategy:
Since our store will be a stand alone facility, there is little in the
way to directly influence how we close the sale other than to have
an attractive storefront with our low prices and excellent selection.
We believe this in itself is its own seller. One critical procedure we
will be establishing is to insure top customer service and reliability
and that our store always has enough inventory of all our products.
We will be using industry data on inventory for bookstore chains
to assist us.

Marketing Strategy:
One of the most critical elements of Flyleaf Book's success will be
its marketing and
advertising. In order to capture attention and sales our company
will use prominent signs at the store locations, billboards, media
bites on local news, and radio advertisements to capture customers.

Competitive Advantages:
The location in which the book store is supposed to be opened has
two other major book stores namely Student’s Friends and Banaras
Book Corporation. But none of them has the type of products and
service offerings as Reader’s Choice Books . Both Student’s
Friends and Banaras Book Corporation mainly concentrate on
educational reading material. None of them is involved very much
in non-educational reading material as provided by our book store.
Also none of the two competitors have either the browsing facility
nor the on demand availability of books service. Besides Reader’s
Choice competitive edge will be the lower prices we will charge
our customers and the dominant selection above what our

Page no: 40
bookstore rivals can offer. As stated before, in the bookstore
industry, low cost
and dominate selection are the two success criteria. We plan to
create these advantages in a new, comforting environment that will
retain customers.

Page no: 41
FINANCIAL PLAN

Page no: 42
Important Assumptions:

1)All sales on cash basis.

2)All merchandise acquisition on cash.

3) Tax rate 30%.

BREAK EVEN ANALYSIS:

Selling price per unit : Rs. 250

Variable cost per tablet: Rs. 150

FIXED COSTS AMOUNT(RS.)

Advertisement 50,000

Depreciation 21,250

Salary (Worker) 72,000

Stationary 10,000

Electricity 25,000

Rent 12,0000

Total Fixed Costs: 2,98,250

Page no: 43
Break even point (in units) = total fixed costs/ (S.P.-
V.C.) =

298250/250-150 = 2982 books

Projected monthly sales : 350 books

Break even point (months): 2982/350 =

9 months(Approx.)

Page no: 44
DEPRECIATION:

Assumption: Depreciation@25%

Furniture : 20,000

Book Shelfs : 25,000

Inverter : 15,000

Computer : 25,000
Total : 85,000

Total Yearly Dep.: 85000*25/100= Rs.21250.

Page no: 45
Projected Profit and Loss Statement:

YEAR 2008 2009 2010

Sales (in units.) 4000 5000 6000

Sales(in Rs.) 10,00,000 12,50,000 15,00,000

Cost Of Goods Sold 6,00,000 7,50,000 9,00,000

Gross margin 4,00,000 5,00,000 6,00,000

Expenses

Depcreciation 21,250 21,250 21,250

salaries 72000 72000 72000
advertisement 50000 50000 50000
stationary 10000 10000 10000
Electricity 25000 25000 25000
Rent 120000 120000 120000

Profit before Tax 1,01,750 201750 301750

Tax @ 30% 30525 60525 90525

Net Profit 71225 141225 211225

Page no: 46
Projected cash A/c (1st Year):

Particulars Amount Particulars Amount

To bal. B/d 100000 By purchases 600000
To sales 1000000 By Salaries 72000
By Advertisement 50000
By Stationary 10000
By electricity 25000
By Rent 120000
By tax 30525
By drawings 50,000
By Bal C/d 142475
11,00,00 11,00,00
0 0

Projected cash A/c (2nd Year):

Page no: 47
Particulars Amount Particulars Amount
To bal. B/d 142475 By purchases 7,50000
To sales 1250000 By Salaries 72000
By Advertisement 50000
By Stationary 10000
By electricity 25000
By Rent 120000
By tax 60525
By drawings 50,000
By Bal C/d 304950
14,42,47 14,42,47
5 5

Projected cash A/c (3rd Year):

Particulars Amount Particulars Amount

To bal. B/d 304950 By purchases 900000
To sales 1500000 By Salaries 72000
By Advertisement 50000
By Stationary 10000

Page no: 48
 By electricity 25000
By Rent 120000
By tax 90525
By drawings 50,000
By Bal C/d 487425
1804950 1804950

PROJECTED BALANCE SHEET:

Assets 31st Dec. 31st Dec. 31st.Dec.

2008 2009 2010
Current Assets
Cash 142475 304950 487425
Fixed Assets
(Less Dep.)
furniture 15000 10000 5000
Inverter 11250 7500 3750
Book Shelfs 18750 12500 6250
Computer 18750 12500 6250
Total 206225 347450 508675

Page no: 49
LIABILITIES&CAPITA
L
capital
185000 256225 347450
Profit 71225 141225 211225
Less : drawings 50000 50000 50000
Total Liabilities 206225 347450 508675

BIBLIOGRAPHY
1. Business Policy and Strategic Management.
Azhar Kazmi
Second edition
Tata McGraw Hill Publication

2. Financial Management, eighth edition

I M Pandey
Vikas Publishing House

3 Marketing Management, Seventh Indian Reprint

Kotler Philip

Page no: 50
Pearson Education (Singapore) Pte. Ltd.

Page no: 51