Business Development Proposal

DELI FOOD - THE FROZEN VEGETABLES PRODUCER

Yossemi Vanesa Gomez Maldonado
L0447PHPH0211 / ST20028970

Submitted in fulfilment of the requirements of the Masters degree to the University of Wales Institute Cardiff, for the degree of Master in Business Administration (MBA)

Supervisor: Dr K V Shenai

May 2012

DELI FOOD - THE FROZEN VEGETABLES PRODUCER

Contents Executive Summary Chapter 1: Introduction Chapter 2: The Business Concept Chapter 3: Feasibility 3.1 Product Feasibility 3.2 Market Feasibility 3.3 Industry Feasibility 3.4 Organisational Feasibility 3.5 Financial Feasibility Chapter 4: Strategic Analysis and Business Model 4.1 Strategic Analysis of the Business Idea 4.2 SWOT analysis and Value Chain 4.3 Selection of strategies for success 4.4 Development of appropriate Business Model Chapter 5: Business Plan 5.1 Overall assessment of Business Development plan 5.2 Business Plan Schedule 5.3 Discussion of critical success factors References Bibliography Appendices

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Executive Summary

The food industry has evolved throughout the years as a consequence of diverse factors which affect the eating habits. This factors are clearly related to the social and economical aspects of our societies which live in a more time-demanded world, the new exigencies of these times make people live under pressure to manage their time to perform various activities. Convenience food industry respond to this necessity with products that can be prepared and eaten quickly, but the major awareness for healthy food widespread in the world has contributed to develop healthier options as is the case of frozen vegetables and fruits, which are practical and nutritive food at the same time. Latin American countries have available theses products in their markets, they do not reach the volume of production of developed countries, but this industry is growing steadily as is the case of Chile and Argentina which have a production of 18000tons and10000tons respectively last year. Even the social and economical factors are affecting Peruvian citizens; Peru does not have this product in the local market what shows that there is a gap in the market which needs to be satisfied. The project of production of frozen vegetables in Peru has been developed to take the advantage of an evident opportunity of an unsatisfied demand. At the same time the innovative of the idea in this market and the absenteeism of direct competitor make this project more attractive. To analyse the business feasibility other elements were considered, for instance the improvement of national economy and its effects on the income per capita which are signs of better life standards and purchasing power that are reflected in the possibility of buying better and more products, also social factors such as the increasing participation of women in the labour market, the growing rate of single mothers and women with high education and the problems originated for bad eating habits which triggered the alarming percentage of overweight. The factors

mentioned are creating the necessity of a change so they are the main drivers to pull people to our product. Even the panorama seems to be encouraging, we consider an introductory production of just 4% of the total Chilean production because it is an innovative product and the market and the penetration could be challenging due to the buying behaviour of Peruvians and the wrong ideas concerned with the quality and nutritive values of frozen vegetables. To overcome these barriers and reach our segment market, Marketing will be supportive by educating and informing people to gain major awareness. Also the value chain through the development of good relationship with our suppliers and an efficient production process according to high standards of quality and hygiene established for food industry will contribute to deliver an excellent product, gain market share and increase the demand year by year. To make it a sustainable business, we will emphasize on our good practices with our employees, the fair trade and support to our supplier and our policies of Corporate Social Responsibility. Our operating model will create a good image of the company to attract more customers, in addition the interaction with them through our web page and the sponsorship of educational and sport activities will reinforce the customer loyalty.

Chapter One Introduction Throughout the years people have changed their life style due to diverse factors such as social, educational or economical. The effect of social factors is clearly seen in the evolution of traditional families which have defined roles for men and women, nowadays we have single parents or dual career couples with children, in addition education and the fact of living in a competitive world has obliged individuals to dedicate more time to study and work, also women have the pressure to assume new career challenges to access to the same opportunities as men. In addition, the current economical situation has forced couples to work together to have a better life style or single individuals work for long hours just to survive. As we have seen the factors mentioned have a strong impact in our lives by changing the structure of traditional families and the new roles assumed by men and women in this more time-demanded world which absorbers our energies and time, leaving us with less time to enjoy ourselves or spend with family and friends. The burden duties and the problems to manage our time obliged individuals to dedicate less time to household activities and most of them purchase the latest devices to reduce the time of tedious everyday chores. Cooking demands hours in kitchen, so diverse products have been developed to minimise the time spent on it. As an option for busy people who dont have enough time to cook or eat, fast food restaurants have flourished around the world, but this type of food has been criticized for its highly content of fat and salt which is harmful for our health, even if the recommendation were defunded to give it up, it is part of the daily diet of millions of individuals. To provide a new option for people looking for something similar to home-made food, convenience food was launched with the aim to give people the satisfaction of eating the most popular dishes, so this industry developed more elaborated frozen dishes which just need to be heated for few minutes to be ready. At the same time campaigns of sensibility for healthier food was

promoted, so frozen vegetables were launched to respond to a new demand by offering peeled, cut and pre-cooked vegetables, this product offer convenience and nutrition. Those are the global trends of food consumption that are followed by some countries of Latin America, for example 61% of Brazilians purchase frozen food, while in other countries this is an industry which is in its infancy stage. Nevertheless, it is growing at an annual rate of 10% as is the case of Argentina whose production was 10,300tons in 2010, whereas Chile reached a production of 18000tons last year, which means consumption per capita of 1.3kg. (www.latinamerican-markets.com) Peru has the potential to develop this industry, according to The Ministry of Agriculture of Peru, it has more than 4400 vegetable species and agriculture is one of the main economical activities whose contribution to GDP was 7.5% in 2010 and 31.6% (8.1 million) of the national population live from farming. (www.inei.gob.pe) Peruvian population are facing the same challenges to manage their time because of the same issues faced by citizens from other countries, for example a traditional Peruvian family has defined roles for men and women, so women are responsible of bringing up children and house hold activities, while men have an out-home job; this structure has changed in many cases due to the women access to education and the economical factors. The figures reported by INEI reinforced these statements, just in the capital of Peru, Lima, the employment rate grew in 2% compare with the last year, in addition female employment increased in 3.7% while male employment in only 0.7%, this is an interesting information which make evident the change of roles and the problems that women must be facing due to their responsibilities inside and outside home. (www.inei.gob.pe) The information presented give us a better view of an existent gap in the market which make the frozen vegetables project attractive.

Objectives To develop a plan that identifies the viability of the creation of a frozen vegetables business. To analyze the market to know the potential demand and the expectation of people to be able to respond successfully. To have a better view of different factors to assess the market potential. To use different tools which help us to analyse the market and create strategies to respond to the market change and competitiveness

Chapter Two The Business Concept 2.1 Background review The frozen food industry emerged at the beginning of twentieth century with the preservation of food using the cold-pack method, it consists on packing fruits or vegetables which were placed in large containers holding from 30-400 lb (14-180 kg), then these containers stayed in a cold storage room for several days until the mass was frozen solid. Definitely this method did not have the quality of modern frozen foods because of the time it took for the process of freezing which destroy cells walls and deteriorate the taste and texture of vegetables. Clarence Birdseye experimented with the Eskimo method of quick-freezing foods in the subzero Arctic climate which remained the fresh flavour of food in comparison with previous methods, it helped him to develop a new freezing technology to reduce the time needed to freeze and in 1929 his patents were sold for enormous sum of money to General Foods Corporation which marketed its frozen foods under the Birds Eye trademark, , this company made an intensive marketing campaign, developed a system of distribution for long distances and make more items available in grocery store such as pizza and or entire meals. General Foods researched in this arena to improve the time of freezing by blanching vegetables before freezing, this process permit that boiled vegetables stops the activity of certain enzymes and preserves their flavour more

effectively.(www.madehow.com)

2.2 Definition of the product Peeled, sliced, selected and precooked frozen vegetables, all-natural (free from added preservatives, artificial flavours and colouring agents). The vegetables are frozen through a quick process that when defrosted, they are very close to fresh in taste and texture; in addition they can keep their nutritional values better than the fresh ones which lose their properties each day since harvested until

we can have them at home. This product is a healthier option which offers good taste and convenience.

2.3 The target market The new global trend forced people to change their life style, this phenomenon is also affecting Peruvians who have to perform multi task activities to survive in a competitive society, in addition the participation of more women in the labour market have altered the traditional roles of Peruvian families. To overcome the new challenges of busier life style, people need to reduce the time in certain activities such as cooking, frozen vegetables are oriented to time-pressured costumers or people who dont want to spend hours in the kitchen, but with a commitment to their health. 2.4 Innovative of the product In Peru there are not frozen vegetables, so this is an innovative product to Peruvian market which can satisfy the latent demand of easy-to-cook products. The convenience of frozen vegetables reduces the time of preparation because they are already peeled, sliced and pre-cooked, so people just need 2 or 3 minutes to have them ready to eat. As this is an innovative product in the market and Peruvian inhabitants don not have enough information about it, the product will face some challenges to penetrate the market to make it an attractive option, so Marketing will play a vital role to educate people, promote the benefits of the consumption of them and remove myths related to quality of frozen vegetables and the assumption that fresh vegetables are better than frozen ones.

2.5 Advantages of frozen vegetables

Longer life in comparison with fresh ones, up to 12 months of life since the day of production. All year- round availability without being affected by seasonal products Innovative product in the market Constant price which is not affected by the shortage

Healthy and convenience product Preservation of freshness and retention of nutrients Low fat and calories Easy to storage

2.6 Key player This business involve farmers because they are the principal suppliers of raw material (fresh vegetables), the company have to establish agreements with them some months previous to the harvest period to ensure the availability and set up schedules of supply and production, at the same time the company will provide technical assistance to improve the quality of their crops and promote a fair trade. Based on a win-win relationship, the company and farmers work together benefitting each other from their alliance. The distribution will play a transcendental role to guarantee the supply of the product and the access to them, in this way supermarkets are the best option because they are located in the most populated cities and the appropriate facilities for frozen food.

Chapter Three Feasibility Research In this part 6 key areas will be analysed 3.1 Product feasibility Because of busier lifestyle, we have become adept at managing our time, employing labour-saving devices, multi-tasking and organising our busy lives. Each day we have a new challenge to reduce the time spent on monotonous household tasks. With busier lifestyles, the preparation of formal meals has been changed for quick and easy to prepare food. Peruvian population dont have access to convenience food which can help them to overcome the new challenges of these times, it makes evident that there is a gap in the market claiming for products which facilitate the preparation of food. Frozen vegetables are a good alternative to satisfy this demand because of the advantages in term of convenience and the healthy contribution in the daily diet. Primary data will help to support the above statements, 65 questionnaires were responded by Peruvian citizens, so the graphs below shows the answer to the question: would you like to have ready products which facilitate the preparation of your meal and minimise the time of cooking? As we can see 92% affirmed the necessity of them. Potential demand for convenience food
92%

Yes 8%

No

In addition, Peru is a country with diverse climate and its geography benefit the production of a broad variety of vegetables and fruits. The population consume a broad diversity of agricultural products, the two most favourite are potatoes and corn, according to Ministry of Agriculture 42% of the total products commercialised in the main wholesale market of Lima are potatoes, while 11% are corn. The vegetables chosen to be frozen are corn, carrots, peas and beans which according to the information provided by the Ministry of Agriculture are in the top ten demanded products, with an outstanding participation on the trade market, the volume of commercialization of corn was 11% (140657tn) last year , carrot 6% (81470 TN), peas 6%(31910TN) and beans 1%(12484tn). (www.minag.gob.pe)

These above figures show the preference for the vegetables selected, in addition the election of these vegetables and the mixture of them is based on the fact that they are the most used ingredients of Peruvian food, there are more than 30 recipes which include sliced carrots, peas and corn, being the most popular dishes: arroz con pollo, cau-cau , seco, guiso, arroz a la jardinera, saltado de vainita, which are cooked daily.

Percentage of commercialization of the main agricultural products in the most important wholesale-market of Lima - La Parada (2010- 1257949 TN)
Garlic Tomato Chilli Peas 1% 2% 3% 4% others 7% Potato 42% Corn 11%

Carrot 7% Sweet Potato 5%

Lemon 9%

Onion 11%

Source: Ministry of Agriculture-Office of Economical and Statistic Studies

3.2 Market feasibility The global trend of life style is followed by Peruvian society which has been intensified by a prosperous economy that provide with more job opportunities, according to a research of INEI the employment rate grew by 2.0%, which in absolute numbers means 88 400 jobs. Being female employment rate which have a higher increase of 3.7% (70 500) compared with 0.7% of male, it is also reflected in GDP per capita which grew from $9500 to $10000, these factors definitely influence on the buying behaviour of people, their purchasing capacity and in their preference for convenience food as a mean to reduce the time of cooking. (www.inei.gob.pe)

The market research is also supported by primary data, a survey in the capital of Peru, Lima was carried out and 65 women of diverse age, sex and social background participated on it. Ocupation of people surveyed
47 13 5 Worker Housewife

Student

They were asked about the availability of time to cook, 68% affirmed not to have enough time to cook; this answer gives the certainty that there is a necessity in the market to be satisfied. It is important to notice that people with a job predominate in this asseveration, so it confirms that the target market is busier people, mainly workers.

Availavility of time to cook Yes

68%

32%

No

According to the information of the National Health Institute we could see that Peruvian population have bad eating habits which is reflected in the levels of overweight and obesity (www.minsa.gob.pe). Our survey reinforces these asseverations, 37% of surveyed confirmed eating chips and fried food in general when they dont have enough time to cook, while only 15% prepare salads.

Nevertheless when they are asked about fried food and frozen vegetables as a better option of food, the answer is surprising because 85% consider frozen vegetables a better choice compared with fried food, it is an important information to deduce that even people is aware of the unhealthy effects of fried food, they consume them because of the fast preparation and lack of another alternative. For that reason 92% claim the necessity of ready products which facilitate the preparation of food to reduce time of cooking. Preference between fast food and frozen vegetables
Fast food (chips, burgers and fried food in general) Frozen vegetables (carrots, broccoli, green beans)

15%

85%

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We could noticed that 72% of people surveyed had experience buying frozen food, but 66% of surveyed people affirmed that the main constrain to buy them is related to the nutritional values, so a wrong assumption could affect the demand of frozen vegetables and this could be the main constrain to penetrate the market.

3.3 Industry attractiveness 3.3.1 Porter 5 Forces a) Threat of new entry The threat of new entrants in the market is high because there are companies which export fresh and canned vegetables and fruits, so they could be interested in selling in the local market when the perceive a growth in the demand for convenient food. b) Supplier power Peru's climate and different geographical make possible to have more than 4400 vegetable species, for that reason agriculture constitute an important activity to the national economy, its contribution to GDP was 7.5% in 2010 and according to INEI 31.6% (8.1 million) of the population live from farming. The factors previously

mentioned mean that the access to the crops is not a problem, but the agreements with farmers have to be handle carefully to ensure the supply and determine the terms concerned with quality and price, special attention should be put on small farmers because they prefer an informal trade, they sell their product directly in the main wholesale markets at the price of the day according to the supply and demand. c) Buyer power The bargaining power of buyers is low because it is an innovative product in the market which does not have direct competitors. Also is evident that there is a

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potential market for frozen vegetables because of the current life style which demand more practical options so these factors will drive people to buy our products. d) Threat of substitutes Definitely, the most important substitutes are fresh vegetables. The availability, cheap prices, the buying behavior and the idea that fresh is better than frozen food can direct people towards this option. Also canned food could be considered a substitute, but there are not canned vegetables in the Peruvian market, canned food is just offered as fish and fruits conserves. e) Competitive rivalry There is not direct competitor in the market as this is an innovative product for Peruvians.

3.3.2 PESTL Analysis a) Political- Legal Government programs of development of small and medium businesses have been developed through the years; new reforms to improve the business climate and create a more favourable environment for national and foreign investors have been one of the priorities of the government. The Ministry of production through the Department of Micro and Small Enterprises and Cooperatives (DGMYPE-C) is working to promote sustainable development of micro and small enterprises (MSEs) by encouraging competitiveness and providing technical and financial support to entrepreneurs. The effort of government, political and economical environment are promoting the creation of new ventures, in 2008 there were 160,000 businesses, and at the end of 2000 there were more than 200,000 companies. ( www.crecemype.pe),

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b) Economical The forecast of Peruvian economical situation for the future years is encouraging. According to Consulting Focus Consensus Forecast, Peru will have the lowest inflation among the major economies of Latin America during 2012 and 2013, this year it will be located within the target range at 2.6%. Also GDP has grown significantly in the last ten years and it has been projected to grow at 5.3% this year and 5.9% in 2013. Both projected levels located Peru as the country with the highest economic growth rate among major economies in Latin America. These factors have a direct impact on the income per capita which has showed an increasing trend. According to the Peruvian authorities, the income per capita could reach U.S. $ 6,134 in 2013, which would mean an increase of 2.7 times of the income in 2000. The improvement in income per capita is a sign that there is a better standard of life of the Peruvian population which is part of modernization, economic and employment growth, all the factors mentioned energize and expand markets for goods and services.

c) Social Population growth

There are 29 798 000 inhabitants in Peru and the annual growth rate since last year was 1.14%, the largest segment of the population is the 15 - 59 years old people, accounting for 61.7% of Peruvian population. It is forecasted that by 2025 the population would exceed 34 million. The target market consists on working people whose are part of the largest segment of Peruvian population. Electricity service and ownership of refrigerator

As the product are frozen they need to be refrigerated for their preservation, so 2 considerations are taken into account the electrical service and the ownership of a

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refrigerator. According to the last National Survey, the electrical service for homes is the one with more coverage, 82.4% of inhabitants have access to it and in terms of possession of refrigerator over one-third of the households (38.1%) have a it, this is the most common household after TV and radio. 53.8% urban household belong a refrigerator while only 5.9% of rural household have it. To be more precise the inhabitants of cost region have this appliance in more proportion than the highlands and jungle, because of the weather and the necessity of conservation of food, so it is said that 70.9% of homes in Lima have a refrigerator, Ica 52,9%, while Moquegua 50,2%. Women employment

As in many countries, economic, social and cultural changes have affected Peruvian society and they have conditioned women to work outside home. The National Institute of Statistics and Informatics (INEI) reported that there are 7 061177 working women, which represent 44.3% of the total employed population and 187 200 women enter the labour market annually. It is important to mention that 65.0% of women work in industries and trade services, while 35.6% generate their own employment; this is explained basically for the job flexibility which allows them to manage their own time. (www.inei.gob.pe) Women access to education

The proportion of female population with higher education grew from 19 % in 2001 to 28.0% in 2011; this is an important factor which will have a direct impact on job o opportunities for women. (http://www.inei.gob.pe) Single mothers

Based on information of the National Institute of Statistics and Information (INEI), there are about half million single mothers (487.321), which constitute 7% of all mothers. Single mother are forced to work to sustain their children, it means that they have to perform activities inside and outside home, so the demand of product which facilitate their duties is a necessity of them.

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Health

According to First Peruvian Nutrition Assessment in 1975 and the National Survey of Nutritional Indicators of the National Institute of Health in 2005, in the last 30 years, overweight increased from 24.9% to 32.6% and obesity from 9% to 14.2%. Also it is forecasted that more than 50% of adults will be overweight or obese in 10 years, the Ministry of Health (MINSA) affirmed that fighting against these diseases cost 8 billion dollars to Peruvian state, because they are covered by the Integrated Health System. The root of these problems are the bad eating habits; the figures presented by the National Survey of Nutritional Indicators (2005) shows a disturbing reality because 87.1% of the population affirmed to eat fried food at least once a week and 29% consumed fast food (chips, nuggets, fried chicken and pizza) once a week, also the intake of fibre reaches less than 50% of the recommendations, while carbohydrates consumption reaches up to 134% (www.minsa.gob 2011). Bad eating habits, also has implications in malnutrition, INEI informed that chronic malnutrition affected 23.8% of children under five years. As we could see the health of Peruvian population present many deficiencies, so the need of a change in the eating habits is a priority this days, in this way frozen vegetables is the perfect alternative to supply with the vitamins that our organism need. d) Technological The technological factors have contributed in the development of new techniques and the creation of innovative alternatives for convenience food. Current methods of freezing allow manufacturers to freeze vegetables in a quick process, it ensure the preservation of taste, colour texture and nutritional content of fruits and vegetables compared with the fresh ones. (www.madehow.com)

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e) Environmental The process of production do not require too much transformation and it is environmental-friendly, so it is according to government policies. In addition these ideas will be transmitted to our suppliers (farmers), who have to be assisted to reduce the negative impacts on the agricultural environment in terms of water management, pest control and biodiversity.

3.4 Market attractiveness

3.4.1 Key buyers This product was developed to attend the demand of people without the enough time to cook formal meals to their selves or to feed their families quickly and easily but at the same time giving to them a healthier option of food.

Target segment Family households with children under 18: busy parents who have to share their time at home and work, but with a serious responsibility to provide their children with a healthy diet. Family Household with no children: career oriented couples who have to manage their time between their work, the challenges to a career development and household activities, so they try to minimise their time in everyday chores. Single Parents: Since one parent is responsible for sustaining the household alone, they have more challenges and issues to manage their time, so they faced some difficulties to cook healthy food.

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3.4.2 Market food tendency Definitely the time-pressured life styles have created new eating habits with a high demand of fast food which have caused heath problems, The National Survey of Nutritional Indicators (2005) shows that 87.1% of Peruvian population affirmed to eat fried food at least once a week, these bad eating habits have its consequences in the high percentage of overweight and obesity which reach 32.6% and 14.2% respectively. Recently there are a growing health consciousness which drive customer to make a better choice for their alimentation, so home cooking is benefiting the category of convenience; especially frozen vegetables provide a good alternative of healthy and fast-to-prepare food.

3.4.3 Demand forecast As frozen vegetables is an innovative product in Peruvian market, we will use information from similar markets in other countries of South America, according to Latin Panel, 40% of Latin American households buy frozen prepared food, this industry is more successful in Brazil where 61% of the population purchase frozen food. But in terms of frozen vegetables, Argentinas industry started their operations in 1994, and it was penetrating the market at a growing rate of 10% since that year to 2004, reaching a production of 12,300tons in 2011. In Chile the consumption of frozen vegetables was 18000 tons last year with a frequency of purchase of each 62 days, being the consumption per capita of 1.3kg. According to the commercial manager of Alifrut, Felipe Barriga "frozen products have grown steadily in recent years because of busier life styles and the removal of the myth that the frozen products are of poor quality"(www.latinamerican-markets.com)

Based on the above information the demand has being forecasted at 780000Kg in the first year, it means just the 4% of Chilean production, because of the difficulties that the company will face to penetrate the market due to the buying behaviour of customers and their reaction toward frozen food, but as we will undertake a

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Marketing campaign to educate people and the social factors (growth rate of population and female employment) will pull people towards our product, so we expect to have a growth of 15% in the following two years of operation, while a drop of 5% is expected in the fourth year as a result of the entry of competitors, but supported by our programs of customer loyalty, the demand will increase in 10% in the fifth year.
Calculation of market growth rate Annual growth rate of population Annual growth rate of female employment Marketing campaign and the awareness of health Total

1.14% 3.70% 10.00% 14.84%

Year 1 780,000

Demand forecast of frozen vegetables (Kg) Year 2 Year 3 Year 4 897,000 1,031,550 979,973

Year 5 1,077,970

In addition, as we have 4 products, the demand has been determined in the following proportion, this calculation is founded on the most used ingredients of Peruvian dishes and the fact that the mix salads is a meal that does not need another ingredients, so its preparation is the easiest one.

Product Corn Peas Mix- salad (corn, carrot peas, beans) Mix vegetables( carrot and peas)

Production distribution 10% 5% 50% 35%

3.5 Organisational feasibility The type of company chosen will be a Limited Liability Company under the name of Deli food. It will have a flat organisation structure with 5 key positions.

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3.5.1 Required set of skills

Position General Manager Marketing executive Requirement Knowledge in marketing, HR, operations, cost and production process. Analytical, strong interpersonal skills to negotiate and motivate people. Experience in the food industry, able to develop a campaign for new products, dynamic and creative Graduate in Agro-industrial engineering, analytical, creative, and organised. Strong leadership and capacity to work in team. Able to evaluate and improve processes to maximise resources and maintain high quality standards.

Operations Manager

Clear understanding of employment legislation and remuneration structure. Human Capital Motivating skills and capacity to develop training and motivation programs. lead Finance and accounting Graduate in Account, negotiating skills and clear understanding of tax legislation. executive

3.5.2 Business experience Definitely this is the first attempt to the General Manager in this position, but she is aware that this is a new challenge to achieve. Her past work experience during 4 years and the fact of belonging at an entrepreneurial family has allowed her being involved in a business world by providing her with knowledge and some skills, but definitely the support of experienced professionals in the food industry will be important to have a better view of the mechanisms and more adequate strategies in this arena.

3.5.3 Source of advice and support Peruvian government provide support in different ways to start up business, it has developed many programmes to stimulate the entrepreneurship, for example the Ministry of Production through specialised staff provide information and advice related with finance, accountancy and production process, while the Ministry of Labour gives training programs concerned with job legislation; so the different sources of support will be employed. In addition, as the business is immerse in the food industry, the implementation of good practices in the whole process will be done

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to ensure the quality and hygiene required, it will be supported by the application of HACCP (Hazard analysis and critical control points) preventive approach.

3.5.4 Sustained energy and motivation to succeed Working for another company can give you some benefits such as gaining experience, knowledge and the improvement of certain skills and related with the economical aspect, a good and stable remuneration within putting at risk anything, but managing your own company can give you more satisfactions because you are working for yourself and building a company according your own culture and principles, it means an organisation which respect and recognise the work of employees, promote good practices such as fair trade and CSR, in addition, being able to generate job and improve the life conditions of your internal and external clients is a great the gratification.

3.6 Financial feasibility 3.6.1 Start up capital Family fund is the main source of capital, it will be used to start up and working capital. The start up capital has been determined as S/.410,000 nuevos soles (Peruvian currency, exchange rate 1GPB=S/.4.29 on 27th April)

(www.exchangerates.org.uk/) It includes the following costs:

Start up capital Conditioning infrastructure Furniture Machinery equipment Truck Marketing research Recruitment and selection Formalization fees Other contingencies TOTAL Amount Percentage 75,000.00 18% 20,000.00 5% 170,000.00 41% 20,000.00 5% 100,000.00 24% 15,000.00 4% 3,000.00 1% 4,000.00 1% 3,000.00 1% 410,000.00 100%

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3.6.2 Sales volume, suggested prices The demand forecast is show in the following table and the explanation of it was made in the Chapter 3, section 3.4.3
Demand forecast of frozen vegetables (kg) Year 2 Year 3 Year 4 897,000 1,031,550 979,973

Year 1 780,000

Year 5 1,077,970

Suggested prices
Product Corn Peas Mix- salad (corn, carrot peas, beans) Mix vegetables( carrot and peas) Production distribution 10% 5% 50% 35% Price per unit( 1kg) 9.00 4.70 5.50 4.00

3.6.3 Assessment of variable and fixed cost Variable costs are directly associated with the level of sales, these include the raw material (fresh vegetables) and liquid nitrogen to freeze the vegetables because it is used 0.5kg of nitrogen liquid for 1kg of vegetables.

Product Corn Peas mixsalad(corn, carrot, peas and beans) mix vegetables (carrot and peas)

Demand distribution 10% 5%

Cost of net raw material per kg 4.79 1.77

Cost of raw material year 1 373,286 69,030

Cost of raw material year 2 429,279 79,385

Cost of raw material year 3 493,670 91,292

Cost of raw material year 4 468,987 86,728

Cost of raw material year 5 515,886 95,400

50%

2.29

893,100

1,027,065

1,181,125

1,122,069

1,234,275

35%

1.26

343,980 1,679,396 1,244,880 2,924,276

395,577 1,931,305 1,431,612 3,362,917

454,914 2,221,001 1,646,354 3,867,355

432,168 2,109,951 1,564,036 3,673,987

475,385 2,320,946 1,720,440 4,041,386

Total annual cost of net raw material Total annual cost of nitrogen (S/.1.596/kg of vegetable) Total variable cost

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The fixed cost are steady, the company will incurs in them even it is not operating, it includes wages and salaries, electricity, water and telephone service, promotional activities. In this case, we are assuming that the fixed cost will vary throughout the 5 years, for example the wages and salaries will have a growth of 10% annually, because of the inflation and more responsibilities that the staff will assume when the demand increases, whereas the general expenses are expected to grow at 5% as an effect of inflation and more use of electricity and water.

Fixed cost/ year Wages and salaries General expenses Depreciation Other expenses Total fixed cost

333,600 366,960 403,656 444,022 488,424 571,900 600,495 630,520 662,046 695,148 63,000 51,400 42,120 34,696 28,757 25,000 993,500 1,018,855 1,076,296 1,140,763 1,212,329

3.6.4 Anticipated margin The business venture expected to have the following profit margin for the next 5 years
Year Demand Revenue Cost of sales Gross Profit 1 780,000 4,122,300 2,924,276 1,198,024 Anticipated margin 2 3 897,000 1,031,550 4,740,645 5,451,742 3,362,917 3,867,355 1,377,728 1,584,387 4 979,973 5,179,155 3,673,987 1,505,168 5 1,077,970 5,697,070 4,041,386 1,655,685

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3.6.5 Depreciation schedule

Year
Building Furniture Vehicles Machinery and equipment Total book values (ie net fixed assets)

0 1 2 75,000 72,000 69,000 20,000 18,000 16,000 100,000 80,000 64,000 190,000 152,000 121,600

3 66,000 14,000 51,200 97,280

4 63,000 12,000 40,960 77,824

5 60,000 10,000 32,768 62,259

385,000 322,000 270,600 228,480 193,784 165,027

Annual Depreciation Building-4% straight line Furniture-10% straight line Vehicles - 20% reducing balance Machinery&equipment-20% reducing balance Total annual depreciation

3,000 2,000 20,000 38,000 63,000

3,000 2,000 16,000 30,400 51,400

3,000 2,000 12,800 24,320 42,120

3,000 2,000 10,240 19,456 34,696

3,000 2,000 8,192 15,565 28,757

3.6.6 Profit and loss account

Year Revenue Cost of sales Gross profit Total expenses/overheads Profit before tax Tax @18% Profit after tax 204,524 0 1 2 3 4 5 0 4,122,300 4,740,645 5,451,742 5,179,155 5,697,070 0 2,924,276 3,362,917 3,867,355 3,673,987 4,041,386 0 1,198,024 1,377,728 1,584,387 1,505,168 1,655,685 0 0 993,500 1,018,855 1,076,296 1,140,763 1,212,329 204,524 358,873 36,814 322,059 508,091 64,597 443,494 364,404 91,456 272,948 443,356 65,593 377,763

The company registers profits through the five years of operation, but as we can notice it is not steady or growing because it is the result of a variable demand. The complete Profit and Loss Account is in the appendix V.

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3.6.7 Cash flow The buying of the raw material one month in advance to ensure the stock, the investment in fixed assets and the capital of S/. 500,000 will be considered in the cash flow.
Cash flow summary NET CASHFLOW FOR PERIOD OPENING CASH BALANCE CLOSING CASH BALANCE -153,690 0 -153,690 -87,554 -153,690 -241,244 279,893 -241,244 38,650 442,470 38,650 481,120 299,743 481,120 780,863 700,142 780,863 1,481,005

As we can see, we have a negative value in the year 0 because the amount of capital is just S/500,000 which does not cover the total initial investment of S/653,690. The difference is not possible to be covered in year 1 due to the cash outflows are higher than the inflows, just in year 3 the initial cash outflow is completely met, so the company register a positive cash flow in the following years. information of cash flows is in the appendix V. The detailed

3.6.8 Sensitivity analysis: NPV, IRR and Payback period NPV (30%) NPV (40%) IRR Payback period = = = = 187,020.3 -45,292 37.69% 3 years and 8 months

As an investor I require a return of at least 25% on cash flow, in this case it is 37% that means that the project is viable.

The payback Period has been calculated as 3years and 8 months, it means that the cash inflows will be the same as the cash outflows in that period of time.

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3.6.9 Break-even Analysis The break-even point will determine the volume of sales to start making profits; in this case we will work with the average price and costs.
Contribution/unit Average fixed cost Breakeven Units Breakeven Value (S/.) N 0 200000 400000 600000 800000 1000000 Sales 0 1,160,000 2,320,000 3,480,000 4,640,000 5,800,000 Break-even calculations = Selling Price - Cost price = = average fixed cost/ contribution per unit S/.1.67/unit S/.1,088,349 651,706 units

= average sales price x number of breakeven units S/.3779895 Total cost 1,088,349 1,914,349 2,740,349 3,566,349 4,392,349 5,218,349 Fixed cost 1,088,349 1,088,349 1,088,349 1,088,349 1,088,349 1,088,349

Beyond a level of sales of S/. 1,088,349 or 651,706 units, the business start making profits because the total costs are covered.
7,000,000 6,000,000 5,000,000 Values S/. 4,000,000 3,000,000 2,000,000 1,000,000 0 0 500000 1000000 1500000 Number of units Sales Total cost Fixed cost

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3.6.10 Financial risk As this is an innovative product in the market the demand is difficult to forecast , for that reason , it is based on data of international markets in South America , at the same time a questionnaire has been developed to access to primary data which gives a better view and a confirmation that there is a gap in the market which claim for convenience food, but at the same time , cultural pattern associated to buying behaviour and bad eating habits show a resistance to change of food consumption, at the same time the wrong ideas associated to frozen food will constrain the rapid penetration and growth in the market. A strong marketing campaign boosting the nutritional and practical properties of the product will play an important role to overcome the barriers. Also it is highly probably that competitor appear in the market when people show more openness to frozen food, it could reduce the market share and sales of the company.

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Chapter four Strategic Analysis and Business Model

4.1 Strategic analysis of the business idea Every company have to develop a Business strategy as a way to guide their action to accomplish the organisational objectives. The following are the most used strategies:

4.1.1 Core competence analysis: This approach focuses on central activities that generate competitive advantage. Its more important consideration is the value of uniqueness which are valuable properties of the product that attract customer and influence in their decision making and the willingness to pay a premium price. (http://www.mindtools.com)

4.1.2 Boston Matrix: This strategy uses the concept of the product life cycle and the relation between market growth and market share. This strategy is useful to evaluate the performance of the products by classifying them in one of four different categories: stars, cash cows, question marks and dogs. After this analysis, the more successful products will be prioritized to ensure a long life in the market. Van Assen et al (2009,p8)

4.1.3 The Mckinsey 7S: It is related to the alignment and interrelation of seven internal elements of an organization whose smoothly running is important to ensure the achievement of organisational goals. The 7 element considered are the following: strategy, structure, system, share values, skills, style and staff.

4.1.4 PESTL Analysis: this strategic tool makes possible to have a broader view of the Political, Economical, Socio-Cultural and Technological, Environmental and Legal context where the firm is operating. This big picture allows basing our analysis on the reality by avoiding unconscious assumptions that could drive to a failure. This

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strategy has been chosen to analyse the Peruvian context in the industry feasibilitychapter 3. (http://www.mindtools.com) 4.1.5 SWOT Analysis: this strategic method is important to identify and evaluate our internal sources of strengths and weaknesses. At the same time the identification and understanding of external factors such as opportunities and threats in the competitive environment can guide our actions to select the more appropriate strategies and make better decision. It has been selected to analyse the internal and external factors to accomplish our objectives. (http://www.mindtools.com) 4.1.6 Porters Five Forces: It gives a simple understanding by evaluating and analysing the strength of current competitive position of a business and showing the attractiveness of the industry. The following 6 elements are assessed: Bargaining power of buyer and suppliers, barriers of entry, intensity of competitive rivalry, the threat of new competition and substitutes. This strategy has been of useful application to the evaluation of industry feasibility in chapter 3. Van Assen et al (2009,p14) 4.1.7 Porter Generic strategy: This strategy is focus on gaining a leadership position in the market by the application of one of the four generic business strategies. "Cost Leadership" (no frills or lowest cost producer), "Differentiation" (uniqueness) and "Focus or market segmentation" (using any of the previous strategies mentioned but in a small segment of the target market). This strategy will be considered in the development of the business to achieve competitive advantage. (http://www.mindtools.com) 4.1.8 Ansoff matrix: it is useful to gain market through the following strategies: Market penetration (more market share with the same product), Market development (new market with the same product), Product development (innovative or reformulated product to the same market) and Diversification (new product, new market)

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4.2 SWOT Analysis and Value Chain

4.2.1 SWOT Analysis

STRENGHTS Healthy and convenience product Long life in comparison with fresh ones Whole year availability without being affected by seasonal products Innovative product in the market Constant price which is not affected by the shortage WEAKNESSES New product in the market The lack of information about this product The preference for fresh vegetables The myths related to quality of frozen food The lack of experience in frozen food

OPPORTUNITIES THREATS The increasing rate of working women Cheap and fresh vegetables The new trends of life style and eating habits The buying behaviour of Peruvian citizens Health problems: obesity, overweight and malnutrition Not direct competitors The reluctance of buying frozen vegetables under the assumption that they are not as good as fresh ones

4.2.2 Value Chain a) Support activities: Infrastructure of the firm: the company has a flat organisation which facilitates the coordination; also the functions of the diverse areas are clearly defined to stimulate an efficient and harmonious work. In terms of the plant of production the design and layout plays an important role because of its implication in the minimization of time in each task of the process. Technology: nowadays technology allows freezing vegetables quickly which have benefits in the preservation of nutritional values and physical properties. So our mission is updating our machines with the objective of increasing the quality of our products.

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Human resource management: HR activities must be developed according to the strategic plan of the organisation to provide the human capital with the knowledge and skills needed to perform their duties effectively and contribute with the success of the company.

Procurement: ensuring the access to resources is important, farmers are our main suppliers and arrangements will be make in advance to ensure the continuous supply of raw material and avoid ruptures in the process of production which could have serious implications in terms of costs, availability of our products and the loss of our customers.

b) Primary activities: In bound logistics: the reception of resources and the management of them to make sure their availability. Operations: the production process and the quality control in all the stages to ensure the quality and hygiene as a way to obtain an excellent product which satisfy customer expectations. Outbound logistics: the efficient supply process using cold storage trucks to ensure the quality and availability of our products in the supermarket. Marketing and sales: the lack of information and some myths related to frozen food could constrain the consumption. The use of marketing communication mix will contribute to educate, create major awareness and stimulate the purchase of our products. Service: the company will need IT service to manage the information and the creation of an interactive of a web page.

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4.3 Sources of competitive advantage and sustainability To make it a sustainable business, we will emphasize in our good practices with our employees, the fair trade and support to our supplier and our policies of Corporate Social Responsibility. Our way of operating will contribute to create a good image of the company to attract more customers and to ensure their loyalty we will be in contact through our web page and the sponsorship of educational and sport activities. Our sources of competitive advantage are the following a) Cost and quality will be two sources of competitive advantage it will be created through the building of a strong relationship with our suppliers to obtain good terms of negotiation and high quality of materials. The

sustainability of this advantage will be based on our fair trade and programs of CSR to support farmers in the improvement of crops quality. b) Process: the process of production based on high standards will contribute to obtain high quality outputs, also the maximisation of resources and an efficient design of the process will contribute to reduce our costs. This competitive advantage will be sustainable in the time based on the use of the quality approaches for food safety, the quality certification and the adaptation of the philosophy of continuous improvement. c) Human Capital: Hiring the best professional and promoting a participative culture through motivation and good practices, the company will be able to have the needed support to achieve the organisational objectives. The retention of our employees through our career development and good relationship will enable to have a sustainable advantage. d) Supply chain: the win-win relationship developed with farmers and distributors will help us to gain competitive advantage through the loyalty of them and the benefits in terms of quality and efficiency to have an attractive price to the market. Marketing plays a vital role to create major awareness of our product and reach our target market. e) Ethics, good practices and CSR policies: all the elements mentioned are definitely sources of competitive advantage, because through the application
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of them we can obtain employees, suppliers, distributors and customer loyalty. It will be maintain as the base of our organisational culture.

4.3 Selection of Strategy for success:

4.3.1 Porter generic strategy

Cost leadership: This is the most suitable strategy for our product because it involves gaining market share through low prices; we can succeed in this aspect based in our good relationship with our suppliers whose loyalty will be the result of the fair trade promoted by us and the corporate social responsibility programs developed, it will help us to have good terms of agreements and obtain convenient prices. In addition the brand loyalty reinforced by our close relationship with our customer will allow us to produce great deals of product, making possible to have economies of scales and the benefits that it bring in terms of costs.

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4.3.2 Ansoff Matrix: At the beginning of our operations the strategy will be the market penetration in Lima, the capital of the country due to its large population, then we will move into the other strategy, Market development, to reach other cities of the coast, if the buying behaviour change and it benefits frozen food we could diversify our product and offer more options, it means that we could use the product development strategy.

4.3.3 Porters value chain: The application of this strategy has been done in the section 4.2.2, the idea is gain value in each activity of the production of our goods, starting with the supply of raw material to the delivery of the product.

4.4 Development of appropriate Business Model The business model is part of the business strategy which helps to analyse different elements, their interrelation and how they fit together to in the process of the creation, capture and delivery of value. So the harmony between the elements and the alignment of them will be translated in a successful performance of the new venture which means that it will be able to achieve its goals.

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4.4.1 Business Canvas Model It will be used to analyse 12 key elements of the business and demonstrate how they work together by developing different activities to gain value chain.

1) New business driver: the opportunity to introduce an innovative product which is able to respond to the latent demand for healthy and easy to prepare food, at the same time the contribution to improve the diet of the population.

2) Priority customers: this product is oriented to busier people who do not have enough time to cook for their selves or their families. Family households with children under 18 Family Household with no children. Single Parents

3) Superior value preposition: a new alternative of food which has two valuable characteristics in the same product: convenience and healthy food. The high standards to ensure the quality of the product in terms of taste, texture and nutritional values.

4) Channels: They will contribute with the dissemination of value preposition to gain major awareness of the product. TV and radio are useful because of their mass coverage; promotion will allow the direct interaction with customers, while the web page will be use to reinforce the relationship with them. 5) Key activities: selection of good sources of raw material and a production process considering the standards of quality and hygiene established for food industry to deliver a product able to satisfy the expectations of customers. 6) Competition/competitive strategy: Porter Generic Strategy and value chain will be used to build a competitive advantage.

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7) Relationship: the firm image built trough our operating policies will have an impact on the brand and the preference of our customers. In addition to reinforce customer loyalty, the interaction with them will be vital, it will be through the web page which will provide information about our products and recommendations to have a healthier life, the feedback will be encouraged to improve or create new options.

8) Key partnership: strengthen: the relationship with suppliers and distributors are important, it will be based on a fair trade and constant interaction to create a win-win relationship. 9) Revenue streams: the primary source of revenues is based on the sales which will be stimulated by the Marketing campaign and supported by our activities to make it sustainable in the time. 10) Cost & Cost budget: a good structure of cost must be developed to classify and manage them appropriately, for example through a mass production the companies could be benefited by economies of scale which have a direct influence on the reduction of indirect and fixed costs. At the same time the Kaizen philosophy about the continuous improvement will be of useful application to maximise the use of resources and productivity. 11) Identity: the brand position in the market will be the result of the creation of an image of healthy and high quality food associated with wellbeing. Besides, the ethical and social responsible way of operation of the firm will boost the brand name. 12) Value chain based resources: its application and contribution has been explained previously in the section 4.2.2

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Chapter five The business plan

5.1 Overall assessment of Business Development Plan 5.1.1 The industry Food industry has evolved throughout the years affected by some factors such as the new consumption trends which obliged them to create or reformulate their products, also technology has influenced through the development of new machinery which improve the process and maximise the resources to allow having higher volume of production in shorter time. Definitely the emerge of convenience food is the result of a potential demand of ready and easy to prepare food which in developed countries reach high volumes, while Latin American industry of frozen vegetables is in its infancy stage with a volume of production of 18000 ton in Chile, 10000 ton in Argentine whereas Peru does not have frozen vegetables in the local market. The technology innovation has benefited this industry because it allows freezing the product in a very short time which means better preservation of nutritional values in comparison with fresh ones.

5.1.2 The product Frozen vegetables can perfectly satisfy the potential demand of busier Peruvian people who are facing the same problems as any other citizen to manage their time in a society which require each day more effort. This product has advantages in terms of nutrition and convenience because vegetables are highly nutritional and are part of a recommended diet which produce some benefits in our health such as providing diverse vitamins and reducing the risk factors of for heart disease and stroke. (www.hsph.harvard.edu) In terms of convenience, the vegetables are peeled, sliced and pre-cooked so the time of cooking is only 3 minutes, all- year availability and can be storage for a long time. The presentation is mono and mixed vegetables for microwave steam-cooking, pan or

36

wok, Mono vegetables (individual bags of 1kg of corn or peas), mix vegetables (bag of Peas and carrot or bag of peas, carrot, beans and corn)

5.1.3 The company Mission: Providing pre cooked, frozen vegetables as an alternative of practical and healthy food for people who do not have enough time to cook, contributing with a better diet and improving the lifestyle of the population. Vision: Being a recognized company for its high-quality products and great contribution to improve the diet of the population and good practices. Objectives: To foment consumer awareness of healthier food by educating and motivating people. To drive a sustainable supply change by working closely with farmers and promoting a fair trade. To have efficient management of resources to be competitive in the market. To maintain a long-term relationship with customers based on quality, service and competitive prices.

5.1.4 Company location The determination of the location of the production plant is based on demography and social patterns. Peruvian population is distributed unequally according the natural region, 51.1% of the population lives on the coast and as Lima is the capital of Peru, it is the most populated city which concentrates 11 390 955 inhabitants, it means the 38% of the total population, followed by La Libertad with 2 082 737 and Piura with 1 974 262, so Lima is the largest market that should be attracted. In addition, there is a constrain for the purchase of frozen product, it is the lack of a refrigerator to maintain the products, Coast inhabitants belong a refrigerator in more proportion than in other regions because of the weather conditions which demand the use of it to preserve food, 70.9% of Limas households have a refrigerator followed

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by Ica 52,9% and Moquegua 50,2%. What is more Lima have the main road connections with the main cities of Peru, especially with the coast region.

5.1.5 The market, market analysis and market research Several aspects of the market have being analysed to have a better view of their implication in the demand of the product: Economy

Peru has a sustainable economy, it is reflected in the income per capita which shows an increasing trend and according to the Peruvian authorities in 2013 it could be 2.7 times more than in 2000. It means that Peruvian population is improving their life style, so better choices in terms of food can be made.

Social:

Women participation in the labour market is an important determinant of the necessity of practical sources of meal, because most of women have the responsibility of feeding their families. The National Institute of Statistics and Informatics (INEI) reported that there are 7 061177 working women, which represent 44.3% of the total employed population and 187 200 women enter the labour market annually. In addition, the proportion of female population with higher education is growing and it is expected that more women enter to the labour market in future years. Another variable which obliged women to work is their condition as single mothers for being responsible of sustaining their families, according to INEI there are about half million single mothers (487.321). (www.inei.gob.pe). Health: Peruvian population have bad eating habits, it is reflected in the high rates of overweight and obesity which reach 32.6% and 14.2% respectively. What is more, the wrong choice of food and the lack of time to prepare healthy food have its implications in childrens malnutrition which affect 23.8% of children under five years. (www.minsa.gob.pe)

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The conditions previously mentioned indicate that there is a latent necessity of healthy and easy to prepare food, this asseveration is supported by primary data which show that 92% of surveyed people need products to reduce the time of cooking.

5.1.6 Marketing plan Positioning the company at the most valuable level, making the product more attractive to gain market share and strengthen the brand loyalty. Product

Frozen vegetables, all-natural (free from added preservatives, artificial flavours and colouring agents), the freezing process makes possible the preservation of taste, texture, nutrients (vitamins, fibres, minerals) by locking in all the goodness of freshly-harvested. They will be packaged in bags of 1kg which will be recyclable to show our grateful with the environment which make possible to enjoy 100% natural product provided by it, so it is our responsibility be environmental friendly.

Price

Even if the product is innovative in the market, price skimming is not the right strategy because of the buying behaviour and preference for fresh vegetables, so to reach the most of the segments of the population and make it a mass consumption product, the most suitable strategy is price penetration to have a competitive position in comparison with the fresh vegetables, for that reason our products are less than 10% more expensive than the average price of fresh ones.

Products Corn Carrot Peas Beans

Average retailer price per kg 3.02 2.05 3.85 3.16

Yield 35% 75% 84% 75%

Average retailer price of net product 8.63 2.73 4.58 4.21

Price per unit ( 1kg) 9.00 4.70 -

Variation % 4.30% 2.55% -

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mix- salad vegetables (25% corn, 25%carrot,25%peas and 25%beans) mix vegetables (50% carrot and 50% peas)

5.04 3.66

5.50 4.00

9.13% 9.34%

Promotion

The promotion mix Several promotional methods will be used to attract consumers. Advertising: it is the most costly, but TV and radio are mass coverage media so they can help to reach a large number of people in a short time. Due to the innovative idea in the market, it is of vital importance the promotion of the product, so the message must boost the attributes of the product emphasising in the benefits in health and its help to deal with the new challenges of modern life style. Sales promotion: It is an important way to reach potential customers through the explanation of the products, giving some samples and letting them to try cooked- frozen vegetables with the objective that they realise that frozen vegetables do not lose their colour, taste and texture during the freezing process. The product tasting will be carried on leading supermarket chains and events which gather lots of people.

Public relationship: Public communication campaign oriented to stimulate the change of bad eating habits which have triggered different problems such as malnutrition and overweight. At the same time the company will support event concerned with education and sports to create an image that each of these aspects are directly related with the wellbeing.

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Place

Chanel of distribution: Producer to retailer, in order to have a low cost of sales we will have less intermediaries in the supply chain. Supermarkets have been chosen as the best channel because of the special areas for frozen food, their presence in strategic points of the main cities and the preference for buying frozen food at these places; it is reinforced by our primary data which show that 100% of people surveyed made noticeable their absolute preference for supermarket. Also secondary data show that supermarkets sales are growing at 17.9%, this is influencing on the opening of new establishments, just last year 25 new supermarkets were opened and it is expected to open 24 more for this year. (www.americaeconomia.com)

Customer relationship

Customer loyalty will be created with the constant interaction between the company and customers through our presence in the main educational and sport events. Besides, the web page will allow the contact with customers by providing information about our products, recipes and articles related to health and wellbeing. What is more, a special section for people with problems of overweigh will be developed, it will contains information about calories to consume per day, some pieces of advice to lose weight and special recipes for them. The feedback will be valuable for the company; so customers will be able to upload their own recipes and their important suggestion to improve our product or develop new option will be welcome.

5.1.7 Management team It will be composed by 5 key personnel; each of them has specific functions and duties. General Manager: who will direct and control the entire operations of the business by ensuring the integration and coordination of the process to achieve the organizational objectives.

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Finance and accounting executive: in charge of the negotiation with banks, payment of our suppliers and taxes, the elaboration of the financial statements. Sales and marketing executive: responsible for the Marketing campaign to stimulate the purchase of our product and the coordination of sales. Operations managers: in charge of the production process and supply chain. He will have 3 subordinates: the quality control inspector who will ensure the product is within the quality standards through the use of some tests, the machine operator who will program and control the machine according to the level of production.

Human capital manager: responsible for the recruitment, selection, training programs and salary determination.

Organisation Chart Flat organisation has been chosen to promote the direct involvement of all the areas and have a quick decision process.

General Manager

Operations Manager

Human Capital lead

Finance and Accounting executive

Marketing executive

Logistic Coordinator

Quality Control supervisor

Machine operator

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5.1.8 Operations plan a) The supply chain

Supplier (farmers)

Producer

Retailer (supermarket) )

The suppliers: the agreements and the relationship with farmers is the vital importance to ensure the availability of raw material, also it should be a direct negotiation to obtain better prices. To succeed in this aspect, we have to consider Peruvian geographical zones and climates and its effects on the availability of agricultural products which have a direct impact on the price. So we have to set up a schedule of supply according to the considerations mentioned. The table below show the variation of price of our raw material throughout the year, as we can see the prices are lower during the harvest period, it means that we have to take an advantage of it to access to cheaper prices and have an stock for the other months, fortunately as the vegetables are frozen we will not face problems related with the conservation of them.

Average price per month in the main wholesale market - La Parada (Lima) (S/./Kg) Jan Corn Carrot Peas Beans 1.68 0.46 1.90 1.32 Feb 1.75 0.55 2.45 1.56 Mar 1.58 0.78 2.92 1.53 Apr 1.69 0.79 2.68 1.20 May 1.85 0.71 2.13 1.09 Jun 2.00 0.61 2.04 1.69 Jul 2.14 0.64 1.54 2.33 Aug 1.93 0.95 1.45 1.86 Sep 2.07 1.12 1.46 1.61 Oct 2.49 1.40 2.16 1.96 Nov 2.25 1.26 2.57 1.32 Dec 2.61 0.91 1.97 1.32

Source: Empresa de Mercados Mayoristas SA(EMMSA) Ministry of Agriculture - Office of Economic and Statistic Studies

Retailer: supermarket were chosen as the more effective distribution channel of frozen vegetables, as we mentioned this choice was made based in three considerations , the facilities to conserve frozen food, their growth in the country and the preference of people to buy frozen food at this place.
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b) The process A typical process consists on the following steps. Cultivating: Certain considerations are required in this step such as the variety of vegetable because some of them are better to be frozen. In addition, the harvesting schedule is considered because the vegetables used in the freezing industry must be picked when they have an optimal tenderness. Washing: The crops are dumped into beds and sprayed with water to remove dust and dirt. Blanching: The cleaned vegetables are translated to a vat of boiling water for a few minutes; the objective of this process is killing the enzymes that change their taste. Sorting: The vegetables are passed to a gravity sorted to remove any old, starchy peas. The objective of this is to ensure the homogeneity and quality of them. Inspection: It is a visual inspection of vegetables which are moving along a belt, where discoloured peas or any rocks are removed. Freezing: Vegetables are quick frozen by any standard method. The most used is where vegetables pass through a blast tunnel where ultra-cooled air. Packaging: It is fully automatic, the frozen vegetables passes on a belt to mechanical equipment that bags it and then put on pallets. The pallets are stored in a warehouse cooled to between 0- -20 F (-17.8- -28.9 C). Distribution: It should be carried out at 0 F (- 17.8 C) or cooler, it include cold-storage trucks that carry the pallets, cold warehouses and storerooms. Quality control: Laboratory workers will test the vegetables randomly at different steps of the production process to ensure it is free of bacteria or any kind of contamination, also the final product will be cooked and tasted to guarantee the food safety. To reduce the risks during the whole process, since

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supply to packing and distribution we will work with the HACCP, this preventive approach will help us to design the appropriate measurements. Hygiene: The freezing equipment must be cleaned at specified intervals to keep it sterile. Nowadays freezing equipment is easy to clean and maintain. (www.madehow.com/Volume-5/Frozen-Vegetable.html)

c) The facilities and equipment The building has to be conditioned to facilitate the administrative and production operations. The machinery and equipment will be imported and the transactions have to be made with 3 months of anticipation.
Equipment Sorting conveyor Washer Blancher Lukewarm and ice water cooler Vibration water dropper Elevator Vibration feeder IQF Freezer Cold room Application Pick out the bad one after washing Clean out the products Cook and sterilize the vegetable Clean and cool the boiled vegetable Remove the water stick on the surface of the products Transfer the products into the IQF freezer Prevent the vegetable from gathering when being transferred into the IQF freezer Freeze the vegetables quickly Preserve the frozen vegetables

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d) Corporate Social Responsibility Our programs of CSR will be emphasised in two aspects: Social Actively promote more sustainable activities within the communities, a close work with farmers and suppliers will be established to know their problems and develop programs to overcome them. A win-win relationship will be created, so farmers will receive technical assistance to improve the quality of their crops, it will allow them to obtain better prices for their crops and we will be benefited by the improvement of our product and the constant supply. The company will stimulate families interest in eating healthy food to reduce the level of malnutrition and obesity. In addition, the firm will sponsor activities which encourage the wellbeing such as sport and education. Environmental Awareness of sustainable sourcing will be boosted, so farmers will be encouraged to be environmental friendly too, through the water management, pest control and the reduction of negative impacts on the agricultural environment. Water use: it is one of the natural resources that could run out in the future, so its conservation is a responsibility, the company will develop a production process which ensures an efficient use of water. Packaging: the use of recyclable packaging and the sources of them must be sustainable.

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5.2 Business plan schedule The project involves several activities throughout the development stage; the Gantt chart will help us to identity the needed time to prepare the company until it is ready to operate.

Schedule for implementation

Task Secure star 1 up capital Building 2 conditioning Order machinery and financial 3 transaction Registration 4 of the firm Contact 5 suppliers Import process of 6 machinery Hire management 7 team Refurbish area to 8 operate Submit business permit 9 application Preparation Marketing 10 promotion Hire the rest 11 of staff

Dependency

10

11

12

13

14

15

16

17

18

19

2 0 weeks 1 10 weeks

1 1 4

2 weeks 2 weeks 3 weeks

7 weeks

3 weeks 2 weeks

2 weeks

7 9

4 weeks 3 weeks

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5.3 Discussion of critical success factors: The elements or activities required to ensure success and achieve our mission are related with the value chain. The negotiation with our suppliers and the creation of a strong relationship based on trust, fair trade and CSR policies will generate a win-win relationship, so we will have access to good sources of raw material to start our process of production. Each activity of the value chain will generate value and the maximisation of our resources will contribute with the delivery of an excellent product which satisfies the expectations of our customers and develops a competitive advantage in terms of quality and price. As this is an innovative product in the market, Marketing plays a vital role to create major awareness of our product and reach our target market.

Critical success factors: Vision Being a recognized company for its highquality products and great contribution to improve the diet of the population. Create of a strong relationship with farmers. Maintain high standards of quality and hygiene in each stage of the process. Develop a Marketing campaign to attract customers and build a strong relationship with them.

Goals: To drive a sustainable supply change To have an efficient management of resources to be competitive in the market. To foment consumer awareness of healthier food T o maintain a long-term relationship with customers based on quality, service and competitive prices. the market

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Reference Books Van Asseen et al (2009), Key Management Models, 2ND ed, UK, Prentice Hall Websites America Economy magazine, growth of supermarkets, available from http://www.americaeconomia.com/negocios-industrias/ventas-de-supermercados-enel-peru-creceran-179-este-ano (Accessed on 10th April 2012) Ansoff Matrix, available from http://www.ansoffmatrix.com/ (Accessed on 05th May 2012) Arcor, Argentinian Market of frozen vegetables, available from http://www.arcor.com.ar/PageController.aspx?pgid=4028&secid=5 Accessed on 20th April 2012) El comercio Newspaper Growth of creation of new ventures, available from http://elcomercio.pe/economia/497484/noticia-numero-empresas-se-elevo-juniosuperarian-200-mil-nivel-nacional (Accessed on 17th April 2012) Peruvian obesity, available from http://elcomercio.pe/peru/1361602/noticia-uno-cadados-peruanos-sufrira-exceso-peso_1(Accessed on 17th April 2012)

Harvard School of Public Health, the nutrition source of vegetables and fruits, available from http://www.hsph.harvard.edu/nutritionsource/what-should-you-eat/vegetables-fullstory/index.html#blood_pressure, (Accessed on 10th April 2012) How products are made, Frozen Vegetables, available from www.madehow.com/Volume-5/Frozen-Vegetable.html (Accessed on 20th April 2012) Latin American Markets, Chilean trends of consumption, available from http://www.latinamerican-markets.com/chile---tendencias-de-consumo (Accessed on 15th April 2012) Made in Argentina, Frozen vegetables production, available from http://www.madein-argentina.com/alimentos/congelados/temas%20relacionados/produccion%20 de% 20vegetales%20congelados%20en%20argentina.htm

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Mind tools, essential skills for excellent career, http://www.mindtools.com (Accessed on 21st April 2012) National Institute of Statistics and Informatics

available

from

Growth of employment, available from http://www.inei.gob.pe/web/NotaPrensa/Attach/13716.pdf (Accessed on 28th March 2012) Women employment, available from http://www.inei.gob.pe/web/NotaPrensa/Attach/13716.pdf National Survey of demography and health, available from http://desa.inei.gob.pe/endes/resultados.asp

Peruvian Ministry of Agriculture Agricultural Sector, available from http://www.minag.gob.pe/portal/sectoragrario/agricola (Accessed on 25th March 2012) Supply and prices of agricultural products, available from http://www.minag.gob.pe/portal/herramientas/boletines/abastecimiento-y-precios Agriculture monthly newsletter of supply and prices, available from http://www.minag.gob.pe/portal/download/pdf/herramientas/boletines/boletineselectr onicos/abastecimientoyprecios/2012/precios_febrero12.pdf Peruvian Ministry of Health Management Guidelines for Health Strategy of Food and Nutrition, available from http://www.minsa.gob.pe/portada/est_san/Lineamientos%20_ESNANS_FINAL.pdf (Accessed on 20th April 2012) Peruvian Ministry of Production, Office of development of SMEs, available from http://www.crecemype.pe/portal/index.php/publicaciones (Accessed on 18th April 2012) http://www.ciudadanosaldia.org/press/0409/NP_Bolet%C3%ADn%20Madres%20Sol teras_Nacional_27Abril_09.pdf

http://www.exchangerates.org.uk/Pounds-to-Peruvian-Nuevo-Sol-currencyconversion-page.htmlit

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Bibliography Books J Kourdy (2008), 100 Great Business Ideas,1st ed, Marshall Cavendish Limited, UK W Pride et al (2012), Business, 11th ed, South-western , Cengage Learning, USA T Lucey (2009), Costing, 7th ed, South-western , Cengage Learning ,UK Ray Proctor (2009), Managerial Accounting for Business Decision, 3rd ed, Pearson Education Limited, UK G Johnson et al (2008), Exploring Corporate Strategy, 8th ed, Pearson Education Limited, UK K Borrington et al(2003), Business Studies, 2nd ed, Hodder Headline Group, UK A Bhide et al (1999), Harvard Business Review on Entrepreneurship, 1ST ed, Harvard Business School Press, USA Web sites Advanced IQF freezer, products, available from http://www.advancedfreezer.com/plistings_239_42.php (Accessed on 24th April) Mail online, why frozen vegetables are fresher than fresh, available from http://www.dailymail.co.uk/health/article-1255606/Why-frozen-vegetables-fresherfresh.html#ixzz1p1eMWLMu (Accessed on 20th April) Western Farm Press, Frozen fruit and vegetables market, available from http://westernfarmpress.com/orchard-crops/frozen-fruits-and-vegetables-market-hit226-million-tons-2015 (Accessed on 20th April) Birds eye, Fresh Frozen Food, available from www.birdseye.co.uk/fresh-frozenfood/vegetables/

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Appendices Appendix I Questionnaire 1. What is your occupation? a) Student b) Worker c) Housewife 2. Do you have enough time to cook? a) Yes b) No 3. What do you do when you do not have time to cook? a) Chips or fast food b) Salads c) Going to a restaurant 4. What do you consider as the best food option? a) Fried food (chips, burgers and fried food in general) b) Frozen vegetables (carrots, broccoli, green beans) 5. How often do you eat vegetables? a) Daily b) 3 to 5 times per week c) 1 time per week d) Never 6. Would you like to have ready products to facilitate the preparation of food and minimise the time of cooking? a) Yes b) No 7. Have you ever purchased frozen or convenience food? a) Yes b) No

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8. What are main restrictions to purchase frozen or convenience food? a) Price b) Availability problems c) Nutritional value 9. Where do you prefer buying your refrigerated food? a) Supermarket b) Corner shop 10. What type of packaging do you prefer for frozen vegetables? c) Transparent bag which show the content. d) Bag with a picture of the product

Appendix II - Data collection Total respondents: 65 Date of survey: 14th -16th April 2012 Place: Lima Metropolitana
Question 1 What is your occupation? a) Student b) Worker c) Housewife 2 Do you have enough time to cook? a) Yes b) No 3 What do you do when you do not have time to cook? a) Chips or fast food b) Salads c) Going to a restaurant 4 What do you consider as the best food option? a) Fried food (chips, burgers and fried food in general) b) Frozen vegetables (carrots, broccoli, green beans) 10 55 15% 85% 24 10 31 37% 15% 48% 21 44 32% 68% 13 47 5 20% 72% 8% Total Percentage

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5 How often do you eat vegetables? a) Daily b) 3 to 5 times per week c) 1 time per week d) Never 25 27 13 0 38% 42% 20% 0%

6 Would you like to have ready products to facilitate the preparation of food and minimise the time of cooking? a) Yes b) No 7 Have you ever purchased frozen or convenience food? a) Yes b) No 47 18 72% 28% 60 5 92% 8%

What are the main restrictions to purchase frozen or 8 convenience food? a) Price b) Availability problems c) Nutritional value 9 Where do you prefer buying your refrigerated food? a) Supermarket b) Corner shop 65 0 100% 0% 14 8 43 22% 12% 66%

10 What type of packaging do you prefer for frozen vegetables? a) Transparent bag which show the content. b) Bag with a picture of the product 61 4 94% 6%

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Appendix III Peruvian economic forecasting

Forecasting of Inflation in Latin America

2012 2013 32.4 29.0 5.35.4 5.95.7 6.56.2 6.66.3 10.2 9.5

2.62.5

3.23.0

3.43.4

3.73.5

4.24.4

Source: Latin America Consensus Forecast, March 2012

Forecasting of PBI growth in Latin America

2012 5.9 5.5 4.85.1 2013

4.54.4

4.44.4

4.8 4.3

4.1 3.7

4.1 1.6

3.84.1

4.7 3.7

4.5 3.3 3.23.3

Source: Latin America Consensus Forecast, March 2012

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Appendix IV Agricultural sector

Volume of commercialization of vegetables in the main Wholesale market of Lima -La Parada (TN) Year 2005 2006 2007 2008 2009 2010 Corn 111315 129398 120482 121629 127440 140657 carrot 63920 67519 75625 79991 77565 81470 Peas 26731 26 394 31637 10400 32407 31910 Beans 12569 10913 12941 13016 13928 12484
Source: Ministry of Agriculture-Office of Economical and Statistic Studies

Average price per month in the main wholesale market - La Parada (Lima) (S/./Kg)

Jan Corn Carrot Peas Beans 1.68 0.46 1.90 1.32

Feb 1.75 0.55 2.45 1.56

Mar 1.58 0.78 2.92 1.53

Apr 1.69 0.79 2.68 1.20

May 1.85 0.71 2.13 1.09

Jun 2.00 0.61 2.04 1.69

Jul 2.14 0.64 1.54 2.33

Aug 1.93 0.95 1.45 1.86

Sep 2.07 1.12 1.46 1.61

Oct 2.49 1.40 2.16 1.96

Nov 2.25 1.26 2.57 1.32

Dec 2.61 0.91 1.97 1.32

Average price trend in the main wholesale market La Parada Lima

3.50 3.00 2.50 Corn Carrot Peas Beans

Price

2.00 1.50 1.00 0.50 0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Empresa de Mercados Mayoristas SA(EMMSA) Ministry of Agriculture- Office of Economic and Statistic Studies

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Appendix V Financial statements Profit and loss account

Year Revenue Cost of sales Gross profit Expenses/overheads Wages and salaries General expenses Depreciation Other expenses Total expenses/overheads Profit before tax Tax @18% Profit after tax 204,524 333,600 571,900 63,000 25,000 0 0 993,500 1,018,855 1,076,296 1,140,763 1,212,329 204,524 358,873 36,814 322,059 508,091 64,597 443,494 364,404 91,456 272,948 443,356 65,593 377,763 366,960 600,495 51,400 403,656 630,520 42,120 444,022 662,046 34,696 488,424 695,148 28,757 0 1 2 3 4 5 0 4,122,300 4,740,645 5,451,742 5,179,155 5,697,070 0 2,924,276 3,362,917 3,867,355 3,673,987 4,041,386 0 1,198,024 1,377,728 1,584,387 1,505,168 1,655,685

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Cash flow
(1) SALES FORECAST Product/Year Units Sales Cash flow (S/.) COST OF GOODS Costs of sales Cash flow (S/.) (2) CASHFLOW FORECAST CASH INFLOWS Cash from Sales Capital TOTAL CASH INFLOW CASH OUTFLOWS Payments for materials Operating expenses Plant conditioning Wages and salaries General expenses Corporation Tax 18% Marketing Campaign Other preliminary expenses Plant and other capital expenditure TOTAL CASH OUTFLOWS Cash flow summary NET CASHFLOW FOR PERIOD OPENING CASH BALANCE CLOSING CASH BALANCE -153,690 0 -153,690 -87,554 -153,690 -241,244 279,893 -241,244 38,650 442,470 38,650 481,120 299,743 481,120 780,863 700,142 780,863 1,481,005 15,000 10,000 310,000 653,690 0 0 0 3,866,329 75,000 0 0 0 333,600 571,900 0 366,960 600,495 36,814 0 0 0 4,409,223 0 403,656 630,520 64,597 0 0 0 4,950,014 0 444,022 662,046 91,456 0 0 0 4,902,127 0 488,424 695,148 65,593 0 0 0 4,953,768 243,690 2,960,829 3,404,954 3,851,241 3,704,603 3,704,603 0 500,000 500,000 3,778,775 0 3,778,775 4,689,116 0 4,689,116 5,392,484 0 5,392,484 5,201,870 0 5,201,870 5,653,911 0 5,653,911 243,690 2,924,276 2,960,829 3,362,917 3,404,954 3,867,355 3,851,241 3,673,987 3,704,603 4,041,386 3,704,603 0 1 780,000 4,122,300 3,778,775 2 897,000 4,740,645 4,689,116 3 1,031,550 5,451,742 5,392,484 4 979,973 5,179,155 5,201,870 5 1,077,970 5,697,070 5,653,911

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