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Executive Summary

On the contrary to the previous years, these days popular culture is not confined to the particular regions. This is because of the advancements in cable televisions, a collection of radio programs, and most crucially, the wide usage of the internet. Nowadays, a popular fashion statement in, say Texas, is made a common attire in New York in a matter of days. Telecommunication speeds have increased the expectations of the young customers, as well as their demands representing their own cultural identity. McMilton will offer its customers, mostly those, between the age of eleven to twenty-one, in small towns, as well as in communities in the United States, the youth-customized products and clothing. These are the items that are popular throughout the country, but unavailable in these small towns and communities (Cerioni, 2007).

McMilton is unique from other e-commerce websites that target the youth in that it lays its focus only on the customers, who are living in the small towns, which have no supply of the products the company is offering. The aforementioned target groups are those, whose lives are characterized by their participation in sports for the youth, such as skating, snowboarding, or listening to music. These groups seek for inspiration in the alternative trends in clothing from big and urban towns. McMilton will look for customers by aggressively advertising in the small towns and communities comprising of populations of about 130,000 residents. The aim is to utilize the existence of the small businesses that also target the youth in these areas, such as alternative music shops and skateboard shops, to market McMilton’s product line.

1.1   Mission

The mission of McMilton is to be the market leader in offering distinctive products and fashion to the youth in the small towns.

1.2   Keys to Success

  • Outstanding relationship with customers to enhance fast shipment of ordered products;
  • Established efficiency in advertising strategies in businesses that target the youth;
  • Development of a good image amongst customers in order for them to identify the products’ aesthetics;
  • Easily accessible website with numerous tools that make it entertaining, while surfing. The excitement is much like what you get, when you walk into a store, where you find exactly what you were looking for.

Company Summary

McMilton aims at offering products and clothing, which are popular in the urban towns, but are unavailable in the small ones to the youth aged 11-21 years, online, by availing them locally. The company’s owners, Mildred and Clinton, will be actively involved in the development of an efficient operation strategy that will have the capacity to deliver to the customer within a very short time. McMilton will be focusing on advertising and marketing of its product line by using the website that will be introduced to the customers using existing local small businesses that also target the youth as a platform. This will increase the product awareness (Fingar, 2003).

2.1 Company Ownership

McMilton will be co-owned by Strat Mildred and P. Clinton.

2.2 Start-up Summary.

The costs that are expected to be incurred on the start of the company include product inventory costs, promotion campaign costs, and the costs of the development of a company’s website. Funding sources for the start-up are to come from the owners’ funds, as well as by means of the long-term loan. 

Initial Funding

Initial Expenses to Funded

155.4

Initial Assets to Funded

194.6

Total start-up Funding

350

Assets

 

Initial Non-cash Assets

130

Initial Cash Requirements

64.6

Additional Cash Contributed

0

Cash Balance Brought Forward

64.6

Total Fixed and Current Assets

194.6

Funded by

 

Liabilities

 

Long-term Liabilities

150

Accounts Payable

0

Other Current Liabilities

0

Total Liabilities

150

Capital Invested

 

Projected Investment

 

Strat Mildred

100

P. Clinton

100

Additional Investment Required

0

Total Projected Investment

200

Loss on start-up (Initial Expenses)

(155.4)

Total Capital

44.6

Total Capital and Liabilities

194.6

Total Funding

350

 

Start-up Funds Required

Initial Expenses

 

Legal Expenses

2

Stationery etc.

0.4

Website Development Expenses

30

Insurance Expenses

1

Rent Expenses

2

Marketing Expenses

120

Depreciated Equipment

0

Other

0

Total Start-up Expenses

155.4

Initial Assets

 

Cash Required

64.6

Initial Inventory

80

Other

0

Fixed Assets

50

Total Fixed and Current Assets

194.6

Total Funds Required

350

                                                                                                                 All figures are in $ (‘000’).

Products

McMilton intends to offer to the customers the following products tailored for the young members of the community: Jackets, Hats, Sweaters, Shoes, Bags, Pants, T-shirts, Shirts, Eyewear, Time pieces, Shorts, Dresses, and Skirts.

Market Analysis

The millennials are the fastest-growing members of the demography that includes those, who fall under 65 years of age. In the US, youngsters between the ages of 11 to 21 form an integral part of the country’s market demand with their population approximated to be 23.4 million in 1999, representing 8.6 percent of the total population in the country. They are estimated to spend about $24 billion annually, $151 billion in personal income, and sway the spending of about $324 billion annually. By 2002, the youth were spending about $1.2 billion online, and about $82 per week on average on food, fashion, entertainment, and technology.

In the recent past, fashion in clothing and items related to entertainment through technology has developed into a profitable niche in the economy. The aggressiveness, with which the youth absorb the internet and its facilities, is well documented leading to the coming up of the several companies, which rely on the online sales to this market segment. These companies have most of their stores located in the urban centers acting as promoters of their online shopping outlets. Since most families, who have children in their teens, tend to have internet access in their homes, most teens, 55 percent, prefer spending time on the internet, rather than watching TV. The internet is a handy tool for shopping, since it is easily accessible for the companies’ target population. About 64 percent of the youth have internet access in their homes nationwide.

It was estimated that the number of online shoppers, who are between the ages of 11 and 21 years old, was $300 million in 2002, exceeding by about twice the number of adult shoppers. In 2003, the number was estimated to be $2 billion annually. This trend continued and by 2004, a majority of the youth formed a large part of the people, who shopped online. Among the items purchased online, books, clothing, computer related items, CDs, and toys made the top five most purchased items by the sales volume.

4.1 Market Segmentation

Demographic changes in the recent past in the US have seen a lot of young people living in the non-metropolitan areas in numbers that match those, living in metropolitan. Nowadays, there are millions of youngsters living in the countryside, as opposed to the traditional setting, where most of them live in the urban centers, where there is a variety of clothing products, which form a strong part of the youths’ demand. This trend creates a gap in the supply of such products in these areas. This is particularly realistic in the communities, where a school or college institution is located in such a community (Bauknecht, 2005).

Currently, there are no small channels that can avail fashion and styles to the young people, who live outside of the big urban centers. This is because only urban centers have malls in every region responsible for the distribution of these products. The malls only focus on the majority of the youth market in these areas, ignoring those, who are out there. This is especially aided by the fact that the producers are mostly of the small scale that heavily rely on such malls as outlets.

The following are the characteristic of the “Generation Y” that McMilton will seek to capitalize on:

  1. Need for affiliation: the youth are known to be social creatures among peers. They are always after fellow teens for companionship, as well as a means to show off or stand out.
  2. Attitude: they go about their business with an attitude meant to portray them as define and belonging to a certain domain, i.e. they want to create a certain identity that appeals to them. This is represented in the way they dress, their hairstyles, and the kind of music they listen to. In addition, they also have a unique sense of humor and a degree of silliness.

McMilton will offer alternative clothing and other products to the youth in the non-metropolitan towns in America through the internet. The company will create an image in this industry that will take advantage of the above characteristics of the intended customers. McMilton will lay emphasis on the following two types of communities (Plunkett, 2009):

  1. Those with a resident population of between 100,000 and 150,000;
  2. Those with a major learning institution in their locality of at least 75,000 in population.

Market Analysis

   

Year I

Year II

Year III

Year IV

Year V

 

Target Customers

Growth Rate

         

CAGR

Communities with at least 100,000 to 150,000 people.

7.5%

5,500

7,200

7,660

8,125

8,985

7.50%

Communities with a learning institution more than 75,000.

7.5%

2,750

3,200

3,830

4,245

4,892

7.50%

Total

7.50%

8,250

10,400

11,490

12,370

13,877

7.50%

Implementation Strategy

McMilton will use the two strategies to introduce and to develop its product line in the market:

1.      The company will advertise in all local magazines that have an interest in the youth;
2.      The company will also plan and carry out over fifteen events involving all retail outlets of items that the youth often purchase, as well as sponsor youth events, such as skateboard competitions.

5.1 Competitive Edge

McMilton seeks to offer product lines that are aesthetic and stand out, but are relatively cheaper than other products from competitors. Most of other brands are not as distinctive to the extent of satisfying the dynamic tastes and preferences of the target customers. McMilton’s products are market leaders and promise a price that is sure to make a mark in the repeat business. Customers will be attracted to buy the products again. They will, therefore, visit the website again in order to find out the new products that the company had prepared for them.

The fact that the product line chosen by McMilton is a lifestyle statement, gives us an edge against competitors, since we focus more on the youth living in the local areas. McMilton seeks to be the representative of these youths in terms of their style, as well as their life choices. We seek to create a pool of the loyal customers, who will form a backbone of the company’s sales in addition to the company forming an important part of the customers’ lives. The company’s website will be highly customable for every customer, who will create their profiles with us online according to their interests. The website will also employ the social media features, such as chatting, so that we will be able to collect important information on the market and also our products, so that we will learn about our progress and improvement areas.

5.2 Sales Strategy

It is expected that there will be no sales for the first 45 days. Sales will start after this period and will gradually increase, as the company makes progress in marketing.

5.2.1 Sales Forecast

Sales Forecast

 

Year I

Year II

Year III

Sales

     

Clothing

$200,900

$208,000

$304,000

Shoes

$103,135

$201,000

$205,000

Products

$50,530

$102,000

$106,000

Total Sales

$354,565

$511,000

$615,000

       

Direct Sales Cost

Year I

Year II

Year III

Clothing

$60,300

$90,000

$101,000

Shoes

$20,510

$40,400

$60,000

Products

$10,264

$30,000

$40,000

Total Direct Sales Cost

$91,074

$160,400

$201,000

Financial Plan

The following is the financial plan for McMilton.

7.1 Break-even Point Analysis

Based on monthly expenses and costs forecasted, the following is the break-even point, shown in table and chart format. 

Analysis of the Break-even Point

   

Monthly Income at Break-even

$27,667

   

Assumptions:

 

Average Variable Cost

25%

Estimated Fixed Cost (Monthly)

$20,635

7.2 Forecasted Profit and Loss

The forecasted profits and losses for the first three years of operations are as presented in the table and charts below.

Income Statement

 

Year I

Year II

Year III

Sales

$395,660

$620,000

$755,000

Direct Cost-Sales

$100,840

$165,000

$215,000

Cost of Goods Sold

$100,840

$165,000

$215,000

       

Gross Margin

$294,820

$455,000

$540,000

Percentage Gross Margin

74.51%

73.39%

71.52%

       
       

Expenses

     

Payroll

$178,600

$194,600

$214,000

Sales and Marketing Expenses

$0

$135,000

$155,000

Depreciation

$7,240

$7,240

$7,240

Leased Equipment

$0

$0

$0

Utilities

$6,500

$6,500

$6,500

Insurance

$6,500

$6,500

$6,500

Rent

$24,200

$24,200

$24,200

Payroll Taxes

$26,740

$28,890

$31,900

Other Expenses

$0

$0

$0

       

Total Expenses

$249,780

$402,930

$445,340

       

PBIT

$47,540

$51,470

$103,160

EBIT

$54,680

$58,520

$110,210

Interest Expense

$13,840

$12,850

$12,670

Taxes Incurred

$10,150

$11,686

$27,247

       

Net Profit

$23,600

$27,134

$63,443

Gross Margin

5.97%

4.44%

8.47%

7.3 Forecasted Cash Flow for Three Years

Cash Flow Statement

 

Year I

Year II

Year III

Cash Received

     
       

Revenue from Operations

     

Sales

$395,750

$620,000

$752,000

Subtotal for Revenue from Operations

$395,750

$620,000

$752,000

       

Subtotal Cash Received

$395,750

$620,000

$752,000

       

Expenditures

Year I

Year II

Year III

       

Expenditures on Operations

     

Cash Spending

$177,600

$192,600

$212,000

Bill Payments

$103,957

$364,975

$463,540

Subtotal Cash Spent on Operations

$281,557

$557,575

$675,540

       

Long-term Liabilities Repayments on the Principal

$21,620

$1,820

$1,820

Purchase of Other Current Assets

$19,820

$19,820

$19,820

Dividends Paid to Shareholders

$0

$0

$0

Subtotal Cash Spent

$322,968

$579,175

$697,240

       

Net Cash Flow

$72,695

$30,836

$52,861

Cash Balance

$137,393

$168,128

$220,971

7.4 Forecasted Balance Sheet in the First Three Years

Balance Sheet

 

Year I

Year II

Year III

Assets

     
       

Short-term Assets

     

Cash

$137,294

$168,119

$220,979

Stock

$6,275

$10,209

$13,075

Other Short-term Assets

$19,820

$39,620

$59,420

Total Short-term Assets

$163,389

$217,948

$293,474

       

Fixed Assets

     

Fixed Assets

$52,000

$52,000

$52,000

Accumulated Depreciation

$7,150

$14,290

$21,430

Total Fixed Assets

$44,850

$37,710

$30,570

Total Assets

$208,239

$255,658

$324,044

       

Liabilities and Capital Invested

Year I

Year II

Year III

       

Short-term Liabilities

     

Accounts Payable

$9,634

$31,832

$38,761

Subtotal Short-term Liabilities

$9,634

$31,832

$38,761

       

Long-term Liabilities

$128,200

$126,620

$124,820

Total Liabilities

$137,834

$158,452

$163,581

       

Capital

$200,500

$200,500

$200,500

Retained Earnings

($155,500)

($131,484)

($104,700)

Earnings

$23,600

$27,134

$63,400

Total Capital

$68,190

$95,224

$158,567

Net Liabilities and Capital

$208,239

$255,658

$324,044

       

Net Worth

$68,190

$95,224

$158,567

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