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.
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.
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).
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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 Expenses to Funded||155.4|
|Initial Assets to Funded||194.6|
|Total start-up Funding||350|
|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|
|Other Current Liabilities||0|
|Additional Investment Required||0|
|Total Projected Investment||200|
|Loss on start-up (Initial Expenses)||(155.4)|
|Total Capital and Liabilities||194.6|
|Start-up Funds Required|
|Website Development Expenses||30|
|Total Start-up Expenses||155.4|
|Total Fixed and Current Assets||194.6|
|Total Funds Required||350|
All figures are in $ (‘000’).
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.
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.
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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:
- 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.
- 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):
- Those with a resident population of between 100,000 and 150,000;
- Those with a major learning institution in their locality of at least 75,000 in population.
|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%|
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.
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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.
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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
|Year I||Year II||Year III|
|Direct Sales Cost||Year I||Year II||Year III|
|Total Direct Sales Cost||$91,074||$160,400||$201,000|
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|
|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.
|Year I||Year II||Year III|
|Cost of Goods Sold||$100,840||$165,000||$215,000|
|Percentage Gross Margin||74.51%||73.39%||71.52%|
|Sales and Marketing Expenses||$0||$135,000||$155,000|
7.3 Forecasted Cash Flow for Three Years
|Cash Flow Statement|
|Year I||Year II||Year III|
|Revenue from Operations|
|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|
|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|
7.4 Forecasted Balance Sheet in the First Three Years
|Year I||Year II||Year III|
|Other Short-term Assets||$19,820||$39,620||$59,420|
|Total Short-term Assets||$163,389||$217,948||$293,474|
|Total Fixed Assets||$44,850||$37,710||$30,570|
|Liabilities and Capital Invested||Year I||Year II||Year III|
|Subtotal Short-term Liabilities||$9,634||$31,832||$38,761|
|Net Liabilities and Capital||$208,239||$255,658||$324,044|