End of Module Project
The deadline for your end of module project is at the end of unit 9.
Part 1:
Prepare a report for potential investors to justify their involvement in a project, new business idea, business start-up or other form of investment you would like them to make. This should follow the format of a business plan.
The report should make clear why they should consider investing in your idea. You should use module concepts and models to convince them of the viability and attractiveness of your proposal. You should justify the returns expected with the use of at least two financial techniques.
Part 2:
You are also required to prepare and submit a set of suitable PowerPoint (or equivalent) presentation slides which would be appropriate to support a "pitch" to your potential investors promoting your idea. The slides must be submitted as an appendix to your Business Plan and should not be more than five slides long.
Part 3:
In retrospect and based on your analysis in Part (1) Critique your business idea (using module models and concepts), this could include:
• Risks
• Weaknesses
• Whether you should proceed, defer or abandon your idea
• Limitations of models and concepts you have used
Your final report should be between 1,500 - 2,000 words.
Solution:
1.1 Introduction
All businesses and organizations begin with an idea of a product or service to be provided. Most businesses need investors to enable them get the funding for operations and expansion. However, the ability of a business to present a feasible and viable business plan is essential to getting investors to invest in the business idea, product or service. This report presented Muna Global Concept (MGC) Makeup/Beauty business idea to potential investors justifying their involvement in business, assess the competition it faces and so on. The report adopts some models such as STEEP, Porter Five Forces, SWOT analysis among others.
1.2 Muna Global Concept (MGC) Makeup/Beauty Business and Target Market
MGC main business line is primarily on cosmetics and makeup products to meet individual beauty needs. The product portfolio of MGC comprises of skin care products such as face oil, moisturizer, sunscreen, treatment among other.
The makeup/beauty industry is development rapidly all over the world with approximate to the tune of $532 billion and by 2023 it estimated to $805 billion (Danziger, 2019). MGC market is targeted mainly on female of age bracket 18 to 55 in Nigeria and some part of Africa. In addition, the products target other businesses such as Spas, saloons, makeup outlets among others.
1.3 Segmentation, Targeting and Positioning (STP)
MGC adopted segmentation, targeting and positioning strategy to penetrate the target market. This is significant according to Tanford & Malek (2015) to ensure that the right products are delivered to the right customers.
Segmentation: Segmentation entails dividing the market according to consumers preferences, age, interest and taste (Akram, 2017). Conversely, segmentation enable the right products to get to the right persons (Thoeni, 2014). Consequently, MGC segmentation includes geochemical, demographical, psychographics and behavioural to meet the objectives of the business (Truong, 2016).
Targeting: In targeting, MGC selects the market units to reach with its various products (Venter, Wright & Dibb, 2015). Therefore, MGC target male female of various classes from ages 18 to 45 in Nigeria and some part of Africa.
Positioning: MGC has positioned its products in a unique stand in the market and in the potential customers’ minds through the 7ps (Armstrong & Kotler, 2013). In addition, the company adopted various methods for positioning such as innovation, brand image, brand identity and packaging.
2.1 Assessing Muna Global Concept Business Environment
This section of the report assesses the macro business environment of Muna Global Concept using STEEP, Porter Five Forces and SWOT analysis.
2.2 STEEP Analysis
The analysis here focuses on the external business factors that have significant impact on MGC business activities. In addition, the STEEP analysis assist in predicting the trends in the external business environment. STEEP means Social, Technological, Economical, Environmental and Political.
Social: Social factors such as the consumer attitude, demographic, lifestyles, religion among others could significantly affect MGC. Some culture and religion in Nigeria forbid the use makeup products. Nevertheless, owing to social development, majority of the population particularly young women are currently using various makeup products.
Technological: The advancement of technologies have immense impact on MGC business. For instance, technology plays significant role in the areas of e-marketing, product development, effective communication and research and development.
Economic: Covid19 pandemic has affected various businesses globally. However, the good news for MGC is that Nigeria is recovering fast from this effect through various economic initiatives such as tax reduction and tax holiday for startup companies like MGC.
Environmental: Nigeria as a country has a good environment which includes good water, soil and there are good environmental regulations. MGC will take advantage of this good environment with less pollution.
Political: Trends in political environment could have significant influence in businesses. However, despite the recent #ENDSARS Protest in Nigeria, the Nigeria political environment has been stable since the emergence of democracy. Furthermore, there is no monopoly and little impact of trade unions in the beauty and makeup industry.
2.3 Porter’s five forces analysis
This section assess the business environment using porter five forces as illustrated in the figure 2 below:
Figure 2: Porter’s Five Forces Diagram: Source (Chi, 2020).
Threat of new entrants: New entrant in any industry is always a threat to existing business (Chi, 2020). There are various new entrant companies in the beauty and make up industry that has significant threat to MGC. Nevertheless, the unique products and positioning of MGC give an advantage to the business.
Bargaining power of customers: Owing to several beauty and make up companies and products, the bargaining power of customers is high which could affect MGC. However, with the corporate strategy of MGC such as the pricing strategy, the company will continue to gain market share.
Bargaining power of suppliers: Suppliers in Nigerian makeup and beauty industry manipulate the prices of products through high barging power since there are many companies to supply (Panda, 2019).
Threat of substitutes: There is proliferation of substitutes make up and beauty products in Nigeria which has immense impact on MGC business. For instance, the various substitutes products in the industry has given customers options to choose from leading to threat (Kotler, 2011).
Rivalry: There are various rivalries in the makeup/beauty industry today in Nigeria resulting to fierce competition. However, MGC have an advantage edge owing to its segmentation, targeting and positioning in the market.
2.4 SWOT Analysis
Based on the porter five forces, and STEEP analysis, this section summarizes with SWOT analysis as stated by (Proctor, 2014) to examine the strengths, weaknesses, opportunities and threats of MGC.
Figure3: SWOT Analysis (adapted from Armstrong & Kotler 2013)
Strengths: Owing to the large market in Nigeria and the rest of Africa, MGC gains its strength from this huge market. Furthermore, MGC products are unique, well designed and packaged.
Weaknesses: The price of MGC beauty/makeup products is higher due to the quality and uniqueness. This could be a weakness as various products in the industry are lower. Low earner consumers will find it difficult to purchase MGC products.
Opportunities: The market opportunity in Nigeria and the rest of Africa in the area of beauty/makeup industry is huge and still untapped owing to the signing agreement of Africa Continental Free Trade Area is a great opportunity which MGC can take advantage of (Callaghan Jacob & Swilling, 2020).
Threats: The various companies in the beauty/make up industry having same or similar products have pose threat to MGC. Conversely, Nigeria with cultural diversity and religious beliefs that are against makeup/beauty brands and products is a another threat.
3.1 BCG Matrix
Figure 4: BCG Matrix for Muna Global Concept: Source:
MGC product areas are question marks owing to the fact that it is still an idea. However, there is a turning point as seen at the question mark product due to the fact that it could become a market leader and a start with good investment. Furthermore, the products could easily turn to dogs resulting to eating up big amount of company cash (Alshahrani, 2018).
The greatest strength of the products is the face oil as seen from the line between the question market and a star due to the fact it is capable to generate big amount of money as they have big share of market and growth level.
MGC intends to push the face oil in the portfolio to stars ensuing better shape with the product portfolio. The face oil cures different facial diseases and pimples which makes it stand to be a huge market. This will follow by the treatment products in the green circle area. While the sunscreen are nearest to the line of a star product with a high market growth rate and a low to middle sized market share. Conversely, the moisturizer are targeting the dog category. Though it still lies in the question mark area, with good promotion, it could turn to a dog (Pareira, 2015).
4.1 Corporate Strategy Adopted by MGC
The Corporate strategy adopted by MGC is to translate the objectives into an execution plan. The company adopt a Corporate strategy that create a community to build brand advocate, unleashing the potential of content marketing, involve micro influencer, collaboration with Spas and skimming pricing strategy. Furthermore, the corporate strategy focuses on effective allocation of resources, portfolio management, strategic tradeoffs among others.
4.2 Porter's Competitive Strategy
MGC adopted Porter’s Completive Strategy which consists of three major kinds of strategies to gain competitive advantage. MGC reduce cost than its competition and differentiation relative to its rivals which results cost leadership, differentiation and focus strategies. Put differently, they are strategic scope and strength which assess the market MGC intent to target and the supply side.
5.1 Financial Techniques
This section adopts investment appraisal (Pay Back Period Rate) and break-even analysis as financing techniques.
5.2 Investment Appraisal (Pay Back Period)
The formula for the Payback period is stated below;
Initial investment –opening cumulative Cash flow
Closing cumulative cash flow –opening cumulative cash flow
The Opening Cumulative Cash Flow is $900,000, while the Closing cumulative Cash Flow is $1,200,000.
NB: Investors will recoup the initial investment in 2 to 3 years.
Therefore:
Payback Period = $900,000 - $1,200,000
$1,200,000-$900,000
=0.33
From the above calculation and analysis, the payback period will be 3 years. The risk is higher when the payback period is longer as the decision rule is to minimize the time taken for the return of investment.
5.3 Break – Even Analysis:
The break-even analysis here takes into consideration only the face oil product. For instance, MGC purchases the face oil for $10 and sells for $20, making a gross profit of $10 on each face oil, then the gross profit formula will be;
Sale Price
Cost of Goods Sold
$20 / $10 = $10 per Face oil:
Here, the gross profit is the profit made after removing the costs. The direct cost is the
$10 which MGC bought a face oil from the manufacturer. The indirect costs or overhead costs would be the costs of running the business.
Let’s put other expenses such as salaries, advert and, utility rent at $2,000 per month. MGC analyzes the break-even using the fixed cost of $2,000 per month. Then divides that by the gross profit of $10 that MGC made on the sale of each face oil. So, the break-even in terms of unit sales is $2,000 divided by $10, or 200 face oil per month.
Break-Even Formula
Fixed Cost / Gross Profit per Unit = Break-Even in Units
$2,000 / $10 = 200 Units (face oil)
MGC sales break-even would be 200 face oil because break-even is view in terms of units sold.
Break-Even Formula in Sales $:
(Fixed Cost / Gross Profit per Unit) x Sales Price per Unit =
Break Even Sales $
($2,000 / $10) x ($20) = $4,000
If MGC sales are greater than $4,000 per month, MGC is making a profit—$10 for every 200+ face oil that MGC sells each month.
6.1 Critique of Muna Global Concept business idea
Based on the SWOT analysis above and the payback period of the business which is 3 years, the risk of this business is minimal. In addition, the SWOT analysis shows the weaknesses of MGC are minimal. Therefore, MGC can proceed with the business idea.
Finally, some of the models and concepts used in this report are limited in the sense they might not be accurate in real life practice.
7.1Conclusion
In summing up, the report presented Muna Global Concept (MGC) Makeup/Beauty to potential investors and justifying their involvement in business. Furthermore, it assessed the target market, the competition it faces and so on. The report adopted various model concepts such as STEEP, Porter Five Forces, SWOT analysis among others. Finally, the report used some financial techniques such as investment appraiser (Payback period) to assess the payback period for investors and breakeven analysis.
No comments:
Post a Comment