New Business with detailed research

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A New Business WIth Detailed research about SWOT Analysis, Porter Analysis, Generic Strategy, Corporate Strategy, Planning and Gantt chart, Break-even Analysis, Motivation, Organizational Chart, CSR and Social Responsiveness Activities, Leadership Style and Controlling Process!

Submitted: November 08, 2016

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Submitted: November 08, 2016

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Term paper onBlue bird leathers ltd.

MGT211_Sec: 01_Summer 16

Submitted By

Pranta Paul – 15304030

MD. Sohan Shahriar – 15304025

Ishtiak Ahmad Zim – 15321022

Md. Masum Kamal – 15104054

H.M. Afazuddin Nayan – 15304041

 

Submitted To

Ms. Iffat Tarannum

Faculty, BRAC Business School

 

 

Date of Submission: 31/07/2016

March 20, 2016

Ms. Iffat Tarannum

Lecturer

BRAC Business School

BRAC University, Dhaka

Subject: Submission of term paper.

Respected Teacher,

With due respect we would like to inform you that we are the students of MGT211 section 01. It is our great pleasure to present our term paper report on “Blue Bird Leathers Ltd.” titled as “A Term Paper on Blue Bird Leathers Ltd”.

 It has been a great learning experience for us taking a real life exposure of analyzing basic management system and strategy of the organization. We have tried our level best to follow the guidelines provided by you. We are very much glad that you have given us the opportunity to prepare this report and hope that this report will meet the standards of your judgment.

Thank you again for this opportunity, your time and your kind considerations.

 

Sincerely yours,

---------------------------------------------------

H.M. Afazuddin Nayan – 15304041

 

 

 

Table of Contents

Introduction. 3

Vision: 3

Mission: 3

SWOT Analysis: 4

Porter Analysis. 6

Generic Strategy. 7

Corporate Strategy. 7

Planning and Gantt chart 8

Break-even Analysis. 10

Motivation. 12

Organizational Chart 14

CSR and Social Responsiveness Activities. 15

Leadership Style. 16

Controlling Process. 17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction

We start a leather products business where we produce leathers product in our own factory and sell them to the customers in our own outlet. We named the company as “Blue Bird Leathers Ltd.”. Our main product will be:

  • Handbag
  • Wallet
  • Purse
  • Craft
  • Belt
  • Footwear
  • Strap
  • Holster

We buy raw materials from the suppliers and then process it in our factory then make product which we will sell in our own outlet. Our business includes production, sell, supply, online delivery. We have showroom in every division of Bangladesh. There will be one Head Office from where our whole management will do their operation. And in every showroom there will be salesman along with sales managers. Also in our factory there will be production manager and skilled labor will produce leather product. Every branch around Bangladesh (all division) will be operated by branch managers. And branch manager has to give report to head office about current business situations and as per the chain of command every employees or managers are bound to fulfill, report or obey/agree their position demand. We will sale our leather product in our showroom which will be produced in our own factory. We will have free delivery option for the customers. Also customers can order our product via online and our website has updated and all products shown in details with price.

Vision:

Blue Bird Leathers Ltd. are committed to being the best leather products seller and manufacturer in whole Bangladesh.

Mission:

Blue Bird Leathers Ltd will function as a designer, developer and integrator of every usages leather products.

We will offer unsurpassed value and aggressively market our products to the whole Bangladesh and target every customers to whom we can sell our products.

We will never lose sight of our core values and will conduct ourselves with the highest level of professionalism and ethics.

To our customers we offer:

  • A commitment to provide superior service and delivery
  • World-class quality products, designed to your requirements and competitively priced
  • Quick response to your expectations
  • A supplier who is easy to work with and respected for our ethics, professionalism and culture

To our employees we offer:

  • Our commitment to ensure a viable future focused on cost, innovation and market growth
  • A desirable and rewarding place to work
  • To be the best managed company with the best employees
  • The opportunity to grow to your maximum potential

To our shareholders we offer:

  • Relentless pursuit of increased value through focus on cost structures and capital requirements
  • A commitment to continuous improvement and Adding Value through all activities and resources.

SWOT Analysis:

Strength: The strength of Blue Bird is promised to reach quality product to the consumers. That is why this company from the very beginning focuses on efficient system to collect quality raw materials, advanced manufacturing technology. To ensure collecting quality raw materials Blue Bird Ltd. has formed specialized team which is assigned to create a strong network of raw materials supplier. This team is also responsible for identifying the quality of collected raw materials. The next component of quality is advanced manufacturing technology. Blue Bird Ltd. thinks without using efficient advanced technology it is impossible to provide quality products only with best raw materials. For this we imported latest technology of manufacturing and hired proficient engineers to run the manufacturing system smoothly. Quality products is not enough to attract customers. Attracting customers demands beautiful, innovative design. Blue Bird Ltd. is concerned about this and for this it has formed “Fashion & Trend” department which is rarely done by new company. This department is responsible to make beautiful and innovative design of leather to maintain our distinctiveness. Brining differentiation in products is also included in their job responsibility. As we are new company we focus on products which is main component of grabbing and maintaining a consistent market.

Weakness: As we are newcomer in this business we have some weakness which normally all newcomers face. Our main limitation is distribution system. We have distribution system at division level of Bangladesh which is not very bad for a new company but our main target is to reach district level which is far from us. Without vast and efficient distribution we cannot earn our desired revenue. Our other weakness is not having research facility which is very important for further improving of product and business. We have target is to gradually form R&D department which can help to make our business more efficient. Now we have to depend on other organizations for formula and information which is big problem for our company because we have to spend a comparatively more money to get this stuff. We have also shortage of foreign currency as we have not started exporting, but foreign currency is important to import machineries as we want to expand the capabilities of production. For these reasons we fall behind than other companies.

Opportunities:  Recently, The market of leather is increasing day by day. Purchasing capability of people of Bangladeshi has increased, at same time people has become more fashion oriented which is a great opportunity for us. As we bring differentiation in products, the opportunity will increase gradually. Moreover, demand per man is also increasing because nowadays people are intended to lead luxurious lifestyle. Additionally, the trend of online shopping among the city people is rising. This is plus point for us because we are offering online order and home delivery service in cities. The other opportunity for us availability of raw materials in our country at a cheap rate. When we have started this business, we have noticed there are enough suppliers of raw materials who are ready to supply at a cheap rate which increases our profit. Low wage rate of labor in Bangladesh is also helpful for us because it decreases the production cost ultimately results in advantages in getting foreign order.  The other opportunity is to grab the organizational level customer, because there are many organizations who need leather product in their organizational work like defense cohorts, factory workers. There is huge possibility of increasing revenue if we can grab these organizational level customers.

Threats: The main threat is high competition in this business because there are some established companies. Customers are very sensitive in choosing leather product. They consider some factors during purchasing product like price, quality, brand, design, availability etc. Meeting this all at a time criteria is threat to any leather company. Unskilled labor is also a threat for this sector, for this efficiency of production decreases. For training them a part of revenue of company has to spend.

 Porter Analysis

Bargaining Power of Suppliers: In this business suppliers are actually raw materials suppliers and machineries suppliers. There are many suppliers of raw materials of leather products in Bangladesh. As a result, bargaining power of raw materials is low. There are also many machineries suppliers, but as we are fully dependent on importing and we need latest machineries and it is difficult to switch in international market the bargaining power is moderate.

Threat of New Entrants: In leather business newcomers face very hard situation because it demands huge investment. From collecting materials to distribution it demands not only investment, but also skilled manpower, organizational capability etc. Moreover, it is more difficult to survive in this sector because there are some established leather company here. As a result, threat of new entrants is low.

Bargaining Power of Buyers: There are some well-known brands in this sector who are providing quality products. That means, buyers have good option to switch and for that bargaining power of buyers is high.

Threat of Substitute: Nowadays some alternatives of leather is becoming popular some people are against animal killing. Some alternatives are jute maid product, glazed cotton and so on, but these product are not so available and durable like leather product. That is why, maximum people still prefer leather product first. So, threat of substitute is low for this sector.

Threat of Rivalry: Competition in this sector is very high because many brand or non-brand sellers operate in Bangladesh. People of all classes have enough options to switch. For high class people there are some established national and international brands, and for lower and middle class people non-brand leather products are also available. This availability of product makes the level of threat of rivals high. 

Generic Strategy

Differentiation Strategy: We follow differentiation strategy as generic strategy. We concentrate on the distinctiveness of our product and service. We apart ourselves from our competitors with superior engineering design and advanced manufacturing technology. We bring variations in our products which not only fulfills daily basic needs but also increases the standard of life. We provide one month replacement guarantee and one year servicing warranty. Moreover, we also take order to make buyers desired product. For instance, some people with physical challenge may need special type of shoe. If someone orders us, we can make special shoe for him/her according to the need or instruction. We have another exclusive offer for our regular customers. If someone can show the cash memo of previously bought product, he/she will get five percent discount on our any product and ten percent discount on that particular product which he/she bought.

Corporate Strategy

Since we are new company, we want to increase our market share, for that reason we follow growth strategy. We follow two types of growth strategy. First one is vertical integration and second one is unrelated diversification.

Vertical integration:

  1. Backward integration: Gradually we want to integrate our raw materials suppliers. It will help us to increase our revenue, because in that case it can save us from sudden rise of price of raw materials. Before launching this business we studied sometimes suppliers make artificial crisis to increase the price. If we follow backward integration we will be our own supplier.  So, we can remove the middle men from the way of getting raw materials. That means, we can attain increased control over the production segment which will increase our efficiency in production. It will give competitive advantage as well because, we can control the access of other competitors in getting raw materials.
  2. Forward integration: Now we are following forward vertical integration, we have own controlled showrooms at city level. We directly operate this showrooms which enables us to exercise better control over distribution. We want to assure that we can remain close with our customers. We can also get the customer feedback directly which helps us to improve our product. We also offer own operated home delivery service so that we can ensure to reach to the customer’ door our products at the right time. Moreover, through forward integration, costs can be considerably controlled because it helps us to reduce the cost of middle men which ultimately results in increased profit.

Unrelated diversification: We have plan to expand our business through unrelated diversification. In near future we want to start meat business. We noticed that there is only one meat supplier in Bangladesh. We want to break their monopoly business and as the restaurant business is growing, the demand of hygienic meat is increasing. This meat supplying business will help us in some ways. First way is, it will make our financial base strong. Additionally, it spread investor risks over a wider base. Other way is, we will get directly skin from this business. That means it will reduce the cost of buying our main raw material. It will give a unity in our production process and competitive advantage as well.

 

Planning and Gantt chart

Strategic Plan: It is important to have a road map to understand where we are going and how we will get there. We want to build a strong position in market by opening outlets in every district of the country and hence ensuring maximum reach to the customers. It is a long term plan which will take around 3 years. The top management is responsible for the planning. Within these 3 years we will build at least one outlet in every district of the country. We have set a budget of 5 crore BDT. Beside that from the 2nd year we want to build a strong relationship with the customers. As we want to spread our business through the country we need to run campaigns in different areas of the country to promote our products and establish the brand image in people’s minds. As branding is a continuous process, so we have set a budget of 2 crore BDT which can take almost 1 year. As we are creating a manufacturing company we need a huge employee workforce to operate the business. We want to be the most preferred employer in Bangladesh. For employee recruitment we have a budget 5 Lakh BDT as it will start from the beginning till 1 year. As a manufacturing company we need raw materials. In 2 years we will be our own supplier of raw materials. We will collect the leather and other raw materials from local suppliers and will build a vertical Integration with them. For the vertical Integration we will cost 10 crore BDT.

Operational Plan: Operational plans tell how to operate a business. It varies on the types of the business. As a manufacturing and sales company we have to focus on Production/Inventory, Distribution and marketing plans for short time. It is short time plan covering around 1 year.

  1. Manufacturing and Supply: Our management has estimated the needs for the material and describe the agreements with suppliers, including their length and that have arranged to consummate those needs. We need all machineries within 6 month from the beginning to start our production simultaneously.
  2. Labor Force: All the labor force we would like to recruit in 3 different departments like production, sales and administrative. We plan to be fixed an exact time when our HR department will recruit several number of employees for the time being. That recruitment process will begin after 1 month from the starting of the business and runs till 5 month. 
  3. Conduct Social Events and Programs: Our management will prefer conducting social event plan for the betterment and ethical responsibility for the growth of our business. It is a 4 month plan which will enrich our social identity among the customers and other people. It will start after 6 month.

 

 

Gantt Chart:

 

 

Break-even Analysis

The first thing we need to consider when doing our break even analysis is the total amount of money we will need to spend as the total fixed costs when setting up our business. First, let us consider the start-up expenses including legal work expenses, logo design, site selection, brochures etc. The following table shows our estimated start-up expenses.

 

Start-up Expenses

Amount (in BDT)

Legal

100,000

Stationery etc.

60,000

Brochures

20,000

Consultants

100,000

Insurance

50,000

Rent

100,000

Research & Development

100,000

Other expenses

20,000

Total

550,000 BDT

 

Next, we need to consider our start-up assets. Our capital, as in the total amount of money in our bank account when the business starts is an important measure in this. Other assets include short and long term assets like equipment, office furniture, machinery etc. The following table shows the start-up assets.

 

Start-up assets

Amount (in BDT)

Cash Balance on starting date

990,000,000

Short-term assets

200,000

Long-term assets

500,000

Total

990,700,000 BDT

 

We have 3 investors. They invested 500,000,000 BDT, 300,000,000 BDT and 191,250,000 BDT respectively. Since at this starting point in the business we have no sales yet and hence no revenue, we shall consider the 550,000 BDT spent in the start-up expenses as loss at start-up. Other fixed costs include-

i)  Industrial equipment - 300,000,000 BDT

ii) Employee recruitment - 10,000,000 BDT

Hence, our break-even analysis is going to start with a total fixed cost of 310,550,000 BDT which includes the loss at start up.

Now, we are planning to sell a variety of leather products including Shoes, Belts, Straps, Vanity Bags, Wallets, Purses, and Holsters etc. Different types of products are going to be priced at different amounts. But for our break-even analysis we need to compute the total number of product units we need to sell in order to equal our costs and revenues. For that to happen, we have to consider the prices of all our different types of products and calculate the average to find an average unit price of the products sold. Let us start by setting prices.

 

Shoes – 2000 BDT

Belts – 800 BDT

Vanity Bags – 1200 BDT

Wallets – 700 BDT

Purses – 500 BDT

Holsters – 800 BDT

So, the average unit price is 1000 BDT.

 

The next parameter of our break-even analysis is the variable cost per unit product sold. These variable costs increase at a constant rate relative to labor and capital and include raw materials purchases, wages, utilities, materials used in production etc. Since our average unit price is 1000 BDT, we can set our variable cost per unit product at 400 BDT. Now, we can apply the Break-even formula. 

 

Hence, rounding the above value, we can conclude that our company will reach break-even after the sales of 520,000 product units. From then onwards we will start making profit in this business.

 

Break Even Point Graph:

 

Motivation

Employee motivation can be performed by different kinds of techniques. It can be financial and it can be non-financial. Like if a manger gives some bonus to his employee to motivate them then it is a financial way and safety is an important aspect for a worker so if manager can ensure safety for his employee then it considered as a non-financial technique. There are some motivation theory by those we can get to know that how mangers can motivate their employee. Therefore, in our leather industry we will apply Maslow’s hierarchy of needs theory and Herzberg’s Motivation- hygiene theory. First of all Maslow’s hierarchy of needs theory. Here we will find two types of hierarchy of needs, which is external and internal. Physiological and safety needs include in external needs and social, esteem and self-actualization include in the internal needs. Here we have to full fill the lower level needs before higher level needs. First of all physiological needs, here person wants salary because salary will full fill his or her physiological needs. Without enough the employee will not be able to lead a happy life. Then comes safety here employees want some benefits. We have to give them a secure environment for work. We have to control all kinds of harassment and must ensure a safe environment. For example, we need to set-up a fire exit. People used to get certain amount of money, which is also, consider as a safety issue. This two is the lower level needs. After completing these two needs people can go ahead for higher level of needs. Here social safety comes first. We have to make sure the interaction among the employee member. We have to make an environment where all employees have a good relation with each other. Because this will improve the business of the company. Then comes esteem, here employees want their recognition and a good work place and respect. We can take ideas from them to take different kinds of decisions, which can helps to complete this needs. We also give them a good work place to inspire them. Lastly, it is about self actualization, here we should set up a certain goal to meet up for the employees which can helps to full fill there self actualization needs. Here employee needs to be much more skill at which he is performs.

Now we will describe how we apply Herzberg’s Motivation- hygiene theory. There are tow factors in this theory, which are hygiene factor and motivator’s factor.  First of all hygiene factors. This factor includes some issues which are pay, company policy, fringe benefits, status, job security etc. These factors are work for making motivation in the work place. By these factors, we can create job satisfaction among the employees. If we do not apply these then it can bring dissatisfaction among the employees. These factors are extrinsic factors. Motivattion factors include some issues which are achievement, recognition, work itself, responsibility, advancement and growth. We will apply all these factors. Because these factors motivate employees a lot. Here we have to praise employee when they done a good job. Then we will make aware employees about their goal. And we should announce about reward for good work for the employee. We have to give responsibility to the employees for their work which make them responsible. Our process of work should be an interesting one which can bring motivation for employees.

 

Organizational Chart

We have work specialization in our company. Our own manager will divide all complex type work into several part and some different employees will be appointed for certain tasks and they will well train for that task. For in the dressing system those people will get appoint who have good skill to complete this kind of work. It can help us to make efficiency in our working process and it is also less time consuming. This also makes that employee expert at that certain task.

We have different kinds of department in our company. Generally, we have total five departments. The five departments are Operational department and under this department, we have: finance department, marketing department, human resource department and Production department.

 

Operational Department: In the operational department, we have product line. Here we have footwear, bags for women and gents and other accessories like belt, wallet etc. In the footwear part we will produce different kind of shoes and bags for men and women with different kinds of designs and belt wear etc. Moreover, operational department has these parts which is given below.

Finance Department: Finance department helps assistant managers to take strategic decision. Finance department will control the daily transection of the organization. This department will control the cash flow and also ensure the payment of all the employees.

Marketing Department: Marketing department will involve with all the program of advertisement. This will try to spread the news about the organization. This department will be responsible for growing the company and also increasing the profit. One of the main work for marketing department is to conduct research on the current market.

Human Resource Department: This department will recruit the best employee for the organization. This department will also manage all the employees and increase their performance. They also supervise the each and every employee to work hard. They make their employee aware about their responsibilities.

Production Department: In the production department, we will work to maintain our good quality of the product. Because without this, it is impossible to improve a business.

  • We will follow decentralization system only in marketing department and supply chain management. Because in this part lower level managers have lot of things to do. Here lower level managers have to take some important decision that is why we make it decentralize.
  • Other all section will follow centralization system because in those part there are highly requirements for the involvement of top level manager.

Lastly, we follow formalization process in our organization. We have some rules and regulations which have to be followed by all the employees of the organization.

 

Chain of Command: In the chain of command section, we will follow an informal system. Because it will help us to aware easily for any kinds of problem. Any employee can talk with top-level manger without any barrier.

  • Span of control:  In our organization under each department manager there will be 30 employees so that they can work hard without any barrier.

 

CSR and Social Responsiveness Activities

Blue Bird Leathers Ltd. authority is very much admirable of the responsibilities to take action which help society along with keeping own interest. Our management is very much concern about the CSR including enhancement of growth and profitability. Firstly, as a running company, we always build long lasting relationship with our customers by providing them excellent quality, reliability and maximum service. We make customers choice centered decisions to keep our brand reputation and not let them switching to other brand. Moreover, we are contributing more to provide work which is meaningful and helps employees increase and realize their potential. We also provide healthy wages, maximum safety and a good working environment. We mainly focus on the better workforce diversity, job security and skill development training. The company believes in making long term relationship with its business partners and in some case even with the competitors in order to make competitive success. We try to cope up with the raw material suppliers, online partners and product distribution partners to reduce complexity and costs. As we give fair and renegotiate policy to be become very loyal and valuable to our partners. Blue Bird Leathers Ltd. is very concern about the environmental protection and sustainable dimensions. In the full life cycle of the product, we maintain:

  • decreasing toxic diffusion
  • increasing material recyclability
  • expanding sustainable use of revival resources by deflating energy inputs

We use an emerging tools to link economic and environmental interests and make the market suitable for society thus paying environmental taxes to perceive and imitate the environmental costs. As our company is operating in the local market, we consider the regional and national context. We have a great concern about the local communities and their health, stability and welfare. Furthermore, we believe in the community based business operation which let make us sure that we do best for the community.

To meet the CSR, Blue Bird Leathers Ltd. does several activities like volunteer programs, exclusive campaigns, community involvement programs, investment for environmental risk reduction etc. Our company tries its best to fulfill social responsiveness activities demand. Volunteer program like “Community Resilience to Climate Change” and exclusive campaign like “Say no to violence against women and children” help us to fulfill the societal demands. In addition, we often arrange community involvement programs in order to raise the consciousness of communities against any harmful activities. For instance, “Save River, Save Environment” can be a plausible program where our community will attend and do their self-activity to formulate their habit for the betterment of the environment. Our company are willing to invest for reducing the environmental risk as we may be ethically wrong to produce leather product which may harm the environment. So, the management are highly concern about any of the environmental risks and try to act like a trustworthy company by investing an immense amount of money for rebating the environmental damage.

 

Leadership Style

Blue Bird Leathers Ltd. has a mesmerizing management which always follows the accurate leadership style in the organization which will bring the greater advantages for the employees and the whole organization process.

In this organization, the leaders follow the “democratic leadership style”. Leaders or managers frequently use this leadership style as it is considered the best leadership style in this challenging market. Team leaders feel better to use this style as it is very open and effective style of running a team. This participative model also helps leaders to take decisions accurately and boost up the team synergy. Our organization always supports the capitalization of skills and talents, so that the leaders encourage everyone to share their ideas to make the adaption of better and flexible ideas about any plan. If the leaders face any difficulty to take any decision or making any plan, they arrange a discussion about the decision or plan which can conform them to take decision or make plan at ease. However, in a suitable and comfort situation, our leaders use democratic leadership style which may ensure everybody’s participation and exploring their knowledge so that the organization can efficiently touch its goal. Which means our organization believes in people oriented leadership. Sometimes, in some situation leaders focus on contingency variable. Then they go for “transactional leadership style” where they find the way forward and then leading the charge. Whereas the leaders can give reward or punishment to the members according to their performance.

On the other hand, in a crisis situation of the organization, our leaders follow “coercive leadership style” which is under “autocratic leadership style”. By this style, leaders can easily understand what is going on inside the organization and perform a subsiding to crisis. If any crisis situation comes up for the leaders, they give direction and demand conformance about any particular task to the members which means “do whatever you asked to do”. Among the departments of our company, if any department fails to perform up to the mark then the leaders of that department do the initiatives for short time period to undo the damage. For example, if our productivity is decreasing grudgingly then production department’s head will take immediate steps to recover from that situation whether the other employees like these steps or not. So, Blue Bird Ltd. believes in anticipating and mitigating during the crisis period as the company can successfully come back from that situation.

 

Controlling Process

Revenue Control: Blue Bird Leathers Ltd. has a phenomenal concern about its revenue. So, the managers are highly sophisticated about this particular controlling side. Firstly, price controlling comes up at the first stage where overcharge and undercharge of product will be clarified properly. Additionally, proper authorization of transaction must be maintained and adequate documents and records must be kept. Also our assets and records has to be controlled physically over time to time.

Employee Satisfaction: Our Company has much more concern about employee satisfaction as we have an excellent amount of employees in our whole business. The management has taken some great steps like: giving employees more control, ease commuting stress, support social connection, provide accurate safety and good health, make an atmosphere of growth by giving them proper commitment and maintain an easy and regular schedule to control over employee satisfaction.

Production Control: Our Blue Bird Leathers Ltd. has magnificent flow over our productivity. Also we are taking into account manpower, materials availability and other capacity restrictions, and cost so as to achieve convenient quality and quantity at the time it is needed and then following up the schedule to optically discern that the plan is carried out.

 

 

 

 

 

 

 

 

 

 

 


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