CBR Mobile Phone Company

23 Pages   |   5,112 Words

Business Plan for CBR Mobile Phone Company as they venture into mobile recycling

Plan Preparer
 
Plan Copy Number
 
True Lines

Technology has both its advantages and disadvantages associated with it. The most widely used mobile technology which has made the globe a compact place also has certain disadvantages associated with it. The users should also know about the hazards that it can create for their future generations. Batteries of the mobile phones can cause soil contamination due to the heavy metals such as cadmium and mercury. The leakage from one tiny battery of any mobile is enough to contaminate 600,000 litre of water. Having said this we offer to provide you with the solution to this problem as well. Mobile users should definitely opt for recycling their old mobiles as it would result in a reduction of landfill and will be a great source in the process of saving the environment. (Recycling Mobile Phones)
 

The Proposed Business Plan

 

Table of Contents

Business Plan for CBR Mobile Phone Company as they venture into mobile recycling. 1
The Proposed Business Plan. 3
Executive Summary. 6
Introduction: 7
Description: 7
The products: 7
Purpose: 7
Business Structure: 7
Location: 8
Personal Characteristics and the industry: 8
Objectives: 8
Financial Objective: 8
Strategic Objective: 10
Marketing Objectives: 10
Operational Objective: 11
Market Analysis. 11
Geographic Scope: 11
Competitors and Competitive Advantage. 11
Market Research. 12
Market potential 12
Production and Distribution channels. 13
Financial Plan. 14
Wages plan. 14
Cost of expenses plan. 14
Cost sheet and profit margin. 15
Start up costs. 16
Break Even analysis. 16
Financial projections. 17
Organisation and management 18
Business Plan. 19
Risk. 20
Legal Documentation. 20
Social Responsibility Program.. 21
Code of Ethics. 21
Bibliography. 22

Executive Summary

The CBR mobile phones, a company in Saudi Arabia, offers to provide a value added service to its customers. The company offers to take the old and unused handsets from the people of Saudi Arabia in exchange of a sum of money or a gift. They wish to resale the handsets which are in good condition to the less privileged people.

They want to sale the pieces in good condition at a lesser price, use the spare parts of sum which are not anymore usable and recycle the rest. By doing this they are also addressing to the serious most concern these days i.e. environmental issue. They want to make people aware that mobiles are not very safe and healthy device and are made up of many toxic elements.  They are likely to cause huge damage to the environment which is irrevocable. By recycling the instruments they would try to reduce the effects.

This business plan explains in details the market potential of the venture. The financial aspects of the venture are also explained in detail. The plan also advises about the risks and the opportunities available in the market. The most effective way to handle the corporate hierarchy system is also given in the plan.

The ways to approach to the sales and promotion, and selling and distribution is explained by using the value chain model. We have tried to discuss all the aspect of this new venture which could result in huge profits or could lead to not making such a good impact in the market.
 

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Introduction:

 

Description:

KSA is supposed to be a very rich country with a population of 25 million and a per capita GDP of $24200 which is pretty high when compared to the other Asian countries. So the Saudi Arabian markets have tremendous potential for the mobile sector which is undergoing a boom in the current period and is expected to see a rise in the coming years. The markets are very lucrative in the sense that there are said to be 36 million subscribers to the mobile phones in a population of 25 million. The CBR mobile phones is an already established company and the company is going to launch a new business where it plans to take back the old and used phones and make the best possible use of them. The phones which are in a reusable condition would be resold, the ones which have some spare parts in the right condition then the parts would be reused and the ones which are of totally no use for anyone will be recycled. The company takes back the phones at a fixed price and then make the best possible use of an assumed waste (Plus, 2011).

The products:

The company in its new plan offers extended services to its already existing clients. The company also plans to bring in some untapped market segment to it. The segment it plans to reach to are the ones who could not afford a good new mobile due to lack of funds and to the sub-urban customers who do not have both funds and access to the latest in the technology. The working condition spare parts can be sold or reused.

Purpose:

With the advancement in technology and the introduction of new and latest features each new day the unused mobile phones are becoming a matter of concern. This is the purpose statement for the company. The unused mobiles are indeed a matter of concern for the environment as well. Most of the mobiles are made up of harmful toxic material that causes long lasting damage to the environment. To overcome this problem CBR has come up with this new concept of recycling the waste of the mobile phones. They wish to use the material used in the extreme possible ways and discard the residual in way that causes the least possible damage to the environment. They take back the unused or old phones from the existing users by paying them a certain amount and use it in a proper way. This idea though not totally unique but they certainly have the initiators advantage in Saudi Arabia as they are the first ones to introduce this concept to the people of their country.

Business Structure:

CBR Mobile Phone Company was initially a sole-proprietorship but now in the new business plan is to be taxed under partnership laws in Saudi Arabia. It has three partners who are extremely experienced in the industry. Out of the three, one is sleeping partner and does not get involved much in the company operations but just because of his investment in the company’s capital he owns 24% of the company shares. Rest of the two are active partners and look after the operations of the company. They have an equal share in the profit of the company which is 38% each.

Location:

Saudi Arabia is a royal country and people here have rich culture and taste. They are used to live luxurious lifestyles as money is not an important issue here. So this kind of business plan is a must for the people of this country as they have black boxes full of old and unused mobiles. The purpose is to make them aware of the benefits of recycling and the dangers of wasting the technology that they own.

Personal Characteristics and the industry:

Being a company which deals in the mobile phones from a long time, the company is aware of the hazardous material used in the phones. They now want to perform their social duties by trying to save the environment by using the toxic materials in the right way. The aim is to earn a profit as well as they are now trying to tap the market that they did not do earlier. This company has a huge chance to succeed as they are expanding and dealing in the same market where they have been operating from a long time and are enjoying a fair market share. Their social concern may be the driving force for this business plan but they are also here to serve a niche.
The mobile market has many players but not all of them have realised the importance of using the waste of unused mobile. To take them out from the closets of the rich and sufficient and provide it to the less privileged is not an easy task as it involves a lot of vigour and focus. The advantage that this company has is that it can utilise the mobile phones made by other companies also to reap profits from them.

Objectives:

Financial Objective:

Given below is the projected profit and loss statement for the years 2012-13. The data that we have put in here are all assumed and the company aspires to achieve them. The statement shows that the company is targeting a 20% gross profit margin in the year 2012 and increase it to 23% in the next year. Saudi Arabia is a small country and acquiring the rightly skilled labour remains very difficult there, so while designing the projected profit and loss statement we have assumed that there is no major inflation  in the market and the cost of labour remain the same. The country is also very much dependent on foreign labour so we also assume that there is no major happening in the international market domain. We have also assumed that the other expenses remain the same and are not dependent on the units that are acquired or used.

 
 
Profit and loss statement
   
       
    2012 2013
Revenues(All figures in $)      
Total sale from the buyback mobiles   139500 162750
(900@155), (1050@155)      
Gain from the use of spare parts   25000 36000
Sale of scrap   12000 13000
Total Revenues   176500 211750
Expenses      
Paid while buying back   106500 120000
700@120,750@120      
300@75,400@75      
Paid as Gifts   5000 8000
250@20,400@20      
Labour   18500 22940
Miscelleneous   11000 11000
(Rent, administrative,electricity,      
other utilities etc.)      
Total cost   141000 161940
Gross Profit   35500 49810
Gross profit Margin(%)   20.11 23.52
Interest expenses   1950 2150
Earning before taxes   33550 47660
Income Tax   3950 4250
Net profir after tax   29600 43410

Strategic Objective:

The company can use this four step model to define the strategic objective for the coming years.

The company operates in a service industry where they have to directly deal with the reactions of the customers. So the first and foremost step would be to take care of the fact that the customers get the right kind of assistance while selling their old phones or while buying the second hand phones. The company also has to make sure that they use the right parts of the discarded mobiles in a right way, and also recycle the ones which are of really no use. Then the second stage is sustainability where the company has to make sure they have the right kind of vision which is achievable with a generous amount of profit. To create a level of confidence in the customers it has to keep updating the systems on a regular basis. The third stage that is important is the organisations value. As we have stated in the company’s purpose statement that the motto is not only to generate profits from a business but also to serve the social issues of waste discard which causes any damage to the environment. The company also needs to provide the employees with the right kind of infrastructure which would help them to achieve the targets in a better way. The Final step in this model could be providing the right kind of leadership to the plan. There would be tie ups with the retail level of shops, so the company needs to make sure that they choose the right shops for this purpose. The management also plays an important part so it is of utmost importance to hire the right management team for this purpose.

Marketing Objectives:

The sales which is the ultimate aim of the company has to be achieved through very planned and focused approach. As we have seen in the financial objective of the company that it is trying to increase the gross profit margin, but this section refers to an increase in sales. In this case the sales is directly related to number of second hand mobiles the company can obtain. Then only it can decide what to resale, what to reuse or what to scrap. The company is trying to reach to the mobile users in a large way so that they are lured to sell off the unused pieces for a sum of money.

 Operational Objective:

CBR which is an already established player in the mobile industry has tremendous infrastructure to support the new plan. So the objective is to utilise the capacity to the fullest. In this case there is no limit as the plan does not require much infrastructural support. They can obtain as many used mobiles and continue to reap profits out of waste. The operation of the company does not involve much investment in creating infrastructure for the plan as they can easily use the existing infrastructure. Therefore, the operational objective for the company would involve planning to obtain as many used mobiles as possible.

Market Analysis

Geographic Scope:

Saudi Arabia has huge potential for luxury products because the residents have that much of fund available with them to afford it. Therefore the mobile market registered a huge growth in a short period of time. The operators and customers of this technology kept on increasing everyday but there were still a few who were left out and could not participate in the growth. These were the people who have income probably just enough to support their daily bread and butter. The mobiles bear a price tag which may or may not be affordable by these people. So the company CBR came up with the idea that these people can also be served by taking the unused mobiles by the rich.  These people include the people who do not live in the big cities and have lesser exposures to the latest trends in the mobile phones.
The CBR mobile phone does not ignore the existing users in their new business plan as well. This service that they are coming up with is very useful for the tech savvy customers also. They can sell their older version to get the latest ones. They can also sell their old phones which are lying in the closets from a long time and not in a working condition.

Competitors and Competitive Advantage

The CBR Mobile phones have an advantage of being a single player in the market. There is no current competition in this new plan so they can use the profit acquired by this venture to fund the projects which have more competition and require heavy investments. By launching this kind of a plan the company can reach to the end users easily and can understand their needs. Customer Grievances with the existing models can also be understood and the company can take steps towards serving them in a better way. They also have a competitive advantage in the sense that in this new venture the company does not have to make huge investments in the network establishment as it already has a network. They just have to tap the most efficient resources and the shops that are most strategically located in the market. The initiators of a venture always enjoy the advantage of being the first one. Their name is the first name that comes to the mind for many years even after there are many players who have joined in. CBR has the same competitive advantage.

Market Research

 Market research can be better achieved by doing proper segmentation. So let us segment the market in three sections. (Andersen M.M., 2007)
  • The Core customers which comprise of the existing users who have become addicted to mobile phones. These mainly consist of youngsters and business executives.
  • The Coming core customers which comprise of the people who could not afford it mainly the lower incomes masses and the people who did not know about it who are the sub-urban people.
  • The non- focus customers which consist of the large companies and the public institutions.
Now we can deal with each of them individually. This business plans has lots of things to offer  to the core customers as they would now be able to change in the models more frequently being less concerned about the wastage of money. The upcoming core customers are the niche for the new venture which this is going to target for long term profitability. The objective is to convert these people into the core customers in long term. The non- focus customers may not be as important initially but they have good potential as they can have bulk orders for their employees.

Market potential

CBR mobiles provide the customer the easiest way to drop the old mobile while buying new ones. The users of the mobile are huge and the purpose of the plan is to tap them and show them the easier ways to obtain a new phone which may be through exchange. The market potential is also great in the sense that it serves towards reducing the environmental problems. The social issues are addressed to a great extent by this plan.

 

Production and Distribution channels

 
Following is a value chain model for establishing the production and distribution channels for the new business plan that the CBR Mobile Phone Company is going to launch. Here at each and every step we must assure quality checks.

The quality assurance can be provided by the following checkpoints.
  • Assure that the collaborating shop has sufficient and qualified staff to provide services the customers.
  • While repurchasing the used mobiles access the condition properly and pay the customer accordingly.
  • Sell only those mobile which are worth and the buyer of these used mobile does not repent about buying it.
  • After the sell whatever is left should be dismantled ad checked for working condition spare parts.
  • Finally whatever is left should be sent for recycling as a scrap.
Saudi Arabia is a country of royals. People are so used to living life in a royal way that they want to see quality in everything that they use. So in order for the company to survive in the market the company has to assure a top-quality service to the customers. They should create separate departments for each of the following steps of the value chain model and keep a strict check in the quality of service provided by them.

Financial Plan

Wages plan

(All figures in $)    
  2012 2013
Wages 13700 18140
Workers compensations 1500 1500
Superannuation entitlements 1200 1200
Recreation leave 800 800
OH&S requirement 1300 1300
  18500 22940
Units produced 1250 1550
Rate/unit 14.8 14.8
While doing forecasting for labour hours we have assumed that all the rates are fixed and do not undergo any change in the two years. Only the wages are dependent on the number of articles produced.

Cost of expenses plan

While forecasting data for Cost we have assumed that  all the other components of cost are fixed and only the wages and material buyback is dependent on the
Cost of  expenses(All figures in $)        
    2012   2013
Rent   4000   4000
Electricity   2000   2000
Logistics   1450   1450
Administration   2450   2450
Insurance   1100   1100
Wages        
1250 units @14.8 18500 18500   22940
Mobiles Buyback        
700@120 84000   90000  
300@75 22500   30000  
250@20 5000   8000  
    111500   128000
Total cost of expenses   141000   161940
Units Produced   1250   1550
Cost/unit   112.8   104.48

Cost sheet and profit margin

In this section we have worked out the cost incurred in the form of direct cost, indirect costs and selling cost. We have assumed that except for the direct material and the wages, the other costs are constant. The selling expenses have been accounted for total year. The selling price we have taken into account is the average price which is obtained by dividing the total sales to the number of units sold.
 
Cost sheet    
 (All figures in$)   2012
    Total
Direct Cost    
Wages   18500
Materials    
Mobiles Buyback    
700@120 84000  
300@75 22500  
250@20 5000  
    111500
Total Direct Cost   130000
     
Indirect Cost    
Rent   4000
Electricity   2000
Logistics   1450
Administration   2450
Insurance   1100
Total Indirect Cost   11000
Selling and distribution Overheads    
Advertising 3000  
Selling expenses 4500  
Total expenses   7500
Total cost of Production   148500
Units Produced   1250
Total Cost/unit   118.8
Selling price   155
Profit margin   30.47
 

Start up costs

Here while estimating start up costs we have assumed all the costs keeping into mind all the possible component of the cost. We have estimated the research expenses, legal establishment expenses, Advertising and promotion, Administrative expenses, Collaboration costs, Employee expenses. The company also needs some assets to start up any new business, In this case the company’s are not very high on assets as they are mostly playing in service industry (Business Start up costs, 2011).
Start up cost  (Figures in $)
Start up expenses   
Research expenses 2500
Insurance License and permit fees 1500
Collaboration costs 1800
Advertising and promotion 3000
Employee expenses 4000
Administrative expenses 2500
Total  Start up Expenses 15300
Start up assets needed  
Cash on hand 10000
Other assets 25000
Total assets 35000
Total start up expenses needed 50300
 

Break Even analysis

(Fast4cast Business Plans, 2007)The break even analysis formula can be given as                                                                                         (Total fixed cost)/(selling price-variable cost per unit)
=(11000)/(155-104)=215.68=216  units
This means the company has to sell a minimum of 216 units to reach the break even point.
(All Figures in $)
Variable cost    
wages 18500  
Materials 111500  
Total Variable cost   130000
Units Produced   1250
Variable cost/unit   104
Fixed cost    
Rent 4000  
Electricity 2000  
Logistics 1450  
Administration 2450  
Insurance 1100  
Total Fixed cost   11000
Units Produced   1250
 

Financial projections

(All Figures in $)
      2012    
Revenues   Estimated Best Worst Estimated in 2013
Total sale from the buyback mobiles   139500 186000 93000 162750
(900@155)          
Gain from the use of spare parts   25000 35000 15000 36000
Sale of scrap   12000 16000 10000 13000
Total Revenues   176500 237000 118000 211750
Expenses          
Paid while buying back   106500 128250 75000 120000
700@120          
300@75          
Paid as Gifts   5000 6000 3000 8000
250@20          
Labour   18500 22200 12580 22940
Miscelleneous   11000 11000 11000 11000
(Rent, administrative, electricity,          
other utilities etc.)          
Total cost   141000 167450 101580 161940
Gross Profit   35500 69550 16420 49810
Gross profit Margin(%)   20.11 29.35 13.92 23.52
Interest expenses   1950 1950 1950 2150
Earning before taxes   33550 67600 14470 47660
Income Tax   3950 3950 3950 4250
Net profir after tax   29600 63650 10520 43410
 
While doing financial projections we have taken into account the estimated sales with the best and worst possible scenarios. We have assumed that in the tear 2012 the estimated sales was 1250 units, the best possible sale will be 1200 units and the worst possible will be 600 units (Elearn, Financial Management Revised Edition, 2007).

Organisation and management

The company has a partnership structure where two of the partners are actively involved in the business operations. They have divided their responsibilities and look after separate departments. Let us name them as partner 1 and partner 2 and form an organisational hierarchy.

In the business plan we have planned the work for both the partners in such a way that they look after separate departments and do not have conflicts. Partner 1 looks after the purchase and sale of the mobile phones where as partner 2 looks after the spare parts and the scraps department. They have their own teams to perform the tasks.

Business Plan

The business plan includes the following steps.
  • Invest in people
  • Reach your market
  • Make things happen
  • Think quality
  • Learn and lead
  • Blend the past with the future
The company is operating in a service industry so the most strategic asset to have is the right kind of people. We plan to achieve this by hiring smartly and then providing proper training to the staff. The two major partners are mainly responsible for this job. They have to make people believe in the vision of the company. The budget for this would be the amount invested in the labour.
Reaching the customers which is the ultimate aim for any company’s existence, is a difficult target but it has to be achieved. This can be done through identifying the most strategically placed shops, collaborate with them and start talking to people. This decision is also taken by the partners. This is done through marketing so the budget for this would be allocated to the marketing overheads.
The company is launching a new product in the market. So they have to learn to make things happen. They have to adopt an aggressive marketing strategy and bring more and more people to use the service provided. The staff who have been hired and trained are basically responsible for this.
Like we have discussed earlier the quality of the service forms a very integral part of the service industry so keeping the quality checks is very important. The partners can even think about forming a different department for this who perform the checks randomly anywhere, anytime. This has a separate budget attached to it. It may not be that high an amount but is of utmost importance.
We must learn from the past and lead the way to the followers as this company is the first one to launch any such product in the country. The managers in the different departments are the people who would highly be responsible for this as they have to keep preparing reports for any tiny development that takes place in the industry or in the environment. This budget should be allocated to marketing research overhead.
In this particular plan blending the past mobile of someone with a new mobile for someone is very important and must be done creatively and smartly.

 Risk

This business as we can see has tremendous potential but is also exposed to some risks (Hoeing T.M., 2006). The risks are
  • The customers not responding to the idea in a positive way.
  • The old mobiles which we sell to the new customers may not have long life and they revert with grievances
  • The price that the company is paying for old and used mobiles may not be acceptable to the customers
  • The reuse of spare parts idea may not work at all
  • In the process of recycling the waste are not discarded properly.

Legal Documentation

There are three steps involved in registering the partnership firms
  1. Prepare the partnership deed which includes
  • The amount of capital contributed by each partner
  • Profit or loss sharing ratio
  • Salary or commission payable to any partner, if any
  • Duration of business, if any
  • Name and address of the partners and the firm
  • Duties and powers of each partner
  • Nature and place of business
  • Any other terms and conditions to run the business
  1. Filling up of partnership firm at the registrar of firms.
  2. Submission of the form, partnership deed, the required documents and the fees.
 
In their web page specify that the companies who want to register their business as partnership business in the kingdom of Saudi Arabia must enter a limited partnership. The limited partnership is termed “sharikat tawsiya baseetah”, is a separate business entity comprised of several individual or companies, including at least one and limited number of partners. The general partners are liable for debts to the extent of their personal assets and limited partners are liable to the extent of their contributions.

Social Responsibility Program

Every organisation is responsible towards the social systems where it exists. Some important points of the social responsibility programs are explained below:
  • Make the right kind of disclosure of accounts and other policies to the stakeholders, the public, the society and the Govt.
  • Create as many opportunities for the society as possible
  • Manage the risks effectively so that the people involved do not lose everything
  • Create a conducive atmosphere for the employees inside the organization
  • Pay the right amount of taxes to the Government
  • Make proper arrangements for hazardous waste
  • Hire honestly and do not discriminate
  • Honest management who see employees as an asset and not a cost.

Code of Ethics

Right ethics is the cornerstone in any business which leads to success, without which confidence and ability to perform shall cease to exist and even more so in the new discipline of mobile recycling.  The most commonly used and the most useful technology calls for ethical and honest behaviour in the industry (Elearn, Managing Legal and Ethical Principles Revised Edition, 2009).
This industry is undergoing a boom and the players are ready to do anything to survive inside but the CBR Mobile Phone believes in total honest service at the best possible rates. The code of ethics is a combination of broad principles and specific issues which set very high standards in the industry.
There are many mobile companies in the market who provide new mobiles to the people who can afford them but we wish to go one step further and serve those who probably do not have enough money to afford a new one but would be very happy to own one. This company wishes to serve the economy by making proper use of the unused mobiles (Mobile Market association).
Finally we in the company believe that we serve people better not only because we have virtue and excellence but also we have the right people to carry our visions. We value our strategic assets. As a duty to the society we will keep the social accounting book up to date. We will discard the hazardous waste through the proper channel and use the right use of the naturally limited resources.
Therefore, the following principles we wish to provide excellent services to the industry.

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