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PART 2 Question 6 – 2006 – Business In Action
Part 2
Enterprise
Business in Action
Question 6 – 2006
Paula and Thomas have recently returned to Ireland having worked with transnational companies for
ten years. They wish to set up in business together in Ireland manufacturing a range of new organic
breakfast cereals. Paula has particular expertise in production and finance and Thomas in
marketing and human resources.
(A ) Draft a Business Plan for this proposed new business using five headings, outlining the
contents under each heading.
BUSINESS PLAN FOR ORGANIC BREAKFAST CEREALS LIMITED.
1. Company Name and Description of Business
Name:
Organic Fruit Food Limited.
Owners:
Paula Black, Thomas Brown each owns 50% of the shares.
Registered Office:
129 the Old Mill, Tullow Road, Carlow.
The Business:
Manufacturing a range of organic fruit Juices.
Unique selling point? 100% Irish. All ingredients sourced in Ireland.
2. Management
Managing Director: Thomas Brown
Education:
Degree in Business Studies, U.C.G and Masters In Business, Carlow IT.
10 years experience in marketing and human resources for Irish Fruit Juices
Experience:
Limited.
Owned by Foods International Limited
Production
Paula Black
Manager:
Education:
Degree in Financial Management, U.C.C.
10 years in Braun Ireland Limited with experience in finance, Human
Experience:
Resources and production.
3. Production
Production will take place in Unit 2, Strawhall Idustrial Estate, Carlow. The premises has been
inspected and passed by the Health Board. Initial production will be on a batch basis.
4. Marketing and Marketing Strategy
Target Market:
Initially, 82 health food shops in the South East region of Ireland.
Contact has also been made with a supermarket chains Tesco and Superquinn, which
has expressed an interest.
Competition:
More expensive organic fruit juices sources outside Ireland.
Targets:
450 units in Month 1, rising to 2,250 units in Month 6.
Pricing:
5% lower than competitors' average price.
Promotion:
Advertising on local radio, newspapers and in trade magazines.
In-store merchandising and free samples.
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PART 2 Question 6 – 2006 – Business In Action
5. Finance
Initial Finance Required:
3 year lease on IDA, Dublin.
Equipment
Working Capital
Sources of Finance:
Finance invested by shareholders
Financing sought
Projected Profit:
Year 1
Year 2
Year 3
€35,000
€20,000
€10,000
€65,000
€35,000
€20,000
€25,000
€35,000
€45,000
Signed : Thomas Brown and Paula Black
(B) In time, Paula and Thomas intend to expand the business into the EU Market.
(i) Describe the implications for the business of expansion into the EU market.
(ii) Explain two methods of expansion you would advise them to consider.
(i) The implications for the business of expansion into the EU market are:
1. Finance: Paula and Thomas will have to raise additional finance through equity capital or loan
capital. This will be necessary to fund market research on the EU market and to establish distribution
channels overseas.
2. Control: If Paula and Thomas sell shares in the business to raise finance, they will lose some control
over business decisions. All shareholders are entitled to be involved in decision-making.
3. Organisational Structure: Currently Paula and Thomas run the business themselves. As the business
grows and the workforce increases, delegation is required. They may bring in people with knowledge
and experience of the EU breakfast cereal market.
4. Language and cultural differences: These differences will have to be accommodated in the EU
market. Product modifications such as packaging and labelling will have to be changed for different
countries.
5. Profits: The cost of expansion may lead to a short-term reduction in profits. However, in the long
term, the expansion can lead to increased efficiency, which boosts profits.
(ii) Two methods of expansion Joe and Susan should consider are:
1. Licensing: This would allow an EU cereal manufacturer to produce and sell the product of Organic
Breakfast Cereals Limited under licence. This manufacturer must uphold all product standards. The
licensee would pay a fee for each item produced, called a royalty. This is a relatively easy way to
expand without too much risk as there is no large capital investment. However, the licensee gets some of
the profit that Paula and Thomas could be making.
2. Takeover/Acquisition: Organic Breakfast Cereals Limited could buy 51% or more of the share
capital of a cereal manufacturer that already sells in the EU market. This is a quick and certain way of
achieving expansion as a greater capacity and a new range of products is acquired. By having a
controlling interest in such a business, Paula and Thomas could use their channels of distribution to
market their own original cereal abroad.
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