In the modern business world, customers form a major part of any organization. In fact, as it is noticed by every single individual without any doubt that no firm can operate without customers. Thus, to this most demanding element in customer satisfaction, there exist market gaps that can be exploited by new organizations. Indeed, the customer department does have a significant role to play if the organization is to succeed. This opportunity was hence the motivating factor behind the formation of American Delivery Department Company. It is an organization that delivers goods and services of other companies who finds it difficult to provide them to their customers. As a result, companies can find easier alternatives to satisfy the customer needs. Consumers are motivated by this extra service that the company provides to them increasing their trust with the manufacturer.
There has been an increased demand for companies to provide clients with personal experiences over the last few decades. Major organizations find ways to reach out to the client in delivery form. American Delivery Department provides them with the opportunity to fulfill their objectives. ADD, will deliver those company products which cannot make it up to their clients. This market gap has initiated the formation of the ADD Company. Due to many customers that are served by the similar institutions, they cannot reach them in person and will have to hire other firms such as ADD on their behalf. Furthermore, companies nowadays are in the need to find customer response concerning their products so that they can evaluate where to improve their production, a desire that ADD will offer as an extra sales services to the respective organizations.
Due to the serious nature of the industry to proffer such services, ADD organization has a market opportunity that will ensure productivity. The population is increasing by the day those results in increased customers to many companies. Due to problems of reaching all the customers, ADD will be hired by most organizations to oversee the service delivery. Our costs are relatively small that will attract major customers for our services. American Delivery Department, therefore, has already market that will increase its sales leading to high revenues. Though, competition is stiff in the industry, the organization majorly targets average and small organizations that market leaders are not concerned about. The company will be assured henceforth to make an impact on the market and become a force to other rival firms.
Benefits to the Community
The American Delivery Department is expected to benefit the majority of the population. Customers save a lot of time that they might otherwise used to collect the product from the company. The community hence can use the extra periods to venture into other production ways that improve their livelihood promoting their welfare (Casadesus, Ramon, and Joan, pg 103).The consumer will also save costs such as travel, hiring of carriers of the products to their premises making them have a lot of reserved income. More money saved means the customers have more cash to spend in other areas increasing their consumption bundles. The society can then maximize their utility.
There is straight interface between the customer and the service providers. This enables the exchange of information between the consumers and the company so that any complaint they have is remitted to the manufacturers. The producers can make the necessary changes that improve their products making the consumers enjoy high-quality goods. American Delivery Department will have to employ a majority of its workers from the communities. It is because they are familiar with the environment and would help in quick deliveries. The society members will be provided with jobs that generate income to them so that they can manage their livelihoods.
Company and Industry
The shipping industry in the United States is very competitive and American Delivery Department must be creative if they are to establish a force in the market. The major players such as United States Postal services and YRC worldwide are two big firms that almost have more than a 50% of the market share. The firms enjoy an extensive civilian delivery in America. They, however, major with the big organizations for their services and charges high prices that small companies cannot afford. The Market gap is hence inevitable that provides an opportunity for ADD to make profits from the industry.
Competition is stiff while entry and exit are neither prohibited from the industry. Due to increased revenue and profits, entry into the market is guaranteed making operations more complicated. Firms will have to adopt other ways of competition rather than price if they are to sustain themselves in the market. ADD plans to offer quality delivery and employs the use of modern technology that ensures security to the products. In addition, the company will use simple delivery tracks that are cost effective so that the operations costs are substantially reduced. These measures will provide a competitive edge over the rival firms. The proximity of the business, as it is located in the city avenue of Philadelphia, is also attractive for accessibility that attracts more clients which increase revenue to the organization.
Management forms a major part of any organization since they are tasked with daily operations of the business. Policies formulation and implementation majorly comes from them as they are the intermediaries between the owners of the business and employees (Casadesus, Ramon, and Joan, pg 103). ADD owners comprise of three persons and plans to hire two managers to oversee the daily business activities. This will involve the management team. However, the team is bound to increase with the business growth so that we maximize on the profits. The managers will be experienced individuals who have worked in the delivery sector. They are well placed to steer the organization forward since they understand the market better. These persons also have negotiation skills that can help us to seal contracts with the respective firm that offers business opportunities for the ADD. The company will also hire various staffs that will work hand in hand with the managers to ensure efficiency in delivery. These personnel include drivers whom will be tasked to deliver goods to the customers using vehicles or tracks. Other employees include Individuals that will load and offload goods and services at producer and customer destination respectively.
Manufacturing and Operation Plans
The business core objective is to deliver other company products to the relevant customers. Thus, the producers of the goods will have a binding trade agreement with ADD, to provide them to customers who cannot collect them at the manufacturer point. The management team is hence asked to bid for such contracts with the many manufacturer firms that ensure the goal of the business objective is achieved. Therefore, the many business opportunities we get, the higher the production.
The business tracks in case of heavy goods and cars are moved to the manufacturer destination to collect the items for shipment. The transportation vehicles are also marked with our special business logo so that customers can easily identify them while on transits. Each car will move to a particular route as determined by the management. The customers are also expected to provide unique codes that so that the delivery team knows their specific locations. Upon arrival at the consumer point, delivery is done by our team and ensures that all the items are in good shape. This system will ensure that customers are more confident with us thus provide a good image for the business. A real image attracts more customers that increase our market to other firms leading to high sales revenue.
America delivery department requires various persons both who work from the office to the field distributors. At the very top are the managers that take care of the business operations on a daily basis. They are also involved in planning of the business and plan of duties to the diverged employees. Under them will individuals who act as their assistance and are responsible for different regions within the city where the business customers are based. The force reports to any improvements that should be made to any route vehicle and ensure the transition of products from the manufacturer to the customer is done in an efficient manner.
Another labor force of the ADD will be drivers and their support staff members while on transit. Each driver will be assigned two workers that help in the loading process on either side of the shipment. This will enable heavy goods and services to be offloaded with ease so that no damages are experienced and as such, quality of the delivery is ensured.
A successful marketing strategy is important, especially if it is new to the American Distribution Department, for the company’s success. It shows various positions of the venture and strategies that the firm will use to enter the industry successfully. The plan includes pricing policies, how to counter competitors, promotion, trends in the market and market share.
Nature of the Market
Delivery markets in the United States are presumably available annually and are very stable. Any company wishing to enter the industry is assured of the substantial share of the industry. The two major organizations YRC Worldwide and united states postal services only commands a proximately 60% leaving a wider niche for the small firms. Supply and demand are expected to be high during significant parts of the year assuring ADD of a constant market. Due to the reliable market within the industry, the company can then plan on how to improve its services and delivery process without any disturbances throughout the calendar year.
There has been an increased manufacturer in the city of Philadelphia leading to high competition among the organization. The companies compete in ways such as the delivery of products to consumers so that their clients are satisfied. But the population has also risen in the recent past leading to many users whom fully require delivery of the products at their door steps. An increasing trend of contracting or hiring an outside distributor is on the demand. Various producers also aspire to have direct interactions with the consumers that are made possible by the delivery of the products. These trends nonetheless are expected to continue in the industry that will make ADD have improved revenue enabling easier growth.
The competition in the market is stiff and is majorly generated through three various fronts. The market is free entry zone due to the increased profits; hence, many firms are likely to join the industry to share the boom (Casadesus, Ramon, and Joan, pg 104).The firms in the industry offer almost similar service in delivery, and the threat of substitutes is high. A customer will easily shift to a rival company quickly since they can access the same service. As a result, ADD will have to remain to its core objectives and offer quality delivery if they are to rival other organizations. Another competition is generated from within the industry where two large distribution firms in the market have a market share of nearly 60% leaving the small firms to fight for the remaining share. The condensed stock makes the competition so high that the existing firms will have to compete by other means such as quality rather than price.
More than half of the market share is occupied by the United States postal services and YRC Worldwide shipment companies. However, they majorly deal with big firms leaving a considerable share for other firms. A majority of the organizations are free to enter the market that provides for rivalry in the industry. American Delivery Department targets majorly the small and medium firms as the major customers. These target groups are majorly available and will provide more than enough trade for the business. For the first year, the business might be low, and the company only needs to acquire 5% of the available market share. This ratio will make the company meet its operations costs with ease even though profits are little. For the second year, stability will have been ensured, and we expect annual growth market share of 3% was making ADD become one of the most profitable small organizations around the delivery process.
The most significant aspect of a business campaign is the pricing policy. Price is key to the customer availability concerning a particular product. For ADD, we plan to start at relatively reduced prices that will be charged to our clients while maintaining quality of the service. This strategy will make the organization attracts customers for our services. Increased customers will make ADD acquire a bigger market share and improves its performance. Price determination, however, will be based on the distance covered by our vehicles. This implies that there will be price difference since if the delivery is to be made at longer distances, it is only fair that the client compensate fairly. ADD then can avoid losses due to insufficient payments that might make our business bankruptcy in early stages of operations.
Development involves creating public awareness concerning the availability of American Delivery Department. The organization is still new and do not have big capitals to spend on large advertisements as on televisions. Furthermore, we are still just located within the city of Philadelphia. The company hence would create its website that any client can log into and access our services. We would also use social media such as Facebook, twitter and Google to market ourselves. ADD companies will offer delivery services such as feedback information from the consumers to the relevant manufacturers so that the producers can always know if their customers are satisfied or where to improve. By doing so, the organization can create a good rapport with various manufacturers increasing our chances of attracting more clients.
Distribution and Service Policy
The distribution channels will involve collecting products from the producers to consumer destination. The movements are based on individual routes making various stoppages so that those whom the vehicles do not reach their homes can find their products at particular points. ADD and manufacturers will assign the agreement to the consumers that customers do not accept products that are tampered with or do not meet their delivery expectation. The policy will ensure precise transportation measures are adhered to so that consumers are satisfied with their best.
It is the business part that determines the success of the venture. The capital provided will be majorly from the contribution from the business owners. This amount will be invested into purchasing the business assets such as vehicles that forms the major trading of the business. Nonetheless, the operation costs will be high that the business will have to acquire an extra loan facility of about $150,000 since a lot of cash will be trapped in the major assets that take too long to recover. Below therefore provides for the projected financial flow in the first year and second year of the business operation.
1st year 2nd year
Startup capital $200,000 $150,000
Income from sales $80,000 $110,000
Total $280,000 $260,000
Rental of office year $30,000 $30,000
Buying of used vehicles $120,000 –
Renovating of the vehicles $20,000 $30,000
Salaries to employees $72,000 $84,000
Office equipments $10,000 $20,000
Miscellaneous expenses $10,000 $15,000
Trade license $5000 $5000
Vehicle maintenance $20,000 $30,000
Web design $3000 –
Web maintenance $1000 $1000
Advertisements $5000 $3000
Office travel $1000 $1,300
Service loan – $20,000
Total annual expense $297,000 $237,000
Profit ($17,000) $13000
The business makes losses in the first year. It is majorly attributed to the high operational costs. The sales are also relatively low since the business is new and having low publicity. However, in the second year, sales are expected to increases by 30%. The business will apply for a loan of $150,000 to supplement the operations from the second year which will be paid at the rate of $20,000 annually. This will help stabilize the company and compete fairly in the market.
It is the point where the business will start recording profits. Basically it will be at the second year of the business operations. The average price of charged by the company will be $60 per kilometer of the distance covered by the vehicles. The average cost is $35. The average fixed cost for the month is estimated to be $10000.
Break even point = fixed costs/ (average sell price-average cost)
= 1000/ (60-35)
The business needs to breakeven point operating 40 per hour. If the business was to charge more than $60 per kilometer, then they will make losses as the customers will shift to the rival firms. But if the organization was to charge lower than $60, the business will make losses since the operating expenses will be so high.
Exit Strategy and Succession Plan
The American delivery department will operate as distinctive entity with the owners being the sole financiers of the basis. Over time, the business will grow and expands to other cities and region such as Washington and Los Angeles and if possible become an international firm like YRC worldwide delivery services. The growth and diversity will increase the company revenue and become competitive both in the short run and long run increasing its market share (Casadesus, Ramon, and Joan, pg 102).
However, this growth would require a substantial amount of capital for investments. First, the organization plans to go public by selling a 40% of its stake. It is a healthy way of generating capital for the organization. These funds would provide necessary capital that would speed up growth into other places while diversifying the business. Diversity ensures that income is not dependent on one source leading to the security of the company. Shareholders will also act as a motivating factor for the business to grow as they would require dividends. Another strategy for expansion will be to franchise the business. It would provide for capital venturing and management from the experienced organizations so that the business can grow properly.
Risks and Assumptions
Risks are part of any business and ADD has its chances within the industry. First the company is established in an industry where competition is high and major firms have already established their authority. Under these circumstances, the probability of failure is high but the organization will take their chances. Mitigating this risk is hence a priority. ADD believes and will target small firms as the major customers. We will also offer extra service information that our competitors are not providing. Due to the strategy, ADD will attract more customers that will make the organization to succeed. Another risk is the capital needed for the startup of the business. In case the company makes losses, the future operation may be hampered. But ADD have formulated ways to borrow loans from financial institutions that will ensure such breakdown never exists or are minimized.
The industry is assumed to be relatively competitive, and there are free entry and exit. Therefore, firms will make their decisions regarding production. The Market of the delivery services is also believed to be annual that no fluctuations occur during the financial year. This assumption will ensure that the organization will have business the whole year.
- Casadesus-Masanell, Ramon, and Joan E. Ricart. “How to design a winning business model.” Harvard Business Review 89.1/2 (2011): 100-107.