The Business of Sport:
W11007742
Stage: Business Analysis
Word count: 500
Armstrong, Kotler, Harker & Brennan
(2009) state that the business analysis reviews sales, expected demand, costs,
and estimated profit for a product or service. It is important for an
organisation to have a structured business plan in order to run the business
effectively identifying specific courses of
action that may need to be taken to ensure the business runs effectively. (Lamb, Hair & McDaniel 2011). A business analysis
consists of 5 sections; sales, market, demand projections, cost projections and
competition.
A a business should conduct a sales estimation. Similar product sales figures of revenue and
expenditure must be compared to create a sales forecast (Armstrong et al 2009) The forecasting allows the
business to compare figures regularly to see how well the product is selling in
comparison to the planned sales and revenue. (See appendix A)
The forecasting figures should reflect
on the financial state of the market. The recent recession may impact some
business as potential customers will have less disposable income to spend on
luxury products. However this should not affect the Deep Heat Support Bandage because
it is in a mass market and there is always going to be injured athletes, which
means the product is always going to be needed, guaranteeing sales. Research
shows that there has been a rise in sports injury cases by 14% in a year. (NHS, 2012) New research by Barclays
Spaces for Sports has revealed that just under 30% of the nation pick up 22
million sporting injuries per year. 80% of which being a sprain or muscle
pull (Barcalays, 2005) While
research is limited on specific sports bandages, there is increasing
applications in the treatment of minor-to-moderate injuries will boost global
demand for sport bandages of 4.2% annually through 2013. (ReportLinker, 2012)
The growth of sales is higher than planned in the second month, however could be improve due to be firstly selling the product to different sports clubs as this is the
trial period before the product is sold to retailers. Once the product has
become recognised and successful in these firms hopefully connections with
retailers such as ‘Sports Direct’ and ‘Boots’ will develop, helping secure a
strong channel of distribution.
Production cost per bandage is just over £10, materials being approximately
£8 and additional costs being around £2. (Appendix A) The
selling price is £15, resulting in a total profit of £5. Costs will be saved throughout
the manufacturing process due to relatives being in the machinery business therefore
the cost of use of machinery will be cheaper. A profit was made in the first
two months means the product is being successfull.
The closest competitor is the ‘Homedics Ultimate Hot & Cold
Therapy Wrap’ priced at £9.99.
However this product does not have the deep heat thermal element and is not
water resistance therefore not as durable. The wrap is also only eligible to
buy on the internet, and not yet in retailers. It must be
taken into consideration companies may begin to copy the bandage idea, therefore
the product must me constantly developed to best satisfy customers.
Appendix
Appendix A:
The cash flow forecast
shows the forecast for first two months for the ‘Deep Heat Support Bandage’, including
all aspects of income and expenditure resulting in a profit being made. The bandage will be
sold for £15 with 2,000 being made per month for the duration of the first
month.
The Neuroprene material can be purchased in bulk, with 1.5mm doubles
lined Neuroprene at £17.30 for 1000mm x1270mm which will make 3 bandages. The crystilized deep heat Supersaturated
Solutioncan be made from a combination of deep heat and a hand warmer like
product, total costs being £5 (deep heat £2, supersaturated solution £3), which
will aid in making 3 bandages. Velcro will also need to be purchased as this
will enable the bandage to adjustable aiding in maximum support to the injury.
The total cost of the Velcro is £1.84 for 1m which will also make 3 bandages.
The initial costs of the materials to make one
bandage is £8.01. In order to make 2000 bandages for the first month the total
expenditure will be £16,200. However the manufacturing of the product will also
be additional costs, and the fixed asset is the start-up cost of the use of machinery to manufacture the product.
Costs will be saved throughout the
manufacturing process due to relatives being in the machinery business therefore
the cost of use of machinery will be cheaper. Decision to buy own machinery will
be made on the progression of the product and how much revenue is left over to spend.
Although there
seems to be an increase in the net cash flow for cash outgoings, this is because
more products have been made. However it is not a total loss because each
product sale is making a total profit of £5 resulting in a total profit of
£12,500 being made in the first month however this does not include outgoings. It is a positive outcome that more products are
being made as this means more sales have been granted, which will hopefully
lead to distributing products to retailers in the next month.
The increase in sales in month 2, increases the sales revenue, resulting in profits gained. If
this successful cycle continues the business will be able to think about
buying there own machinery and developing links with greater chains stores in order to maximize sales. It is important the company breaks even or makes additional profits in order to establish success.
References:
Armstrong, G.,
Kotler, P., Harker, M & Brennan, R (2009). Marketing an
introduction, Pearson Education Limited: Essex
Buyometric.
(2010). HoMedics Hot and Cold Therapy Elbow Wrap.Available:
http://www.homedics.co.uk/uk/hot-and-cold-therapy-elbow-wrap.html. Last
accessed 4th December 2012.
Lomo Industries Ltd. (2011). Neoprene Sheets. Available:
http://www.ewetsuits.com/acatalog/Neoprene-Sheets.html. Last accessed 13th
December 2012.
McDaniel, C & Lamb, C &
Hair, J (2008). Introduction to marketing. London: Thomson Learning
. p280-298.
unkown. (2005). Survey reveals sporting injury rate in the uk.Available:
http://www.personal.barclays.co.uk/BRC1/jsp/brccontrol?task=popup1group&value=11147&target=_blank&site=pfs.
Last accessed 10th December 2012.
Unkown. (2012). Muscle
Strains and their Prevention. Available:
http://www.physioroom.com/prevention/muscle_strains.php. Last accessed 4th
December 2012.
No comments:
Post a Comment