Executive Summary
The new Company that is going to be started will be called Trustworthy Management Technology, Inc. (TMT). This company will be giving to the market computer products and also computer services. The customers that will be mainly targeted are the small businesses. The company is going to concentrate on providing network systems as well as services mostly to small business organizations. The systems to be offered will encompass the “micro-computer server-based systems” and also the personal computer based Local Area Network systems. The services that the company is going to provide will be network systems design and installation. In addition to this, the company is also going to offer to its customers.
TMT will be targeting to bring up the level of sales to more than 12 Million US dollars in the third year of its operation. This will be realized by way of the company putting focus on the main customers that it will have and the underlying values that these customers will require. This business plan is written to serve as a guideline to the business operations that this company is going to engage in. In the first year, the company will require approximately $3 million to commence its operations.
TMT is going to be developed on the supposition that IT management for business is similar to the schools of knowledge such as legal advice among others. Those business operators who are elegant are required to get excellent vendors that have hardware that is dependable, as well as software. In addition to this, they also need service and support that can be relied on. TMT is going to seek to ensure fulfillment of these needs and eventually turn out to be a leading company in business IT for its area.
For those business people who are ready to have assurance that the computer systems they have are working all the time in a reliable manner, TMT will be a vendor and a strategic ally that will be trustworthy who will ensure these business people’s systems work properly. It will also ensure their employees receive training, and that there is reduction of down time they will have. In a different manner from the chain stores, TMT will take steps to have an awareness of the customer and will be taking initiatives to reach the customer’s site when needed and provide service and training that is practical.
In order for the new company to attain its goals, the forecasted avenues to success for the company in the first three years are going to be;
- Ensuring that the company makes itself different from box-pushing, who are operators that are inclined towards the price, by offering to the customers as well as delivering to them service and support and getting some fee in return for this.
- Networking know-how, high-class training, and setting up proprietary software or network administrative systems that is unique.
- Providing an actual alliance which encompasses things that are not tangible, such as reliability and confidence, to the customers.
TMT is going to be a reseller to fill the market need for personal computers and it will put emphasis on support as well as service to achieve differentiation in order to have a competitive advantage over the rivals who are inclined towards the price.
This company is going to have one location which is going to be a 7,000 square foot store that is going to be located in an inhabited shopping center situated near the downtown region in a most convenient way in New York. This is going to encompass a training area, showroom area, offices, and service department.
TMT is going to be a privately owned company and it will be owned in majority by the person founding it. In addition, there are going to be five investors who are going to invest in the company. In this company, the team will be comprised of 20 employees who will be working under a president and four managers. The major departments in management will be the sales department, the service department, the marketing department and the administration department. Each of these departments is going to be headed by a manager. The management team is going to be comprised of highly qualified people with adequate experience in their areas of operation, all being holders of degrees.
The transformations which came about some few years back in the computer reseller market have brought in great impacts on the business operations of those organizations operating in this industry. These transformations which occurred involved a longer collection period, inventory turnovers that were longer as well as the margin squeeze (Anonymous, Csi Computer Specialists, 2010). In order for this company to operate effectively following these changes, it will have to differentiate itself by clearly defining the vision it will embrace of becoming an IT ally to its customers. TMT will not stand in a favorable position in the competition with the chains that employ boxes as appliances. The company will be required to provide an actual alliance which encompasses things that are not tangible like reliability, confidence, and having knowledge that a person will be there to respond to questions and offer assistance at the times of significance.
The support services which the company is having hopes of using in capturing the market will be services like installation, training, network configuration and upgrade offers among others. As the company continues with its operations, it will look for ways to capitalize on new opportunities.
A number of computer retailers in the industry do exist. These are;
- Computer dealers: These often put their focus on a small number of the major hardware brands and in most cases they provide software on a very minimal level and the amount of service and support they offer is very variable. The services and support they offer to the customers are not good enough and they charge higher prices as compared to those charged by the larger stores.
- Computer superstores and chain stores: These are the larger chain stores like Computer City and CompUSA among others. These stores are those that are normally over 10,000 sq ft of space, and in most cases they provide excellent wall-in -service, and are often warehouse-like locations at which customers go to get products in boxes having quite aggressive pricing, and minimal support (Highbeam Business, 2010).
- Mail order: These business organizations supply the market with products and they are increasing the supply to the market with each and every coming day. They charge lower prices for boxed products. For those buyers who are driven by the price and are not interested in being offered services during their purchases for boxes, these kinds of businesses are very favorable for them.
The company will be required to compete in an effective manner against the notion that businesses are supposed to purchase computers as plug-in appliances that do not require continuous service as well as training and support.
TMT Company will have to concentrate on its central message of service through such mediums as TV and radio among others. The company will be required to sell itself and not the product. It will be selling Compaq, IBM and Apple among other software brand names. By the end of year three while the company will be carrying out its operations, the level of sales is forecast to have risen to more than 12 million US dollars from the initial figure of about 7 million in year one.
Objectives
The company’s objectives are:
- To achieve sales above $12 million by the third year.
- To have a gross margin of over 30 percent and stand at that level.
- To sell $2.9 million of service, support, and training by the first year.
- To realize a turnover by six times in the third year.
Objective 1: Target date – 31 December 2013
Objective 2: Target Date – 31 December 2013
Objective 3: Target Date – 31 December 2011
Objective 4: Target Date – 31 December 2013
Key Success
- Ensuring that the company makes itself different from box-pushing, who are operators that are inclined towards the price, by offering to the customers as well as delivering to them service and support and getting some revenue in return for this.
- Raising the level of sales of non-hardware products to about 1/5 of all sales at the end of year 3.
- Providing an actual alliance which encompasses things that are not tangible like reliability and confidence to the customers.
Mission
The mission of TMT is going to be “to serve its customers as a trustworthy ally by offering services with a business partner’s loyalty”.
History of computer sales industry
The development of computers was carried out in the course of the Second World War. However, selling of the computer was carried out later and this was in the year 1953. In the course of the 1960s, the computer sales were over five thousand computers and beginning from that time, these sales started to more than double every after 3 years and by 1970, the sales had risen to over forty thousand computers. However, at that time the computer was still very costly and could not be afforded by a large number of people.
The computer retail industry was promoted by some measures that were taken in the course of the 1980s and these were “commercial sale of personal computers and the development of easy to use software” (“Encyclopedia of Business”, 2010). From that time, the targets for the computer sales were aimed at more customers and not just the big businesses that had been the usual targets. On top of the big businesses, the sales were made to small-scale business enterprises, to such organizations as schools and even individual people were now targeted as customers for personal use in the home. These computer sales have risen to a great level in the present day.
According to “Encyclopedia of Business”(2010), the computer sales industry went through remarkable growth going to a high level where the sales were about four hundred billion US dollars in the year 2000. This figure represented a twelve percent rise above what was realized in the previous year (1999). Yet, in the year 2001, the industry was greatly affected in a negative way. The industry was affected negatively following growing weak of the economy, the severe competition that came in as well as the reduction of prices. At this point, there was a general reduction in the amount of sales. According to “Encyclopedia of Business” (2010),“sales declined by 7.7 percent in 2001 and another 8.5 percent in 2002. Although the industry rebounded slightly in 2003, the computer industry is positioned for restructuring” (Para 2). In this industry, the business customers who represent about 75 percent of the total computer sales, have cut down the budgets on IT and “consumers have become saturated with megasystems and have little need for more processing speed or storage capacities” (“Encyclopedia of Business”, 2010, para2). At the start of this century, in the course of the first two years the unit sales remained constant.
In the current days, the computer stores are experiencing tough competition that is coming from the “online sales” as well as from “manufacturers-turned-retailers”. One of the greatest “manufacturer-turned-retailer” is Dell. The sales operations of this company have flourished even if the market conditions have not been favorable in general. “In the course of the 1990s, “Big-box computer stores” underwent rapid growth to a level that there was compromising of the customer service” (“Encyclopedia of Business”, Para 4). Mathewson (2003) made reference to this poor service to the customers and pointed out that “in computer use, friends don’t let friends to buy from superstores”. In the current days, “those stores are making efforts to get over the poor reputation they had for offering service to customers” (Mathewson, 2003, pg 1).
An observation is given out by the “Encyclopedia of Business”(2010) that the patterns that will keep shape to this century (21st century) encompass risen significance of “mobility and wireless connectivity”. The sales for laptops are inclined towards going beyond those of desktops and there are expectations among the consumers to be appealed to the desktops that are smaller in size. More so, “cords and wires are also seen as negative components…….wireless integrated functionality is expected to draw customers into stores” (“Encyclopedia of Business”, Para 4).
This industry is a growing industry. As technology advances, each and every individual is willing to have efficient and sufficiently computer services. Therefore, by one venturing in to this business, he or she will take advantage of the opportunity and capitalize on the high demand for the computer services.
Company Description
TMT will be a computer reseller and it will be located in New York. It is going to be set up to fill the market need for personal computers. This company is going to put emphasis on service and support in order for it to make itself different from the national chains in the industry that are more inclined to using price as a competitive strategy. This is going to assist the company in achieving a competitive advantage through capitalizing on the weaknesses of its competitors who are the national chains.
The company is going to be a privately owned company and it will be owned in majority by the person founding it who will also be the President of the Company. He will be a major shareholder having 60 percent of the Company’s shares. In addition, there are going to be five investors who are going to invest in the company. One of them will have a 20 percent share and the remaining four will each have 5 percent.
The legal ownership of the company will be;
- The legal name of the company will be Trustworthy Management Technology, Inc.
- The legal form of the company will be a Subchapter S-Corporation, incorporated in the sate of New York
The business in the first year is going to be funded by owners’ investment. The money that will be invested is going to set up the business and finance the day to day operations of the company inc the course of the first year. These owners will bring in the required 3 million to start the business and the remaining amount will be no relying on borrowing. As the business goes on with its operations, these daily operations will be funded by cutting back the profit into the business before a time comes to get more investor’s. TMT Company is going to have one location which is going to be a 7,000 square foot store that is going to be located in an inhabited shopping center situated near the downtown region in a most convenient way in New York. This is going to encompass a training area, showroom area, offices, and service department.
Products and Services
TMT Company will be offering computer products. In addition to these, the company will also offer computer services. The target market for these products and services is going to be the small business and also the medium business operations. The company will concentrate its operations mostly on the small business operations. The company is going to offer such systems as the ones that are micro-computer server-based. On top of these, the company will offer the local area network that will be linked to the personal computer. Alongside these, the company will offer services. Among the services to be offered by the company will be training and support. Moreover, the company will also carry out installation and designing of the network systems. The price list for the average price of products and services to be offered is given below.
Industry Analysis
The company will be targeting the local markets, small business and home office.
Service business analysis
The TMT Company will be among the computer reselling business operators. There are several such operators and some of them include;
- Computer dealers: Time and again, these operators concentrate on a small number of the major hardware brands and in most cases they provide software on a very minimal level and the amount of service and support they give is very variable (Anonymous: Association of Service and Computer Dealers International., 2010). The services and support they offer to the customers are not good enough and they charge higher prices as compared to the prices charged by the larger stores.
- Computer superstores and chain stores: These encompass the larger chain stores like Computer City and CompUSA among others. These stores are those which are normally over 10,000 sq ft of space, and in most cases they provide excellent wall-in service, and are often in warehouse-like locations at which customers go to get products in boxes having quite aggressive pricing, and minimal support (Highbeam Business, 2010).
- Mail order: These business organizations supply the market with products and they are increasing the supply to the market with each and every coming day. They charge lower prices for boxed products. For those buyers who are driven by the price and are not interested in being offered services during their purchases for boxes, these kinds of businesses are very favorable for them.
- Others: Those that have mixed features of the ones mentioned above.
Buying patterns and competition
Among the smaller business buyers, quite a number of them are aware of the notion of support and service. The probability that these people will pay for it is high. Particularly in a situation where these people are made aware of the presence of the offer and how important it is to them.
It is quite clear that this company, based on the research, is going to enter into competition with all the box pushers on a higher level as compared with other providers of services. In will be obligatory for TMT to engage in competition in a successful manner in opposition to the notion that businesses should be buying computers as “plug-in appliances” which do not require continuing support and training as well as service.
Main competitors
The main competitors are chain stores. Strategies will be put in place to ensure the company wins a competitive advantage over these stores. The strengths these businesses have are that they have a national image, offer a high volume of products, engage in aggressive pricing and take advantage of the economies of scale. However, the limitation with them is that they do not have product as well as support and service information. In addition, they do not have special concentration.
Business Participants
The presence of national chains is increasing: Egghead, CompUSA and others are a growing presence. These chains derive benefits from such sources of strength they have as the economies of scale, advertisement, and an overall pattern in the direction of brand loyalty for products among other sources.
More so, the local computer stores are under threat. The local computer stores are inclined to be small businesses whose owners are those people who set them up for the reason of having a fondness for computers. These businesses are not managed well and they are under-capitalized. The margins are limited while they engage in competition with chains in which the competition is on the basis of price as opposed to competition on service as well as support.
Distributing a service
The buyers in small businesses are used to carrying out purchases from those sellers who come to visit their offices. In setting up this business, one adverse issue is that there may be no prospects about the home office buyers that are targeted of carrying out purchases from this company. They may turn to the superstores in order to obtain the most favorable price. However, they will have to be made to realize that there can be a better option available for them at a slightly higher price.
Target Market segment strategy
This business is going to be part of computer reselling business which comprise of a variety of businesses. These businesses include:
- Computer dealers: These often put their focus on a small number of the major hardware brands and in most cases they provide software on a very minimal level and the amount of service and support they offer is very variable (Anonymous: Association of Service and Computer Dealers International., 2010).. The services and support they offer to the customers are not good enough and they charge higher prices as compared to those charged by the larger stores.
- Computer superstores and chain stores: These include the larger chain stores like Computer City and CompUSA among others. These stores are those that are normally over 10,000 sq ft of space and in most cases provide excellent wall-in service. They are often warehouse like locations at which customers go to get products in boxes having quite aggressive pricing and minimal support (Highbeam Business, 2010).
- Mail order: These business organizations supply the market with products and they are increasing the supply to the market with each and every coming day. They charge lower prices for boxed products. For those buyers who are driven by the price and are not interested in being offered services during their purchases for boxes, these kinds of businesses are very favorable for them
- Others: These have mixed features of the ones mentioned above.
Market needs
Because the target market of the TMT Company is the customer who is looking for service, the market needs that are of great significance here are service and support. In addition, the market needs that are important to the customer are training and installation and these will also be offered by this business. Among the main points of the company’s strategy that is going to be put in place is to put focus on those target segments that have knowledge and understanding of these needs mentioned above and have the willingness to pay in order to ensure the fulfillment of these needs.
In general terms, the personal computer users are supposed to obtain support and service. However, those who are self-reliant engage in supplying these needs on their own. Considering home offices, those who use computers are individuals who have the knowledge and would like to do it by themselves. Among the business organizations are those which have people in personnel.
Market trends
The trend that can be clearly seen in the market is reducing prices. This has been realized over time from the past but at the present, this trend seems to be rapidly increasing more than ever before. The major brand-name manufacturers are seen to be coming up with wonderful products with new improved features and offering them at astonishing prices (Goldberg, 1996). Another tendency or trend is the computer turning out to be a disposable device. Instead of carrying out an upgrade of a system, it turns out to be that it would be less expensive to purchase a whole new one. The other one is the always superior connectivity. Each and every person wants to have internet connection. Every office, however small, desires to have its local area network linked to the internet.
Strategy and Implementation
On the national level, the number of home offices is estimated to be about 30 million and this number is increasing at a rate of 10 percent each year. There are various types of home offices. The major target of TMT is going to be directed at the home offices whose operators are full-time operators and mainly earn their living from them. These may include such professionals as consultants, writers, and graphic artists among others. The other type of home office is the part-time home office where people may be working during the night alone as a part-time activity. These are individuals who strive to make some additional earnings during part-time or those individuals who may be operating part-time in their home-offices in relation to the hobbies they have. However, the company is not going to put much focus on this particular segment (part-time home offices).
Small business within the company’s market is going to include whatever business having a retail office, or industrial location that is situated away from a person’s home and having less than 30 employees. Such businesses that are to be included in the company’s market are estimated at 45,000 businesses. The cut-off point of the number of employees (30) in the businesses to be targeted is subjective. It has been discovered that the large business organizations can turn to other vendors, but it is anticipated that the company will sell to the departments of these business organizations that are larger in size.
Strategy Pyramid
For TMT to concentrate on support and service, the main tactics that are going to be employed will be networking know-how, high-class training, and the company setting up proprietary software or network administrative systems of its own. Particular programs of the new business organization for networking will encompass internal training. Looking at training programs, there will be such programs as “train-the-trainer programs”. Another program will be promoting direct mail.
The other strategy of the company is going to be putting emphasis on relationships. The plans that are going to be employed by TMT will be to engage in “marketing the company and not marketing the products”, getting closely in touch with the customer, and bringing up the level of sales per every customer. The programs that are going to be put in place to ensure constant contact with the customer will be call-backs after installation, management of sales and direct mail. More so, upgrade mailings as well as sales training are the programs that are going to be employed to bring up the level of sales for each customer.
Competitive edge
By the TMT ensuring setting up a business that is based on long-standing relationships with clients who are satisfied, the company will be able to set up protection against competition at the same time. As the relationships remain stable with the clients for an extended time period, this will facilitate offering more help to the clients to have comprehensive understanding of what the company offers and its importance to the customer.
Sales Strategy
Basically, the underlying principle here is that there will be selling of the company and not the product. The company will have to sell itself as well as its service and support. The company will have to provide to the customers what they are actually looking for. It is projected that in the first year, the sales will be 7,900, 000 US dollars, 9,620,000 in the second year and over 12 million in the third year.
The figures below given in the sales forecast table are based on the industry figures for the characteristic growth of a new computer reseller business (start-up business) and the figures give a reflection of “repeat business generated through meeting customer needs”. The sales program that are going to be put ion place will have to be driven by the idea that the “business is driven by customer demand when problems arise”.
In carrying out these forecasts the following general assumptions are made;
N/B: In the course of the first year, the average monthly sales will be $660,000 and the average monthly direct costs will be $315,000.
Marketing Strategy
This strategy is the heart of the main strategy. Under this strategy, there will be emphasis of service and support, setting up a relationship business, and focusing on small businesses and home offices as the targeted markets.
- Promotion strategy
Advertising: This will be carried out using the radio and newspaper to make people aware iof the existence of the company at a time it be getting launched.
Direct mail: TMT will make use of direct mail in order to reach the customers that will be established with “training, upgrades, seminars and training”.
Media: The new company to make use of the local media to market itself. - Pricing strategy
The company will have to charge in a suitable manner for the excellent support and service that it will offer to the clients. The returns structure of the company will have to go in line with the cost structure of the company. It will not set up the support and service returns into the price of the products. All that will be offered to the customer will have to be readily offered and priced to sell and bring revenue. The company will be charging a price slightly higher than what the chain stores charge. The rationale behind this is that, once the customers have the awareness of the products that company is offering to them they will be ready to pay, especially for support and training. - Positioning Statement
For those business operators who have a willingness to obtain reassurances that the computer systems they have are working all the time in a reliable manner, TMT will be a vendor and a trustworthy strategic ally that will ensure these business operators’ systems work properly and who will also ensure their people receive training resulting in a reduction of down time. In a different manner from the chain stores, this company will take steps to have an awareness of the customer and will be taking initiatives to reach the customer’s site when needed and provide service and training that is practical.
Distribution
This business will be located in a region where there will be a large number of potential customers, it will be located in an inhabited shopping center situated near the downtown region in a most convenient way in New York. It will deliver the products as well as services to the customer’s site whenever it will be necessary. The company will be obtaining its products from such companies as Apple.
Milestones
Milestones below basically highlight the tasks that are supposed to be carried out to build up this plan and take TMT to opening day.
Managers in the respective departments will be responsible in ensuring that all the activities are carried out efficiently and effectively to realize the objectives.
A plan is going to be put in place to ensure the milestones are made. There is need to evaluate the performance of each and every individual in the company. The managers in the respective departments will have to set targets that need to be reached by each and every employee. The employees will have to be rewarded for achieving targets that set for them. This will call for putting in place of a reward system. By setting targets, this will provide a direction towards which each and every member of this organization will be working towards and through this, the overall goal of the company will have to be achieved.
Management and organizational structure
The management philosophy of TMT will be on the basis of responsibility and shared respect. TMT will ensure that employees working in this company will want to work in the company due to an environment that embraces creativity and achievement.
Organizational structure
The total number of employees in this new company at the start will be 20 employees who will be working under a president and four managers. This number will have to be increased with time as the business expands. The main departments in management will be the sales department, the service department, the marketing department and the administration department.
Management Team
The President: The person who is going to hold this position is a mature person, being more than 45 years of age with enough experience. The person is a holder of a degree in computer science and has worked in management positions in large computer companies for more than 15 years. The person has acquired knowledge about small business development and therefore has adequate business management skills and knowledge.
Vice President marketing: The person to hold this position is someone with adequate knowledge and skills in this field of marketing and has over ten years’ experience. The person holds a Masters’ degree in marketing and has been working with computer companies in the marketing area.
Vice President Service and Support: This person holds a degree in computer science and has worked in computer companies in the positions related to programming and service.
Vice President Sales: The person to occupy this position has a degree in the sales related field with a more than five years’ experience in sales management in computer companies.
Director of Administration: This person is going to carry out administrative duties. This person has a degree related to matters of administration especially in the computer companies.
Break-even Analysis
The TMT Company projects to break-even in the course of the first year of its operation; by the end of the first six months.
Monthly break even (Units) 600
Monthly break-even (Revenue) 300000
Assumptions are; Average Per-unit revenue is 400 USD, Average per unit cost is 300 USD dollars and the estimated monthly fixed cost is 80, 000 USD dollars.
Financial Plan
In coming up with this plan, several assumptions that are of great significance are made. The main ones are;
- It is assumed that there will be a slow growth in the economy and there will be no occurring of major recession.
- It is assumed that there will be no unexpected variations in technology to cause the products that are going to be offered by TMT to the market to turn out to be obsolete.
Projected financial statements (profit and loss)
The assumption here that is of great significance in the projected financial statement (profit and loss) is the GM which is supposed to increase on a continual basis from the first year all through to the third year
NB: This is just a summary of the financial statement (Profit and loss) and not all the details are shown. It is only an overview of the projections of how the company will perform in the first three years.
Projected Balance Sheet
NB: This is a summary of the company’s balance sheet showing the company’s projected positions in the course of a period of the first three years.
These statements reflect the company’s business objectives which are;
- To achieve sales above $12 million by the third year
- To have gross margin to over 30 percent and stand at that level
- To sell $2.9 million of service, support, and training by the first year.
- To realize a turnover by six times in the third year
Based on the financial statement (profit and loss) above, this company will be targeting to bring up the level of sales to more than 12 Million US dollars in the third year of its operation. This will be realized by way of the company putting focus on the main customers that it will have and the underlying values that these customers will require. This business plan is written to serve as a guideline to the business operations that this company is going to engage in. In the first year, the company will require approximately $3 million to commence on its operations. TMT is going to be developed on the supposition that IT management for business is similar to schools of knowledge such as legal advice among others. Those business operators who are required to get excellent vendors that have hardware that is dependable, as well as software. In addition, they need also service and support that can be relied on. TMT is going to seek to ensure fulfillment of these needs and eventually turn out to be a leading company in business IT for its area. By fulfilling its needs, this will be reflected in the financial statements in terms of continual increased margins as time goes by.
Looking at the financial position of the TMT in the first year, it is expected that it will make a net profit of one million US dollars and this amount is expected to be ploughed back in to the business. The sales are targeted to be 7900000 US dollar in the course of the first year. The assets for the company as at 31st 2011 (first year) is projected to be 3 million US dollars, the liabilities will be 900,000; and the owner’s equity will be 2,100,000 dollars. Such a performance will be a remarkable performance for a company that is just starting.
Clear monitoring and evaluation will be put in place to ensure that each activity is carried out as planned in order to avoid greater deviations from the original projections. Each department will set targets, including short term targets that will be aimed at assisting to realize long-term objectives. A reward system will be put in place for the employees for achieving targets. The evaluation of the performance will be carried out on a monthly basis so that in case there are any deviations, appropriate measures to be taken before greater negative impacts come in.
References
Anonymous, (2010), Association of Service and Computer Dealers International. Web.
Anonymous, (2010), Csi Computer Specialists, Inc. (CSIS) – Description of business. Research Report. Web.
“Encyclopedia of Business”,(2010), Computer and computer software stores. Web.
Goldberg, C. J., (1996), Power surge – decreasing computer prices. Web.
Highbeam Business, (2010), Computer and computer software stores. Web.
Mathewson, J. (2003). Superstores Figure It Out. Computer Use.