PRINCIPLES OF MANAGEMENT BUSINESS PLAN CEMENT AND STEEL RETAIL DISTRIBUTORS
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Cement and steel are the chief raw materials of the construction sector. The increase in construction sector growth has led to an increased demand in the raw materials required in this sector. In India, there are many cement manufacturing companies like ACC, Sankar and MyCem to name a few. These companies produce cement in large quantities but they do not have the supply network to reach small and medium scale customers. They directly provide delivery services to only large scale customers predominantly in metropolitan and urban cities. The steel company that provides steel is Kairali Steel Company.
By setting up a cement retailer, we hope to overcome this problem. The proposed retailer is located in a semi urban area targeting the small and medium scale customers of suburban and rural areas.
Through this retailer, we plan to buy cement from major cement manufacturers like ACC, Sankar and MyCem on a wholesale basis at comparatively lower prices and sell it to the suburban and rural customers on a retail basis at higher prices. The steel manufacturing company that provides the goods for the company is Kairali Steels.
Current Business Position
The company is presently a start-up. It is still in the initial stages of development.
The company is not expected to reap immediate financial benefits. The financial profits are expected within 2-3 years. From then on, steadily increasing profits are expected for next 2-3 years after which the profits are expected to attain a steady rate. As long as there are no competitions in the market, we expect this to be the trend.
The company would be established in order to cater to the needs of the individual house-builders and other small-scale constructors in rural and suburban areas, which have been neglected by the big cement manufacturing conglomerates. In the present scenario, the residents of the region do not have a major retailer to approach in the area for the construction purposes, especially cement. So, the start-up of a company means that there is no immediate competition. But in future, the company expects two or three competitors in the field depending on the developmental progress of the suburban area. We intend to provide the solution to the cement supply difficulty in the region and to establish a firm base in the construction market.
Current Position and Business Objectives
The company is in its pre-start up phase. There are no other companies presently in this field to compete with this firm. The business objectives of the company are
• The company expects to satisfy the customers with an excellent service network
• The company expects to completely cancel out the loan deficits of the company that are required for start-up within two operational years.
• Within five years, the company expects to have a consistent profit in its balance sheet. The company expects to be in the pole position in the market.
• After five years, the company expects to expand its services to the retail distribution of other construction materials and services like sand, bricks, paints, etc.
The ownership of the company is split into four ways among the four founders of the company, with an equal share being allotted to the four. At present, the four founders are the members of the board of directors. The board of directors may decide to extend to more investors in the future if the company requires more capital flow.
The company plans to buy cement wholesale from three different manufacturers, ACC, Sankar and MyCem. These company brands were chosen because these companies had great demand among local construction contractors. These companies provide 53 Grade cement. Different brands are chosen because different cement products are preferred for different purposes, as they differ in the marketing price and setting time.
Sankar Cements and ACC are mainly used for large construction projects. These companies produce cement that has faster setting time and their local demand is high. MyCem is the brand that is mostly preferred for small-scale purposes as they are relatively cheaper but has a higher setting time.
Kairali Steel is the leading steel manufacturing company in South India and they enjoy a large demand among the local customers. Hence Kairali Steel was preferred over other brands like Jindal Steel.
Presently, there is no substantial competition in the field in this locality. Also, the demand for the product is also high, making this locality ideal for this venture. But as business progresses, we expect competitive firms to come up, prompting us to expand into other related products and raw materials eventually. The lack of competition enables us to get a headstart in the business.
Suppliers and Inventory
ACC, Sankar and MyCem are the cement suppliers. These companies send the products via goods wagon. The respective dealers collect their goods from these wagons and store them in their godowns. The dealers supply to the retailers depending on the demand. That is where we collect the goods that we require.
Kairali Steel Company is the chief and only steel product that we are planning to sell at the moment. They have a factory in Palakkad district. We can place orders directly to the factory and receive the steel directly from the factory itself via road transport.
Presently, we are planning to invest only in the cement and steel section in the construction sector. The advantage that these sections have is that they yield definitive and consistent profits as they have a constant demand all the time. But, the problem is that they are comparatively low margin sections. In the future, we plan to diversify to other construction sections like tiles, paint, plumbing materials, wiring materials, etc. These sections do have a larger margin of profit but the demand for these materials is unpredictable due to which the markets for these materials is uncertain.