Question:
Discuss about the Business Challenge of Herbal Products and Health.
The Greenhouse Herb Farming is an herbal product manufacturer in Australia. The company will plant the herbs like parsley, basil, coriander, mint, thyme, rosemary, lavender, oregano, chives, lemon grass etc in the greenhouse setting and then will manufacture herbal products such as, soap, shampoo, toothpaste, candles, bath oils, medicines, tea, pillows and many more. The company will be situated in a very posh area of the country. The exact location of the firm will be in Orange NSW near Sydney. In this manufacturer company, the herbs that will be used to make the products will be planted within the area that is owned by the company. The company have total 1 Acres area for their manufacture in which the farm will be held in two parts. In the one part, the required herbal plants will be harvested and in the other part, the products will be manufactured.
Products and Service
The company will plant the herbs to sale them directly to the customers and will manufacture the herbal products such as soap, medicines, toothpaste, shampoo, candles etc, which will be manufactured in the factory of the Greenhouse Herb Farming. The main aim of the company is to provide good and healthy products that will be completely free from chemicals (Kingsolver et al. 2014). Therefore, they will harvest the plants that will be used in producing the products. The products will be safe for the health of the people to use, as the main ingredients will be all herbal products.
The Market
The company will be working in the market of the highly educated customers and for the customers who are highly conscious about their health. Therefore, the business will be helpful for the customers who will accept the healthy and good quality products for their daily use. These products will be helpful for the people who are very health conscious and always looking for the products that are made of fewer chemicals. Instead of that in these products, the use of chemical is very less and the products that they are using were very good for health.
The Business Potential
The potentiality of the business in the market is high in this context. As in present day products the level of using chemicals are increasing day by day that is harming our body and health gradually (Diver 2010). The company is providing the customers herbal products to reduce the harms created by the chemicals. Therefore, it is expected that the people will accept the products of this company. The people are now becoming very conscious about their health and the products they use in their daily life. Therefore, in this time the business have the potentiality to increase their business in the new market.
Mission, Goals and Objectives
The mission of this new Greenhouse Herb Farming is to become the one and only producer of the herbal products that will serve the customers with the healthy products of daily use with minimum prices. The goal is to become the leading company in this industry. The objective of the farm will be –
Strategies
The strategies that the company will be following in the business are mainly the competitive edge. The farm will analyse the other companies’ strategies and procedures of doing business and then decide their own strategy to get the competitive strategy, sales strategy and marketing strategy. In the time of the competitive strategy, the company will follow two strategies. One will be the farming of healthy plants from which the raw material of the products will be extracted and the other strategy will be the manufacturing process of the products with proper proportion. In addition, the marketing strategy will be to generate awareness among the people who are not aware of this a then making them aware about their health it will be helpful for the company to sale their products easily (Connellan 2013). Their primary focus will be on the communication strategy with the customers. They believe that if they cannot connect with the customers and cannot tell them about the speciality of their products then they will not be interested to the new company. Therefore, their main marketing strategy will be to make popularise the products as well as the company. After setting the competitive and marketing strategy, the company will set their sales strategy, which will focus on identifying the leads that are qualified and then turn them into paying customers.
Business Structure
In this organisation, five friends are starting this business together. In addition, they have another two people with them who will also help them in setting up their new business. Therefore, the business will be partnership business of five people who will get the profit share in a particular percentage (Gooley and Gavine 2012). It can be opened as the sole business if the friends cannot start this business together and therefore the business structure is mainly based on the partnership style.
Finance
The total budget for the project will be $150000 and the project will be done with this amount of investment. The investment will be done in the first year of the plan and then the invested amount will be compensated by the revenue collection. The main aim of the company in first year is to get the revenue of $256500 that they will want to collect within one year.
The Market
Greenhouse Herb Farming has identified the market for them in the posh area of the capital city of Australia. Therefore, the focus of the farming company is to become popular and one and only dealer of the herbal products. In this section, the researcher has developed the industry profile for their business plan and then segmented the market according to their need (Wilson 2012). After this, they can promote their market properly to the target customers and the plan has developed according to that.
Industry Profile
The Greenhouse herb farming is one of the businesses that are now become very much popular in the market. Therefore, the researcher has selected this business as their new industry to start up the new business. As the business will be about the herbal products such as, the herbal soaps, shampoo, toothpaste, candles, bath oils, medicines, tea, pillows etc therefore, the business will be competitive very much as these are related to the daily work products. The major characteristics of this industry are to provide the customers with healthy and innovative products that are made of herbal products completely, which is the main service of the industry (Marangos and Williams 2015). As the industry is mainly connected with the farming of the herbal plants that will be used in producing the herbal products for daily use, therefore it is expected that the business plan will be successful in this sector. The overall size of the market is expecting to be a large capacity that they are planning to implement new strategies and ideas for developing the growth potentials. The company captures the trend of purchasing the healthy products. The recent trend is now that the customers have become more conscious about the safety of health and security. Therefore, the customers are finding for the products that are providing more healthy and safe food and daily use products. This newly emerging company to make their products very popular follows this trend and this customer behaviour is considered by the owner of this company.
Competition
The company is trying to penetrate the market in the time when the market is already full of this type of companies and products. The main innovativeness of this organisation is the production system. The main competition is now to get the trust of the customers for getting the sustainability in the market. The company will focus on the customers’ choice and requirements to get the trust of the customers. The primary aim of the company is to focus on the customers’’ choice to make sure that the demand for their products never lost (Lovell 2010). Therefore, they will decide to make their products with more care and dedication to provide the customers as per their expectations. Therefore, the company is trying to implement the plans those are long-term basis and will get more profit from the customers. In this way, they will remain in the competition. Apart from this, they will start their farming in a part of the firm where they will produce their required manufacturing materials for their products, which will be the uniqueness of their firm. They will also implement some competitive strategy after analysing the other organisations strategies and will try to get more advantages in their business than others with various new and innovative ideas.
The company has set their target market for selling their herbal products in market. Their primary motto of the market segmentation is to publish their products in the places where the demand of the product is a high. For this reason, the company has segmented the market according to the demographic segmentation, psychographic segmentation and geographical segmentation (Marangos and Williams 2015). The demographic segmentation wise the market will target the customers who are between the age group of 20 to 45 are normally become very conscious about their health and safety. Therefore, the company is targeting these groups of customers to promote their products, which are mostly manufactured with concentrating on the welfare of the health. The next segment of the market that refers to the psychographic segmentation, which means that the company has targeted those people who are very conscious about their health and others safety matters. The other one is segmented according to the geographical location. The power of the company has chosen the posh area of Australia to make their business success. Therefore, the company will manufacture products for those customers who are able to afford the products of this company.
Customers
The company will target the customers who are more conscious about their health and safety and always find the products those will harm their health and other safety measures less the other products (Brown 2013). Therefore, the focus of the company will be on this type of customers to get their trust and loyalty to continue their business in future. The company is targeting those people who are between the age group of 25 to 45 and are normally live in the posh area of Australia, especially on Sydney. The lifestyle of this section of people is more sophisticated and for being educated, they are more conscious about their health and well-being too. Therefore, the Greenhouse Herb Farming will focus on the part of these customers to spread their market.
Value Proposition
The customers will like these products as these products are mainly made of the herbal products, which are very healthy for the well-being of the people. However, many more companies are giving the customers the opportunity to get the herbal products that are good for health. In this company, the speciality is in the manufacturing procedure (Ivicevich 2013). The company will produce the raw materials for making those products by their own. In a part of the organisation, the herb owner in a greenhouse will farm area the plants and then from them, with the fresh products the soaps, shampoos, candles etc will be manufactured. Therefore, the importance of this new procedure will attract the customers surely to this company. This will make the organisation different from the other existing farming companies.
Product or Services
The products of the company will be the herbal products that will be no harmful for the health and safety of the people as well as will be helpful to the environment. As the product is made of herbal elements, then the pollution ratio will be decreased and the level of product quality will increase (McFarlane 2012). The main products of their company will be the herbal soaps, shampoos that are used in daily use. These products are those that are made of completely herbs, which are very helpful to the health and are harmless too. The products then will be supplied with a good packaging system that will be very hygienic too. Apart from this, the company will produce more products like toothpaste, candles, bath oils, medicines, tea, pillows and many more. All these products will be made of herbs that are harvested in the land too.
Promotion
In the present day the promotion of any product or service is more important than the other things. In this case, the promotion will be done through the processes of television and internet mainly. The main medium of promotion will be the advertisements and social media promotion. The promotion through the social media is now more effective than any other process. Therefore, they will open a face book page and twitter account with the name of Greenhouse Herb Farming and in these pages they will promote their products and processes of their manufacturing to attract the customers easily.
Strengths, Weaknesses, Opportunities, Threats
The company will use their land for harvesting the herbs and then use the fresh herbs in manufacturing their products. This is the strength of the company that they will use their own materials to make the products. They have not to wait or depend on others to get the raw materials for making their products. This will increase their productivity. However, if the production of their harvested plants will decline by any means then the production will also affect. Apart from this, as the new generation people and the educated people are tending towards the healthy products then it will be the opportunity for the company.
The initial investment of the company is $150000 and the target of the company is to gain the total within five years. The total amount of their revenue will be obviously aimed to be more than the invested amount and they are targeting to achieve the amount within thus time expansion. They are manufacturing their herbal products and their main specific item is to use the herbal products more in the daily life. Their products are made of herbal products only which can be, measurable in the products. It is very much agreed with the customers and the business is very realistic objective that the company will face.
Sales and Distribution
The products will be manufactured in the farm of their own land and then the company will supply the products to the suppliers. The suppliers will provide that products to the wholesaler who will then reach the products to the shops and retailers to buy it to the customers. This chain process will help the owner to make popularise the products which is very helpful for their health and well being therefore the products will be distributed among the retailer to reach the customers.
Pricing
In the meantime, the company would like to explore the possibilities of crayfish production. Farmers Group believes this to be a high revenue venture with retail prices running in excess of $15.00 per pound in most places. The company also believes that if crayfish production is successful then it could become the number one endeavour of Farmers Group. Most of the products will be affordable and cheap for the target customers that they can avail it without any hesitation.
Production
The production will be proceeding with the farming in the land first. If the farming has done then the production will be handled with the products and the herbal items will be manufactured for the customers for ready to sale. Therefore, the products will be sent to the suppliers for selling them and to make them reach of the customers to buy the products and become the loyal customers of that.
Premises, Plant and Equipment
The factory buildings for manufacture of drugs shall be so situated and shall have such measures as to avoid risk of contamination from external environment including open sewage, drain, public lavatory or any factory, which produces disagreeable or obnoxious, odour, fumes, excessive soot, dust, smoke, chemical or biological emissions. In this case, the health and the safety will be obviously checked by the company owner. The complete system will be maintained with the proper laws and acts. In this country the Health and Safety Act has to be followed properly to maintain the safety margin of the workers.
Finance Plan
Capital Requirements and Funding Proposal
Finance is one of the essential parts for any kind of business. Before starting up a new business, the planning is also required for the finance of the business. In case of the new business of “Greenhouse herb farming”, the financial planning is as under:
It has been planned that the company will be mainly based on the owner’s capital in the beginning. The owner of the business has decided to provide 80% of the initial capital. The rest will be arranged by taking bank loan at the interest rate 8% per annum. This means the proportion of debt and equity capital will be 80: 20. The initial investment will be $150000.
The owner of the business has assumed that the initial investment of the company will be recovered within 5 years.
The owner has also assumed that the total costs of the company will increase from 1st year to 2nd year and again from 2nd year to 3rd year because of the increase in the production.
Cash-flow Projection
Yearly projected cash flow statement for the 1st year
|
January |
February |
March |
April |
May |
June |
July |
August |
September |
October |
November |
December |
|
|
Profit |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
|
Cash from operating activities |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
|
Cash from investing activities: |
(70000) |
(30000) |
(30000) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|
Cash from financing activities |
||||||||||||
|
Issuing equity share |
150000 |
– |
– |
– |
— |
– |
– |
– |
– |
– |
– |
– |
|
Taking bank loan |
30000 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|
Net cash inflow in the year |
131375 |
(8625) |
(8625) |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
21375 |
Table 1: Cash flow Projection
(Source: Created by author)
Projected cash flow statement for the 2nd year
|
January |
February |
March |
April |
May |
June |
July |
August |
September |
October |
November |
December |
|
|
Profit |
21917 |
21917 |
21917 |
21917 |
21917 |
21917 |
21916 |
21916 |
21916 |
21916 |
21916 |
21916 |
|
Increase in current assets |
(18041) |
(18041) |
(18041) |
(18041) |
(18041) |
(18041) |
(18042) |
(18042) |
(18042) |
(18042) |
(18042) |
(18042) |
|
Cash from operating activities |
3876 |
3876 |
3876 |
3876 |
3876 |
3876 |
3874 |
3874 |
3874 |
3874 |
3874 |
3874 |
|
Cash from investing activities: |
(60000) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|
Cash from financing activities |
– |
– |
– |
– |
— |
– |
– |
– |
– |
– |
– |
– |
|
Net cash inflow in the year |
(56124) |
3876 |
3876 |
3876 |
3876 |
3876 |
3874 |
3874 |
3874 |
3874 |
3874 |
3874 |
Table 2: Cash flow Projection
(Source: Created by author)
Projected cash flow statement for the 3rd year
|
January |
February |
March |
April |
May |
June |
July |
August |
September |
October |
November |
December |
|
|
Profit |
22016 |
22016 |
22016 |
22016 |
22016 |
22016 |
22017 |
22017 |
22017 |
22017 |
22017 |
22017 |
|
Increase in current assets |
(17016) |
(17016) |
(17016) |
(17016) |
(17016) |
(17016) |
(17017) |
(17017) |
(17017) |
(17017) |
(17017) |
(17017) |
|
Cash from operating activities |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
|
Cash from investing activities: |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
|
Cash from financing activities |
– |
– |
– |
– |
— |
– |
– |
– |
– |
– |
– |
– |
|
Net cash inflow in the year |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
5000 |
Table 3: Cash flow Projection
(Source: Created by author)
Projected Profit and Loss
Projected profit and loss statement for the 1st year
|
Particulars |
Amount (in $) |
Amount (in $) |
|
Sales (including all the products) |
370000 |
|
|
Less: Cost of goods sold |
90000 |
|
|
Net sales |
280000 |
|
|
Expenses: |
||
|
Total cost for payroll |
10000 |
|
|
Commission and fees |
4000 |
|
|
Total freight and cartage cost |
2700 |
|
|
Total cost for debt serving |
2400 |
|
|
Cost of marketing |
4400 |
|
|
Total expenses |
23500 |
|
|
Net profit |
256500 |
Table 4: Projection of Profit and Loss
(Source: Created by author)
Projected profit and loss statement for the 2nd year
|
Particulars |
Amount (in $) |
Amount (in $) |
|
Sales (including all the products) |
390000 |
|
|
Less: Cost of goods sold |
100000 |
|
|
Net sales |
290000 |
|
|
Expenses: |
||
|
Total cost for payroll |
10000 |
|
|
Commission and fees |
6000 |
|
|
Total freight and cartage cost |
2900 |
|
|
Total cost for debt serving |
2400 |
|
|
Cost of marketing |
5700 |
|
|
Total expenses |
27000 |
|
|
Net profit |
263000 |
Table 5: Projection of Profit and Loss
(Source: Created by author)
Projected profit and loss statement for the 3rd year
|
Particulars |
Amount (in $) |
Amount (in $) |
|
Sales (including all the products) |
410000 |
|
|
Less: Cost of goods sold |
110000 |
|
|
Net sales |
300000 |
|
|
Expenses: |
||
|
Total cost for payroll |
14000 |
|
|
Commission and fees |
8000 |
|
|
Total freight and cartage cost |
3700 |
|
|
Total cost for debt serving |
2400 |
|
|
Cost of marketing |
7700 |
|
|
Total expenses |
35800 |
|
|
Net profit |
264200 |
Table 6: Projection of Profit and Loss
(Source: Created by author)
Projected Balance Sheet
Balance sheet for the 1st year
|
Liabilities |
Amount (in $) |
Assets |
Amount (in $) |
|
Capital |
150000 |
Total fixed assets |
130000 |
|
General Reserve |
Nil |
Current assets: |
|
|
Current Liabilities: |
Debtors |
30000 |
|
|
Bank loan |
30000 |
Cash at bank |
10000 |
|
180000 |
180000 |
Table 7: Projected Balance Sheet
(Source: Created by author)
Balance sheet for the 2nd year
|
Liabilities |
Amount (in $) |
Assets |
Amount (in $) |
|
Capital |
406500 |
Total fixed assets |
190000 |
|
General Reserve |
10000 |
Current assets: |
|
|
Current Liabilities: |
Debtors |
100000 |
|
|
Bank loan |
nil |
Inventories |
90000 |
|
Cash at bank |
10000 |
||
|
Other current assets |
26500 |
||
|
416500 |
416500 |
Table 8: Projected Balance Sheet
(Source: Created by author)
Balance sheet for the 3rd year
|
Liabilities |
Amount (in $) |
Assets |
Amount (in $) |
|
Capital |
670700 |
Total fixed assets |
190000 |
|
General Reserve |
10000 |
Current assets: |
|
|
Current Liabilities: |
Debtors |
170000 |
|
|
Bank loan |
nil |
Inventories |
110000 |
|
Cash at bank |
70000 |
||
|
Other current assets |
140700 |
||
|
680700 |
680700 |
Table 9: Projected Balance Sheet
(Source: Created by author)
Risk Identification and Mitigation
The company can face a few risk factors in the case of manufacturing any wrong product. As the products are very sensitive to the customers and the herbs that will be used in manufacturing the products then the workers may face risk or accidents. Then the company owner has to consider these risk factors in the company. The risks are following –
Structure and Management
Organisational Structure
The organisational structure will be based on two structures. One will be the board of director who will decide the problems of the organisations. Then came the director general who will observe and investigate the total structure of the farm. The main responsibility of the directors will be to observe the procedures and processes of the farming in the land and the process of production whether the products are using in the manufacturing process or not. In addition, the other parts are the workers who will be working for the company to produce the products for the company.
Key Personnel
The key personnel of the company will be the Board of Directors, Directors, Departmental heads, employees and the sales staffs. Overall, Farmers Group will have seven personnel. The company expects to employ three temporary employees during the equipment re-location phase, two employees on a permanent basis, and two part-time employees. The Farmers Group team is organized into three groups: Management, inspectors and workers.
Project Plan
Action Plan
(For Extra larze size)
|
Activities |
Month 1 |
Month 2 |
Month 3 |
Month 4 |
Month 5 |
Month 6 |
Month 7 |
Month 8 |
Month 9 |
Month 10 |
Month 11 |
Month 12 |
Month 13 |
Month 14 |
Month 15 |
Month 16 |
Month 17 |
Month 18 |
|
Developing Business Summary |
||||||||||||||||||
|
Determining products and services |
||||||||||||||||||
|
Determining Market |
||||||||||||||||||
|
Determining Strategies |
||||||||||||||||||
|
Market Evaluation |
||||||||||||||||||
|
Industry profile |
||||||||||||||||||
|
Competition |
||||||||||||||||||
|
Market Segmentation |
||||||||||||||||||
|
Sales & Marketing Plan |
||||||||||||||||||
|
Determining customer and value proposition |
||||||||||||||||||
|
Promotion |
||||||||||||||||||
|
SWOT |
||||||||||||||||||
|
Sales and Marketing Objectives |
||||||||||||||||||
|
Sales and Distribution, pricing |
||||||||||||||||||
|
Operation Plan |
||||||||||||||||||
|
Production |
||||||||||||||||||
|
Premises, Plant and Equipment |
||||||||||||||||||
|
Finance Plan |
||||||||||||||||||
|
Financial Assumptions |
||||||||||||||||||
|
Projected Balance Sheet |
||||||||||||||||||
|
Risk Assessment |
||||||||||||||||||
|
Risk Identification |
||||||||||||||||||
|
Mitigation |
||||||||||||||||||
|
Structure and Management |
Table 1: Gantt Chart
(Source: Created by author)
Reference List
Brown-Paul, C., 2013. Mint fresh hydroponics. Practical Hydroponics and Greenhouses, (132), p.14.
Connellan, G.J., 2001, April. Selection of greenhouse design and technology options for high temperature regions. In International Symposium on Design and Environmental Control of Tropical and Subtropical Greenhouses 578 (pp. 113-117).
Diver, S., 2000. Aquaponics-Integration of hydroponics with aquaculture. Attra.
Gooley, G.J. and Gavine, F.M., 2002. Integrated Agri-Aquaculture in Australia: virtual industry or commercial reality?. Peter Core, p.72.
Ivicevich, T., 2003, February. The New Zealand greenhouse industry. InSouth Pacific Soilless Culture Conference-SPSCC 648 (pp. 15-18).
Kingsolver, B., Hopp, S.L., Kingsolver, C. and Harris, R., 2007. Animal, vegetable, miracle. Blackstone Audiobooks.
Lovell, S.T., 2010. Multifunctional urban agriculture for sustainable land use planning in the United States. Sustainability, 2(8), pp.2499-2522.
Marangos, J. and Williams, C., 2005. The effect of drought on uncertainty and agricultural investment in Australia. Journal of Post Keynesian Economics, 27(4), pp.575-594.
Marangos, J. and Williams, C., 2005. The effect of drought on uncertainty and agricultural investment in Australia. Journal of Post Keynesian Economics, 27(4), pp.575-594.
McFarlane, P., 2012. Future direction: Australian herb and spice industry.
Wilson, G., 2002. Can urban rooftop microfarms be profitable. Urban Agriculture Magazine, 7, pp.22-24.
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