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Business plan Jute bag

Business plan Jute bag

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Published by Toshika Monica

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Published by: Toshika Monica on Feb 15, 2011
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03/24/2013

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Brief Description of the ProjectBusiness Idea:
Housewives love plastic bags and shoppers find it indispensable because plastic bags are light enough for anyone to carry it easily. There is more harm than benefit by the use of plastics bags. Plastic is not biodegradable and releases harmful dioxins into the air. Besides, people who work in plastic industries areat a greater risk for cancer and other diseases. Colored plastic bags contain harmful toxic metals likechromium and copper which can cause allergies. Now everyone has come to realize that plastic bags havemany disadvantages that have adversely affected the environment.I think jute can be a most viable option to the light plastic bags. Jute being bio-degradable it does not pollute the air. Disposal of jute will be no problem as they rot easily and turn to soil.There are two manufacturers of jute bags in the market till date. They are covering 100% market share inthe premium segment but they have a very limited distribution. Consumers have to go to departmentstores and Thamel area to get those bags. The bags they are producing are less attractive, heavier andexpensive. The price they have charged doesn’t go with the product quality.I conducted a survey with 100 people in the department stores and local markets to know the viewregarding the quality and availability of jute bags. From that survey I found that people are very muchaware about their health and they want to use jute bag which is environment friendly but the bags areexpensive, less attractive and are not available in the local market.
Opportunity:
As per the market survey majority of people are ready to use jute bags instead of plastic bags. They saidthat the jute bags which are in the market are heavier, expensive, not well designed and limiteddistribution. They also said that if they get the jute bags which are reasonable, well designed, environmentfriendly and don’t have any harmful affects on human health they will be happily using such bags for their daily use.So I want to start this business. I want to manufacture jute bags which have good finishing, reasonable price, lightness, attractive design and wide distribution.
Chapter1. Marketing Plan
1. 1. ProductThe product we are dealing with is jute bag. Jute bag is the best alternative for the plastic bag. Its size will be 18 by 9 inches. Their will be two colours which will be normal jute color and other one will be in black. Both color bags will be embroided with different color thread and with zipper. It is durable, can bereuse and carry up to 15 kilograms. It can reuse even after people reach home, for their future shoppingand packing needs.1. 2. Market simulationThe target segment of this business is segment A which is upper class. Till now all the jute bags are pricessimilar and have similar quality. There are two major competitors engaged in this business. Thecompetitors are covering 60% and 40% market share respectively. I estimate to cover 40 % market share by the end of 3 rd year. This business targets the upper class segment because they are the major shoppersand are willing to pay premium price for the natural and environment friendly product.The average cost of the product is Rs.60 and the market price per bag is Rs.75 for the existingcompetitors.The product demand is highly sensitive to price, promotion and place: - one unit change in price effectssales by 100 units, when Rs.10000 is spend on promotion, it has 1200 units of effect on sales units.Similarly, spending Rs. 5000 on Place or distribution will have 500 units’ effect on sales units.
 Business Plan for Jute Bag 
1
 
1.3. Demand forecasting:In 2001 the demand for jute bag was 28000.It’s demand has been increasing due to increase in populationand urbanization by 2.5% and 4.5% respectively. Hence the effect will be increased by 5%. Till 2009 thedemand for jute bag will be around 40000.1. 4. Marker share:
 
The firm estimates to capture 40 % of the total market share within three years.The total bags sold in the year 2008 were 38067; we have forecasted the units sold will be around 40000in 2009. So the total demand will be 3,333 bags per month. With 40 % market share we plan to capture 80% of our target in the first year. So we need to sell 16000 bags per year which is 1333 bags per month and67 bags per day.1.5. Marketing & PromotionIn order to market the product, initially campaigning program will be conducted to create the awarenessto the customers about its impact on environment and human health. Promoting the product is a must for selling the product because as per the mini research, most of the consumers are unaware of the product.But upon having learned the benefits, most of them are willing to buy.My promotion strategy will be basically word of mouthQuality->value->satisfaction->word of mouth1. 6. Market expansion:Market expansion will be done with the aid of considerable advertising and promotion activities. We will be advertising our product in TV, radio and newspaper and make consumers aware of the usage of environment friendly jute bag in their daily life.I. 7. Main CustomersThe main target customers of this business are upper class customers, shopping centers and departmentstores as they have the purchasing power and also are most willing to switch over from plastic shopping bags for jute bags which are durable and environment friendly.1.8. DistributionDistribution is the major concern of our business. An outlet will be opened at Kupodole and it will also bethe distribution centre for Kathmandu, Lalitput and Bhaktapur.I. 9. Selling PriceOur manufacturing cost is Rs.60 per bag and our selling price is Rs.70. In market it will be sold at Rs. 75 but we will be charging Rs 70. Our unit cost of production cost is Rs 49 and after adding other administrative cost and marketing cost it will become around Rs 60. We will not be charging the market price as our competitors are charging because we will be followinglow price strategy as a beginner . Our margin will be 14.28 %.1. 10. Marketing ExpensesThe company will have wide promotional activities because at first it is necessary to make consumersaware about the value about the product and its availability. Brochures, hoarding board, posters and flexwill be made. It will be an informative ad targeting the intended market. We will be advertising our  product in TV, radio and newspaper and make consumers aware of the usage of environment friendly jute bag in their daily life. The total marketing expenses will be around to Rs. 11666 per month in the initial phase. A total of Rs.140000 will have to be expensed in order to gain targeted sales.1.11. LocationThe business will be located at Satdobato, Lalitpur. The location is chosen because;
 Near at the markets: Lalitpur, Kathmandu and Bhaktapur.
 Business Plan for Jute Bag 
2
 
Cost of rent is lower 
 Near the transportation hub
Chapter 2. Operation Plan
The production process of bag will be using automatic machinery and equipment which requiresminimum human effort and supervision. The whole production process is shown in the diagram below:-2. 1. Fixed Capital RequirementMachineries and equipments, vehicle, other tools and furniture, office equipments are our initialinvestment. The total investment in the fixed assets will be Rs. 1500002. 2. Life of Fixed CapitalMachineries and equipments will be depreciated at the rate of 7%, vehicle will be depreciated at the rateof 8%. Other tools & furniture will be depreciated at the rate of 7% and office equipments will bedepreciated at the rate of 7%. These are the ongoing rate of depreciation for similar kinds of assets. Thetotal depre4ciation in a year will be Rs. 11500.2. 3. Repair & MaintenanceBecause of the
 
simplicity in handling and using the product it’ll not require any repair work at all.However, if users face any kind of problems, the service will be provided by the owner herself.2. 4. Raw Materials Required:The raw material in this business is the critical factor. It constitutes total of 50% of selling price. The rawmaterial will be procured from Biratnagar jute mill. Other raw materials required like threads and colorsare procured from the local market.2. 5. Administrative ExpensesThe total rent for land and building per month will be Rs.5000. Our owner and manager will be the same person. The salary for the manager will be Rs. 5000. An electricity and water cost per month will beRs.800. total administration cost will be Rs 6000 per month.2.6. Cost of Labor:There will be 3 staffs at the factory for operation; each will be for cutting, stitching and embroidery.There will be 2 staffs one for supervision and other for distribution .The cost of five labours will be Rs90000 annually. I will myself look after other activities of the business like Marketing, Finance andAccounting ,HRM and Operational management in the beginning five years of the operation. All theadministrative work will also be handled by myself and will be paid a monthly salary of Rs.5, 000.
Chapter 3. Organization & Management Plan
3. 1. Form of BusinessThe business will be registered under the name “Baliyo Ramro Jute Bag” as a sole proprietorship andowned by Ms. Ranju Shakya.
 Business Plan for Jute Bag 
3Drying of juteCutting andsewing the bagsColouringthe bagsDesigningandEmbroidry

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I Want to start this business.is there any training program ?
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