KENYA INSTITUE OF HIGHWAYS AND BULDING TECHNOLOGY

DEPARTMENT: MECHANICAL ENGINEERING

DESON Motor bazaar

STUDENT NAME: JACKSON OKANG’A OOKO

SUPERVISOR: MR. PETER GASAIRO
PRESENTED TO: KENYA NATIONAL EXAMINATIONCOUNCIL
PARTIAL FULFILMENT FOR THE AWARD OF A
DIPLOMA IN AUTOMOTIVE ENGINEERING
SERIES: JULY SERIES

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 TABLE OF CONTENTS

Declaration...............................................................................................................4
Dedication................................................................................................................5
Acknowledgement....................................................................................................6
Executive summary...................................................................................................7

CHAPTER ONE
1.01 Mission statement............................................................................................9
1.02 Sponsor.............................................................................................................9
1.03 Education background......................................................................................9
1.04 Professional qualification.................................................................................9
1.05 Business Identity...............................................................................................9
1.06 Form of ownership...........................................................................................9
1.07 Business location............................................................................................10
1.08 Products and service.......................................................................................11
1.09 Benefit obtainable..........................................................................................11
1.10 Uniqueness of the product and service..........................................................11
1.11 Competitive advantage...................................................................................12
1.12 Industry outlook.............................................................................................12
1.13 Justification of Industry..................................................................................12
1.14 Objectives.......................................................................................................12
1.15 Entry strategy.................................................................................................12
1.16 Growth strategy..............................................................................................12

CHAPTER TWO
2.01 Marketing plan................................................................................................13
2.02 The importance of marketing.........................................................................13
2.03 The marketing environment...........................................................................13
2.04 Marketing strategy.........................................................................................18
2.05 Market share..................................................................................................19
2.06 Pricing strategy...............................................................................................23
2.07 Distribution channel.......................................................................................23
2.08 Anticipated problems and their solutions......................................................23

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CHAPTER THREE
3.01 Organisation plan............................................................................................25
3.02 The Managing Director qualifications and duties...........................................25
3.03 Remuneration.................................................................................................28
3.04 Licences and by-laws......................................................................................29

CHAPTER FOUR
4.01 Operation plan................................................................................................31
4.02 Operational facilities.......................................................................................32
4.03 Sales strategy..................................................................................................32
4.04 Regulations affecting sales.............................................................................33

CHAPTER FIVE
5.01 Financial plan..................................................................................................35
5.02 Pre-operational costs......................................................................................35
5.03 Estimation of working capital.........................................................................35
5.04 Cash flow........................................................................................................36
5.05 Income statement..........................................................................................37
5.06 Balance sheet.................................................................................................37
5.07 Breakeven point..............................................................................................38
5.08 Profitability ratios...........................................................................................38
5.09 Desired financing............................................................................................39

CHAPTER SIX
6.01 References......................................................................................................40

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 DECLARATION
I declare that this is my original work.
NAME: .............................................................
SIGN: ...............................................................
DATE: ..............................................................

SUPERVISOR: ..................................................
SIGN: ...............................................................
DATE: ..............................................................

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 DEDICATION
I dedicate this project to my beloved mother, Zipporah Waithira Ndirangu for the
support she has given me throughout this project.

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 ACKNOWLEDGEMENT
I would like to thank the Almighty Father for his love, grace and enlightment
throughout the entire project.

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 EXECUTIVE SUMMARY
There is a need in Nairobi County for a large selection of quality used cars, and
DESON Motor bazaar will sell these top-quality used vehicles at a competitive
price. The owner and sales manager have over 30 years of combined experience
in new and used auto sales. We will continue to develop our excellent working
relationship with local dealers and auctions to bring the savings to the customer.

We will be successful because we offer something different; a pleasant car buying

experience. We will create a purchasing environment that caters to the
customer's needs. We are selling a professional service and an experience in car
buying that will bring customers back again, as well as referring friends and
family. We estimate an optimistic gross margin over the industry average. We will
be successful because of the excellent team we have assembled and the drive and
determination of the owners.

Objectives

1. 100% customer satisfaction, measured through repeat customers, referrals

and surveys.
2. To achieve and surpass the industry average profit margin within the first
two-years.
3. To achieve a respectable net profit by year two.

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Mission

DESON Motor bazaar provides a unique car buying experience to the customers
in Nairobi County. One that focuses on customer satisfaction first. We understand
that vehicle purchasing is a necessary, but sometimes unpleasant experience. Our
goal is to provide the customer with an enjoyable, honest service by
satisfying individual customers practical transportation needs with a quality
product.

We also believe it is important to have quality vehicles at a low cost, and will back
each vehicle with a 30 day limited warranty. Our company will make a profit by
generating sales. It will provide job satisfaction and fair compensation to its
employees, and a fair return to its owners. Hard work and performance is
rewarded through bonuses and commissions. Job satisfaction is very important
for employees and owners, we will create a work environment that is enjoyable
and profitable for all.

Keys to Success

To succeed in this business we must:

 Put together a team of experienced professionals.

 Secure an excellent high-traffic location.
 Establish a network of suppliers, in order to buy and sell products that are
of the highest reliability and quality, at a competitive price.
 Ensure customer satisfaction by encouraging the two most important
values, honor and integrity.
 Create high morale by rewarding employee success with monetary
compensation.

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 CHAPTER ONE
1.00 INTRODUCTION
DESON MOTORS is motor bazaar which sells second hand imported car brands
from Germany, United Kingdom, U.S.A, and Japan. We are situated along Ngong
road next opposite Nakumatt Prestige.
We also offer car repair and service maintenance in our facilities, and stock
quality car parts so as to assure you of quality in the services we offer.

1.01 MISSION STATEMENT

To offer the best service, and sell the best products to our customers.

1.02 EDUCATIONAL BACKGROUND

1999-2001: Josemaria Academy
2002-2009: Unity Primary School
2010-2013: NPC senior school

1.03 PROFESSIONAL QUALIFICATION

I am, at the moment, studying Mechanical Engineering at the KENYA INSTITUTE
OF HIGHWAYS AND BUILDING TECHNOLOGY.

1.04 BUSINESS IDENTITY

My company is called DESON Motor Bazaar, we specialise in second hand
imported car brands, namely manufactured from the following countries:
i) Japan
ii) United Kingdom
iii) U.S.A.
iv) Germany
We also offer car repair and maintenance service to our customers.

1.05 FORM OF OWNERSHIP

This Business is of sole proprietorship.

1.06 BUSINESS LOCATION

ADDRESS: DESON MOTOR BAZAAR
P.O.Box 25500-00100
NAIROBI

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TELEPHONE: 0780682268
EMAIL: desonmotorbazaar@gmail.com

1.07 PRODUCTS AND SERVICES

We sell the following car brands:
1) Toyota Corolla.
2) Toyota Fielder.
3) Toyota Premio.
4) Toyota Allion.
5) Toyota Raum.
6) Toyota Probox/Succeed.
7) Toyota Crown.
8) Toyota RAV4.
9) Toyota HiAce.
10) Toyota Prado.
11) Toyota Land Cruiser.
12) Toyota Kluger.
13) Toyota Mark X.
14) Nissan Sunny.
15) Nissan Tiida.
16) Nissan Note.
17) Nissan Wingroad.
18) Nissan AD.
19) Nissan Bluebird
20) Nissan Skyline.
21) Nissan Navara.
22) Nissan Teana.
23) Subaru Impreza.
24) Subaru Legacy.
25) Subaru Forester.
26) Mercedes-Benz saloons
27) BMW saloons.
28) AUDI saloons.
29) Volkswagen.
30) Jaguar.
31) Range Rover.
32) Jeep. Chevrolet.

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We also offer the following services:
1) Car repair.
2) Service.
3) Maintenance.

1.08 BENEFITS OBTAINABLE*

The business will benefit by offering quality, affordable, showroom condition
vehicles to its customers. It will also benefit through exceptional service delivery
to its customers, enabling the customer to have peace of mind when they buy a
vehicle from us, or when they bring in their car for service or repair.

1.09 UNIQUENESS OF THE PRODUCT AND SERVICE

The vehicles we sell are in optimum showroom condition, we ensure that before
we bring it into our yard for sale.
We also keep records of service, maintenance or repair done on cars. This enables
us to always make sure that the vehicles belonging to our loyal customers are
maintained.

1.10 COMPETITVE ADVANTAGE

Competitor Strengths Weaknesses
GIGI Motors  It is located next to  They sell cars at
P.O.Box 43900-00200 the road, and so it is high prices.
NAIROBI easily accessible  They have poor
 It is a well customer service.
established
Business


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1.11 INDUSTRY OUTLOOK
The industry out is as per attached.

1.13 JUSTIFICATION OF INDUSTRY

This is per attached

1.14 OBJECTIVES
Our business objectives are classified into two, namely:-
a) SHORT TERM
a. Advertise ourselves to our surrounding customers.
b. Hire staff.
c. Make sales.
d. Establish a good relationship with our customers.
b) LONG TERM
a. Ensure quality service.
b. Cement the reputation of our brand.
c. Gain the trust of our customers.
d. Improve the efficiency of our services.

1.15 ENTRY STRATEGY

The business will create awareness to the public about the products through
advertisement in social media, word of mouth and also preparing business cards
and calendars so as to create interest to customers

1.16 GROWTH STRATEGY

In order to grow our business we will utilize the following strategies
a) Market penetration; we will achieve this by selling high quality vehicle at a
slightly lower price compared to our competitors, giving us the edge in the
market.
b) Product expansion; we will expand our product range based purely on
customer demand, therefore satisfying our customers.
c) Market expansion; based on our progress, and at the right time we will
venture to new markets in order to increase our profits, and bring our
services closer to our customers.

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 CHAPTER TWO
2.01 MARKETING PLAN
This is a written document that entails certain necessary actions that a business
person needs to carry out to have the customers attracted to the service or
product the entrepreneur has to offer.

2.02 THE IMPORTANCE OF MARKETING

a) Financial success often depends on marketing ability.
b) All business functions will not really matter if there is no sufficient demand
for products and services.
c) Helps a business compete more effectively against its rivals.
d) Assists in the identification of opportunities and threats.
e) Enables an organization to take advantage of emerging strategic
opportunities.

2.03 MARKET ENVIRONMENT

2.03.1 Micro-environment
Company aspect of micro-environment refers to the internal environment of the
company. This includes all departments, such as management, finance, research
and development, purchasing, operations and accounting. Each of these
departments influences marketing decisions. For example, research and
development have input as to the features a product can perform and accounting
approves the financial side of marketing plans and budget in customer
dissatisfaction. Marketing managers must watch supply availability and other
trends dealing with suppliers to ensure that product will be delivered to
customers in the time frame required in order to maintain a strong customer
relationship.

2.03.2 Macro-environment

The macro-environment refers to all forces that are part of the larger society and
affect the micro-environment. It includes concepts such as demography,
economy, natural forces, technology, politics, and culture.Factors affecting
organization in Macro environment are known as PESTEL, that is: Political,
Economical, Social, Technological, Environmental and Legal.

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2.03.3 Environmental scanning
Environmental scanning is one of the essential components of the global
environmental analysis. Environmental monitoring, environmental forecasting
and environmental assessment complete the global environmental analysis. The
global environment refers to the macro environment which comprises industries,
markets, companies, clients and competitors. Consequently, there exist
corresponding analyses on the micro-level. Suppliers, customers and competitors
representing the micro environment of a company are analyzed within the
industry analysis

2.03.4 Barriers

Environmental scanning isn't always as effective or useful in an organizational

setting for several reasons. The volume of the information received through the
scanning process can be disadvantageous when attempting to translate and make
sense of the information as some information may get overlooked or just missed
entirely. Because of the volume of information its hard to decipher what is
important or not so management and key information may be missed. Another
way vital information can be missed is if the information is unordered and
unorganized. Due to ever changing environment all information runs under a time
limit of validity. Another barrier to environment scanning is the interpretation of
information that has been collected. Undetermined sources can cause confusion
and irrelevance to the process.
2.03.5 Macro environment

There are a number of common approaches how the external factors, which are
mentioned in the definition of Kroon and which describe the macro environment,
can be identified and examined. These factors indirectly affect the organization
but cannot be controlled by it. One approach could be the PEST analysis. PEST
stands for political, economic, social and technological. Two more factors, the
environmental and legal factor, are defined within the PESTEL analysis (or PESTLE
analysis).

The segmentation of the macro environment according to the six presented

factors of the PESTEL analysis is the starting point of the global environmental
analysis.

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2.03.6 PESTEL analysis

The six environmental factors of the PESTEL analysis are the following:
2.03.7 Political factors

The company/organization needs to consider the political environment when

creating business strategies. The entire political environment includes looking at
government policies and the risk and instability of current political factors.
Political risks can include an unexpected loss of ownership due to government
takeover (nationalization), or changes in labour laws which might increase the
cost of the company's workforce. However often business can anticipate issues by
performing a political risk analysis. The political instability can influence the
business and the duration of time that business/ organization is profitable.

 Taxation Policy
 Trade regulations
 Governmental stability
 Unemployment Policy, etc.
 political stability
2.03.8 Economical factors

The economic factors of the business environment are all the variables that
impact how the consumer spends their money and the power of that purchase.
There are multiple factors that exist at any time. An example of an economic
factor is the recent recession influenced people to spend less and save more
which has impacted current consumer spending patterns. The economic
development of a country Is an important element when scanning the economic
environment. Countries are often categorized as either 'developing' or
'developed'. The exchange rate of a country can have an extensive impact on the
profitability of a business. Relatively small changes in the exchange rate may be
the difference between profit and loss. When promoting, selling a product it is
important for an organization to consider the extra financial information including
current rates, taxes etc. in the economy of the country.

 Interest rate
 Inflation rate
 Growth in spending power

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  Rate of people in a pensionable age
 Recession or Boom
 Customer liquidations
 Balances of Sharing

2.03.9 Socio-cultural
The socio-cultural environment looks at the demographic characteristics of the
current business environment. It looks at the values, customs and norms of the
environment of which a company or organisation is placed. When looking at the
socio-cultural environment it is important to consider the social values of the
environment. Organizations look at the cultural characteristics of the society and
consider all values and customs that are often associated with the culture while
they try to market and sell the product or service, such as:

 values, beliefs.
 language.
 Religion.
 Education.
 Literacy.
 time orientation
 lifestyle.
2.03.10 Technological factors

The technological environment is becoming a lot more important in the modern

day business environment. New technology produces new opportunities for
companies and organizations to create, sell and promote a product. Technology is
rapidly growing and forever changing. Telecommunication technology e.g.
cellphones and laptops are increasing the opportunity within an organization to
promote and sell a product. The internet has made information available to the
consumer to easily compare current prices of a product or service with the price
of the competitors of the same product or service. The internet has also created
more opportunity to market the product or service via the use of social media.

 Internet
 E-commerce
 Social Media
 Electronic Media

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  Research and Development
 Rate of technological change.
2.03.11 Environmental factors

The environmental factors of the PESTLE analysis include natural resources that
are affected by the processes of selling and marketing products or services. The
two main environmental trends that need to be considered when evaluating the
natural environment is the increased pollution and growing shortage of raw
materials, Government regulations are creating practices that encourage
environmental sustainability. A business might for example utilize recyclable and
biodegradable packaging, thus making the most of the environmental
opportunities to create a sustainable organizational in the current natural
environment.

 Competitive advantage
 Waste disposal
 Energy consumption
 Pollution monitoring, etc.
2.03.12 Legal factors

The legal environment includes the laws and regulations of a state. The laws and
regulations will influence the way in which an organization will market or sell the
product and services. The legal factors influence trade agreements between
different governments and states. The governments that have a well developed
public policy about selling and marketing goods may limit competition and place
other obligations on retailers.

 Employment law
 Health and safety
 Product safety
 Advertising regulations
 Product labeling
 Labour laws etc.
2.03.13 SWOT analysis

SWOT or situation analysis is used when without to look at both the internal and
external environment. SWOT stands for Strength, Weakness, Opportunity and
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Threat. The internal factors considered are the strengths and weaknesses where
the opportunities and threats are external factors that are all used and considered
to help improve the overall decision making process in dynamic strategic
situations the business is facing.

The strengths are positive characteristics in the internal business environment

which can be capitalized on to increase the overall organisations performance.
The weakness are factors of the internal environment which may restrict and
interfere with the positive organizational performance. The internal environment
factors will include finance, production, research, development and marketing.
The opportunities include factors of the external environment that act like
stepping stones for the organization in order to achieve their current strategic
goals. The threats include the factors that have an effect and may interrupt the
organization from achieving the goals. Often threats will come out of the external
business environment.
2.03.14 Mesoenvironment
The meso-level is settled between the macro- and the micro- level. This field deals
with the design of the specific environment of the enterprises. It is of decisive
importance that the layout of the physical infrastructure (transport,
communication and power distribution systems) and of the sector policies,
especially of the education, research and technology policy, are oriented towards
competitiveness. In addition, the design of the trade policy and systems of rules
(for example: environmental norms and technical safety standards), which
contributes to the development of national advantages of competition, is
relevant. Like on the micro-level, on the meso-level new patterns of organisation
and steering must be developed. The state shall give impulses and mediate
between enterprises, associations, science and intermediate institutions. "The
design of locations becomes like that a continuous process on the basis of the
efforts of enterprises, science and state as well as of the determined cooperation
of private and public agents".

2.04 MARKETING STRATEGY

Our marketing strategy will focus on two segments. Those segments are
described in the following subtopics. We will implement a strategy that treats
customers as a community. This means our marketing resources will be centered

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around advertising both sales promotions (events) and personal sales (customer
service, friendly atmosphere).

 The marketing budget will not exceed Kshs.3,000,000 per year.

 Marketing promotions will be consistent with the Mission Statement and
support the following objectives:
1. 100% customer satisfaction, measured through repeat customers,
referrals and surveys.
2. To achieve a respectable profit margin within the first three-years.
3. To achieve a healthy net profit by year two.

2.05 MARKET SHARE

2.05.1 Market Analysis Summary

Almost everyone needs a car to get from point A to B. Many families have two or
more cars. Due to the recent success of the new car market, there is a large
inventory of used cars available for re-sale. New car sales have enjoyed the
largest single month gain in October 2016, up 24%.
2.05.2 Market Segmentation

Our market segmentation will consist of four basic segments; students, retired,
families, and singles.

Students will include high school and college age students who need a safe and
economical car. This group is concerned with price, flashy looks, and being cool.
These drivers tend to be less educated and will buy on impulse paying more for
less car. They will also buy cars more often than others, on average every two to
three years.

The retired group will focus on practicality. Cost may be less important than
quality and features. This group wants comfortable, nicely equipped vehicles at a
reasonable price. They will want a vehicle that will last for years.

Families will focus on safe, practical vehicles. Something that will last for years,
can fetch groceries, carry the kids, and perform long trips. Many will be on a
budget, and price may be a big factor. They will shop around and educate
themselves on vehicles, shopping for a specific make or model.

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The last group is the singles. They are similar to the students in that they want
flashly cool cars, but may be a working professional who can afford to pay
more for a higher-quality vehicle.

The Market Analysis pie chart shows an average increase of 10% in potential
customers. Many of these groups will want to trade up for a newer or more
expensive vehicle at a later date. This will create an ever increasing market for
used car buyers.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential
Growth CAGR
Customers
Students 10% 45,000 49,500 54,450 59,895 65,885 10.00%
Retired 12% 60,000 67,200 75,264 84,296 94,412 12.00%
Families 10% 400,000 440,000 484,000 532,400 585,640 10.00%
Singles 10% 200,000 220,000 242,000 266,200 292,820 10.00%
Other 10% 20,000 22,000 24,200 26,620 29,282 10.00%
Total 10.17% 725,000 798,700 879,914 969,411 1,068,039 10.17%

2.05.3 Target Market Segment Strategy

We focus on providing for the average car buyer first. Our focus will be on those
most likely to purchase low-end, low-cost vehicles (highest profit margin). The
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students, families, retired, and singles have very different needs and wants. We
will focus on each group separately, and prioritize our efforts. We will look at
every customer as a potential repeat customer, reference, or spokesperson for
other car buyers.
2.05.4 Market Needs

There are two important underlying needs: quality vehicles at competitive prices,
and a large supply of available vehicles.

1. There is a real need for a highly professional used car dealer who can
provide quality vehicles at competitive prices, in a pleasant purchasing
environment.
2. There is also a practical need for new car dealers to move a large used car
inventory that takes up valuable space on their lots.
2.05.5 Market Trends

We have four major trends that help us:

1. New car sales have boomed over the last five years. This has contributed to
a large supply of quality used cars and a 14% growth in used car sales.
October 2016 had a record sales increase of 24%. Consumers recognize the
value of a good used car, and are willing to pay for it. Even those consumers
who would be more prone to purchasing a new vehicle are now purchasing
used.
2. Lower interest rates, and a slow economy are creating an opportunity for
buyers to purchase more car for the same price. Used car loans are
currently as low as 6%. Typically many have paid as much as 10-12%. The
consumers savings are in the thousands for a long-term loan.
3. Specific vehicles, like SUVs and trucks are more popular and have sold
better than passenger cars.
4. Recreational vehicles are becoming more popular for travel after the
terrorist attacks on the World Trade Center September 11. Travelers are
choosing to travel shorter distances and enjoy local destinations. This
includes increased use of RVs, ORVs, and boating.

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2.05.6 Market Growth

According to available market information, used car sales have risen 14%.
Spending on used cars continues to rise, despite a slowing economy. As
population increases in the area, so will the need for vehicles. Another strength is
the fact that people are keeping cars for a shorter period of time before trading or
selling. The average driver buys a new (or used) vehicle every four years. Vehicles
are also maintaining more value. The result is continued increases in sales and
profit margins.
2.05.7 Industry Analysis

 The used car sales industry is continuing to grow at or above population

increases. Vehicles are the second largest purchase most consumers make,
and more people are buying new and used vehicles than ever.
 Relatively good margins have resulted in some success in the local used car
industry.
2.05.8 Competition and Buying Patterns

Used car dealers are notorious for unethical sales practices. Customers are
inherently cautious and untrusting as a result. The more we can provide a high-
quality sales experience, the more successful we will be. Our salesmen will
provide a friendly and personal experience for the buyer. We will follow up and
ensure customer satisfaction. We will rely on these customers for an excellent
reference to other car buyers. This company will build an excellent working
relationship with our suppliers and customers.
2.05.9 Industry Participants

Used car sales in the area are still relatively average in size. Dealers have varying
degrees of success based primarily on location, products, and the sales team
assembled. Quality sales personnel are usually not adequately compensated for
their services, and as a result they tend to move from one dealer to the next.
2.05.10 Main Competitors

Our closest, similar competitors are AA Auto Sales, Big Apple Car Sales, Frank's
Auto Place, Guaranty, R & L Motors, and Sierra Truck, all on Ngong road near
Nakumatt prestige.

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  The primary competitors will be those in and around Junction City.
Guaranty is a large, well-established dealer, with approximately 75% of the
local market share. Guaranty has a large operation with a well-trained sales
staff. Our sales manager is a former Guaranty sales manager, who
understands the competition's operations very well.
 Frank's Auto Place offers a limited selection, and appears to be
unorganized. Frank's does not offer any competitive marketing and
primarily focuses on the Kshs. 300,000 – Kshs. 10,000,000 vehicle.

2.06 PRICING STRATEGY

Our pricing strategy will be based on competitive Blue Book values (wholesale and
retail) plus vehicle handling fees. We will not exceed competitive retail prices, and
will attempt to sell at wholesale plus a fair profit, generally 15-25%. Quality and
price say a lot about our vehicles. The vehicles that are rare or not readily
available to meet demand will be priced accordingly. The average industry mark-
up for similar vehicles is 20-30%.

2.07 DISTRIBUTION CHANNEL

The vehicles will undergo inspection at their home country and will a bear a
certificate as proof of passing the inspection test.
The vehicles will then be loaded onto a ship and then delivered to the port of
Mombasa.
Upon delivery DESON Motor bazaar shall conduct its own inspection in Mombasa,
if the vehicles pass the inspection, then they can finally be brought to the yard in
Nairobi to be sold to a potential customer.
Cars which do not pass the Inspection while in Mombasa will be shipped back to
their country of origin for another vehicle of the same brand to be shipped.

2.08 ANICIPATED PROBLEMS AND THEIR SOLUTIONS

The following are problems which we may encounter in this business:-

2.08.01 Risk of accident along Mombasa-Nairobi Highway

An accident may occur at any time while the car is being transported from
Mombasa to Nairobi. This is hazardous as it may mean the driver getting killed in

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the accident and the business failing to meet its deadline delivery, therefore
making the business to incur loses and lose assets.

2.08.02 The car can be stolen

There’s risk of the car being stolen, while it’s on its way from Mombasa to
Nairobi. This puts the drivers life at risk because, he can either be killed or left in
the middle of nowhere without any food, water, money, or means of
communication. This is also bad for business, because we fail to meet our supply
deadline, this puts our reputation on the line, and also the affects the trust we
will have built with our customers.

2.08.03 Risk of fire

This, if at all it happens will be a disaster. This could mean the end of the business
as we will have incurred a lot of loses, and all of our assets will have been
destroyed by the fire.

2.08.04 Solutions
a) To ensure that we avert any possibility of an accident occurring in the first
place, all our drivers will have black boxes with them which will record their
speed, location, time, and anything they say. This will make all our drivers
careful on the road as they will not want to violate any traffic rules and
regulation because there will be consequences if they do.
b) We work in collaboration with the local authorities to ensure the safety of
our vehicle, drivers are required to inform the company of any suspicious
car following them and we in turn inform the police so that they can take
the necessary action, we also warn the drivers of any accident or unusual
road blocks as this may be car jackers pretending to be in distress and
therefore we advise our drivers to use another route or to be careful if
there is no other route available, at the same time we also inform the
police of the situation at hand.
c) We have state of the art fire emergency equipment, we also have a lot of
smoke detectors within our facility, and if things go beyond our means we
also have Fire Brigade hotlines so that we can call them in case the fire
becomes uncontrollable.

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 CHAPTER THREE
3.01 ORGANISATIONAL PLAN
A well organized and efficient management of a business will offer a conductive
environment where the employees will work together without any discomfort
thus having increased efficiency in business.

Owner

Managing Director

Secretary

Human Resource

Sales Manager

Sales Accounts Staff

3.02 THE MANAGING DIRECTOR QUALIFICATIONS AND DUTIES

Bachelor's or master's degree in business
Required Education
administration or subject related to their industry
Significant work experience relevant to specific
Other Requirements
industry often preferred
Projected Job Growth
6% for all top executives
(2014-2024)*
Median Salary (2015)* $98,560 for all management occupations

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3.02.1 Job Description of a Managing Director
Managing directors work with other top-tier executives to oversee the operations
of companies and organizations across a variety of industries, such as banking,
healthcare, marketing, advertising, information technology, and government.
They may establish new business contacts, interact with clients, and recruit
employees. Managing directors might develop strategic marketing and sales plans
to boost profits and efficiency. They may also coordinate the efforts of various
departments, such as legal, finance, marketing, and sales, to meet company goals.
Some managing directors oversee other managers or department heads, and they
often report to top executives and boards of directors.

3.02.2 Managing Director Requirements

The U.S. Bureau of Labor Statistics (BLS) reports that top executives typically hold
undergraduate or graduate degrees in business administration or another
specialized field relevant to the industries in which they work (www.bls.gov).
December 2014 job postings for managing directors on Monster.com and
CareerBuilder.com noted that employers usually require applicants to hold at
least bachelor's degrees, though some employers prefer candidates with master's
degrees. Additionally, employers often require technical expertise and experience
relevant to their specific company or industry.

3.02.3 Essential Skills

The BLS indicates that managing directors and other top executives are effective
communicators with excellent leadership skills, management experience and the
ability to motivate employees. Additionally, managing directors must be results
oriented and creative in addition to having strong business-development skills
and the ability to interact with clients, staff and senior management.
Monster.com and CareerBuilder.com job postings often cite the need for
managing directors who are able to supervise and build teams, delegate
responsibility and develop employee talents.

3.02.4 Career Outlook and Salary

The BLS predicted a 6% job growth for top executives over the 2014-2024 period.
In 2015, the BLS stated that the median annual income for all management
occupations was $98,560. Salaries also vary by industry, and incentives such as

26
yearly bonuses may significantly impact annual compensation. PayScale.com
reports that most managing directors in sales and marketing, for instance, earned
between $40,279 and $191,769 as of January 2016. However, managing directors
working in private investment services earned between $110,331 and $340,812,
per PayScale.com reports, also from January 2016.
Knowing the education and work experience required to become a managing
director is a good first step in considering if this is the right career choice for you.
It's also important to have an idea as to which industry you would like to enter, so
that you can gain relevant work experience.

Job Title Qualifications

1. Secretary  Technology Skills
 Interpersonal Skills
 Writing skills
 Organizational skills
 Transcription skills
 Multi tasking
 Research skills
2. Human Resource  A bachelors degree in Human
Resource management
manager  Certification
 Expirience

3. Sales manager  Excellent computer and project

management skills.
 Familiar or experienced in a
consultative sales methodology
and value based selling.
 Excellent problem solving and
communication skills.
 Demonstrated ability to build
and maintain client
relationships
4. Sales  knowledge of the business
 open-mindedness
 tact
 courtesy
 loyalty
 initiative
 courage

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 5. Accounts  Math and detail-oriented skills
 High ethical standards and
professionalism, since they are
often responsible for the
banking and bookkeeping of a
business
 Familiarity with computer
technology and knowledge of a
variety of software programs
related to the field
 Ability to interact well with
others

6. Staff:-  Competent
 Honest
a) Cleaners - 8  Punctual
b) Watchmen - 3  Hard working
 Innovative

3.03 REMUNERATION
Job title Monthly salary Annual salary
1. Owner Kshs. 50,000 Kshs. 600,000

2. Managing Director Kshs. 40,000 Kshs. 480,000

3. Secretary Kshs. 30,000 Kshs. 360,000

4. Human resource Kshs. 30,000 Kshs. 360,000

manager

5. Sales manager Kshs. 29,000 Kshs. 348,000

6. Sales Kshs. 25,000 Kshs. 300,000

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7. Accounts Kshs. 25,000 Kshs. 300,000

8. Staff
a) Cleaners Kshs. 15,000 Kshs. 180,000
b) Watchman Kshs. 15,000 Kshs. 180,000
TOTAL SALARY Kshs. 259,000 Kshs. 4,728,000

3.04 LICENCES AND BY-LAWS

3.04.1 Licenses
 Agency: Kenya Revenue Authority
 Purpose: Issued to dealers or manufacturer or repairer of motor vehicles
 Application Fee: No Fee
 License Fee: Khs 18,500/=
 Maximum Processing Time: Same day
 Statutes:
 Gazetted On: 1993-01-01
 Related Websites: www.kra.go.ke
 Validity: One year
 Enactment: 1993-01-01
 Contact Office: Registrar of motor vehicles Dealers licence section 7th Floor
 Resolution Criteria: On submission of documents and payment.
 License Type: License/Permit

3.04.02 By-laws
1. The vehicle must not be more than 8 years old from the year of first
registration. The difference between the date of registration and the date of
manufacture shall not be more than one year.
2. All vehicles imported to Kenya must right hand drive (RHD) except for special
vehicles such as ambulance and fire engine.

29
3. All vehicles must undergo car inspection before being shipped to Kenya. KEBS
issues a vehicle roadworthiness certificate which is necessary when clearing
the imported car from the port of Mombasa

30
 CHAPTER FOUR
4.01 OPERATIONAL PLAN
The following section will identify the proposed operational plan for DESON
Motor bazaar. Included are the general operating procedures, human resources,
insurance, and working capital requirements of the business. Also included is a
table outlining the office space requirements, asset acquisition and an outline of
DESON Motor bazaarr operational workflow.

4.01.1 General Operating Hours

DESON Motor bazaar intends to operate Monday thru Friday from 9 am to 5 pm.
DESON Motor bazaar will be operational year round.
4.01.2 Human Resources
Mr. Njorge and Mr. Maina will be the sole employees of DESON Motor bazaar for
the first two years of operation. When additional human resources are needed,
DESON Motor has identified the persons qualified and able to assist on a contract
basis for the same rate as the owner.
Once the business reaches 60% of its operational capacity this will represent 1300
hours, DESON Motor bazaar will offer the above environmental professionals full
time positions. Also at this time, an administrative assistant will be sought.
Once hired, all employees will be covered by the Workers Safety and Insurance
Board and covered for Employee Benefits.
4.01.3 Insurance Requirements
DESON Motor will have to incur costs for business liability insurance. The
estimated cost for this requirement is Kshs. 4,000 per year.
4.01.4 Operating Capital Requirements
Due to the demands imposed at start up, DESON Motor bazaar will require that
the business have sufficient working capital to meet all operational
responsibilities of the business for the first three months.

It is estimated that the business will need approximately Kshs. 2,000,000 in

working capital to sustain and ensure the business meets all opening and on-
going financial obligations.
Also, throughout the year there tends to be periods of low activities.
Consequently, the company will experience financial pressures during these
months. While much of this time will be spent developing proposals and
marketing strategies, there will be a need to maintain sufficient working capital to
cover these periods.

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A long term strategy to maintain a positive cash flow during these periods will be
to diversify the company and develop environmental training programs for
certain communities. These training programs will be given during these months.

4.02 OPERATIONAL FACILITIES

Office Main
Entrance
Workshop
Workshop

KEY: Workshop entrance

 Car
 Entrance

4.03 SALES STRATEGY

4.03.1 Sales Strategy

Sales compensation is based on a percent of profits. We will invest adequate time

and resources into training each member of the sales team and into good
customer relations. Salesmen will be paid a portion of their salary based on
32
commission. Good performance is rewarded with increased commission and
bonuses. However integrity will not be sacrificed for sales. Customer satisfaction
will continue to be a top priority. All potential sales will be attended to in a timely
fashion and long-term salesperson-customer relationships will take precedence
over sales closure.
4.03.1 Sales Forecast

The following table and charts give a run-down on forecasted sales. We expect
sales to increase at a slow rate per month for each product in the first year. From
June through September we expect minimal growth during our start-up period.
October through December we expect decreased sales due to historical trends,
and a depreciation in value based on less demand. February through August we
expect increased sales growth again. In 2017 and 2018, we expect solid
steady sales growth as DESON Motor bazaar claims a larger market share. We
expect increased sales in lower-priced vehicles, and this will be our
primary product that yields the highest margin. We feel this sales forecast is
realistic based on the market analysis of similar businesses performance. The
opportunities for used car sales have increased with the high sales of new
vehicles, increasing the number of quality late model used vehicles in the market.
More new car buyers directly affect the number of used cars available. The
current low interest rates also have a positive impact on the high-end vehicle
purchases. The population growth in the area creates a need for more vehicles as
well.

The risks involved with this forecast include technology and the need for low
impact environment friendly transportation. Older used cars tend to be less
efficient, and will become less popular. Current hybrid vehicles are priced
extremely high, and car makers have not found an economical answer for
consumers. We estimate conservative earnings from selling extended warranties
and from selling loans (we will sell the loan for the lender).

4.04 REGULATIONS AFFECTING SALES

4. (1) No person shall carry on the business of buying and selling second-hand
motor vehicles unless he holds a license to do so, issued by the Registrar of Motor
Vehicles.
(2) A fee of two thousand five-hundred shillings shall be payable for a license
under subsection (1):

33
Provided that no fee shall be payable by a person who holds a dealer's general
license issued under section 23 (1) of the Traffic Act.
(3) A license under subsection (1) shall be valid for a period of one year from the
date of issue.
(4) Any person who contravenes subsection (1) shall be guilty of an offence and
liable to a fine not exceeding one thousand shillings.

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 CHAPTER FIVE
5.01 FINANCIAL PLAN
1. Growth will be moderate to good, cash flows steady with several months of
loss in 2001-2002.
2. Marketing will remain below 10% of sales.
3. The company will invest residual profits (10%) into financial markets and
approximately 50% into company expansion for the first year.

5.02 PRE OPERATIONAL COSTS

Requirement Costs
1. Retail location Kshs. 200,000 per month

2. Registration Kshs. 50,000 annually

3. Inventory Kshs. 70,122,000

4. Accounting needs Kshs. 900,000 annually

5. Operational license Kshs. 20,000

6. Liability Insurance Kshs. 70,000 annually

5.03 ESTIMATION OF WORKING CAPITAL

Working capital is the amount of money the business will work with to run its
operation
CURRENT ASSETS AMOUNT (KSHS)
Cash in hand Kshs. 5,000,000
Cash in bank Kshs. 6,500,000
Debtors Kshs. 1,000,000

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 Total assets Kshs. 12,500,000
CURRENT LIABILITIES
Creditors Kshs. 4,000,000
Loans Kshs. 2,000,000
TOTAL LIABILITIES Kshs. 6,000,000

Working capital = Current asset – Current liabilities

= 12,500,000 – 6,000,000
= Kshs. 6,500,000

5.04 CASH FLOW

Cash flow JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Total
Balance b/f
Cash in 160,000 160,000 160,000 160,000 160,000 200,000 160,000 160,000 160,000 200,000 160,000 160,000 2,000,000
hand
Cash in 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 3,000,000
bank
Debtors 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000
Cash sales
Loans 1E+06 1E+06 500,000 2,500,000
Total cash 2E+06 845,000 1,105,000 935,000 1E+06 2E+07 1E+06 1E+06 1E+06 1E+06 2E+06 1E+06 15,850,000
inflow
Cash
outflow
Salaries 259,000 259,000 259,000 259,000 259,000 259,000 259,000 259,000 259,000 259,000 259,000 259,000 3,108,000
Purchases 100,000 500,000 90,000 80,000 45,000 60,000 75,000 80,000 80,000 40,000 80,000 80,000 860,000
Rent 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 1,200,000
Water 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Power 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Creditors 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000
Loan 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 2,400,000
payment
Loan 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 360,000
interest
Transport 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
License 18,500 18,500
Promotion 1,700 1,700 1,700 1,500 1,700 1,700 1,500 1,700 1,700 1,700 1,700 1,700 20,000
Total cash 432,600 417,800 427,600 403,500 410,600 424,600 435,400 412,300 426,500 400,500 412,800 442,600 5,046,800
outflow
Net cash 1E+07 437300 663300 498500 738800 2E+06 768,500 703,800 933300 723300 1E+06 1E+06 10,788,000

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 5.05 INCOME STATEMENTS
This record which business uses to evaluate itself if it is running at a loss or profit.
It is important as the company uses it to take caution about its weakness.
ITEM AMOUNT(KSHS)
Sales 24,000,000
Less purchases 860,000
Gross profit 23,140,000
EXPENSES
Transport 300,000
License 18,500
Promotion 20,000
Water 24,000
Salaries 3,108,000
Power 36,000
Rent 1,200,000
TOTAL 4,706,000

Net profit before tax = Total gross profit – Total expenses

= 23,140,000 – 4,706,000
= Kshs. 18,434,000
Provision of tax 16% = 18,434,000 * 16/100
= Kshs. 2,949,440
Net profit after tax = 18,434,000 – 2,949,000
= Kshs. 15,485,000

5.06 BALANCE SHEET

ITEM AMOUNT(KSHS) ITEM AMOUNT(KSHS)
FIXED ASSETS LONGTERM LIABILITIES
Vehicles 4,500,000 Relative contribution 2,100,000
Computer 35,000 Friends contribution 1,000,000
Bank loans 2,000,000
CURRENT ASSETS Own contribution 500,000
Cash in hand 2,000,000 SHORT TERM LIABILITIES
Cash at bank 3,000,000 Creditors 42,000
TOTAL CURRENT ASSETS 5,000,000 Tax 16% 2,949,000
TOTAL ASSETS 9,535,000 TOTAL LIABILITIES 2,907,000

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5.07 BREAK EVEN POINT
ITEM AMOUNT (KSHS)
VARIABLE COST
Water 24,000
Power 36,000
Transport 300,000
TOTAL VARIABLE COST 360,000
FIXED COST
Salaries 3,108,000
Rent 1,200,000
License 18,500
TOTAL FIXED COST 4,326,500

Contribution margin = Total sales – Variable cost

= 24,000,000 – 360,000
= Kshs. 23,640,000
Contribution margin percentage = (Contribution margin/Total sales) * 100
= (23,640,000/ 24,000,000) * 100
= 98.5%
Breakeven point = Total Fixed cost/Contribution margin percentage
= (4,326,000/98.5)
= 43,918.78

5.08 PROFITABILITY RATIO

Sales turn over = (Net profit after tax/Total sales) * 100
= (15,485,000/24,000,000) * 100
= 64.52%

Capital employed ratio = (Net profit after tax/ Total assets) * 100
= (15,485,000/9,535,000) * 100
= 162.4%
Current assets ratio = (Net profit after tax/Total current assets) * 100
= (15,485,000/5,000,000) * 100
= 309.7%

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5.09 DESIRED FINANCING
ITEM AMOUNT(KSHS)
Preoperational cost 5,143,000
Working capital 3,970,000
TOTAL 9,113,000

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 CHAPTER SIX
Some of the information contained in this business plan has been sourced from
www.google.com

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