Acknowledgement

Firstly, the most heartfelt thanks go to our course instructor as well as supervisor, Mohammad Ali Arafat, for providing us such an interesting task. His valuable guidance and advice made this task achievable in a smooth, easy, and organized way for all of us. His ways of being helpful, approachable, and understanding to us made it easy for us to communicate with him and tell him about our problems freely.

Also, we must not overlook the fact, that we are truly amazed at ourselves for being the most co-operative team-members. We showed ourselves respect, understanding, we were prompt with our work, no one slacked, and each of us contributed with passion and enthusiasm.

We thank the authors of the books, articles, and websites that we referred to, for giving us such wonderful information, which has really been great help for us to attain this task.

And last but not least, we would like to thank our friends and family, because without their unending support and encouragement, this task would not have been possible.

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Declaration

We do here by declare that this study work titled “Business Plan of Timberland” has been

submitted to the School of Business, Independent University Bangladesh; in partial fulfillment of

the requirement for the degree of Bachelor of Business Administration (BBA) is our original

work and not submitted for the award of any degree, Diploma, Fellowship of any other Institute /

University.

Section- 4

School of Business

Independent University, Bangladesh

Name ID Signature

Falil Mohiuddin Gaalib 0930083

Aniqa Hasin 0930027

Rahat Bin Shahid 1111017

Sheikh Ripon Hossain 1030336

Mahamudul Hasan 1120139

Farjana Sultana 1221283

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Table of Contents2.0 Executive Summary------------------------------------------------------------------------ (06)

3.0 Transcom----------------------------------------------------------------------- (07)

3.i) List of companies------------------------------------------------------------------- (07-09)

3.ii) Transcom into footwear industry----------------------------------------------- (09)

3.1 Timberland-------------------------------------------------------------------------------- (10)

3.2 History of Timberland------------------------------------------------------------------- (10)

3.3 Number of Employees------------------------------------------------------------------- (10)

3.4 Financial status of Timberland-------------------------------------------------------- (11)

3.5 Products of Timberland----------------------------------------------------------------- (11)

3.6 Target market----------------------------------------------------------------------------- (11)

4.0 The Products and Services-------------------------------------------------------------- (12)

4.1 Footwear------------------------------------------------------------------------------------ (12)

4.2 Why Timberland is unique compared to other shoes available in market--- (13)

4.3 Why people will buy Timberland----------------------------------------------------- (13)

4.3.i) The quality of the product------------------------------------------------------ (13)

4.3.ii) Waterproof------------------------------------------------------------------------ (13)

4.3.iii) Slip proof------------------------------------------------------------------------- (13)

4.3.iv) Timelessness--------------------------------------------------------------------- (14)

4.3.v) Variety of products------------------------------------------------------------- (14)

5.0 Business environment analysis-------------------------------------------------------- (14)

5.1 Type of Industry------------------------------------------------------------------------- (14-15)

5.2 Characteristics of the Footwear Industry----------------------------------------- (15)

5.3 Competitors within the industry---------------------------------------------------- (15)

5.4 Market location------------------------------------------------------------------------ (16)

5.5 Customers------------------------------------------------------------------------------ (16-17)

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6.0 Industry Background--------------------------------------------------------------- (17)

6.1 Production capacity, unit sale, profitability and growth rate-------------- (17-18)

6.2 Industry location-------------------------------------------------------------------- (18)

6.3 Pattern of the industry------------------------------------------------------------- (18)

6.4 Control of the industry------------------------------------------------------------ (18)

7.0 Competitive Analysis-------------------------------------------------------------- (19)

7.1 Direct Competitors----------------------------------------------------------------- (19)

7.2 List of Direct competitors and Competitive review of competitors------ (20-21)

7.2.v) Fortuna Shoes Ltd

7.2.iv) Bay Emporium

7.2.iii) Jennys

7.2.ii) Apex

7.2.i) Bata

7.3 Key success factors----------------------------------------------------------------- (22)

7.4 Competitive analysis through Porter’s five forces-------------------------- (23-25)

8.0 Market Analysis------------------------------------------------------------------- (25)

8.1 Market summary----------------------------------------------------------------- (25)

8.2 Market size and Growth-------------------------------------------------------- (25)

8.3 Target market-------------------------------------------------------------------- (25-27)

8.4 Value proposition---------------------------------------------------------------- (28)

9.0 Sales and Marketing Plan----------------------------------------------------- (29)

9.1 Brand Recognition-------------------------------------------------------------- (29)

9.2 Demand Analysis--------------------------------------------------------------- (30)

9.3 Factors affecting the marketing of timberland-------------------------- (31-37)

9.3.i) Customer problems Timberland is solving

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10.0 Operational plan-------------------------------------------------------------------- (38)

10.1 General operating hours---------------------------------------------------------- (38)

10.2 Arrangement of Raw Materials / Product------------------------------------ (38)

10.3 Distribution System--------------------------------------------------------------- (39)

10.4 Technology utilization------------------------------------------------------------ (39)

10.5 Skilled employees----------------------------------------------------------------- (39)

10.6 Pricing strategy------------------------------------------------------------------- (39)

11.0 Management Summary--------------------------------------------------------- (40)

11.1 Personnel plan-------------------------------------------------------------------- (40)

12.0 Financial Plan-------------------------------------------------------------------- (42)

12.1 Anticipating reader’s concern------------------------------------------------ (42)

12.2 The Initial investment---------------------------------------------------------- (42)

12.3 The Pro Forma Income statements------------------------------------------ (43-45)

12.4 Pro Forma Cash flow Statements------------------------------------------- (46-51)

12.5 Pro forma balance sheets----------------------------------------------------- (51-57)

12.6 Definitions and assumptions of financial statements------------------- (57-58)

12.7 Break even analysis----------------------------------------------------------- (59-60)

12.8 Calculation of IRR------------------------------------------------------------ (60)

12.9 NPV analysis------------------------------------------------------------------- (61)

13.0 Risk management plan------------------------------------------------------ (62)

13.1 Risks related business------------------------------------------------------- (62-63)

13.3 Probability Impact Matrix------------------------------------------------ (63)

13.4 Risk minimization---------------------------------------------------------- (64)

14.0 Proposal for loan----------------------------------------------------------- (65-66)

15.0 Conclusion-------------------------------------------------------------------- (67)

16.0 Appendix--------------------------------------------------------------------- (68)

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2.0 Executive Summary

The Timberland Shoe Company is an American success story that started with Nathan Swartz from Boston, Massachusetts. Swartz was a determined and hard-working gentleman who worked his way up from an apprentice boot stitcher in 1918 until he owned part interest in the Abington Shoe Company in 1952. Three years later he became the sole owner, and quickly brought his kids on board.

Our Aim is to provide the people Of Dhaka City with premium quality footwear for both men and women and make Timberland an ideal place for people who care what they wear. The Timberland BD will offer wide range of high quality shoes for both men and women and this will differentiate Timberland from the rest of the competitors. We will associate the Timberland BD with Transcom Limited by making it its franchisee.

The capital we require to start the project is 20,661,000 which cover all initial development expenses, ongoing expenses will be covered by sales and by taking working loan from bank. Among the 20,661,000 we will take 8,500,000 loans. The loan will be paid off over a 3.5 year period.

Our expected market share will grow most rapidly in the first 5 years then stabilize after 8 to 10 years. Our promotion strategy includes: billboard, magazine advertisements, website advertisements, newspaper.

The financial prospective is very lucrative as it will generate high profit and its IRR is around 60% which is much higher the Transcom’s hurdle rate.

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3.0 Transcom:

Transcom Limited is a Bangladeshi business conglomerate. Originated with tea plantations in

1885, TRANSCOM today is one of the leading and fastest growing diversified business houses

in the country employing over 10000 people. Not many industrial groups in Bangladesh can

claim a history of continuous business pursuits stretching back over 125 years! Initially tea and

later jute formed the backbone of the family business. Although these are still part of the

activities and contributing marginally to the overall group turnover. Presently those early

industrial ventures have moved over to businesses involving high-tech manufacturing,

international trading and distribution, forming strong ties with a host of blue chip multinational

companies. In recent years, TRANSCOM has emerged as the largest media house in Bangladesh.

3.i) List of companies:

Transcom Electronics Ltd: Transcom Digital is the outlet started in the early 2005

through which TEL is retailing products directly to end consumers in the metro and

urban cities. In 2008, the company re-introduced itself as “Transcom Digital” as a

multi brand, multi-category retailer catering for all Electronics, Appliances and IT

products. Currently it is successfully running with 48 outlets throughout the country

and expects to increase the total outlet number eventually.

Through the Electronics & Appliances Distribution Consumer Electronics, Home &

Domestic Appliances from global brands such as Samsung, Philips, Whirlpool and

home brand Transtec are sold throughout the country via a nationwide dealer

network.

Transcom Foods Ltd: Transcom Foods Limited (TFL) started its journey in 2003 as

a franchisee of Pizza Hut, the first International Chain Restaurant in Bangladesh, and

went on to sign the contract to become the franchisee of Kentucky Fried Chicken

(KFC) in the year 2006. Both Pizza Hut and KFC are subsidiaries of the world’s

largest restaurant company Yum! Restaurants International. In a span of seven years,

TFL has opened 4 Pizza Hut and 7 KFC outlets so far throughout the country.

Transcom Beverages Ltd: Transcom Beverage Ltd (TBL) is the exclusive PepsiCo

Franchisee for Bangladesh. TBL owns and operates modern plants in Dhaka and

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Chittagong for bottling the renowned soft drink brands such as, Pepsi, 7UP, Mirinda,

Slice, Mountain Dew, Pepsi Diet and 7UP Light.

Transcom Mobile Ltd: Transcom Mobile Limited (TML) is the TRANSCOM's

latest venture into the Mobile Handset business and the company is exclusively

distributing Mobile phones to all over the country. It started its' operation on 22nd

June, 2010. At present TML operates nationwide as a single distributor with trade

marketing operation of SAMSUNG Mobile.

Transcom Cables Ltd: Transcom Cables Limited is one of the largest

conglomerates in Bangladesh has established in July 2009 for manufacturing of

cables, wires and Conductors. The company started its' commercial production in

May 2010.

Transcom Distribution Co. Ltd: Transcom Distribution Company Limited (TDCL) has the

largest independent distribution setup in Bangladesh with full infrastructural facilities

provided by a countrywide network of 23 branch offices along with one main office. The

company started its business with the distribution of quality pharmaceutical products

manufactured by ESKAYEF, NOVO NORDISK, SERVIER, ALLERGAN and consumer

brands like Frito Lay, Heinz, Wrigley, Mars, Energizer, Schick, L'Oreal, Garnier, ConAgra

Foods, McVities and Hemas.

Bangladesh Electrical Industries Ltd: Bangladesh Electrical Industries (BEIL) is a

leading producer of televisions and radios in Bangladesh and is the official licensee of

PHILIPS Electronics N.V. Holland. The company was incorporated in 1960 as a

subsidiary of PHILIPS, Holland. In March 1993, PHILIPS sold its entire shares to

TRANSCOM.

Eskayef Bangladesh Ltd: Eskayef Bangladesh Limited (SK+F), a successor of

Smith Kline and French in Bangladesh was acquired by TRANSCOM in 1990, is one

of the leading and fastest growing pharmaceutical company of Bangladesh

Mediastar Ltd: Mediastar Limited is an affiliate, emerging electronic media and

newspaper concerns within TRANSCOM group. The company is currently consist of

the following media associates: 1. Prothom-Alo 2. Abc radio 3. The daily star.

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Reliance Insurance Ltd: Reliance Insurance Ltd was the fourteenth in line to start

general insurance business in the private sector. It is basically one of the associates of

TRANSCOM group. True to their vision to become the premier insurance

organization and the insurer of first choice in Bangladesh with a sound reputation for

dependability, professionalism and the highest standard of customer services, it is

working in the following areas:

1. Underwriting of Fire Insurance

2. Underwriting of Marine (Cargo & Hull) Insurance

3. Underwriting of Motor Insurance

4. Underwriting of Overseas Med claim & Holiday Insurance

5. Underwriting of Miscellaneous Insurance

6. Underwriting of Public Issue of Shares & Debentures

7. Investment of Shares & Debentures

3.ii) Transcom into footwear industry: As it is already clear that Transcom ltd is a diversified company which is competing in almost every industry except the footwear industry and they are very successful too in those industries. So, to fill the gap of the footwear industry transcom is coming with the brand timberland and want franchise it in Bangladesh.

Timberland is already a well known brand worldwide and Transcom feels that it will also do well in Bangladesh. As it is popular and famous brand it will lower cost of promotion and advertising. It is the best time to diversify because the footwear industry has a weak competitive position and also the market growth rate is slow. It will not be a problem to coming into new industry because transcom has a well availability of adequate financial and organizational resources. It will create opportunities to achieve economies of scale and scope.

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3.1 Timberland

The Timberland Shoe Company is an American success story that started with Nathan Swartz from Boston, Massachusetts. Swartz was a determined and hard-working gentleman who worked his way up from an apprentice boot stitcher in 1918 until he owned part interest in the Abington Shoe Company in 1952. Three years later he became the sole owner, and quickly brought his kids on board.

3.2 History of Timberland

The Abington Shoe Company mostly manufactured shoes for other companies until 1965 when they introduced injection-molding technology to the footwear industry. This innovative technology fused the sole to the leather upper without stitching, enabling the production of a virtually waterproof boot. This waterproof boot gained popularity quickly, and was named the "Timberland." Due to its immense popularity, in 1978, the Abington Shoe Company officially changed their name to the Timberland Shoe Company.

With their roots firmly placed in the rugged boot market, the Timberland Shoe Company started to expand its collection to include casual classics, boat shoes, and eventually, clothing. Everything in the line-up continued to display a commitment to quality, and thanks to the urban fashion community in the late 80s, Timberland began to look equally at home on the city streets as it did in the great outdoors.

Today, the Timberland Shoe Company is still thriving in the footwear market. They even introduced an exclusive collection of boots and shoes appropriately named, the Abington Collection. With fashion changing constantly and new shoe companies popping up every day, Timberland has stood the test of time. And, they are not going anywhere.

3.3 Number of Employees

Timberland has approximately 5,600 full and part-time employees worldwide at December 31, 2012.

Employees NumberU.S Employees 2198

Employees Outside U.S 3402

3.4 Financial status of Timberland10

Company’s current financial conditions give an overview about how company is doing financially. From the given information we can see how company has done in the year of 2013.

Revenues: Revenues increased 15 percent to a record $10.9 billion from $9.5 billion in 2013. On a constant dollar basis, full year revenues increased 17 percent. The Timberland acquisition accounted for 9 percentage points, or $907 million, of the revenue growth in 2012. International revenues on a constant dollar basis were up 29 percent, of which Timberland accounted for 17 percent. Direct-to-consumer revenues were up 25 percent, with Timberland accounting for 15 percentage points of the growth.

Gross margin: Gross margin rose by 75 basis points to a record 46.5 percent, compared with 45.8 percent in 2012, with improvements in nearly every business. The improvement in gross margin reflects the continued shift in our revenue mix towards higher margin businesses.

Operating income: Operating income on an adjusted basis increased 17 percent to $1.5 billion in 2013. The Timberland acquisition accounted for 6 percentage points of the increase. On a GAAP basis, full year operating income rose 18 percent to $1.5 billion from $1.2 billion in 2012.

Net Income: Net income on an adjusted basis rose 18 percent to $1.1 billion compared to $913 million in 2012.

3.5 Products of Timberland

Timberland’s products fall into two primary categories

1. Footwear2. Apparel and accessories.

They also derive royalty revenue from third party licensees and distributors that produce and/or sell Timberland’s products under license.

3.6 Target market

Timberland has identified its target market are both men and women, whose age from 18 to 40, are very stylish, like to wear comfortable product. Most of the existing footwear company in our country has a common trend. If they focus on style they forgot about the comfort or they focus on comfort and forgot about the style. But Timberland will give the customer very good looking, stylish footwear with comfort in a reasonable price. Initially we select our place in Gulshan. The college and university students and the other working people who want stylish and comfortable footwear will be our main targeted customer. The organization would propose an expansion phase into other sector of the city.

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Timberland’s mission is to equip people to make a difference in their world. We do this by creating outstanding products and by trying to make a difference in the communities where we live and work. Timberland has a rich New England heritage that inspires the way they make their products and run their business. They make boots, shoes, clothes and gear that are comfortable enough to wear all day and rugged enough for all year.

Timberland’s vision is to become number one outdoor brand on earth, and to achieve that they are committed to do the right thing. Whether it's making products with the environment in mind, volunteering in communities, or having one of the toughest Codes of Conduct around, Timberland cares about their colleagues, their community and planet because how they do their business matters to them.

4.0 The Products and Services

Today Timberland can be found over 60 different countries and more than 230 company-owned stores and through department and athletic shops in Asia, Canada, Europe, Latin America, the Middle East, and the US.

As we mentioned about products of Timberland previous section, we already know that their major products are Footwear, Apparel and Accessories, but for our business we will be focusing on Footwear only which generates 75% of company’s total revenue.

4.1 Footwear

In 1973, Timberland produced their first pair of waterproof leather boots under the Timberland brand. Timberland now offers a broad variety of footwear products for men, women and children, featuring premium materials and state-of-the-art design and construction. Timberland’s men’s footwear products emphasize durability, comfort and craftsmanship. Timberland’s women’s footwear line combines beautiful styling, performance features and eco-conscious materials. Timberland’s kids’ footwear products are designed and engineered specifically for kids with the same high-quality standards and materials as their adult footwear products, combining Timberland’s heritage of premium leathers and craftsmanship with a focus on fit, functionality and convenience.

Timberland brand footwear offerings within each of our men’s, women’s and kids’ lines include

I. Basic, premium and sports boots, including hikers.II. Hand sewn oxfords, boat shoes and casual footwear.

III. Performance footwear.

The Timberland PRO series for skilled tradespeople and working professionals is an additional footwear category being developed to address those consumers’ distinct needs.

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4.2 Why Timberland is unique compared to other shoes available in market

Some of the principal features of Timberland boot products include premium waterproof leather, direct-attach and seam-sealed waterproof construction, rubber lug outsoles for superior traction and abrasion resistance, shock diffusion plates, durable laces, padded collars for comfortable fit, enhanced insulation, rustproof hardware for durability and moisture-wicking components for comfort and breathability. Timberland’s casual footwear is rooted in their commitment to the environment, craftsmanship and innovation, a design ethos which results in products made from superior earth-conscious materials and characterized by enhanced comfort. Timberland’s performance footwear continues to address the needs of outdoor recreationalists and enthusiasts of all levels, offering technical, end-use driven products for outdoor adventures from summit to sea and everywhere in between.

4.3 Why people will buy Timberland

As a brand Timberland has an image of being tough, innovative and economically efficient but these things are not considered when people intend to buy their product. Maximum customers of Timberland buy their product because of their quality, durability and longevity of the products and beside all the factors there are some other factors are contributed Timberland’s success in the footwear industry which are discussed below.

4.3.i) The quality of the product

The main reason people buy Timberland because of the high quality. It is safe to say that they are the bit expensive but also the most reliable shoes compared to other brands available in the market. It's definitely an investment but it pays off big time. With the Timberland boots it holds true that when people purchase a high quality product they get their money's worth. Timberland assures that their customer gets an excellent shoe from the premium segment.

4.3.ii) Waterproof

In a country like Bangladesh where roads go under water in the rainy season Timberland shoes are best suited in this type of environment, because Timberland shoes are waterproof, that means users of Timberland do not need to worry about weather conditions. Customers of Timberland really appreciate the fact that boots are waterproof especially compared to the boots previously owned.

4.3.iii) Slip proof

In the rainy season the roads of our country become so slippery but for Timberland users this thing matters a bit because the durable and thick outsole of the shoe delivers superb traction, this means the users of Timberland shoes will not fall so easily. This slip proof feature is a must need for an outdoor enthusiast those who love to go for hiking in the mountains because we all know the roads of highlands are muddy and slippery.

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4.3.iv) Timelessness

Timberland boots are timeless. People wore Timberland boots all the way back in the 1950s and there hasn't been a decade since that declared them as 'out'. No one can't go wrong with some simple straightforward boots. Those who are using Timberland boots will never go out of style because quality never goes out of style.

4.3.v) Variety of products

Timberland offers a wide range of shoes to match customers’ choice within price range, beside this Timberland boots look great too.

Finally we can say that, people will purchase the products of Timberland because of the quality of the product and the brand name associated with the product. The products of Timberland have the capability to attract customer because it is unique in its own way. Timberland can attract young aged people and also attract people of medium ages because they manufacture shoes for people of all ages. People always like changes, wants changes, like to switch. As Timberland is very unusual people can easily attract by our product.

5.0 Business environment analysis

5.1 Type of Industry

The footwear industry is a diverse industry which covers a wide variety of products from different types of men's, women's and children's footwear to more specialized products like snowboard boots and protective footwear. This diversity of end products corresponds to a multitude of industrial processes, enterprises and market structures.

Recent statistical index collected from Bangladesh economic review indicates that there is a positive growth in this sector which is fueled by the growth of the domestic middle class and high rate of GDP growth. According to a study conduct by Dhaka University, it is assumed that about 31.3% ( around 47 million) of total population are now officially categorized as middle class group with another 4 million is consider to be rich and affluent. Increase in living standard has encouraged many international brands to come to Bangladesh and began its journey when in 2006 first international brand Hush Puppies were introduced by Bata.

The retail footwear market size is approximately BDT 16billion and estimated to be expanding at a rate of 20% per year, according to newspaper reports. With 160mn people in Bangladesh, demand for quality footwear is high. At present, 90% demand for footwear is met by the local companies. The industry is fragmented; with millions of small shoe manufacturing companies that produce footwear in small scale. However, large brands still compose a significant portion of the national footwear market. With increase of per capita income to $1044 in 2013 from $ 848 in

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2012 and population growth of around 6% per year, the footwear market is bound to expand in the future.

In our outlet we will mainly provide various types of men’s and women’s footwear. Our business will operate under retail footwear industry. Our provided products will be:

5.2 Characteristics of the Footwear Industry

The Shoe Industry consists of a multitude of footwear manufacturers, wholesalers, and retailers. The major manufacturer of the Bangladesh market is owners of a brand name and they manufacture their own shoes. Like as Bata, Apex, Jennys, Fortuna, Bay emporium etc. But there are some other wholesaler whose product are not a brand typically they collect their shoes from independent manufacturers. Such as reakhi shoes, classic shoes, infinity, ecstasy etc. The retail segment of the industry ranges from owners of large multinational chains to small local businesses. Many shoe companies operate in both the retail and wholesale arenas. Shoe companies covered by Value Line generally adhere to the standard industrial page format.

5.3 Competitors within the industry

There are various types of Footwear Companies in Bangladesh and the maximum of their products are very same. The products we are offering is bit different compared to traditional shoes available in the market so on that basis we can say that we do not have any competitors. If we think overall resources, manufacturing facility and cost we have some competition. Timberland’s major competitors are

Apex Bata Janny’s Ecstacy Cats Eye

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Men

Hiking Shoes

Shoes

Boots

Sandals

Sandals

Shoes

Boots

Women

Bay Emporium Woodland (Recently Introduced)

When it comes to footwear there are no substitute products for it and it can only be substituted by going bare foot which is impossible in this civilized society. So in this scenario we will have to compete only with competitors which are not so threatening.

5.4 Market location

Initially our store will be opened at Gulshan 1. In our country there is a concept for developing or establishing a brand it’s necessary to open an outlet in Gulshan. It is considered that the people who live in these areas (Gulshan, Banani & Baridhara) are rich and has stable income and they are easily attracted to stylish, luxurious and quality full products. The current demographic of Bangladesh population shows that around 55% of the total population is between the age group of 18 to 45 years that are considered as the target customer of our product. Initially located in Dhaka, our aim will be to capture the consumer this demographic part of population in Dhaka. In this area scope of geographic competition is very high but also for the people’s living standard, income and their clean choice will help us to get market share very easily and effectively.

5.5 Customers

We already mentioned in earlier section our target market will be both men and women between the age group of 18-45. From this segment we can separate some who will definitely buy Timberland shoes.

Students

Students of universities and colleges will choose Timberland because this brand represents youth. Now a days students of universities spend good amount of money in non-branded shoes but if they have the option to buy an internationally recognized branded shoes with adding some more money they will definitely choose Timberland.

Workers

This category encompasses primarily workers who need a sturdy, durable boot for everyday use. Comfort and support are of utmost importance. In addition, reasonable prices and high value are also key since this demographic is not particularly wealthy. They expect to get their money’s worth by investing in Timberland’s product.

Outdoor enthusiasts

These are more recreational users of our footwear and apparel. This group enjoys outdoor leisure activities such as hiking and camping. This category is very family oriented. Value, comfort, and durability are key factors for customers when choosing their products. Because this demographic’s use of the product is primarily recreational, they have greater disposable income.

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Fashionistas

This category covers high income, more urban, female consumers purchasing boots for fashion, rather than work purposes. Those spent over 2.5 times more than those in a lower income bracket.

6.0 Industry Background

Footwear Industry has grown in Bangladesh territory since the colonial era although its modernization took place only in the late 1980s. During the British period, there was no footwear manufacturing firm producing on a mass scale in East Bengal. However, traditional cottage type footwear industry with limited production facilities existed in a skeleton form in the district towns at this time. Various types of footwear were imported, mainly from Calcutta. After Partition of Bengal in 1947, footwear started being imported from West Pakistan. When Bata Shoe Company established its manufacturing plant at Tongi in 1962, it was the first manufacturing plant to produce shoes on a large scale in East Pakistan. Eastern Progressive Shoe Industries (EPSI) established its production plant in 1967 and started exporting footwear to USSR, Czechoslovakia and England. Bata and EPSI held a major share in the local footwear market also. The industry suffered a major setback during the war of liberation but was rehabilitated after independence. Many new footwear manufacturing units have been established recently. Notable among them are Apex Footwear, Excelsior Shoes, and Paragon Leather and Footwear Industries. The industry structure is very competitive.

6.1 Production capacity, unit sale, profitability and growth rate

The footwear industry now exceeds more than 3000 production units. Most units are, however, small and medium in size and only 23 are relatively large and have mechanized and semi-mechanized production technology. The annual production capacity of the industry is about 46.8 million pairs of leather and non-leather footwear. Of this 36.50 million is produced by mechanized and semi-mechanized units. These units generates revenue of BDT 18.0bn or US. Bata Shoe and Apex Adelchi are the only large players in an otherwise fragmented industry. Bata has the largest market share of ~20% and Apex ~5-7%. Bata has two manufacturing plants in Tongi and Dhamrai with production capacity of 110,000 pairs/day. Apex has a production capacity of 15,000 pairs/day for export and another 5000/day for domestic sales.

The industry provides direct employment to about 33,000 people. Nearly 50% of them are engaged in mechanized and semi-mechanized units and are classified, on the basis of employees, as large, medium, and small.

Women workers are predominant (55%-60%) in the mechanized sector. About 80% of all footwear units are located in Dhaka and Chittagong. Production in small units is processed manually. The total volume produced by these indigenous units account for about 7 million pairs per year.

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Top local footwear makers and exporters are set to increase their production capacity to utilize the growing international demand for low-cost Bangladeshi shoes, industry insiders said. Meanwhile, the footwear sector has earned $335.51 million in export during the just concluded fiscal year (FY) 2011-12 against $297.8 million of a year ago, Export Promotion Bureau (EPB) data revealed. The leading manufacturers, including Apex-Adelchi Footwear Ltd, Jennys, Landmark, Leatherex, Bay Footwear and Picard Bangladesh, are increasing their production capacity by opening new factories and importing sophisticated machinery with latest technology.

The continuous growth in footwear export is the main reason that encouraged local companies to go for expansion, and the enhanced capacity will help the exports to the increased manifold in the coming years, industry people said. Currently, the local companies make leather footwear worth around Tk 17 billion yearly, of which 40 to 45 per cent products are meant for shipment. The country exports around sixty five million pairs of leather footwear a year, with Apex-Adelchi being the largest exporter. With this analysis we identified that the growth rate of Bangladesh footwear industry in 2007-2008 was 10.22 %, in 2008-2009 was 9.18%and in 2009-2010 was 48% which was the highest growth in the history of Bangladesh footwear industry.

Footwear units vary in product line, production capacity and exposure to domestic and foreign markets. The relatively large ones manufacture multiple items such as leather shoes, sports and trainer shoes, canvas and leather sandals, jute shoes, chappals (slippers) and shoe uppers. These units constitute the largest share of the export market.

6.2 Industry location

It is an undeniable fact that, shoes are necessary and that is the main reason that the industry is spread out geographically all over the Bangladesh, so that it can reach out to all the customers and it is not concentrated near the source of raw materials. But the industry outlets are situated in near the end users for efficient distribution. This industry is currently strong because there is a growing desire for footwear in the proposed location.

6.3 Pattern of the industry

If we look at some features of footwear industry like, diverse buyers’ demand, low entry barriers, absence of scale of economies, requirements of small amounts of customized or made to order products we can easily say that the industry is fragmented. Many local and big companies are operating in this industry simultaneously but none of them are considered as market leader or hold a major portion of market share.

6.4 Control of the industry

With all other benefit it’s true that actually the footwear industry is controlled by some of our competitors. For cost, comfort, durability and design we determine that the Bata, apex, jenny’s, Fortuna and Bay emporium are our competitors. They are in this business from many years. They have a huge production capacity, goodwill, loyal group of customers and their cost is lower than us. They can serve the customer with a nominal price but it is not possible for us. Rather than we should have to maintain our price. If we charged a high price we can’t compete with them. So it is easily proved that the industry is controlling by some of our competitors. But it will

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not be a big deal for us. With our design, style and comfort we can compete with them and very fast we will able to make a place for us in the industry. In terms of use of technology in manufacturing our competitors are not as good as ours rather they offer traditional stable products. The products of Timberland will be manufactured outside this country i.e China and India. Their technology is much more advanced compared to technology our competitors are using to manufacture their products.

Bangladesh is very densely populated, with over one thousand people per square kilometer and in a place like Gulshan it is more than that and also increasing which will make sure the potential end customer for Timberland. As mentioned earlier the acceptance of western culture along with increase in living standard and presence of many international brands in Bangladesh indicates that the investment in this particular section of HRI will be a huge success. Timberland will be located near our target customers to efficiently fulfill their demands. Though there are few local based and international chain exist in this sector which can be a potential threats to us but our niche market strategy along with internationally recognized brand image will leave very competitive in the market.

7.0 Competitive Analysis

Footwear products are marketed in highly competitive environments that are subject to changes in consumer preference. Product quality, performance, design, styling and pricing, as well as consumer awareness, are all important elements of competition in the footwear. Competitive analysis in strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Although the footwear industry is fragmented to a great degree, many of our competitors are larger and have substantially greater resources than we do. The competition from some of these competitors is particularly strong where such competitor’s business is focused on one or a few product categories or geographic regions in which we also compete. However, we do not believe that any of our principal competitors offers a complete line of products that provides the same quality and performance as the complete line of Timberland products.

7.1 Direct Competitors

In the footwear industry of Bangladesh, Timberland will face direct competition from direct competitors, as Timberland will be providing similar products with some extra value. Competition will be tough because they exist in this footwear industry for a very long time. As our competitors are in the industry for a very long time, so they are aware of the industries dominants trends and demands of customers.

7.2 List of Direct competitors and Competitive review of competitors

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7.2.i) Bata: The Bata Shoe Organization was founded in 1894 by Czech businessman Tomas Bata in the city of Zlin (Czechoslovakia). Bata started operating in Bangladesh in 1962. Having contributed BDT 1.2 billion (year 2009), which is 70% of the entire amount paid by the footwear sector, it became one of the largest tax-paying corporate bodies. Currently Bata Shoe Company (Bangladesh) Limited has two factories – one in Tongi and the other in Dhamrai with a production capacity of 110,000 pairs of shoes daily. The company also has a modern tannery facility with an output of 5 million square feet of leather annually. Annual shoe sales currently stand at slightly more than 30 million pairs with a turnover for the year 2009 of Tk 5 billion.

Bata is playing a pivotal role in developing the leather industry of the country. Bata has introduced internationally renowned brands like Bata Comfit, Marie Claire, Hush Puppies, Scholl, Nike, Bubblegummers, Sandak, Weinbrenner etc in Bangladesh and added a new dimension in branded shoe market of the country. At present, Bata operates 242 retail outlets and 13 Wholesale depots all over Bangladesh.

Strengths and Weakness of Bata

Strengths Weaknesses

Brand Image

Quality of Products and Services

‘Good-value’ Pricing

Targeting consumers of all income segments

Training employees for better service

Strong Distribution Channel

Lack of design variety

Unavailability of some shoes in all the stores

Failed to exploit new mediums of advertisements like online marketing.

7.2.ii) Apex: After Bata, Apex is one of Timberland’s most notable competitors. ‘Apexadelchi Footwear Limited’, a manufacturer and exporter of leather footwear grew from a potential power in footwear market of Bangladesh to major shoe retailers in Western Europe, North America and Japan. The company has revenues of USD 100 million in 2010. AAFL pioneered the export of value added finished products export in the

Strengths and Weakness of Apex

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Strengths Weaknesses

Best quality provider

Packaging design

Fast mover advantage

Stylish product with comfort

Mixture of difference culture

Limitation of offering

Price structure

Distribution channel strategy

7.2.iii) Jennys: Jennys started their journey with ideas of quality products manufacturing and a winner’s vision in the name of “Jennys Shoes Ltd” from 1990. Though they started their journey long time ago but still their product is not very mature and does not hold a notable part of the market share. The company lacks in product variety and class.

7.2.iv) Bay Emporium: ‘Bay’ is relatively a new name in the footwear industry of Bangladesh. With outlets in some of the premium locations of Dhaka and other major cities, Bay Emporium has the potential to become one of the big competitors in the market. Bay Footwear Ltd has a production quantity of 5000 pairs from the company’s 2 production facilities. Turnover is USD $10 million.

Strengths and weaknesses of Bay Emporium

Strengths Weaknesses

Niche Market

High Profitability

Foreign Product

Stylish Product

Limitations of products

Distribution channel strategy

Insufficient numbers of stores

7.2.v) Fortuna Shoes Ltd: Fortuna is a new state of the art footwear manufacturing plant with a capacity to produce 2500 pairs of shoes per day. The 40,000-sqft factory is located in Fortuna Park, Kunia, Gazipur Bangladesh. The company also produces leather bags, sandals, and other accessories. Fortuna is opening in retail outlets to sell shoes, leather bags and accessories under its own brand Fortuna. The company is open to joint ventures and strategic partnerships.

Strength of Competitors

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In this footwear industry the main strength of our competitors is that, their strategy in terms of changes in market demand and consumer preference and due to this strategic strength they have survived for a long time. They know how to spread out through marketing their product on this industry. Most importantly they have customers who are loyal to their respective brands.

Weaknesses of Competitors

In terms of weakness, our competitors don’t have those things that we have and those are quality of the product, variation of the products, ability to customize according to customer preference.

Skilled labor turnover is another weakness of our competitors. It takes so many times to make a skilled labor. But if another company offer good salary to that skilled employee and if they move from the company then it’s become a threats for our competitors.

Timberland is an internationally recognized brand and the products are being designed for the customers of Timberland all over the world, which means in any part where Timberland shoes are sold they all are same so it will help customers of Timberland in this country to match with international fashion trends.

7.3 Key success factors

Timberland considers every company of footwear industry as their competitors or rivals but some of them are considered as their direct competitors (Bata, Apex, Bay Emporium). Now we are going to focus on their key success factors which helped them survive in this competitive industry for long time.

Company Success Factors

Bata

Low-cost production efficiencyHigh labor productivity

Strong network of wholesale distributors/dealers

Having company-owned retail outletsLow distribution costs

Favorable image/reputation with buyersOverall low-cost

Convenient locations

Apex

Product innovation capabilityQuality of manufacture

Flexibility to make a range of productsBreadth of product line

Attractive stylingCourteous employees

Having company-owned retail outletsBay Emporium Quality control know-how

Ability to develop innovative productsAbility to get new products to market quickly

Clever advertisingHaving company-owned retail outlets

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Timberland’s competitors’ possess major threat in terms of Goodwill, Numbers of showrooms, Experience and Customer loyalty. Due to mentioned factors our competitors definitely enjoy strong brand recognition of their products and due to brand recognition they don’t have to market their products aggressively. Competitors of this industry don’t block the entrance of a new rival because they know any type of healthy competition for their business is helpful because then they can come up with innovative ideas and product, which will eventually help them to survive in the long run. Our competitors will certainly recognize differentiating attributes (in our case which is quality of the product and brand value of our product) but they will not be able to include these features in their product. If they want to include one feature (quality of the product), then the cost of their product will increase, as a result the price of their product will increase and they will end up losing their customers.

7.4 Competitive analysis through Porter’s five forces

Competitive Rivalry within The Industry: Intense competition from established and upcoming rivals could threaten Timberland’s market share growth

The market for footwear is characterized by intense competition, with presence of a large number of players such as Bata, Apex, Bay Emporium, Jennys, etc.

The footwear products industry is exposed to continuous changes in consumer preferences and technology; if Timberland is unable to adapt to these changes quickly, it could suffer losses in its market share.

Rising competition from emerging players such as Woodland, which focus on niche market segments also pose a threat to Nike’s share of selected markets.

Timberland also faces rising competition from local players in emerging markets, who are increasingly improving their product quality.

Having said that, Timberland has a strong brand reputation which likely will continue to propel strong demand for its products. Further, Timberland continues to differentiate its products within an innovative product portfolio, leveraging a particularly strong brand with enhanced marketing activities.

Bargaining Power Of Suppliers: While no single supplier holds significant bargaining power, footwear production is concentrated in Vietnam, China and Indonesia and India. This means if one supplier has the bargaining leverage then we can switch supplier which may increase our cost in the short run but in the long run it will help us survive in the industry.

No single footwear factory accounted for more than 6% of total Timberland brand footwear production in fiscal 2013; hence, due to a large base of suppliers, we believe their bargaining power is limited.

Suppliers generally share the inflationary pressure (related to raw material costs and labor expenses) with Timberland through manufacturing service pricing.

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Bargaining Power of Customers: Big wholesale customers could exert some bargaining power.

Timberland caters to its customers through both the wholesale and direct-to-consumer channels, which accounted for 80.6% and 18.9% of total Timberland brand’s sales respectively, in fiscal 2013.

Direct-to-consumer sales rose by 23% in fiscal 2013, as compared to 6% growth in the wholesale channel; hence Timberland is looking to strengthen its direct channel.

Certain big wholesale customers hold bargaining power as they could widen their partnership with Timberland’s competitors or provide their own private label offerings to earn higher profitability.

Bargaining power of end-customers is low as Timberland has a very strong brand image and holds an innovative product portfolio.

However, customers could also choose other brands owing to factors such as price, advertising, product sponsorship, and changing styles.

Threat of New Entrants: Requirement for high capital and research investments could limit the entry of new players; however, there is a threat from new e-commerce players

Significant capital resources are required for creating a new brand as large investments are needed for marketing and procuring floor space; hence, this restricts the entry of newer players.

Timberland enjoys a great degree of brand recognition and loyalty, and it will be a difficult for a new player to match its level.

Having said that, we believe more Internet companies could start selling competitors’ footwear, apparel and equipment online as the barriers to entry are low in this business.

Threat of Substitute Products: Counterfeit products represent the biggest threat in this area

The problem of counterfeit products is an area to watch. As the quality of counterfeit products has been improving over the recent past, we believe this could threaten the company’s sales in emerging markets and could also potentially dilute Timberland’s brand value.

According to our analysis, competitive rivalry within the industry is a key force which has the potential to curtail Timberland’s growth. The competition is increasing from both established, as well as upcoming and local footwear companies. In case Timberland is unable to adapt to changing trends, its growth could be impacted. The company relies heavily on wholesale channel and big wholesale customers could exert leverage to attain higher product discounts/ better credit terms. The low barriers to entry in the Internet retailing business could enhance the competition in the industry. Also, Timberland needs to address the problem of counterfeit products to dilute the threat from small players.

The final result of Porter analysis of Timberland at a glance

Porter Five Forces Intensity

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Competitive Rivalry Within The Industry High Bargaining Power Of Customers Low to Medium

Threat Of New Entrants Low to MediumBargaining Power Of Suppliers LowThreat Of Substitute Products Low

8.0 Market Analysis

8.1 Market summary

Shoe business has become one of the most successful businesses in the industry. Everyone needs shoe for their necessity or their style. The major competitors in the market are undoubtedly Bata, Apex, Jenny’s, Fortuna etc .They offer huge range of footwear with huge collection and showrooms. But Timberland will step forward to gain a first movers advantage in this field by introducing the first huge collection of rugged boots, shoes for both men and women.

8.2 Market size and Growth

Footwear sector is now consider to be a competitive market and with few intentional chain present indicates that the future of this sector is brilliant and worth investing. Acceptance of western culture in Bangladesh indicates that franchisee of Timberland will be a success. As Timberland shops is a specialized shop which offer special kind of products and serves a particular market it will be consider as a niche market. With a raise in income and living standard, people in mega cities like Dhaka will be more willing to spend their time and money in high quality and internationally recognized branded products. A higher living standard in mega cities, people demand international standard of product with superior quality. Timberland will be the first brand to open their store and selling only their product only therefore there is a huge scope for Timberland to enter the market and make profit.

8.3 Target market

After determining the marketing object a firm must need to select its target market. This means choosing one or more profitable customer segment. We have targeted multiple segments consisting of students, outdoor enthusiasts & professionals. For getting the maximum market share and respect of the product in the minds of the consumer, as per our observation and market survey we have concluded that Timberland market segmentation is based on the following points.

Geographic Segmentation:

Calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods. Initially we will open our outlet in Dhaka as it is the capital of Bangladesh and the living standard of this city is higher than other cities. As we will target middle class, upper middle class and high class part of the society we decided that the idle place for opening our first outlet should be in Gulshan.

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Demographic segmentation: demographic segmentation is divided into following sectors.

Age:

Our targeted customer will be between the age of 18 to 45 due to their quick acceptance of western fashion. Moreover we will be selling converse and boots which is very popular among students.

Income:

To sustain in footwear industry the minimum level of profit that should be earned by the international chain is 200%. Even though we will operate on niche market strategy, we need to make enough profit to sustain in long run. Therefore, a relatively higher price will be charged when compared to locally based competitors. So people based on income are segmented in following segments: 40,000—60,000 / 60,000+

Occupation:

We will target urban corporate workers/ business people and students who don’t hesitate to spend their money in high quality and internationally recognized products.

Psychographic segmentation:

Branded shoes are becoming quite popular in our country as people have accept the western culture with open heart and due to globalization people are also aware of different brands. Therefore now people do not want same old typical boring shoes but people demand of high quality and stylish shoes. Being aware of the international standard, people want a great pair of shoes with international brand recognition and higher quality. We will fulfill this need of customers as we are an international recognized brand that produces high quality shoes desired by this specific segment.

People of our country belong to several social classes. Their income and way of living reflect them that which social classes they are belong to. It is very useful path to segment and mark desired customer. Here our people have been segmented into three social classes:

Lower Upper class Upper middle class Middle class.

Behavioral segmentation

From behavioral segmentation benefits is more appropriate term to segment the market for us. It is very tough to find out what kinds of benefits every individual wants. Some class of people want economy, some want quality, some wants both quality and service. So it would be better to segment in following phases:

Economy

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Quality & service Convenience

Timberland’s target market at a glance

Geographic

Density Urban

Region

Dhaka (Gulshan)

Demographic

Age

18 to 45

Income

40,000-60,000 & 60,000+

Occupation

Students, Professionals, outdoor enthusiasts.

Psychographic Social class

Upper middle, lower upper, upper class

Behavioral

Occasions Regular

Benefits Quality ,service & convenient

User status Regular

User rates Medium & heavy

Loyalty status Strong

Attitude towards service

Enthusiastic, positive

8.4 Value proposition

To deliver the ultimate service to our customers we will not only provide a comfortable atmosphere for our customer but also train our employee in regular basis so that they can provide maximum customer service. The targeted customer will buy our products because we will offer them high quality and unique products, and due to these reasons the demand of our product will increase. Our customer will be able to differentiate our products from our competitors because

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we will introduce very first shoes with customizable facility. Not only these we will also offer our customer wide range of products from which they can choose according to their style and budget.

9.0 Sales and Marketing Plan

Since our aim is to provide premium quality footwear to our customers, the initial startup costs of setting up the shop is relatively high because of initial Franchise Fee & Marketing startup fee. So the sales and marketing activity of Timberland is extremely vital to gain enough profit by selling our product. Hence the sales and marketing plan for Timberland needs to be prepared for the long term consequences.

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For this to be achieved, we will foster an environment in which all our employees can play a part through continued training in excellence, emphasis on teamwork, effective communication toward the customer and innovation in all the areas of the our shop.

Our efforts are designed to create distinctive brand image and a cost effective campaign with various advertising focused on publicity and attract potential customer.

9.1 Brand Recognition

The Swartz family began producing boots in 1933, some of which closely represent the Timberland Classic style today. To many customers, this small family-held boot company remains the primary representation of Timberland and Mr. Jeffrey Swartz, the key steward of the community-centric company. Timberland’s brand represents quality, dependability, and a return to nature. This long-standing brand promise is of great significance to Timberland and its loyal consumers around the world. Development of the Timberland brand has taken many years (and three family generations) of consistency in action and messaging. This unique aspirational positioning is apparent in the company culture and is signaled through its actions including: community activism, boot-centric offerings, earthy and innovative product designs, and dynamic marketing campaigns. The strong tie to nature and community serve as the key differentiator among competition and resonates with its many environmentally conscious customers. It also allows for Timberland to charge a slight premium on its products over its competitors. Timberland must continue to remain authentic to its company roots and manage its business in an authentic, consistent, and focused manner as to avoid brand dilution as it has experienced in the past.

9.2 Demand Analysis

The main objective of the Timberland is catering to the needs of that customer whose are aware about fashion and want to lead their life with the new fashion trend and at the same time will set out on a path to continuous innovation to meet the changing needs of this segment. Initially Timberland will fulfill the demand in Dhaka city and later on other parts of the country.

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Gender Products Market Demand

Men

Hiking Shoes

Boots

Shoes

Sandals

Yes

Yes

Yes

yes

Women

Sandals

Shoes

boots

Yes

Yes

Yes

9.3 Factors affecting the marketing of timberland

9.3.i) Customer problems Timberland is solving

Timberland wants to be at the top of the mind of the customers. It will provide them with extra features or benefits in terms of quality which will assure them that they have made the right decision by purchasing this product. Timberland aims towards branding this sector so that consumers see a significant brand difference between this and other shops providing such

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product. Consumers today also like being more involved with their favorite brands. This gives Timberland an opportunity to build up in terms of brand loyalty by hosting events that brings the organization closer to the target market. In terms of demography, the target market of Timberland is mostly university students, corporate people, outdoor enthusiasts/activist and those people who are very careful about fashion and footwear design.

Timberland promises to

Delight customers by providing high quality of products Considers their customers as top priority Excellent value for money to the customer will be provide Deliver the product timely and efficiently

9.4 Positioning

We have done a research and based on the participants’ perception we have done perceptual mapping on Timberland. In the perceptual map, we have plotted Comfort versus high price matrix. In x axis we have put the Quality factor and in Y axis we have put the low price. As Timberland has got a quality assurance along with less low price, we have plotted it in the upper right gap of the perceptual map.

9.5 Product life cycle

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Sales

//

//As we are already established in Dhaka and it’s a renowned brand so our business is in the Growth stage. Our sales are increasing as well as our profit. We are following the High Quality strategy to retain customers.

9.6 Marketing plan objectives

Social impact

Timberland has established a tradition of creating quality, environmentally friendly products, and they intend to expand upon this philosophy. Timberland’s competitive advantage is their focus on corporate responsibility. Timberland will continue to emphasize the importance of community involvement and charitable contributions to eco-friendly organizations, and they will expand their product line to involve our customers in this lifestyle. Timberland’s goal is to educate their customers about the importance of being environmentally conscious and providing them with quality products to lead them in the right direction. By purchasing from Timberland, they are not only receiving a top of the line product, but are also making a difference in the environment.

Profit

Timberland has continued growing despite the economic recession. Their revenues are increasing steadily following a dip during the recession, and company is confident that they will continue on a positive path.

Market share

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High Cost

Our primary focus is on footwear – namely boots. Initially we don’t have any market share but through an aggressive marketing campaign, we hope to increase the appeal of our product which will, in turn, grow the market in this category to 10 percent by 2016. Timberland will then take advantage of this growth and will be the go-to brand for this consumer.

9.7 Customers’ buying behavior

Buyer behavior is at the heart of the marketing concept. Most of the progress over the past few centuries has focused on understanding and identifying observable similarities consumers share. The research and measurement of buyer behavior is vitally important to the field of marketing because it can provide insight into a possible future success.

The Company offers its high quality products under multiple brands and sub-brands. With a diverse product mix, Timberland sells products that encourage outdoor exploration to active men, women and children, without sacrificing fashion. Timberland product brands and sub-brands speak to many customer segments seeking different benefits and have grown by way of line extensions. Product purpose, design, and price vary greatly depending on the product category and customer. The majority of Timberland’s products fall into the BDT 2000-20000 price ranges which is slightly higher than competitors. Timberland has focused its product positioning on selling fewer, higher value, classic offerings. Acquisitions of smaller niche brands that serve small, but growing loyal customers have allowed Timberland to reach target segments previously out of reach and provide access to past distribution and sales channels. Our consumers can buy our product from our authorized outlet which is located at Gulshan. But there is always a question “Why people will buy Timberland shoes with a high price?” to answer that question all we can say that no can put a price tag on quality

9.8 Marketing Mix

Marketing mix consists of 4Ps, product, price, place and promotion.

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/

Product: As our items tend to be more lucrative, and famous brand product, people will focus on more our foods and beverage rather than other local brand. We will be offering footwear for both men and women. The Timberland boot is known for its comfort and durability. Whether it’s bought to make a fashion statement, hike through a dirt trail, the boot is iconic. The product line of green boots will also emphasize eco-friendliness. Timberland will also introduce a revamped Classic Boot to customers to satisfy Outdoor Enthusiasts. The lip at the top, the stitching, and the line at the bottom of the boot will all be green, symbolizing the boot’s eco-friendliness. In addition, there will be a green Timberland logo on the side. To allow customers to see their impact in a more tangible manner, the sole of the boot will come with a tree imprint that will stamp the ground customers walk on. As for the Fashionistas, a stylish boot, chiefly intended for women, has been created. We have set our products and services on three levels. In term of product we are going to come up with strategies in quality, warranty and customization

Quality: As we are entering in a highly competitive market where all the products are identical, so what makes Timberland different is the quality of the product. We will assure that, money the customer will spend on their shoes will worth it.

Warranty: To gain customer loyalty we will provide one month warranty to every customer that if any fault has been seen after purchase we will exchange with a new pair of shoes.

Customization: this is the most unique feature of Timberland compared to other footwear manufacturing companies. With some extra money customer of Timberland has the privilege to customize their shoes in terms of Body, Collar, Hardware, Laces Midsole, Outsole even Monogram too.

Price: Now a day’s customers are quality oriented rather than price oriented. We will provide customer best quality of products at a premium price. We keep our price higher than the other shops as our items are much better than them. Prices of our products are following

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Gender Products Price

Range

(BDT)

Men

Hiking Shoes

Boots

Shoes

Sandals

5000-10000

14000-24000

8000-20000

2500-7500

Women

Sandals

Shoes

boots

5000-9500

6000-16000

10000-24000

Place: Primarily we will open our outlet at Gulshan but later we are planning to open more retail outlets in places like Banani, Uttara and shopping malls like Pink city, Bashundhara city and Jamuna Future Park where there is consistent foot traffic with all the latest design and product of Timberland. We are trying to provide information of our latest promotions and product range through mobiles to our customers. It can be easy for anyone to retrieve information regarding our brand anywhere and anytime. This will definitely attract more customers to our Timberland stores and help building a strong brand image.

Promotion: Timberland is an internationally recognized brand but in this country they are new so we put much emphasis in promotional activities. This has to be done using a massive advertising and promotion strategy. The promotion will be done in the following ways to ensure effective marketing for Timberland.

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Transcom is associated with many famous international brands like KFC and Pizza Hut and now we will be introducing Timberland in this country, so will have the benefit of promotion done by Timberland internationally with famous celebrities like David Duchovny, Julia Roberts.

Formulating easy to understand comprehensive and eye-catching brochures, leaflets and pamphlets with convincing words and circulate it at a mass level to the public in Dhaka city. The brochures will be distributed free of cost via agents at different parts of Dhaka. Leaflet can also be provided with daily newspaper circulation at various households, distributed at mass gatherings like after Friday prayers at mosques or in shopping complexes and University students.

We will use online social media to gain mass attention from customers all around the country. We will also use online marketing in the form of Facebook fan page and a twitter account. In this way, it can spread its word to local online users. Timberland might provide special discounts or offers once in a while for its Facebook fans or Twitter followers.

For students we will offer special discount up to 20% depending on the product.

To create awareness we will be using billboards in the prominent locations like Uttara, Banani and Bijay Sharani.

On the day o inauguration we will arrange a fashion show with famous celebrities of our country as our products model.

Running regular advertisements on all popular local and English newspapers and magazines. Along with advertisements, promotional brochures can also be printed as newspaper supplements to catch people’s attention.

Total Budget for Advertising Plan:

Advertisement Sectors Amount (BDT)Billboards 15,00,000

Newspapers 15,00,000Web Page Design 100,000

Magazines 600,000Leaflets 100,000Banners 100,000

Brochures 100,000Total 40,00,000

9.9 Expanded Mix for services

We will use expanded marketing mix strategy that includes people, physical evidence and process.

People: Employees can play a vital role in selling products and influence customer perceptions. Their dressed and personal appearance influence customer perception of the services. So we hire

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good quality employee and train them so that they can persuade our customer to perceive positively about our services. There will be 15 permanent employees with 5 part-time employees for the rush hour. Also there will be a highly qualified manager who will be capable of managing everything perfectly.

Physical evidence: The shop environment in where products will be sold and any components that facilitate performance and communication of services. We will focus on interior design, Boucher’s, Surrounding environment, music and the entire physical thing that can attract our customer.

Process: The flow of activities by which service is delivered. We will provide services to our customer efficiently and effectively.

Evaluation Sheet

We will prepare this sort of sheet because this would help us to know about the expectations of the customers. We can improve our service as we will know about their wants and expectations. If customers are dissatisfied with our service then we will be able to bring in a change with the help of our 'experts'. The suggestion box in the sheet might let us make familiar about the main problem being faced by the customers.

Criteria Rating

Delighted (4) Satisfied(3) Moderate(2) Dissatisfied(1)

Product Quality

Store Environment

Employee behavior

Overall service quality

Suggestions :

10.0 Operational plan

The following section will identify the proposed operational plan for Timberland. Included are the general operating procedures, sources of materials, geographical location, human resources, pricing strategy and breakeven point of the business.

10.1 General operating hours

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Timberland intends to operate every day from 10.00am to 10.00pm. We also expected to get more customers in the weekend and in various festivals like Eid, Puja so we will keep open our shop 12.00pm on the weekend and also in other festivals and occasions.

10.2 Arrangement of Raw Materials / Product

As we are not manufacturing our products in our country so we don’t have to import any sort of raw materials from any supplier rather we need to import our finished goods or final product. After considering all the facts we have decided that our primary choice for import footwear is China, second choice is Vietnam. Reasons for choosing both the country for the import of our product is the cost of production is of these countries are low compared to other countries manufacturing products of Timberland which in turn will help us to set our price in a way so that we can earn higher profit.

The flowchart drawn below will help understand the overall process.

10.3 Distribution System

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Import in every two months

Transport in own van

Store in a warehouse

Move to outlet for sales

Distributor 1

(CHINA)IF Fail

Distributor 2

(VIETNAM)

Customer comes to the outlet Sales

manager

Cash counter

Customer 1 Customer 3Customer 2 Customer 4

10.4 Technology utilization

We already mentioned that we are not manufacturing our products in this country so when it comes to the fact of technology utilization we are restricted in areas like selling, customer retention and maintaining our daily operations.

We will use latest accounting and other necessary software’s to keep track our daily sales and it will help us to create quarterly reports.

We will store all the necessary information which includes contact address and email address of our respective customers in our database system so that we stay connected with our customers and let them know about latest products and offers.

10.5 Skilled employees

We will not offer any sort of people who is looking for an internship rather we will hire college and university students looking for a part-time job and want to earn handsome money, beside we will have regular employees who are trained by Timberland.

10.6 Pricing strategy

The price of our product is bit higher than other products available in the market due to the superior quality of our product but we will offer special discount to students.

Future plan In the future Timberland will introduce more and more new product to the customers. We have plans to open new outlets at other areas in Dhaka, Chittagong and Sylhet. Internet based customer service will soon be introduced. We will provide 3 types of Cards to our special customers to buy the product with discount.

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11.0 Management Summary

The business’s management philosophy is based on responsibility and mutual respect, Timberland has an environment and structure that encourages productivity and respect for customers and fellow employees. We will concentrate on communicating with employee and be honest with them. We also share with our employees about our objectives, mission and vision for the business with the intent of generating a heighten level of motivation and support. We listen to the employees because we believe that they have intimate knowledge of business and its strengths and weakness and they can express valuable suggestions.

11.1 Personnel plan

As Transcom is entering in a new industry (Footwear industry) and we consider ourselves as employees of Trasncom who are in charge of their footwear section. Overall, Timberland will have 20 personnel. How many personnel requires on the basis of time in two branches that is given bellow:

Type of employees Number of Employees Position of Employees

Full time employees 20 Business Manager (1),

Accountant (1),

Operation Manager (2) ,

Sales man (10),

Cash counter (2) ,

Security guard (4)

Total 20

Business manager

As initially we have only one outlet we will hire one person who will work as business manager and whose main job monitor the outlet and keep track all the transaction.

Accountant

40

In the beginning we will hire an accountant on weekly basis whose main job will be to come once in a week and cross check all the transactions and then enter those transaction data in the database.

Operation Manager

The main job of our operation manager will be to check the inventories while clearing the port and then again recheck those inventories while storing in the warehouse and finally they have to keep track of those inventories which are running short and notify the purchase department,

Sales man

We will have eight full time and two part time sales employees to run our day to day selling activities.

Cash counter

In the outlet we will have two cash counters so that our customers don’t need to wait in line after the purchase of our product.

Security guards

We will employ four security guards to guard our outlet and warehouse.

12.0 Financial Plan:

12.1 Anticipating reader’s concern:

Transcom will only the interested to bring the Franchise of Timberland’s is the ROI and IRR is greater than the Transcom’s Hurdle rate. Hurdle rate in simple form is considered as the

41

minimum rate of return for investment. The hurdle rate for Transcom is 9.99%. The calculation of the hurdle rate is shown in Appendix.

12.2 The Initial investment:

The capital required for initial investment is TK 20,661,000 out of which Transcom will invest TK 12,161,000, the remaining 8,500,000 Tk will be taken as bank loan. The bank loan will be used for the down payment of land and remaining cost will be supported from the investment of Transcom. The detail of initial investment is given below:

Initial Cost US Dollar ($) Taka

Initial Franchise Fee 100,000 7,780,000

Marketing Startup Fee 20,000 1,556,000

Down payment for land 8,500,000

Electronic Cash Register 25,000

Site Development 850,000

Furniture 1,000,000

Employee Training 500,000

Miscellaneous Cost 450,000

Total 20,661,000

12.3 The Pro Forma Income statements for next five years are given below:

Profit and loss Account Year 1 Year 2

Taka Taka Taka Taka

42

Sales 35,000,000 40,250,000

Cost of Goods sold 8,500,000 9,095,000

Gross Profit 26,500,000 31,155,000

Less: oparating Expenses

Salaries 950,000 1,045,000

Depreciation 600,000 600,000

Amortization of Intangible Assets 350,000 350,000

Royalty Fees 2,450,000 2,012,500

Miscellanous Expenses 500,000 535,000

Rent 1,200,000 1,200,000

Prepaid Rent (8,500,000) (8,500,000)

Insurance 450,000 450,000

Utilities 1,000,000 1,000,000

Marketing 4,000,000 3,800,000

Total Expenses 3,000,000 2,492,500

EBIT 23,500,000 28,662,500

Interest 3,525,000 4,299,375

EBT 19,975,000 24,363,125

Tax 8,988,750 10,963,406

Net Profit 10,986,250 13,399,719

Profit and loss Account Year 3 Year 4

Taka Taka Taka Taka

43

Sales 46,287,500 53,230,625

Cost of Goods sold 10,004,500 11,505,175

Gross Profit 36,283,000 41,725,450

Less: operating Expenses

Salaries 1,170,400 1,310,848

Depreciation 600,000 600,000

Amortization of Intangible Assets 350,000 350,000

Royalty Fees 2,314,375 2,661,531

Miscellaneous Expenses 561,750 606,690

Rent 1,400,000 1,400,000

Prepaid Rent (8,500,000) (8,500,000)

Insurance 450,000 450,000

Utilities 1,200,000 1,200,000

Marketing 3,781,000 3,591,950

Total Expenses 3,327,525 3,671,019

EBIT 32,955,475 38,054,431

Interest 4,943,321 5,708,165

EBT 28,012,154 32,346,266

Tax 12,605,469 14,555,820

Net Profit 15,406,685 17,790,446

Profit and loss Account Year 5

Taka Taka

44

Sales 61,215,219

Cost of Goods sold 13,115,900

Gross Profit 48,099,319

Less: operating Expenses

Salaries 1,468,150

Depreciation 600,000

Amortization of Intangible Assets 350,000

Royalty Fees 3,060,761

Miscellaneous Expenses 679,493

Rent 1,800,000

Prepaid Rent (8,500,000)

Insurance 450,000

Utilities 1,400,000

Marketing 3,053,158

Total Expenses 4,361,561

EBIT 43,737,758

Interest 6,560,664

EBT 37,177,094

Tax 16,729,692

Net Profit 20,447,402

he pro forma income statements for five years shows

Net profit in year 1: 10,986,250 , Net profit in year 2: 13,399,719, Net profit in year 3: 15,406,685, Net profit in year 4: 17,790,446,Net profit in year 5: 20,447,402

12.4 Pro Forma Cash flow Statements for next five years

Pro forma Cash flow statement for Year 1

Year 1

Q1 Q2 Q3 Q4

Opening Balance 16,329,500 28,265,750 40,202,000

45

Net Cash provided by Operating activities

Net Income 10,986,250

Depreciation 600,000

Ammortization of intangible assets 350,000

Net Cash provided by Operating activities

11,936,250 11,936,250 11,936,250 11,936,250

Net cash provided by Investing Activities

Capital Investment (20,661,000)

Net cash used by investment activities

(20,661,000)

Cash from Financing Activities

Capital Received from Transcom 12,396,600

Bank loan 8,264,400

Interest Paid (3,525,000)

Net Cash used by financing activities

20,661,000

Net increase/Decrease in Cash 11,936,250 11,936,250 11,936,250 8,411,250

Closing Balance 16,329,500 28,265,750 40,202,000 48,613,250

Pro forma Cash flow statement for Year 2

Year 2

Q1 Q2 Q3 Q4

Opening Balance 48,613,250 62,962,969 77,312,688 91,662,407

46

Net Cash provided by Operating activities

Net Income 13,399,719

Depreciation 600,000

Amortization of intangible assets 350,000

Net Cash provided by Operating activities

14,349,719 14,349,719 14,349,719 14,349,719

Net cash provided by Investing Activities

Capital Investment

Net cash used by investment activities

Cash from Financing Activities

Capital Received from Transcom

Bank loan

Interest Paid (4,299,375)

Net Cash used by financing activities

Net increase/Decrease in Cash 14,349,719 14,349,719 14,349,719 10,050,344

Closing Balance 62,962,969 77,312,688 91,662,407 101,712,751

Pro forma Cash flow statement for Year 3

Year 3

Q1 Q2 Q3 Q4

Opening Balance 101,712,751 118,069,436 134,426,121 150,782,806

47

Net Cash provided by Operating activities

Net Income 15,406,685

Depreciation 600,000

Amortization of intangible assets 350,000

Net Cash provided by Operating activities

16,356,685 16,356,685 16,356,685 16,356,685

Net cash provided by Investing Activities

Capital Investment

Net cash used by investment activities

Cash from Financing Activities

Capital Received from Transcom

Bank loan

Interest Paid (4,943,321)

Net Cash used by financing activities

Net increase/Decrease in Cash 16,356,685 16,356,685 16,356,685 11,413,364

Closing Balance 118,069,436 134,426,121 150,782,806 162,196,170

Pro forma Cash flow statement for Year 4

Year 4

Q1 Q2 Q3 Q4

Opening Balance 162,196,170 180,936,616 199,677,063 218,417,509

48

Net Cash provided by Operating activities

Net Income 17,790,446

Depreciation 600,000

Amortization of intangible assets 350,000

Net Cash provided by Operating activities

18,740,446 18,740,446 18,740,446 18,740,446

Net cash provided by Investing Activities

Capital Investment

Net cash used by investment activities

Cash from Financing Activities

Capital Received from Transcom

Bank loan

Interest Paid (5,708,165)

Net Cash used by financing activities

Net increase/Decrease in Cash 18,740,446 18,740,446 18,740,446 13,032,282

Closing Balance 180,936,616 199,677,063 218,417,509 231,449,791

Pro forma Cash flow statement for Year 5

Year 5

Q1 Q2 Q3 Q4

49

Opening Balance 231,449,791 252,847,193 274,244,594 295,641,996

Net Cash provided by Operating activities

Net Income 20,447,402

Depreciation 600,000

Amortization of intangible assets

350,000

Net Cash provided by Operating activities

21,397,402 21,397,402 21,397,402 21,397,402

Net cash provided by Investing Activities

Capital Investment

Net cash used by investment activities

Cash from Financing Activities

Capital Received from Transcom

Bank loan

Interest Paid (6,560,664)

Net Cash used by financing activities

Net increase/Decrease in Cash 21,397,402 21,397,402 21,397,402 14,836,738

Closing Balance 252,847,193 274,244,594 295,641,996 310,478,734

12.5 Pro forma balance sheet for next five years

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Pro Forma Balance sheet For Year 1 Taka Dep(Taka) Net(Taka)

Assets

Current Assets

Cash 48,613,250

Prepaid Rent 8,500,000

Other Current Assets 1,107,350

Total Current Assets 58,220,600

Property, Plant & Equipment

Furniture 1,000,000 100,000 900,000

Cash Register 25,000 2,500 22,500

Intangible Assets

Franchise Fee 7,780,000 778,000 7,002,000

Marketing Startup Fee 1,556,000 155,600 1,400,400

Site Development 850,000 85,000 765,000

Training 500,000 50,000 450,000

Total Assets 68,760,500

Current Liabilities

Working Capital Loan 21,107,350

Working Capital 37,113,250

Capital Employed

Owner's equity

Capital 12,396,600

Net profit 10,986,250

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Long term Loan 8,264,400 31,647,250

Total Liabilities & Owner's Equity 68,760,500

Pro Forma Balance sheet For Year 2

Taka Dep (Taka)

Net (Taka)

Assets

Current Assets

Cash 101,712,751

Prepaid Rent 6,500,000

Total Current Assets 108,212,751

Property, Plant & Equipment

Furniture 1,000,000 200,000 800,000

Cash Register 25,000 5,000 20,000

Total Fixed Asset 820,000

Intangible Assets

Franchise Fee 7,780,000 1,556,000 6,224,000

Marketing Startup Fee 1,556,000 311,200 1,244,800

Site Development 850,000 170,000 680,000

Training 500,000 100,000 400,000

Total Assets 123,805,551

Current Liabilities

Working Capital Loan 40,000,000

Working Capital 68,212,751

52

Accounts Payable 5,272,916

Accrued Liabilities 5,272,916

Owner's equity

Capital 12,396,600

Retained Earning 24,385,969

Long term Loan 8,264,400

Total Liabilities & Owner's Equity 123,805,551

Pro Forma Balance sheet For Year 3

Taka Dep (Taka)

Net (Taka)

Assets

Current Assets

Cash 162,196,170

Prepaid Rent 4,500,000

Total Current Assets 166,696,170

Property, Plant & Equipment

Furniture 1,000,000 300,000 700,000

Cash Register 25,000 7,500 17,500

Total Fixed Asset 717,500

Intangible Assets

Franchise Fee 7,780,000 2,334,000 5,446,000

Marketing Startup Fee 1,556,000 466,800 1,089,200

Site Development 850,000 255,000 595,000

53

Training 500,000 150,000 350,000

Total Assets 174,893,870

Current Liabilities

Working Capital Loan 80,000,000

Working Capital 86,696,170

Accounts Payable 3,635,895

Accrued Liabilities 24,108,152

Owner's equity

Capital 12,396,600

Retained Earning 39,792,653

Long term Loan 8,264,400

Total Liabilities & Owner's Equity

174,893,870

54

Pro Forma Balance sheet For Year 4

Taka Dep (Taka) Net (Taka)

Assets

Current Assets

Cash 231,449,791

Prepaid Rent 2,500,000

Total Current Assets 233,949,791

Property, Plant & Equipment

Furniture 1,000,000 400,000 600,000

Cash Register 25,000 10,000 15,000

Total Fixed Asset 615,000

Intangible Assets

Franchise Fee 7,780,000 3,112,000 4,668,000

Marketing Startup Fee 1,556,000 622,400 933,600

Site Development 850,000 340,000 510,000

Training 500,000 200,000 300,000

Total Assets 240,976,391

Current Liabilities

Working Capital Loan 113,912,604

Working Capital 120,037,187

Accounts Payable 25,617,062

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Accrued Liabilities 17,078,042

Owner's equity

Capital 12,396,600

Retained Earning 57,583,100

Long term Loan 8,264,400

Total Liabilities & Owner's Equity

240,976,391

Pro Forma Balance sheet For Year 5 Taka Dep (Taka)

Net (Taka)

Assets

Current Assets

Cash 310,478,734

Prepaid Rent 1,500,000

Total Current Assets 311,978,734

Property, Plant & Equipment

Furniture 1,000,000 500,000 500,000

Cash Register 25,000 12,500 12,500

Total Fixed Asset 512,500

Intangible Assets

Franchise Fee 7,780,000 3,890,000 3,890,000

Marketing Startup Fee 1,556,000 778,000 778,000

Site Development 850,000 425,000 425,000

56

Training 500,000 250,000 250,000

Total Assets 317,834,234

Current Liabilities

Working Capital Loan 164,357,050

Working Capital 147,621,684

Accounts Payable 46,488,682

Accrued Liabilities 25,032,367

Owner's equity

Capital 12,396,600

Retained Earning 78,030,501

Long term Loan 8,264,400

Total Liabilities And Owner's Equity

317,834,234

12.6 Definitions and assumptions of few elements of financial statements

Sales:

Each year there will be an increase in sales by 15%. It is because we believe that that Timberland is a well-known international brand and it’s the huge range of premium quality shoes that differentiate us from our competitors. Our wide range of products will allow us to attract more customers as the time pass. Timberland will be maintaining its premium quality thereby, that will not only retain the existing customers but also attract new customers. Therefore we believe that the sales may increase above this mentioned percentage.

Cost of Goods sold:

The cost of goods sold is estimated to 15% of the total sales. This percentage will be maintained for following years. The cost of goods sold is minimum we will not be manufacturing any products. We will be purchasing from Timberland Franchisor at wholesale price.

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Gross Profit:

The Gross profit margin is estimated to 75% of the total sales. The reason behind maintain such high profit margin is that Timberland BD will be required to provide a royalty fee to its franchisor.

Depreciation and Amortization

The calculation for depreciation is done through straight line basis with ten years life and with no scrap value. The details of depreciation and Amortization are given below:

Year 1 Year 2 Year 3 Year 4 Year 5

Cash Register 25,000 2,500 5,000 7,500 10,000 12,500

Furniture 1,000,000 100,000 200,000 300,000 400,000 500,000

Amortization of Intangible Assets

Franchise Fee 7,780,000 778,000 1,556,000 2,334,000 3,112,000 3,890,000

Marketing Startup Fee 1,556,000 155,600 311,200 466,800 622,400 778,000

Site Development 850,000 85,000 170,000 255,000 340,000 425,000

Training 500,000 50,000 100,000 150,000 200,000 250,000

Royalty Fees:

Royalty fee is the percentage of sales that is given to Franchisor. The royalty fee for Timberland is fixed at 5% of total sales of the year.

Miscellaneous Expenses:

These expenses include the travelling cost, telephone cost etc. we observed that the change is inflation rate for the years is on average 3 point basis. Therefore we assumed that expected rate of inflation will be will 3 point basis at will be increasing at an increasing rate. Therefore, there will be a .03% change in miscellaneous expense for the years.

Marketing Expense:

40000000 TK is allocated yearly for marketing expenses that include advertisement on paper and maintaining web domain and bill board advertisement.

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12.7 The Break even analysis for first year:

Timberland’s products can be classified in two broad categories: Men and women shoes. As Timberland is well known for its Men shoe items we are assuming that 65% of our revenue will be generated from men shoes. The remaining 35% revenue will be generated from women shoes. The total revenue generated for the first year is assumed to TK 35,000,000 and it is multiply by the above mentioned percentage to find the revenue generated by each category. The calculation is shown below:

Category Calculation Revenue Generated by Each Section

Men Footwear 35,000,000*65% 22,750,000

Women Footwear 35,000,000*35% 12,250,000

We are assuming that the cost of good that is the variable cost will be 30% of the selling price. To find the unit contribution margin for each category of product we first have to find the variable cost of the each category. Following shows the average price of each category and its variable cost:

Items Average Selling Price

Variable Cost per Unit

Contribution Margin per unit

Men Footwear 6,625 1988 4673

Women Footwear 9,667 2900 6767

Now to find the contribution margin ratio for each category the unit contribution margin will be divided by the selling price. The calculation is given below:

Items Calculation Contribution margin ratio

Men Footwear 4673/6,625* 100% 70%

Women Footwear 2900/9,667*100% 30%

59

Annual Contribution margin for each category

Men Footwear: 22,750,000*70% = 15,925,000 (BDT)

Women Footwear: 12,250,000*30% = 3,675,000 (BDT)

Contribution margin for entire business: 19,600,000/35,000,000*100% = 56%

The fixed cost for the Timberland BD is assumed to 1,65,0000 TK. Therefore the breakeven point for Timberland is

Break-even Point in TK= annual fixed expenses/ contribution margin ratio for the entire business

1,65,0000*56% = 924,000 (BDT)

12.8 The Calculation of IRR:

The Internal Rate of Return, or IRR for short, is a measure of your investment performance, and is expressed as percent return per year. The calculation if IRR for Timberland is given below:

Calculation of IRR

Initial Investment (20,396,000)

Net profit for year 1 10,986,250

Net profit for year 2 13,399,719

Net profit for year 3 15,406,685

Net profit for year 4 17,790,446

Net profit for year 5 20,447,402

IRR 60%

The IRR is much higher than the Hurdle rate of Transcom therefore Transcom should invest in this project.

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12.9 The NPV analysis

Data Description

10% Annual discount rate

(12,396,600) Initial cost of Investment

15,516,033 Return from first year

34,540,125 return from second year

47,675,484 return from third year

76,783,890 return from fourth year

112,039,288 return from fifth year

170,987,047 NPV

Form the above analysis we can see that the NPV for this project is positive so Transcom should proceed with this project.

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13.0 Risk management plan

In this risk management plan we will mention risk factors for our business and how can we reduce risk.

13.1 Risks related to our business

We operate in a highly competitive industry

We market our products in highly competitive environments. Many of our competitors are larger and have substantially greater resources for marketing, research and development and other purposes. Furthermore, efforts by our competitors to dispose of their excess inventory could put downward pressure on retail prices and could cause to redirect some of their purchases away from our products.

Difficulties matching our products to consumer preferences and demand

As we continue to sell established products our success depends in large part on our ability to anticipate, understand and react to changing consumer demands. We believe that our more fashion-focused products are more susceptible to changing fashion trends and consumer preferences than our other products. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change. The success of our products and marketing strategy will also depend on a favorable reception by our customers. Any failure on our part to anticipate, identify and respond effectively to changing consumer demands and fashion trends could adversely affect retail and consumer acceptance of our products and leave us with unsold inventory or missed opportunities. If that occurs, we may be forced to rely on markdowns or promotional sales to dispose of excess, slow-moving inventory, which may harm our business.

Unable to execute key strategic initiatives

We continue to take actions to restructure our business operations to maximize operating effectiveness and efficiency and to reduce costs. Achievement of the targeted benefits depends in part on our ability to identify, develop and execute strategies and initiatives appropriately and effectively. We cannot assure you that we will achieve the targeted benefits under these programs within a targeted timeframe or within targeted costs or that the benefits, even if achieved, will be adequate.

Inflation, import restriction and taxes

Inflation, recession or other economic downturn might lead to the reduction in the purchasing power of our target market, in effect of which the revenue will be affected negatively, beside all

62

these if government restrict our import or increase import duty that will lead to increase of price and eventually it will have an impact our sales.

Disruption to the supply of our products

We are dependent only on two suppliers; if one of them backs out or unable to supply our products that will adversely affect our business

Inability to attract and retain qualified employees could impact our business

We compete for talented employees within our industry. We must maintain competitive compensation packages to recruit and retain qualified employees. Our failure to attract and retain qualified employees could adversely affect the sales, design and engineering of our products.

Business is affected by seasonality, which could result in fluctuations in our operating results

The mix of product sales may vary considerably from time to time as a result of changes in seasonal and geographic demand for particular types of footwear. As a result, we may not be able to predict our quarterly sales accurately. Accordingly, our results of operations are likely to fluctuate significantly from period to period. Results of operations in any period should not be considered indicative of the results to be expected for any future period.

Business could be adversely affected by governmental policies and regulation

Our business is affected by changes in government and regulatory policies in Bangladesh and in other countries. Changes in interest rates, tax laws, duties, tariffs and quotas could have a negative impact on our ability to produce and market our products at competitive prices.

13.3 Probability Impact Matrix

63

Risk Factors Low Medium High

Competition Within Industry

Consumer preferences and demand

Execution of key strategic initiatives

Inflation, import restrictions

Disruption in supply

Inability to attract and retain qualified employees

Business is affected by seasonality

Affected by governmental policies and regulation

Customer’s financial condition

13.4 Risk minimization

64

PROBABILITY

IMPACT

In our country various shoe companies are operating but not all of them are considered as our competitors. Our main competitors are offering various types of products and to beat them all we need is to introduce new line of products.

Consumer demand and preference is changing day by day and to catch up with them we need to focus more on consumer preference and to do that we should do surveys.

In order to attract qualified employees we need to offer them handsome salary and other facilities. After finding the right employees for our business we can retain them by giving them promotions, bonuses and if those employees are from sales department commission on per unit sales.

14.0 Proposal for Loan

65

Since lots of investment is required to enter into new industry. It is not possible to enter into such a business with just the capitals from the investors. The business should also have loan back up plan in order to run the business. Overall the capital part of a business consists of both loan and personal capital from owners.

Timberland is an innovative with a reputation for integrity, quality craftsmanship, and excellence in management. As mentioned earlier, the business plan will be carried out by Transcom Limited. Since it is a franchiser business it would be financed by 2 corers bank loan. We have already taken information regarding the loan and have selected Bank al Arafah as our business loan financer.

The total set up cost of the business is estimated to be BDT.2 cores. Tk. 1cores will be invested by the working capital which rate is 18.80% and the rest Tk. 1 cores will be invested by the fixed loan which rate is 6.50%. The main purpose of the loan is to help in the initial set up cost of the business like leasing land, construction, purchasing the furniture, hiring manpower etc. The repayment of the loan will be done in 72 monthly equal installments, at the end of every month with an annual interest of 15%

14.1 Cover Letter for loan Proposal

66

Date: March 22, 2014

To

Mr. FazluzSobhan

Loan Officer

Bank Al Arafah,

Dhaka

Dear Sir,

Please find enclosed all of the required documentation for a Small Business Loan from Bank AlArafaha detailed by you.

In addition to application forms I have also included the business plan of “Timberland”. In this summary you will find details of our activities, current assets, projected growth and expected financial objectives.

Please review the enclosed business plan and loan proposal, and of course feel free to ask for any additional information or explanations you may want. I will call you in about one week's time to arrange an appointment so we can discuss the loan in person.

I look forward to working with Bank Al Arafah in the future.

Yours sincerely,

___________________

Falil Mohiuddin Gaalib

15.0 Conclusion67

The Internet has totally changed the way we communicate and the way the public is informed, while compelling businesses to listen to the demands of the consumer. We now live in a consumer-driven business world where instant and easy access to information is not only what consumers want but what they expect.

When we developing our business plan we keep ourselves in our customer place and thought that why should I come here and why should I buy Timberland footwear? After realizing this entire situation we plan our product and make plan how we decorate our shop and what type of facility we provide in our shop.

As quality is our main concern we will be assuring to every buyers of our product that their investment is worth to the service of their products. Timberland’s age-long experience and brand image have given it a competitive advantage over all other brands. People prefer and know Timberland as a quality footwear manufacturer. Although Timberland has been quite successful with its marketing strategies, we will get more involved with advertisement and promotional activities and focus more on their products and services as competitors will emerge in the footwear market. With advanced planning and proper implementation of the plans, Timberland is expected to maintain its position in the footwear market, giving a good competition to all other footwear manufacturers of the country.

Appendix

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Calculations

Calculation of risk free rate (Rf):

Average inflation rate for last five years (year 2008 to year 2012) = 0.08664

American T-bill rate = 0.0248

Risk free rate ( Rf) = 0.11144

Calculation of Return on market (Rm) using all price index:

Index return on January 2008 = 2,529.66

Index return on December 2012 = 3,577.21

Average index return for last five years (Rm) = 0.41/5 = 0.082821

Calculation of Cost of capital for Transcom Ltd:

Formula: Rf + β ( Rm – Rf)

= 0.11144 + 0.65 (0.082821- 0.11144)

= 0.09283765

Beta for Fu-Wang Food Ltd = 0.65

Calculation of Cost of Debt for Transcom Ltd:

Formula: interest rate/ debt liabilities

= 5,213,605/ 66,497,124

= 0.078403

Calculation of weight of Debt for Transcom Ltd:

Total equity = 739,787,545

Total Debt =66,497,124

Total debt and equity = 806,284,669

Wd = 66,497,124 / 806,284,669

= 0.082474

Calculation of weight of equity for Transcom Ltd:

69

We = 739,787,545 / 806,284,669

= 0.917526

Weighted Average Cost of Capital for Fu- Transcom Ltd:

Formula: We × Ce + Wd × Cd (1 – T)

= 0.917526 × 0.09283765 + 0.082474 × 0.078403 (1 - .37.50)

= 0.089222= 8.9222%

Hurdle Rate= 8.9222% + 9.283765% = 18.205965%

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