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NAME OF STUDENT (PRINT CLEARLY) SENEVIRATNE LA FABER

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STUDENT ID. NO. 10153055 10163976

MKT 3120 INTERNATIONAL MARKETING

JITHENDRA ROSHANI

NAME OF TUTOR (PRINT CLEARLY)

MR. MARIO FONSEKA Topic of assignment MARKETING AUDIT / MARKETING PLAN Group or tutorial (if applicable) Course BACHELOR OF BUSINESS I certify that the attached assignment is my own work and that any material drawn from other sources has been acknowledged. Copyright in assignments remains my property. I grant permission to the University to make copies of assignments for assessment, review and/or record keeping purposes. I note that the University reserves the right to check my assignment for plagiarism. Should the reproduction of all or part of an assignment be required by the University for any purpose other than those mentioned above, appropriate authorisation will be sought from me on the relevant form. If handing in an assignment in a paper or other physical form, sign here to indicate that you have read this form, filled it in completely and that you certify as above.

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07/2/2010

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OR, if submitting this paper electronically as per instructions for the unit, place an X in the box below to indicate that you have read this form and filled it in completely and that you certify as above. Please include this page in/with your submission. Any electronic responses to this submission will be sent to your ECU email address. Agreement X Date 7/2/2010

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All forms of cheating, plagiarism or collusion are regarded seriously and could result in penalties including loss of marks, exclusion from the unit or cancellation of enrolment.

27.5/4 0

Allocation of Marks Marketing Audit Executive summary Socio-cultural analysis Economic analysis The Product The Market Sources of information Marketing Plan Executive Summary Marketing Objectives Product adaptation Promotional mix Distribution strategy Financial statements Resource requirements Total Marks Pricing, terms of sale & payment methods 0.0/1 1.6/2 Volanka Limited 3.2/4 1.6/2 0.9/1 3.3/6 3.3/6 0.8/1 1.6/2 2.8/4

Marketing Audit and Marketing Plan 2.8/4

2.7/3

2.4/3

(Austrian Market) 27.5/40

0.5/1

The Socio-cultural analysis, and the Economic Analysis were both too brief for this assignment There should have been an Exec.Summary for the Marketing Plan done separately Besides the budget details there should have been a separate section about resource requirements

Name Jithendra Seneviratne

ECU No. 10153055

Roshani La-Faber

10163976 Team Member Declaration

Note: please note that his document should be included as a part of each of your group assignment submissions just after the cover page before the contents page or executive summary (whichever may be the next page in your submission). As this is to be a part of your soft copy submission of your group assignments, each of the group members should scan their signature in a .jpeg format (so that its not too memory consuming) and include it in this document, inside the cage provided and clearly print your name in both the places provided, and delete whichever phrase is applicable as far as other team member contributions were concerned in completing each assignment.

I, Jithendra Seneviratne hereby declare that I significantly contributed towards the discussions and preparation of this assignment and I place my signature here as a sign of proof of that claim. I also agree that all other members who have placed their signatures here contributed towards the completion of this assignment

Jithendra Seneviratne 07/02/2010

I, Roshani La-Faber hereby declare that I significantly contributed towards the discussions and preparation of this assignment and I place my signature here as a sign of proof of that claim. I also agree that all other members who have placed their signatures here contributed towards the completion of this assignment

Roshani La-Faber
07/02/2010

Original document prepared by: Mario Fonseka ACBT Lecturer June, 2009

Marketing Audit

Executive Summary
This report has been prepared at the request of the management of Volanka Limited for the purpose of evaluating environmental and market conditions present in Austria. Volanka Limited hopes to expand its business of exporting coir products, by penetrating the Austrian market. Although Volanka Limited enjoys substantial exports to Europe, the Austrian market is important for one particular reason. Austria lies in the crossroads of Central Europe and will give Volanka Limited vital access to other markets. The most significant socio-economic factors that affect the proposed venture are; that Austrians are receptive to products with socio economic relevance, and that Austria is slower to open up its markets to international trade, than other European nations. It should be noted that the observances stated above are conflicting. Further, many economic factors within Austria are of relevance to Volanka Limited. The Austrian markets resilience to the economic downturn is reassuring to foreign investors. Further, the vast number of medium size enterprises in Austria poses an opportunity to Volanka; in terms of marketing its agricultural produce. With respect to the market for coir itself, much of Austrian land is arable, and is used for agriculture. Therefore the market for agricultural coir products is strong. Further, large department stores are assumed to be the most viable customers for household coir products. These stores have well developed distribution channels, which Volanka Limited can make use of. When considering competition, although Volanka is a significant player in terms of local coir production, India overwhelms Sri Lanka through sheer volumes produced. However, since the Indian industry comprises of small family owned businesses, Sri Lankan companies, which are larger in size, can take advantage of economies of scale, and can secure better deals with European buyers. The marketing audit suggests that Austria is a viable business prospect .Therefore this market should be explored.

Contents
Executive Summary.................................................................................................................5 1.0 Introduction........................................................................................................................7 1.1 Socio Cultural Analysis.................................................................................................8 1.2 Economic Analysis.........................................................................................................9 2.0 The Product......................................................................................................................10 2.1 Coir...............................................................................................................................10 2.2 Agricultural Goods.......................................................................................................11 2.3 Household Products.....................................................................................................11 2.4 Implications..................................................................................................................12 3.0 Market Analysis...............................................................................................................12 3.1 Geographic Regions.....................................................................................................12 3.2 Transport......................................................................................................................13 3.3 Distribution Trends......................................................................................................14 3.3 (a) Household Products............................................................................................14 3.3 (b) Agricultural Products.........................................................................................15 3.4 Marketing Trends.........................................................................................................15 3.5 Competitor Products ....................................................................................................15 3.6 Competitor Prices and Promotion ...............................................................................16 3.7 Market Size and Sales..................................................................................................17 3.7 (a) Industry...............................................................................................................17 3.7 (b) Volanka Limited.................................................................................................17 3.8 Government Participation in the Marketplace.............................................................18 4.0 Reference List...................................................................................................................19 5.0 Appendices.......................................................................................................................21 5.1 Appendix 1 Product Choices....................................................................................21 5.2 Appendix 2 Population Density in Austria (by Region)..........................................22 1.0 The Target Market............................................................................................................26 2.0 Business Objectives and Expected Sales.........................................................................26 3.0 The Business Model.........................................................................................................27 4.0 Promotion Mix.................................................................................................................28 4.1 Integrated Marketing Communications (IMC) Plan....................................................28 4.2 Promotional Objectives and Promotion tools..............................................................28 4.2 (a) Trade Shows.......................................................................................................29 4.2 (b) Magazines and Press..........................................................................................29 4.2 (c) Personal Selling..................................................................................................30 4.2 (d) The Web.............................................................................................................30 5.0 Distribution.......................................................................................................................30 5.1 Agricultural Products...................................................................................................31 5.2 Household Goods.........................................................................................................31 5.3 Port and Mode Selection..............................................................................................32 5.4 Packaging.....................................................................................................................32 5.5 Documentation Required.............................................................................................33

6.0 Price Determination..........................................................................................................33 6.1 Cost of Shipping Goods...............................................................................................34 6.2 Other Costs ..................................................................................................................34 6.3 Payment Methods.........................................................................................................35 7.0 Budgets.............................................................................................................................35 7.1 Product Costs................................................................................................................35 7.2 Annual Sales.................................................................................................................36 7.3 Administrative Costs....................................................................................................36 7.4 Investment Appraisal...................................................................................................37 8.0 Reference List...................................................................................................................38 9.0 Appendices.......................................................................................................................39 9.1 Appendix 1 Business Model.....................................................................................39 9.2 Appendix 2 - Unit Costs and Prices ............................................................................40 ............................................................................................................................................40 9.3 Appendix 3 - Revenue..................................................................................................41 ............................................................................................................................................41 9.4 Appendix 4 - Cost of Sales..........................................................................................41 9.5 Appendix 5 - Overhead Costs......................................................................................43 ...........................................................................................................................................43 9.6 Appendix 6 - Investment Appraisal.............................................................................45

1.0 Introduction
Volanka Limited, one of Sri Lankas largest exporters of coir products, hopes to expand its exports to Europe by penetrating the Austrian market. A number of variables affect foreign marketers operating in Austria. Below is a brief description of the external conditions that may affect the proposed venture.

1.1 Socio Cultural Analysis

Prior to devising a marketing plan to sell the companys chosen products in Austria, it is important to assess the environmental conditions which have a bearing on the venture. Austria is a multicultural and multiethnic society, and has a large immigrant population originating from outside the EU (Austria in Brief, n.d). As a result, Austrians are receptive to products, services and ideas that come with an unfamiliar ethnic flavour. Therefore, aesthetic coir products intended for end consumers have potential in this market. It should also be noted that Austrians are sceptical about integration (with the outside world), primarily due to the diminished security that reforms bring; such as reduction in social welfare (Prisching, 2006). Further, since 1945, Austrians have become increasingly conscious of their national identity (Luft, 1987). Therefore, a perceived invasion by foreign goods may not be welcomed by Austrians, and marketers should ensure that products complement pluralism, and do not undermine Austrians identity. The strength of the Austrian identity is evident in the contempt shown by the people of Salzburg towards The Sound of Music Tourism. The people of Salzburg believe commercialising The Sound of Music has a detrimental effect on culture, history and heritage (Graml, 2004). However, owing to Austrias effort to embrace pluralism, as well as Austrias efforts in strengthening ties with Asia (Austria in Brief, n.d), culturally and socially significant products may be seen favourably by Austrians. Austrian cultural policy suggests a positive attitude towards cooperation with other European countries, and indeed, the rest of the world (Earthtrends Country Profiles: Austria, n.d). There is a significant socioeconomic relevance in building the coir industry, since most of those involved in the manufacturing of coir come from less privileged communities (Fernandez, n.d); which gives marketers the opportunity to link these socio-economic traits of the coir industry with the pluralism promoted by Austria.

As a final note, when marketing goods, it is common knowledge that religious and cultural festivals are prime opportunities to exploit. Although Austria is a pluralistic society, the majority of Austrians belong to the Christian faith (Holzeithner & Strasser, 2006). Therefore marketers should prepare for exaggerated demand during the festive season (Christmas).

1.2 Economic Analysis

Austria seems to have weathered the recession better than most other countries within the European Union (P. Mueller, personal communication, January 21st, 2010). However, the country did witness a slump in gross domestic product, with a negative growth rate of 2.9% (Austria GDP Growth Rate, 2009). This fall in GDP is likely to have an impact on agriculture; a sector still adjusting to reforms imposed in 2004-2005 (The Austrian Agricultural Policy, n.d). As stated previously, growth in agriculture has a significant bearing on the demand for coir products. Another economic condition which affects the coir industry is the corporate makeup of Austrian firms. Marketers of coir products would essentially target small and mid sized firms, especially where agricultural goods are concerned. SMEs make up 99% of all Austrian enterprises, and the Austrian government recognises the importance of small enterprises by offering them loans at concessionary interest rates (Glatz & Chan, 1999); which is encouraging news for coir distributors. Furthermore, Austria is an attractive area for franchising, as German franchising systems have influenced the region to a great extent, since the fall of communism (Glatz & Chan, 1999). This will have a bearing on the business model chosen for the selling of coir products, as the option of opening franchises may be cost efficient. Further, it is important to note that a number of large retail stores may be involved in franchising, which may have a bearing on the total sales made by the retail sector. This will indirectly affect demand for

Sri Lankan coir produce. The final decision for the business model for the new venture can be viewed under the Marketing Plan. Glatz & Chan (1999) also state that Austrian industries use the most technologically advanced equipment, which adhere to strict environmental laws. Naturally, advanced processes have higher costs attached to them. Further, they state that Austria has predictably high labour costs, which should also be borne in mind when distributing coir. It should also be noted that, in countering high labour costs, employing workers from other regions may not be viable, since Austria has restrictions on the free movement of labour (Krings, 2009). In 1995, Austria took steps to integrate itself with the EU (Austria in Brief, n.d) which opened its markets to its neighbours. International marketers have a tremendous opportunity in exploiting the lack of trade barriers between Austria and its numerous trading partners. Furthermore, the country has taken steps to strengthen its capital markets (Structural Reforms on the Product and Capital Markets, n.d). Therefore, Volanka Limited may be in a position to obtain cheap debt funding in Austria to fuel the distribution of consumer goods via agents (see appendix 1 of the Marketing Plan).

2.0 The Product

2.1 Coir
South Asia is the region of coconuts. In fact, just North of Sri Lanka is the true land of coconuts: Kerala. Kerala literally translates to land of coconuts. Coconut related industries thrive in this region, and one such industry is coir. Sri Lankan rural communities have benefited immensely from coir ever since the industry came into being. Volanka Limited currently sells coir products in three continents, and much of its sales come from Europe (I. Piyansena, personal communication, January 23rd, 2010). For this reason, Volanka Limited has decided to strengthen its presence in Europe by penetrating the Austrian market. The proposed products for the venture fall under two broad categories:

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agricultural products and household goods. These items have been listed under appendix 1 of this marketing audit. The business model used to market these goods can be viewed under appendix 1 to the marketing plan.

2.2 Agricultural Goods

These goods are observable and tangible. Therefore buyers have some sense of assurance over what they purchase. However, many potential buyers (estate owners and farmers) may not be present at trade fairs, and will rely entirely on internet catalogues for their purchase decisions. Therefore goods need to be presented well over the website in order to secure the customers confidence. Although most goods are low in complexity, some goods, such as coco peat, may be difficult to grasp. Coco peat is known as an effective substitute for peat soil (which is used as a fertiliser in agriculture). The bio-chemical workings of coco peat may not be easily understood by the target market, and potential buyers may not be convinced by the products uses. Furthermore, such products have low trialability, since the effects of substances such as coco peat will be felt only after some time. Nevertheless, these goods are compatible with the target market. Although agriculture takes second place to industry in Austria (P. Mueller, personal communication, January 21st, 2010), about 80% of Austrias land is fertile, and is suitable for agriculture (Austria in Brief, n.d). Therefore these goods are a good match for the target market.

2.3 Household Products

These goods are, once again, observable and tangible. They are expected to be displayed at retail stores in an aesthetically pleasing manner. Household coir products, unlike some of the goods used for agriculture, are low in complexity, for these products are put to very basic uses. Further, the goods are high in trialability; for they can be examined and tested at the point of purchase.

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However, some house owners who are unfamiliar with coir goods may not see valid use in the products; mistaking them for ornaments alone. Although these products are to be marketed for their aesthetic value, their utility value should take priority, and they should be promoted as such. It has been said that quality is defined by the customer (Cateora, et al., 2009), and it is important that customers perceive the product in the same way that the organisation intends.

2.4 Implications
From the details stated above, we may gather that marketing agricultural goods is more difficult than marketing household products. The high complexity and lack of trialabiltiy of agricultural coir products makes these goods more vulnerable to failure. On the other hand, household products may have a more certain future in Austria. As stated in the socioeconomic analysis, Austria is receptive to cultural novelties, and products with socioeconomic relevance. Therefore, there must be a substantial focus of resources on the marketing of agricultural goods, if Volanka Limited is to make an impact in the new market.

3.0 Market Analysis

3.1 Geographic Regions
While Austria consists of nine unique States, Vienna will be the initial focus for marketing consumer coir products. Although small in size, the State is home to 1.6million people

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(Austria in Brief, n.d). It can be expected that cosmopolitan cities will yield the highest revenue from sales of coir products, and since Vienna holds 19% of resident foreign nationals in Austria (Austria in Brief, n.d), it is the prime market for penetration. Although two other States are heavily populated (Upper and Lower Austria), the vastness of these regions means that inhabitants are widely dispersed, and investment will not be as economically rewarding. Further, not only does Vienna have the highest population in Austria (Austria in Brief, n.d), it also has the highest population density by a considerable margin (see appendix 2). This is important for setting up sales points for consumer goods. About 80% of Austrian territory is used for agricultural purposes (Austria in Brief, n.d), and therefore, the potential demand for complimentary goods in agriculture (such as coco peat) remains strong. Further, Austrias geographical position is such that it lies on the crossroads between the West and the East (Austria in Brief, n.d). As a result, Austria has become a trading hub within Western and Central Europe, for commercial and agricultural goods. Therefore, centralised distribution of coir products may allow the firm to tap into regional demand as well.

3.2 Transport
Both commercial and public transport is highly developed in Austria. Tram systems cover 241km in the cities; while the underground metro system has a far broader coverage, and offers frequent service (Stofer, n.d). This allows commuters to forego hassle of maintaining personal vehicles, and removes the need for parking space in the city. Austria also has a developed alternative transport system, which increases both commuter convenience and social safety (Kaufmann, n.d.).Therefore, when choosing locations to display and sell products, stores need to worry about parking convenience. They should target central locations with high footfall. Access through public transport should be a primary concern when distributing goods. Commuter transit points have the best potential as sales centres.

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Marketing coir products for agricultural purposes is more complex. It requires the transport of goods to rural locations. The heavy rail system in Austria covers 1579km, and reaches all areas of economic interest (Stofer, n.d). Therefore, the most advisable method of transporting goods is rail. The implementation of the Cargo Center Graz in 2003 (cited in Structural Reforms on the Product and Capital Markets, n.d), opened up new avenues for freight forwarding in the region, and significantly reduced time and costs of transporting goods. According to Austrian business consultant Paul Mueller (Personal communication, January 21st, 2010), the large department stores in Austria (such as Hofer and M.Preis) have their own distributors. These distributors will collect goods from the dockyard and carry the goods to distribution centres. From these centres, goods will be sent across the country via heavy rail and road. Therefore tremendous opportunities lie in forming partnerships with large supermarkets and department stores to market goods in Austria. Since the country implemented the Austrian Strategy on Sustainable Development, a number of strong measures which curb fuel emissions have been executed (Structural Reforms on the Product and Capital Markets, n.d). As a result, road taxes have increased, which further strengthen the case for using rail to transport goods across the country.

3.3 Distribution Trends

3.3 (a) Household Products
Typical retailers for household goods are large department stores with nationwide reach. M.Preis, Hofer and Bila are currently the three biggest retail stores in Austria (P. Mueller, personal communication, 21st January 2010). It is expected that contractual agreements will be drawn up with these stores to sell household goods. These stores have their own distribution centres and their own transport facilities; both by road, and by rail. Once goods 14

land at the shipping docks, goods are taken by the department stores transport agents, and will then become the stores responsibility. The stores are then expected to transport goods to central (wholly owned) distribution points; from which goods will be delivered to countrywide sales outlets.

3.3 (b) Agricultural Products

The typical customers for agricultural coir products are medium sized enterprise owners (farmers and estate owners). Volanka Limited expects to target these enterprise owners for its agricultural goods. These enterprises do not have their own distribution facilities. Therefore coir producers must hire distribution agents who will transport goods to distribution points, from where farmers will take ownership of the goods. In the case of Volanka Limited, these agents are to be employed on a contractual basis. This process has been diagrammatically presented in appendix 1 of the Marketing Plan.

3.4 Marketing Trends

The most widely used tools for marketing coir products are trade fairs and personal selling (I. Piyasena, personal communication, January 23rd 2010). This is also a feature of overall b2b marketing (Dwyer & Tanner, 2002). Trade fairs (discussed at length under the marketing plan) prove to be the most effective method of marketing in this industry. Personal communication is also used widely by all coir producers, since many organisations do not have the facilities to conduct large scale advertising.

3.5 Competitor Products

Competition comes primarily from India. The Indian coir industry is many times greater than that of Sri Lanka. India accounts for 2/3 of all coir produced in the world (Export of Coir and Coir Products from India, n.d). As a result, they are able to dominate the industry.

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However, Managing Director of Volanka Limited, Indrajith Piyasena (personal communication, January 23rd, 2010) says individual Indian coir producers are not large enterprises, but rather, small family owned businesses. Therefore, any single Indian coir producer is unlikely to have the capacity to meet demand of large Austrian retail stores or farms. Therefore, Sri Lankan coir producers such as Volanka can strike contracts with the above mentioned farms and retailers for mutual benefit through economies of scale. As far as local (Sri Lankan) industries are concerned, Hayleys Exports Ltd dominates the coir industry (I. Piyasena, personal communication, January 23rd, 2010). Hayleys records its annual sales at Rs.250million, predominantly from coir based products (Hayleys Exports Plc Annual Report 2007-2008, 2008). The organisation also has offices in the UK, US, Japan and Belgium. Volanka Limited is fortunate to be part of the overall Hayleys Group, as this affiliation minimises threats from outside. Mr. Indrajith Piyasena (personal communication, January 23rd, 2010) believes the biggest threat to Hayleys Exports comes from companies such as Manisha Exports, Jafferjee Brothers and Macwood. Austria has not been considered as a market by many of these firms, and therefore, this venture is a tremendous opportunity for Volanka Limited.

3.6 Competitor Prices and Promotion

There appears to be a significant variety in products sold by different coir produces, and therefore it is assumed that each company enjoys the benefits of differentiation to a certain extent. However, price competition is the most distinctive feature of the industry, where raw materials and unfinished goods are concerned. Therefore pricing is quite similar throughout the industry.

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3.7 Market Size and Sales

3.7 (a) Industry
Market sales figures are difficult to gauge due to number of buyers and sellers in the market, as well as the lack of overarching industry governing bodies. However, coir production may give us a good indication of global demand. The Asia pacific region accounts for 85 -90% of world coir production (Fernandez, n.d). The nut equivalent of production from this region is over 47 billion units (Fernandez, n.d). Statistics for 2001 show world coir production to be at 317,000 tonnes, with one sixth of production coming from Sri Lanka (Fernandez, n.d). This indicates that the industry is healthy, and that Sri Lanka is a leading coir producer. Although the market for coir has been hit by the global economic meltdown (cited in the economic analysis), it is difficult to measure the total impact of the recession on coir, due to the vast dispersion of buyers and sellers. However, Indian coir exports statistics are a good indicator of market trends; due to the sheer size of Indian produce. By March 2009, exports in India fell 1.58% by volume, and more importantly, 12.85% in sales value (Ravi, 2009). However, coir producers can look forward to better times ahead. As stated previously, the Austrian market shows potential, since the penetration of coir products is low (I. Piyasensa, personal communication, January 23rd, 2010). Awareness is now increasing about the potential of coir products, both, as complimentary goods used in agriculture, and as useful household products.

3.7 (b) Volanka Limited

The parent company of Volanka Limited, Heyleys Exports, recorded annual sales of 250million (rupees) during the most recently concluded financial year, with 48% of its sales coming from the European region (Hayleys Exports Plc Annual Report 2007-2008, 2008). This indicates that Volanka enjoys the benefits of highly developed marketing channels in Europe. Volankas sales forecasts are in the region of USD 100 million

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(Volanka Export Limited, n.d), with additional income coming from Austria (see Marketing Plan appendix 3).

3.8 Government Participation in the Marketplace

As stated in the Economic Analysis, the government has taken a number of steps to stimulate capital markets in Austria (Structural Reforms on the Product and Capital Markets, n.d). These include a private pension scheme as well as the facilitation of mergers, partnerships and acquisitions. Therefore retailers, who will ultimately sell the organisations coir products, have substantial flexibility in devising a business model for distributing goods; due to low transaction costs. As far as agriculture is concerned, the government has taken steps to boost farming; especially organic farming. This has been done with the intention of increasing sustainable economic activity (Austria in Brief, n.d). Naturally, marketers of complimentary goods for farming, such as coco peat, stand to gain from government backing; which includes concessions and loans. Although Austria offers little direct assistance for trade with Sri Lanka, Austrian Trade Commisioner in India, Hans-Jrg Hrtnagl (Personal communication, January 22nd, 2010), says that Austria finances projects conducted by the European Union, which facilitate trade with the South Asian region. Mr. Hrtnagl also said that he sees a lot of potential in Sri Lanka as a trade partner. Therefore, trading in coir may trigger further investment and will strengthen trade relations between Sri Lanka and Austria.

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4.0 Reference List

Austria GDP Growth Rate (2009). Trading Economics. Retrieved 18th January 2010 from http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=ATS Austria in Brief (n.d). Retrieved 14th January 2010 from http://www.bka.gv.at/DocView. axd?CobId=27026 Cateora, P., R., Graham J., L., Salwan, P. (2009). International Marketing (13th Edition). Tata McGraw-Hill Publishing Company Ltd, New Delhi

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Dwyer, R., F., Tanner, J., F. (2002). Business Marketing: Connecting Strategy, Relationships and Learning (2nd Edition). McGraw - Hill Irwin. Earthtrends Country Profiles: Austria (n.d). Retrieved 14th January 2010 from http:// earthtrends.wri.org/pdf_library/country_profiles/agr_cou_040.pdf Exports of Coir and Coir Products from India (2008). Science Tech Entrepreneur Retrieved 18th January 2010 from http://www.techno-preneur.net/information-desk /sciencetech-magazine/2008/ jan08/Export.pdf Fernandez, C. (n.d). Strategic Alliance for the Development of Coir Industry in the APCC Countries and Demand Prospects for Coir Products in Eco-friendly Applications. Retrieved 14th January 2010 from http://coirboard.gov.in/downloads/article1.pdf Glatz, E., Chan P. (1999). Franchising in Austria. European Business Review. 99 (1), 2331). Retrieved 14th January 2010 from http://www.emeraldinsight.com.libproxy2. usouthal.edu/Insight/viewPDF.jsp? contentType=Article&Filename=html/Output/Published/EmeraldFullTextArticle/Pdf/0540 990102.pdf Graml, G., (2004). (Re) mapping the Nation: Sound of Music Tourism and National Identity in Austria, ca 2000 CE. Tourist Studies 4 (2), 137 159. Hayleys Exports Plc Annual Report 2007-2008 (2008). Retrieved 14th January 2010 from Annual Report - http://www.hayleys-exports.com/Heyleys_2007-2008.pdf Holzleithner, E., Strasser, S. (2006). Troublesome Issues: Current Debates on Tensions between Gender Equality and Cultural Diversity in Austria. Retrieved 14th January 2010 from http://www.univie.ac.at/NODE-CMC/pages/HolzleithnerStrasser_onlinepub_200610-30.pdf Kaufmann, C. (n.d). Alternative Public Transport in Austria. Retrieved 20th January 2010 from www.ictct.org/dlObject.php?document_nr=183&/Kaufmann.pdf Krings, T. (2009). A Race to the Bottom? Trade Unions, EU Enlargement and the Free Movement of Labour. European Journal of Industrial Relations 15 (1), 49-69 http:// ejd.sagepub.com.libproxy2.usouthal.edu/cgi/reprint/15/1/49 Luft, D., S. (1987). Austrian History as a Field of Study in the United States. Modern Austrian Literature 20 (3). Retrieved 12th January 2010 from http://web.ebscohost.com. libproxy2.usouthal.edu/ehost/pdf?vid=9&hid=104&sid=db704e03-4803-4881-bd8a59f5aba1f538%40sessionmgr111 Prisching, M. (2006). Austria in Europe: Size, Smallness, Ambivalence. Retrieved 14th January 2010 from http://www.ces.fas.harvard.edu/conferences/Austria/Prinsching.pdf

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Ravi, R. (2009). High Input Cost, Falling Demand Rattle Coir Industry. The Financial Express. Retrieved 19th January 2009 from http://www.financialexpress.com/news/highinput-cost-falling-demand-rattle-coir-industry/454011/ Stofer, P. (n.d). Public Transport in Austria and Germany Some Examples. Retrieved 20th January 2010 from www.itls.usyd.edu.au/__data/assets/pdf_file/0005/.../peters_ presentation.pdf Structural Reforms on the Product and Capital Markets (Cardiff Report) (n.d). Retrieved 14th January 2010 from http://www.bka.gv.at/DocView.axd?CobId=3487 The Austrian Agricultural Policy (n.d). Austria: Agriculture. Retrieved 30th January 2010 from http://www.un.org/esa/agenda21/natlinfo/countr/austria/agriculture.pdf Volanka Exports Ltd (n.d). Retrieved 4th February 2010 from http://www.alibaba.com/ member/volankaexportsltd/aboutus.html

5.0 Appendices
5.1 Appendix 1 Product Choices
Agricultural Products Below Homelist of products which are to be promoted in the new market. As stated, is a Utility previously, Mats goods are broadly categorised into agricultural products and household Coir these Coir Pots - Small products. Pots - Small Coir Coir Pots - Medium Coir Sheets Coir Brushes Coco peat Briquettes Coco Peat Briquettes Coco Peat - 5kg Block Coco Peat - 10kg Block Grow Bags 21

5.2 Appendix 2 Population Density in Austria (by Region)

Federal State Burgenland Carinthia Lower Austria Upper Austria Salzburg Syria Tyrol Voralberg Vienna Size km 3,9 66 9,5 36 19,1 78 11,9 82 7,1 54 16,3 92 12,6 48 2,6 01 4 15 Populatio n 280, 350 560, 427 1,589, 503 1,405, 693 529, 617 1,204, 100 700, 356 364, 994 1,664, 035 Population Density People/km 71 59 83 117 74 73 55 140 4,010

Source: Adapted from Austria in Brief (n.d). Retrieved 14th January 2010 from http://www.bka.gv.at /DocView.axd?CobId=2702

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Marketing Plan

Executive Summary
This report has been prepared at the request of the management of Volanka Limited, for the purpose of developing a marketing plan for the proposed business venture in Austria. This report identifies the core marketing objectives of the organisation and proposes a business model which aims to fulfil those objectives. The report concludes with an investment appraisal for the project.

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The core objectives have been identified as; strengthening the organisations presence in Europe, and taking advantage of a relatively untapped market (Austria). The business model chosen to achieve these objectives involves two broad product categories: agricultural coir products, and household coir products. These products categories will be marketed using two separate distribution channels. An integrated marketing communications (IMC) plan has also been developed to achieve these objectives. Trade shows play a pivotal role in marketing the products, while emphasis has also been placed on advertising and personal selling. Budgets have been drawn up to depict the possible expenses incurred with respect to the IMC plan. The method of distributing goods is once again twofold. Goods for agricultural purposes will be transported on a CIF basis, with Volanka Limited bearing the responsibility for products until they reach central distribution points in Austria. Household products will be marketed on an FOB basis, with importers (retail stores) assuming ownership of products once goods leave the point of origin. All costs related to the above have been included in the appendices. Both costs and revenues are expected to grow year on year, albeit at differing rates. In conclusion, an investment appraisal has been prepared using a moderate cost of capital of 12%. The investment shows a positive net present value, and therefore, from a financial perspective, it is a viable investment.

Contents

Executive Summary.................................................................................................................5 1.0 Introduction........................................................................................................................7 1.1 Socio Cultural Analysis.................................................................................................8 1.2 Economic Analysis.........................................................................................................9 2.0 The Product......................................................................................................................10 2.1 Coir...............................................................................................................................10 2.2 Agricultural Goods.......................................................................................................11 2.3 Household Products.....................................................................................................11 24

2.4 Implications..................................................................................................................12 3.0 Market Analysis...............................................................................................................12 3.1 Geographic Regions.....................................................................................................12 3.2 Transport......................................................................................................................13 3.3 Distribution Trends......................................................................................................14 3.3 (a) Household Products............................................................................................14 3.3 (b) Agricultural Products.........................................................................................15 3.4 Marketing Trends.........................................................................................................15 3.5 Competitor Products ....................................................................................................15 3.6 Competitor Prices and Promotion ...............................................................................16 3.7 Market Size and Sales..................................................................................................17 3.7 (a) Industry...............................................................................................................17 3.7 (b) Volanka Limited.................................................................................................17 3.8 Government Participation in the Marketplace.............................................................18 4.0 Reference List...................................................................................................................19 5.0 Appendices.......................................................................................................................21 5.1 Appendix 1 Product Choices....................................................................................21 5.2 Appendix 2 Population Density in Austria (by Region)..........................................22 1.0 The Target Market............................................................................................................26 2.0 Business Objectives and Expected Sales.........................................................................26 3.0 The Business Model.........................................................................................................27 4.0 Promotion Mix.................................................................................................................28 4.1 Integrated Marketing Communications (IMC) Plan....................................................28 4.2 Promotional Objectives and Promotion tools..............................................................28 4.2 (a) Trade Shows.......................................................................................................29 4.2 (b) Magazines and Press..........................................................................................29 4.2 (c) Personal Selling..................................................................................................30 4.2 (d) The Web.............................................................................................................30 5.0 Distribution.......................................................................................................................30 5.1 Agricultural Products...................................................................................................31 5.2 Household Goods.........................................................................................................31 5.3 Port and Mode Selection..............................................................................................32 5.4 Packaging.....................................................................................................................32 5.5 Documentation Required.............................................................................................33 6.0 Price Determination..........................................................................................................33 6.1 Cost of Shipping Goods...............................................................................................34 6.2 Other Costs ..................................................................................................................34 6.3 Payment Methods.........................................................................................................35 7.0 Budgets.............................................................................................................................35 7.1 Product Costs................................................................................................................35 7.2 Annual Sales.................................................................................................................36 7.3 Administrative Costs....................................................................................................36 7.4 Investment Appraisal...................................................................................................37 8.0 Reference List...................................................................................................................38 9.0 Appendices.......................................................................................................................39 9.1 Appendix 1 Business Model.....................................................................................39

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9.2 Appendix 2 - Unit Costs and Prices ............................................................................40 ............................................................................................................................................40 9.3 Appendix 3 - Revenue..................................................................................................41 ............................................................................................................................................41 9.4 Appendix 4 - Cost of Sales..........................................................................................41 9.5 Appendix 5 - Overhead Costs......................................................................................43 ...........................................................................................................................................43 9.6 Appendix 6 - Investment Appraisal.............................................................................45

1.0 The Target Market

As stated previously, Sri Lankan handicrafts are in high demand in Europe (Handicrafts, n.d). A number of our coir products are marketed for household use, and for their ornamental value. As stated in the socio-economic analysis (under the Marketing Audit), Austria is receptive to diversity, and products that represent diverse cultures and ways of life. Also, the initial market for household products, we believe, will come from retail/department stores based in Vienna. The concentration of people in this populous yet geographically small region (see appendix 2 in the Marketing Audit), will generate substantial income. Buyers for agricultural products are expected to come from all regions and will consist of estate and farm owners. Therefore, distribution channels need to be developed in such a way that accommodates widespread demand.

2.0 Business Objectives and Expected Sales

The marketing objectives are threefold: 1) To penetrate a new market 2) To strengthen the organisations presence in the region 3) To take advantage of well established logistical services throughout the European Union. 26

Expected Sales figures can be found under appendix 3 to this report. The sales figures have been given per consignment. Each consignments price has been determined by multiplying the selling price per container (see appendix 2) by the number of containers in the consignment. Expected sales for Volanka Limited in 2010 stand at LKR 17,145,498 (appendix 3).

3.0 The Business Model

The business model for the new venture (see appendix 1) revolves around expanding existing operations to accommodate the expected additional demand. For this, Volanka Limited would need to source new raw materials to meet the needs of the new market. Volanka Limited hopes to fulfil these requirements by contracting small estate owners in rural areas. Further, contracted estate owners will produce some of the companys finished goods. These estate owners are have very little capital to work with, and therefore, leased machines will be provided to assist them in the manufacturing process. As stated previously, two broad product categories have emerged for the venture: agricultural goods, and household items. As far as distribution is concerned, most developed countries have short and efficient marketing channels (Cateora et al., 2009), and this is no different in the case of Austria. Volanka Limited hopes to take advantage of developed channels and sell directly to buyers, surpassing middlemen. In the case of agricultural goods however, agents services will be needed to transport goods to distribution points.

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4.0 Promotion Mix

4.1 Integrated Marketing Communications (IMC) Plan

The chosen IMC plan would consist of those marketing tools which are best suited to the target market. It is important to ensure that all components within the IMC plan serve the same objective (Dwyer & Tanner, 2002), and for that reason, careful consideration has been given to all marketing tools. The uniqueness of business to business (b2b) communication should be noted when drawing up the communications plan. Dwyer and Tanner (2002) highlighted some reasons why b2b marketing is unique: Firstly, due to the complex nature of buying procedures, a lot of personal selling is required. Also, the web needs to be fully integrated and interactive, allowing buyers to access information of the seller, and to purchase their products, via the net. Dwyer and Tanner (2002) also state that with this increased complexity, unique promotional strategies are required to engage the customer. Furthermore, it was stated in the Marketing Audit that special emphasis must be given to agricultural products due to relatively high complexity and low trialability (compared to household goods).

4.2 Promotional Objectives and Promotion tools

The promotion objectives for this venture will be twofold. Firstly, the products will be marketed with a value for money proposition. Sri Lankas brown fibre (coir) is renowned for its quality; while low labour costs allow exporters to offer attractive prices to buyers. Secondly, as stated in the socio-cultural analysis (under the Marketing Audit) there is significant socio economic relevance to coir, since much of the industry comprises of workers from underprivileged social strata. The emotional appeal created through this proposition is expected to pay dividends. According to McCann Erickson researchers (cited

28

in Belch & Belch, 2007), emotional bonds that people attach to products, are the strongest. Therefore, it is advantageous to market coir as a socially conscious choice.

4.2 (a) Trade Shows

Trade shows are important for a number of reasons, as pointed out by Dwyer and Tanner (2002): Buyers depend on trade shows, because they often dont have the resources to actively search for viable suppliers. Trade shows also create dialogue, which is important for personal selling. Further, these shows are expected to attract key people from buying companies; many of whom would not be approachable otherwise. Lastly, we should not forget the overwhelming influence of the trade press in creating publicity. Organisations have recognised the importance of trade shows, and budgets allocated for these events are only second to advertising, in size (Dwyer & Tanner, 2002). The effectiveness of trade shows is clear. Research has revealed that 20% of all show attendees will actually buy something at the show, and 76% of them will buy a product they saw at the show (Dwyer & Tanner, 2002). As is evident from the above statistics, trade shows present Sri Lankan coir producers with tremendous opportunities. Managing director of Volanka Limited, Indrajith Piyasena (personal communication, 23rd January, 2010), reaffirms importance of trade shows in the marketing mix, saying trade fairs play a pivotal role in ensnaring buyers. Currently, the most noteworthy trade event in the target region is the Frankfurt International Trade Fair. A number of coir producers have used this trade show to raise awareness about, and find buyers for, their products. Therefore, Volanka Limited intends to work closely with the Export Development Board to have its products displayed at the trade fair.

4.2 (b) Magazines and Press

The media mix is expected to comprise a combination of press and magazine advertisements. Press advertisements will be used for marketing coir products for agricultural use, while magazines advertisements will display products for households (end users). The press advertisements will be descriptive, and will be run in daily newspapers. 29

Marketing for end users is expected to be handled entirely by large department and retail stores. However, a brief description is provided here on how the advertising campaign will be executed. The magazine advertisements are expected to be aesthetically pleasing. Coir products are to be marketed for both, their ornamental value, and for their utility. The types of magazines used will be; interior design publications, leisure magazines and lifestyle periodicals.

4.2 (c) Personal Selling

Along with trade fairs, personal selling is an essential component in the marketing mechanism (I. Piyasena, personal communication, January 23rd, 2010). During the personal selling process, discounts for bulk purchases and repeat purchases will be offered to potential customers, and long term contracts will be drawn up. Catalogues have been found to be effective direct marketing tools (Cateora et al., 2009), and will be considered in personal selling.

4.2 (d) The Web

Another important method of promoting agricultural products to potential buyers is via the web (I. Piyasena, personal communication, January 23rd, 2010). As stated previously, b2b marketing requires a fully integrated net service, and it therefore important to manufacturers of coir products. The web will allow customers to not only purchase products, but to also obtain information about the industry and interact with coir producers. The website is expected to be run in both German and English. Although Austrians speak fluent English (P. Mueller, personal communication, January 21st 2010) the cost of running the website in two languages is low, and will facilitate communication. Costs relating to all marketing tools can be found under appendix 5 (note 5) of this report.

5.0 Distribution

30

A general view of the distribution channels can be sought in appendix 1 to this report. The distribution channels will be different for agricultural products and household goods. A brief description of these follows below.

5.1 Agricultural Products

Buyers for agricultural goods are expected to be small farm and estate owners scattered across the country. These enterprise owners do not have the capacity to carry out their own distribution. Therefore the seller will be required to carry out distribution tasks up to the point goods reach central regional distribution points. For this purpose, contracted agents will be employed by Volanka Limited to fulfil distribution tasks. The agents will be contracted for fixed periods (annually). Since Volanka Limited will be assuming freight, insurance and clearance charges, unit costs for these products are, on average, 35% greater than what they would be if the buyers were to bear the expenses.

5.2 Household Goods

As stated previously, household products will be sold in bulk to giant retail stores such as Hofer, M.Preis and Bila. The stores have well developed distribution channels and will assume responsibility for goods at the discharging dock. There will be no agents or middlemen involved in the distribution of these goods. Goods will be sold FOB (i.e. goods will be sold minus freight, insurance and clearance charges). The goods will be transported from the shipyard to distribution points owned by the department stores. The stores will then send products to retail outlets around the country, by road, and by rail. Please see section titled Transport Systems (under the Marketing Audit) for more information regarding this aspect.

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5.3 Port and Mode Selection

Two important decisions need to be taken with respect to port and mode selection. These decisions will have a bearing, both on cost, and on timeframe for delivery. The first decision revolves around the use of containers. A decision needs to be made on whether the organisation is to use full container loads (FCLs) or loose container loads (LCLs). Transporting goods on an LCL basis means that the organisation pays for stipulated space within a container, unlike in the case of FCLs, where the organisation pays for the container itself. Relative to FCLs, LCLs cost more, according to A. Bandaranayake, General Manager of Transpack International (personal communication, January 18th, 2010). However, if FCLs are used, the organisation needs to ensure that the container is fully loaded (to avoid redundant space). Another factor to be considered with respect to containers is the time it takes to deliver goods. FCLs take marginally longer to deliver (3035 days) than LCLs (25-28 days) (A. Bandaranayake, personal communication, January 18th, 2010). Depending on the decisions regarding the above, the selection of the port will also vary. LCLs can only be discharged at Rotterdam, while FCLs can be discharged at Vienna itself (A. Bandaranayake, personal communication, January 18th, 2010). Further, those cargo loads which are discharged at Rotterdam will need to be transported to Vienna for clearing (A. Bandaranayake, personal communication, January 18th, 2010). Therefore, freight agents will need to be present at Rotterdam to transport goods. The data above tells us that although LCLs take less time to ship between origin and destination, the costs attached (agents fees, container space, etc.) are substantially greater than for FCLs. Therefore a decision has been taken to use FCLs for shipping all goods. However, it should be noted that in the case of household goods, some department stores may require fast replenishments for falling stock levels. In such cases, the organisation may need to oblige with LCLs to ensure fast delivery.

5.4 Packaging

32

No fumigation or special packaging is required as a regulation. (A. Bandaranayake, personal communication, January 18th, 2010). However, coir pots and coco peat briquettes need to be sent in packs of 5peices and 10pieces respectively (A. Bandaranayake, personal communication, January 18th, 2010). Coir sheets for mattresses will be exported as fibre, and will therefore be packed by the respective department/retail stores.

5.5 Documentation Required

The table below has been drawn up regarding documentation requirements, having consulted A. Bandaranayake, General Manager of Transpack International (personal communication, January 18th, 2010).

Document Originator Supplier

Document Name Commercial invoice Packing list Weight note

Description Stating the total shipment value & the basis for the pricing term The total list of items and their quantities Total weight of the consignment Stated port of discharge, vessel details, date of landing, gross weight, total value, date of discharge, etc. The local currency exchange rate as against the Euro according to the commercial invoice

Shipping line

Bill of Lading (B/L)

Bank

Bill of Exchange

6.0 Price Determination

33

A comprehensive list of prices and costs can be found under budgets. A description of the factors that are involved in price determination follows below.

6.1 Cost of Shipping Goods

Once again, cost of shipping will vary according to the type of goods shipped. Where household products are concerned, goods will be shipped on an FOB (free on boat) basis. Under this system, the cost of the goods will only contain direct manufacturing costs and manufacturing overheads. The reason for this is that departmental stores are expected to take ownership of products once they are discharged from the origin. Therefore, where household goods are concerned, Volanka Limited will bear no costs in terms of shipping. However, as stated previously, customers for agricultural products are expected to be small and medium scale enterprise owners, and they would not have the capacity to take responsibility for goods once discharged. Therefore Volanka Limited will have to pay all transport costs from origin until products are delivered to central distribution points. Therefore goods will be shipped on a CIF basis (cost, insurance and freight). Under this system, Volanka Limited will incur insurance and freight charges. For this reason, 35% has been added to the costs of agricultural goods (see section titled budgets, as well as appendix 2).

6.2 Other Costs

Transport costs apply only to goods sent via CIF basis; in other words, agricultural products. These costs come in the form of agents fees and can be viewed under Budgets, as well as appendix 5. Handling fees will include port authority charges, freight charges and freight agents fees. Insurance and Customs charges apply only to goods transported via CIF freight, and these costs have been absorbed into the 35% added to unit costs of agricultural products (see appendix 2). Further, according to EC regulations listed under section 21 and 26, a standard rate of 17.5% is to be added to transportation costs, etc. This has once again been absorbed into the 35% increase in unit costs of agricultural goods.

34

The break up of this cost, as obtained by A. Bandaranayake (personal communication, January 18th, 2010), is given below. Insurance Cost Transportation Handing Freight VAT - 0.01% - 0.25% - 1.04% - 14.00% - 17.5% 35%

Austria - Import Tax - 2.20%

6.3 Payment Methods

The payment will occur through a standard letter of credit. The local bank involved in the transaction will produce the documents required to the negotiating bank in Austria, once goods are loaded. When the shipment reaches the landing dock (Vienna), the negotiating bank releases the documents to the importer, enabling him to clear the shipment, while simultaneously transferring payment to the suppliers local bank.

7.0 Budgets
The budgets have been drawn up using existing data from current sales to the European Union, as well as predictions based on the expertise of business analysts. Separate sheets have been used to calculate unit costs and prices, total revenue, total cost of sales and administrative overheads.

7.1 Product Costs

Costs have been provided separately for both broad categories of products. As stated previously, since agricultural products are being sold on a CIF basis, 35% has been added to the unit expense of the company, in order to absorb insurance and freight costs (see appendix 2).

35

Different mark-ups have been used for the different product categories as well. In keeping with industry trends, as suggested by the Managing Director of Volanka Limited, Mr. I Piyasena (personal communication, 23rd January 2010), 40% has been added to production costs, in order to arrive at the final selling price of household goods. A mark-up of 45% has been used for agricultural products, and this too, represents industry norms (appendix 2). The reason for higher mark-up placed on agricultural goods is so that agents transport fees could be absorbed. Costs have then been calculated for a single container. Sizes of containers also differ, according to the different product categories. 20 foot containers are used to ship household goods, while 40 foot containers are used to transport agricultural products. Refer appendix 2 for the cost of a single container load per product.

7.2 Annual Sales

The sales price per container load has been used to derive annual sales figures (appendix 3). This has been done by multiplying the sales price container load, by the number of containers in the consignment. Annual sales have been assumed to increase steadily over the five year period for which the investment appraisal has been carried out. Note It would have been less time consuming to use gross margins per container load (see appendix 2), to arrive at gross annual sales margins. These margins would have then been substituted for sales and cost of sales figures in the investment appraisal (see appendix 6). However, as per the requirement of this report, sales figures have been shown separately under appendix 3.

7.3 Administrative Costs

Administrative costs can be viewed under appendix 5 to this document. The costs do not grow at a uniform rate, and therefore premiums of varying percentages have been added year on year; to depict realistic market conditions.

36

As stated previously, the venture involves expanding operations to fulfil additional capacity required for the new market. The new venture will require additional staff and these costs have been provided for, in the five year budget. Staff costs have been budgeted for in salaries and wages, and have been explained under note 1. The most significant item under overheads is marketing costs. As stated above, trade shows, newspaper cut outs and magazine advertisements are the primary sources of marketing. Costs involved in personal selling have not been included in the investment appraisal as this could be carried out using existing resources. Two trade fairs have been budgeted for, which are expected to be held in Austria every six months. It is anticipated that participation at the trade shows requires costly licenses, and payment for floor space. Details of these costs can be found under note 5. Further, travel charges found in appendix 5 are notably large, since it is expected that officials will travel frequently to meet retailers and distribution agents abroad. Also, to accommodate the increase in operations, an expansion of the office premises is required, and these additional costs have been reflected in utilities. Lastly, it was previously stated that the some of the production will take place through contracted estate owners. Therefore machines are to be leased, in order to provide them with manufacturing capabilities. These costs are reflected in the section titled machinery costs.

7.4 Investment Appraisal

The organisation has taken a decision to conduct an investment appraisal for 5 years. The figures that make up the investment appraisal can be found under appendix 6 to this report. Ideally, for a new venture, a Sri Lankan firm would use a Cost of Capital ranging from 15% to 16. However, an optimistic Cost of Capital of 12% has been used to discount cashflows. The explanation for this is that although the organisation is venturing into a new country, it does distribute to Central and Western Europe with a lot of success. The forecasted net present value of the venture is positive, and it is therefore a viable project. 37

8.0 Reference List

Belch, G., E., Belch, M., A. (2007). Advertising and Promotion: An Integrated Marketing Communications Perspective (7th Edition). McGraw-Hill Publishing. Cateora, P., R., Graham J., L., Salwan, P. (2009). International Marketing (13th Edition). Tata McGraw-Hill Publishing Company Ltd, New Delhi Dwyer, R., F., Tanner, J., F. (2002). Business Marketing: Connecting Strategy, Relationships and Learning (2nd Edition). McGraw - Hill Irwin. Handicrafts (n.d). Sri Lanka Development Board. Retrieved 19th January from http://www.srilankabusiness.com/trade_info/srilankaproduct/handicrafts.htm

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9.0 Appendices
9.1 Appendix 1 Business Model
Suppliers of Machinery (Browns Group) Agricultural and Horticultural Distribution Centres
ed ick sp od by Go up acted ntr ts Co gen A

Farms

Leased Machines

Products for Agricultural Buyers Finished Goods Products for End Consumers Dockyard Dockyard

Volanka Limited

Estates

Provide Machinery to Subcontractors

Receive Raw Materials and Partially Finished Goods

Go od sp De up b icke d Sto partm y re tru ent ck s

Department Store owned Distribution Centres

Subcontractors: Small Estate Owners

Countrywide Stores

39

9.2 Appendix 2 - Unit Costs and Prices

All Figures in LKR Cos Price t per 20' container 240,000 42,000 480,000 Selling Price (FOB) Per Unit per 20' container 672 196 6,720 336,000 58,800 672,000 Gros Margin per s 20' container 96,000 16,800 192,000

Products - Home Utility 1 Coir Doo M ts r a 2 3 4

per unit 480 140 4,800

2 ite s p r p lle 2 p llet p r con a e 5 m e a t, 0 a s e t in r Coir Pot - Sm ll (p r tra cost) s a e y 5 p p r t y, 2 t ys p r p lle , 1 p lle p r 2 ' con in r cs e ra 0 ra e a t 5 a ts e 0 ta e Coir Sh e (for M t sse et a tre s) 0 ite s p r p lle 2 p llet p r con a e 5 m e a t, 0 a s e t in r Bru e sh s 4 - Sh .1 oe 4 - Bod .2 y 4 - To t .3 ile 2 0 p p r crat , 0 cra e p r 2 ' con a e 5 cs e e 8 ts e 0 t in r Coco Pe t Briq e s (p r tra cost) a u tte e y 1 p p r t y, 3 t ys p r p lle , 1 p llet p r 2 ' co t in r 0 cs e ra 0 ra e a t 8 a s e 0 na e

50 50 90 140

100,000 100,000 180,000 75,600

70 70 126 196

140,000 140,000 252,000 105,840

40,000 40,000 72,000 30,240

Products - Agriculture 1 Coir Pot - Sm ll (p r p llet cost s a e a ) 2 3 4 5 6

per unit 3,105 3,645 41,580 57 108 74

Cos Price t per 40' container 93,150 87,480 831,600 277,830 264,600 519,750

Selling Price (CIF) Per Unit per 40' container 4,502 5,285 60,291 82 157 108 135,068 126,846 1,205,820 402,854 383,670 753,638

Profit per 40' container 41,918 39,366 374,220 125,024 119,070 233,888

1 0 p p r p lle , 3 p lle p r 4 ' con in r 0 cs e a t 0 a ts e 0 ta e Coir Pot - M d m(p r p lle cost s e iu e a t ) 6 p 0 cs/p r p lle 2 p lle s p r 4 ' con a e e a t, 4 a t e 0 t in r Coco Pe t Briq e s (2 0 p p r p lle a u tte ,2 0 cs e a t) 2 0 p p r p lle , 2 p lle p r 4 ' con a e ,2 0 cs e a t 0 a ts e 0 t in r Coco Pe t - 5 Kg Block a 4 0 p p r 4 ' co t in r 9 0 cs e 0 n a e Coco Pe t - 1 Kg Blo a 0 ck 2 5 p p r 4 ' co t in r 4 0 cs e 0 n a e G rowBa s g 7 0 p p r 4 ' co t in r 0 0 cs e 0 n a e

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9.3 Appendix 3 - Revenue

All Figures in LKR Annual Revenue 2011 2012

Products - Home Utility 1 2 3 4 Coir Door Mats Coir Pots - Small Coir Sheets (for Mattresses) Brushes 4.1 - Shoe 4.2 - Body 4.3 - Toilet 5 Coco Peat Briquettes

Selling Price per 20' container 336,000 58,800 672,000 140,000 140,000 252,000 105,840

2010

2013

2014

1,008,000 176,400 2,016,000 420,000 420,000 756,000 317,520 5,113,920

1,008,000 176,400 2,016,000 420,000 420,000 756,000 317,520 5,113,920

1,344,000 235,200 2,016,000 560,000 560,000 1,008,000 423,360 6,146,560

1,680,000 294,000 3,360,000 700,000 700,000 1,008,000 529,200 8,271,200

2,352,000 411,600 4,704,000 980,000 980,000 1,260,000 740,880 11,428,480

Products - Agriculture 1 2 3 4 5 6 Coir Pots - Small Coir Pots - Medium Coco Peat Briquettes Coco Peat - 5 Kg Block Coco Peat - 10 Kg Block Grow Bags

Selling Price per 40' container 135,068 126,846 1,205,820 402,854 383,670 753,638

2010 540,270 507,384 4,823,280 1,611,414 1,534,680 3,014,550 12,031,578 17,145,498

Annual Revenue 2011 2012 675,338 634,230 6,029,100 2,014,268 1,918,350 3,768,188 15,039,473 20,153,393 810,405 761,076 7,234,920 2,417,121 2,302,020 3,768,188 17,293,730 23,440,290

2013 945,473 887,922 8,440,740 2,819,975 2,685,690 5,275,463 21,055,262 29,326,462

2014 1,080,540 1,268,460 9,646,560 4,028,535 3,069,360 7,536,375 26,629,830 38,058,310

Tot l Reven e a u %IN CREA SE

15%

14%

20%

23%

9.4 Appendix 4 - Cost of Sales

41

All Figures in LKR

Products - Hom Utility e

1 2 3 4 Coir Door Mats Coir pots - Small Coir Sheet (for Mattresses) Brushes 4.1 - Shoe 4.2 - Body 4.3 - Toilet 5 Coco peat Briquettes

Cost (per 2 ' container) 0

240,000 42,000 480,000 100,000 100,000 180,000 75,600

21 00

Per A nnumCost of Sales 21 01 21 02 21 03

21 04

720,000 126,000 1,440,000 300,000 300,000 540,000 226,800 3,652,800

720,000 126,000 1,440,000 300,000 300,000 540,000 226,800 3,652,800

960,000 168,000 1,440,000 400,000 400,000 720,000 302,400 4,390,400

1,200,000 210,000 2,400,000 500,000 500,000 720,000 378,000 5,908,000

1,680,000 294,000 3,360,000 700,000 700,000 900,000 529,200 8,163,200

Products - A griculture
1 2 3 4 5 6 Coir pots - Small Coir pots - Medium Coco peat Briquettes Coco peat - 5 Kg Block Coco peat - 10 Kg Block Grow Bags TOTAL Cost % INCREASE

Cost (per 4 ' container) 0

93,150 87,480 831,600 277,830 264,600 519,750

2 1 ,0 0
372,600 349,920 3,326,400 1,111,320 1,058,400 2,079,000 8,297,640 11,950,440

Per A nnumCost of Sales 2 1 ,0 1 2 1 ,0 2 2 1 ,0 3

465,750 437,400 4,158,000 1,389,150 1,323,000 2,598,750 10,372,050 14,024,850 558,900 524,880 4,989,600 1,666,980 1,587,600 2,598,750 11,926,710 16,317,110 652,050 612,360 5,821,200 1,944,810 1,852,200 3,638,250 14,520,870 20,428,870

2 1 ,0 4
745,200 874,800 6,652,800 2,778,300 2,116,800 5,197,500 18,365,400 26,528,600

15%

14%

20%

23%

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9.5 Appendix 5 - Overhead Costs

A m ist tion a d Est b m Exp ses d in ra n a lish ent en Note No. 1 Salaries & wages 2 Labour Charges 3 Superannuation (EPF, ETF) 4 Over tim e 5 M arketing 6 Repairs & M aintenance Printing & stationery Travelling & Allowances 7 Foreign Travelling Security charges Telephone charges Electricity Ex penses Water Expenses Fuel - Generator 8 Insurance Prem s (Exports) ium Vehicle Insurance Sundry expenses 9 Agent's fees
2009 2010 1800000 240000 270000 72000 1390000 60000 48000 72000 750000 48000 36000 84000 60000 24000 180000 18000 36000 1200000 6388000 2011 1800000 240000 270000 72000 1459500 60000 48000 72000 400000 48000 40000 84000 60000 24000 200000 18000 36000 1260000 6191500 2012 1890000 259200 283500 88600 1532475 64800 51840 77760 400000 51840 39600 92400 66000 26400 232000 19800 39600 1323000 6538815 2013 1984500 279936 297675 89430 1609099 69984 55987.2 83980.8 400000 55987.2 43560 101640 72600 29040 278400 21780 43560 1389150 6906309 2014 2083725 302330.9 312558.8 89471.5 1689554 75582.72 60466.18 90699.26 400000 60466.18 47916 111804 79860 31944 334080 23958 47916 1458608 7300940 All Figures in LKR

10 11

M ch eryCost a in Initial Capital Lease cost

1200000 1200000 90000 90000 90000 90000 90000 90000 90000 90000 90000 90000

St s ock Packing m aterials

45000 45000 6523000

55000 55000 6336500

75000 75000 6703815

120000 120000 7116309

120000 120000 7510940

Tot l Cost a

1200000

43

Note No.
1 Salaries & Wages (additional office Staff - new recruits) 01 - Floor Engineer 01 - Quality Supervisor 03 - Machine Operators (Packing) 01 - Stock Controller Labour Charges Calculated Based on 02 Cleaning Staff 12% EPF & 3% ETF - Employer Contribution for Office Staff Based on 10% Overtime Variation/per Month Refer Below for All Marketing Costs 3% per Month on Total Purchase Cost 1%per Month on Total Monthly Lease Cost Inclu. Ticket Cost, Hotel Accomodation & Other Related Costs for 02 Volanka Officials Insurance Cost - 10%/per Consignment: App :03 Consignments/per mth Agents' Fees for Transporting Agricultural Goods to Distribution Points Purchase of Additional 02 Packing Machines 15 Leased Machines to Provide Subcontractors (Small Estate Owners)

2 3 4 5 6 7 8 9 10 11

Marketing Costs Trade Show - 7 Day Tw per Year s s, ice

License Premises Utilities

For One Event

125,000 75,000 25,000

A nnual Cost
250,000 150,000 50,000 450,000

Figures are expected to rise by 5% year on year

A dvertising

Cost per A dvertisem ent

90,000 50,000

A nnual Cost
540,000 400,000 940,000 1,390,000

Trade Magazines - Bi Monthly Newspaper Advertisements - Weekly, for Two Months Total Advertising Cost Total Marketing Cost Figures are expected to rise by 5% year on year

44

9.6 Appendix 6 - Investment Appraisal

All Figures in LKR

Item
Capital Cost Cost of Sales Administration & Establishment Expenses Lease payable Stocks

20 09
1,200,000

21 00

21 01

21 02

21 03

21 04

11,950,440 6,388,000 90,000 45,000 18,473,440 17,145,498 (1,200,000) 1.000 (1,200,000) 1,159,446 (1,327,942) 0.893 (1,185,663)

14,024,850 6,191,500 90,000 55,000 20,361,350 20,153,393 (207,958) 0.797 (165,782)

16,317,110 6,538,815 90,000 75,000 23,020,925 23,440,290 419,365 0.712 298,495

20,428,870 6,906,309 90,000 120,000 27,545,179 29,326,462 1,781,283 0.636 1,132,037

26,528,600 7,300,940 90,000 120,000 34,039,540 38,058,310 4,018,770 0.567 2,280,358

Revenue Profit Discounting Factor @ 12% Present Value Net Present Value

45