Institute of

Business
Administration
Jahangirnagar

Marketing Plan of the Product

Quit Smoke Smartly!

Submission Date: April 8, 2012

Marketing Plan of the Product

Nicotino: Quit Smoke Smartly!

Course Title
Introduction to Marketing (MKT 201)

Submitted to:
Arafat Rahman
Course Instructor

Submitted by:
Group-9: Chrysanthemum
20th Batch, BBA

Date of Submission
April 8, 2012

iii

Group Members Are

Name

Roll

Patrick Kanny Sarkar

801

Ashiqur Rahman Sarker

811

Md. Nafeesur Rahman Khan

821

Md. Ashiqul Islam

1332

Kaiser Mahmud

1983

Saddam Hossain

2137

iv

Letter of Transmittal

April 4, 2012
Arafat Rahman
Assistant Professor
Institute of Business Administration,
Jahangirnagar University,
Savar, Dhaka-1342.

Subject: Submission of a report on marketing plan of the product Nicotino: Quit Smoke
smartly!
Sir,
We are presenting a report on the marketing plan of our product Nicotino: Quit Smoke
Smartly!
In this report we have explained our business idea for this product and showed the marketing
plans and strategies we may take. We have also included our estimated Balance sheet details
for the next few years. In making this report, we had to take help from the various sources of
internet, different institutes and class lectures of our course teacher. We are grateful to them
for extending generous help.
We are pleased to be granted this vital opportunity and grateful for your versatile assistance.
We hope that our work will please you. We will be available in the presentation for further
explanations.

Sincerely,
__________________
Md. Nafeesur Rahman Khan
On behalf of the Group
Chrysanthemum
20th Batch, BBA

Acknowledgement

First of all, I would like to thank the almighty Allah.

I express my heartiest gratitude to our course instructor Arafat Rahman, Assistant Professor,
Batch Manager of 20th batch, Institute of Business Administration, Jahangirnagar University
for his valuable guidance, scholarly direction and unconditional support during the
preparation of this report. I have learnt a great deal from him.
I would also like to express my sense of gratitude and appreciation to Dr. Md. Baktiar Rana,
Director, Institute of Business Administration, Jahangirnagar University.
Finally I would thank my group members for their kind help and assistance in preparing this
report.

vi
vii

Table of contents

List of illustrations
Executive summary
1.0 Introduction
1.1Product offerings
1.2 Features and unique selling proposition
1.3 Business model
2.0 Goals and objectives
2.1 Vision
2.2 Mission statement
2.3 Short term goals
2.4 Long term goals
2.5 Objectives
3.0 Competitor analysis
3.1 Competitive force analysis
4.0 SWOT analysis
5.0 Marketing strategies
5.1 Target customer
5.2 Market positioning
5.3 Product strategy
5.4 Pricing strategy
5.5 Distribution strategy
5.6 Marketing communication strategy

viii
ix
1- 2

6.0 Project implementation schedule and organizational structure

6.1 Project implementation schedule
6.2 Organizational structure
7.0 Sales promotion
7.1 Distribution channels and process
7.2Marketing organization structure
7.3 Advertising and promotional campaigns
8.0 Financial analysis and projections
8.1 Financial statement assumptions
8.2 Accounting assumptions
8.3 Financial assumptions
8.4 Initial investments
8.5 Projected income statement
8.6 Projected balance sheet
8.7 projected cash flow statement
8.8Break even analysis
9.0 Contingency plan
10.0 Appendix

13- 15

1
2
2
3
3
3
3
3
3
4- 5
4
6- 7
8- 11
8
8
8
8
9
10

13
13
16-19
16
17
17
20- 25
20
20
20
21
22
23
24
25
25
26- 27

viii

List of illustrations
Illustration No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

Illustration name
Problems to prospect
Business model
Porters five force analysis of Nicotino
Nicotinos SWOT analysis
Product positioning map
Nicotinos product offering
Wholesale and Retail price of Nicotino products
List of product distribution zones
Pull strategy of Nicotino
Project implementation schedule
Organizational structure of Nicotino
Staffing needs
Distribution Channels
Marketing organization structure
Advertising and promotional campaign schedule
Three year marketing budget

Page No.
1
2
5
7
8
9
10
10
11
12
13
14
15
16
17
18

ix

Executive summary

The following market plan has the potential to be the basis for a new product which can help
the country to ensure a smoking free environment. This product, Nicotino, is a nicotine
chewing gum, which helps smokers give up smoking by suppressing their craving for
cigarettes with almost harmless nicotine.
Smokers take more than 3000 type of harmful chemicals in their body with each smoke puff
they inhale. Nicotine is one of them that creates craving in smokers body. When it is
swallowed as nicotine chewing gum, it goes to liver and is dissolved as harmless chemical.
Thus it enables smokers to gradually give up smoking by chewing these gums for few
months.
Nicotino will be launched in the market at the end of December 2012. It will be launched in
the market in three flavors- original, cinnamon and fresh mint. Each packet will contain 30
pieces of gum. It will operate in the Dhaka city for the first three years. The city is divided
into 8 zones covering 16 areas. The target customers are middle class and high end based on
income. Target segment is divided into two groups on age basis, 20-35 and 35-55 years.
Nicotino will use pull strategy to make people aware of its products. It will be positioned as a
product of moderate price and high quality. There will be various types of promotional
campaign to make people aware of the product brand and the health benefit it offers. The
marketing tools will include TVC, FM radio ads, newspaper ads, 24/7 help desk etc.
Nicotinos marketing budget is estimated in affordable method which will enable it to
continue the huge sales promotion schedule.
Nicotino products are produces in its own production plant in Sirajganj because of
convenient transport and availability of raw materials. Finished product will be distributed
with help of local distributors.
The estimated project cost is BDT 8,493,500 in FY 2012-13 which is financed by 69% equity
from partners and 31% debt from lenders. This report contains projected income statement,
balance sheet, cash flow statement and break even analysis for FY 2012-13, 2013-14 and
2014-15. The projected financial statements portray liquidity and solvency of the firm.

Page- 1

1.0 I N T R O D U C T I O N
Nicotino is the countrys first ever nicotine gum brand which will enter the market as a
Nicotine Replacement Therapy (NRT). This gum will be an alternative nicotine source for the
smokers and will also compel them to give up smoking and thus nicotine and other 3000 plus
harmful chemicals. According to Global Adult Tobacco Survey 2009, around 41.3 million
people of our country use tobacco in form of cigarette. For this around 57000 people die
every year due to smoke related diseases. Also, according to World Health Organizations
survey of 2004-2005, low income households of our country spend around 15% of their
income in tobacco products, which thus reduces private savings. Nicotino identifies these
problems as opportunity and combines two solutions into a single direction which is
producing a chewing gum that reduces the nicotine craving of the smokers by supplying very
small amount of nicotine and ultimately directing them to give up this habit.

Increasing rate of smokers

Solution
to
smoking
problem

Increasing death rate due

to smoking

Unique product for

Bangladeshi market

Solution
to health
hazard

Nicotin
gum

Illustration-1: Problems to prospect

1.1 Product offerings

Nicotino original- Original sweetened nicotine gum.

Nicotino flavored- Nicotino fresh mint (fresh mint flavored gum) and Nicotino
cinnamon (cinnamon flavored gum).

Nicotino will launch its products in 2 small packet sizes: 30 pieces and 60 pieces. These
packs will be released into market containing 2mg strength nicotine gum.

Page- 2

1.2 Features and unique selling proposition

Nicotine gum is a totally new concept in Bangladesh.

Nicotine gum is a commercially and technically viable smoke quitting solution for the

smokers of our country.

Nicotine gum helps smokers quit cigarettes within maximum 6 months, generally in

2-3 months.
No artificial sweetener, color, flavor will used when producing Nicotino.

1.3 Business Model:

Nicotinos business model is entirely production and manufacturing-based. Nicotinos
production process transforms and adds value to the ingredients and produces non-flavored or
flavored nicotine gums. Nicotino will:

Produce gums in its own production plant using eco-friendly production process.
Sell products in 2 small packet sizes (30 and 60 pieces) containing 2mg strength
nicotine gums.

Following is the business model of how Nicotino will make money:

Valued
custome
r

Nicotino
firm
Gum
ingredie
nts

Nicotin
gum

Money

Illustration-2: Business model

Page- 3

2.0 G O A L S

AN D

OBJECTIVES

2.1 Vision
Nicotinos vision is to create a smoking free Bangladesh to create a healthy nation.

2.2 Mission statement

Nicotino wants to offer its nicotine chewing gum to help the smokers give up smoking habit
while using most efficient and state- of- the- art technology in production operation. Nicotino
aims at establishing eco-friendly work environment and providing better employee incentives
as it continues to expand its business.

2.3 Short-term goals:

To offer quality products at a fair price to capture potential market share.

To create a demand for nicotine chewing gums as a solution for tobacco use quitting

process.
To persuade the target customers regarding the benefits of using nicotine gums as a
NRT for cigarettes which will bring familiarity among customers.

2.4 Long-term goals:

To expand its operation beyond Dhaka within the year 2015 and further goes for

export.
To set up new industrial unit in the west region of Bangladesh by the year 2018.
To enlarge its product mix by adding nicotine lozenge and nicotine patch product
lines.

2.5 Objectives:

To attain 20% growth rate by the year 2014.

To attain net profit margin of 25% in year 2017.
To repay loans by the year 2020 and lever up the firm with 25% debt by the year
2025.

3.0 C O M P E T I T O R A N A L Y S I S

Page- 4

Nicotino is the first production company in this country which is going to introduce tobacco
users to Nicotine replacement therapy. That means no other company in this country offers
nicotine gums for smoking substitution. It implies that Nicotino is going to enter the market
as the only one of its kind. Thus Nicotino will have no competitors in this country until the
time when

The existing domestic pharmaceutical companies decide to include this product line

in their product mix.

Other multinational companies such as GlaxoSmithKline, Aventis or Pfizer decide to
launch their NRT products in this country.

3.1 Competitive forces analysis:

Porters five forces analysis has been conducted to evaluate competitive edge of Nicotino
from its potential or existing competitors. The analysis shows:

Bargaining power of suppliers is high because there are not a lot of suppliers who can

supply necessary raw materials.

Bargaining power of buyers is low because the consumers dont have other options,

but it is essential for Nicotino to keep a moderate price to attract new customers.
Threat of new entrants domestically is low as the raw materials are not easily
available and there hasnt been any other company in the past whose market operation

could be monitored.
Threat of substitute is very low also.
The intra-industry rivalry is domestically very low as Nicotino is the first company to
produce this product.

Page- 5

The following illustration shows the summary result of Porters five forces analysis of
Nicotino:

Burgaining power of suppliers

High

Burgaining power of buyers

Low

Threat of new entrants

Low

Threat of substitute products

Low

Intra industry rivalry

Low

Illustration-3: Porters five force

analysis of Nicotino

Page- 6

4.0 S W O T A N A L Y S I S
Strength:

Positive internal factors that Nicotino uses to accomplish its goals and objectives are

Nicotino is the first nicotine chewing gum brand of the country. Thats why it enjoys

the first movers advantage in the market.

The nicotine chewing gum option is commercially and technically the most viable

Nicotine Replacement Therapy for Bangladesh.

The employees are given favorable work environment and it helps to create employee

loyalty.
The management team is comprised of efficient and dynamic persons.
It will face less government regulations due to its business intention to reduce the
smoking habit in society.

Weakness:
Negative internal factors that inhibit the accomplishment of Nicotinos goals and objectives
are

Nicotinos product distribution is highly dependent on dealers.

Nicotine gum making process is highly dependent on other ingredients. The
disruption of those may hamper production. Also a small error can create hazardous

consequence.
Nicotino has no established brand or image. So it may need aggressive promotion to
create brand awareness among customers.

Opportunity:
Nicotino can take advantage of two major market opportunities

There are increasing rate of voice in the nation against smoking habit and its health
hazard. Recent data shows that alone in Dhaka city, 72% of the smokers are willing to

quit cigarettes but are failing to do so. They can be potential customers.
Government has banned smoking in public places. This regulation helps to attract
customers to our product to help them in quitting cigarettes.

Threats:

Page- 7

Nicotino will face three main threats as it is introduced to the market

The level of acceptance by people is not reasonably certain.
Economic recession may lessen the purchase power of potential customers.
As in this country, Nicotino is in the introduction stage of its product life cycle, the

production company may have to face losses in early stages.

Strengths

First movers advantage

being unique product
Commercially and
technically viable NRT
Subject to fewer
government regulations

Weaknesses

Distribution highly depend on

dealers
Any small error in production
process
can
hamper
production hugely
Need
aggressive
advertisement to create brand

Threats

Opportuniti

Increasing rate of smokers

willing to quit cigarettes
Government regulation
against smoking
compelling smokers to
NRTs

Uncertain acceptance level

Decreasing purchase power of
potential customers due to
recession
Production may face losses in
early stages

Illustration-4: Nicotinos SWOT analysis

5.0

M AR K E T I N G S T R AT E G I E S
Making people aware about nicotine chewing gums and its benefits.
Focusing price unique selling propositions while developing marketing campaign

Page- 8

Building brand proposition to different consumers according to their perception (e.g.;

Nicotino as cigarette expense saver for middle class consumers, health preserver for

high end consumers).

Creating customer loyalty and making customer delight by proper quality assurance
campaign.

5.1 Target customer:

Geographic location: Dhaka city for first 3 years

Demographic:
1. Social classmiddle class and high end consumers.
2. Age 20-35 and 35-55 are two prospective buyer segments for flavored gum
and original gum respectively.
Prospective buyers: Around 540,000 ( 30% of Dhaka citys total cigarette smoking
population fall under Nicotinos target customer segments)

5.2 Market positioning

Harmless
to health

Nicotino
Marlbor
Dunhill
B&H
Gold leaf

Nicotino positions itself in the market on

the Basis of its moderate price and the
health benefits the target customers can
receive by consuming this product to help
them give up smoking. The product
position map here shows the unique
position Nicotino will have relative to

High
price

Low
pric
e

some cigarette brands.

Hazardo
us to

Illustration-5: Product positioning map

5.3 Product Strategy

Page- 9

Nicotino offers two basic types of products: original and flavored. The pack sizes of
Nicotino Original is 30 and 60 piece gums per packet. Nicotino Flavored offers 2 flavors
(fresh mint and cinnamon) with pack size of 30 and 60 piece gums per packet. All these gum
are offered in 2mg strength nicotine gum. Nicotino uses state-of-the-art technology for
packing its offers. The following table illustrates Nicotinos total product offeringNicotino Original

Nicotino Fresh mint

Gum strength
Piece per pack

Nicotino Cinnamon

2mg
30

2mg
60

30

2mg
60

30

60

The shelf life of Nicotino is

30 months for
both original
andoffering
flavored gum. If the nicotine
Illustration-6:
Nicotinos
product
gum becomes popular among the target customers, then Nicotino may decide to launch two
more product lines that include nicotine patch and nicotine lozenges.

5.4 Pricing strategy

As Nicotino is a unique as well as a new product in the countrys market, we have decided to
use the market-skimming pricing strategy for the product. The reasons behind using this
strategy are:

68.6% of current smokers, aged 35-55, are looking for means to give up smoking.

Thus there are enough buyers who will pay high price for the product.
As the product is totally new for Bangladesh market, competitors are unlikely to
emerge in the market easily and undercut the high price.

Nicotino will be introduced to market at Tk.195 wholesale / Tk. 240 retail price for 30 pieces
gum packet. For 60 pieces gum packet, the price is estimated Tk.390 wholesale/ Tk. 480
retail price.
The following price list shows the wholesale and retail prices of Nicotino products:

Page- 10

Piece per pack

Wholesale price (BDT)
Retail price (BDT)

Nicotino Original
30
60
195
390
240
480

Nicotino Fresh mint

30
60
195
390
240
480

Nicotino Cinnamon
30
60
195
390
240
480

Illustration-7: Wholesale and retail price of Nicotino products

5.5 Distribution strategy

The production of Nicotino will be done in the own operational plant in Sirajganj because the
availability of raw-materials as well as the convenient transport and communication.
Nicotino uses a simple distribution channel with zone-wise distributors. The Dhaka city has
divided into 8 different zones covering 16 areas. Their list is given below:

Zone
Zone-1
Zone-2
Zone-3
Zone-4
Zone-5
Zone-6
Zone-7
Zone-8

Covering areas
Mirpur, Pallabi
Cantonment, Kafrul,
Mohammadpur, Dhanmondi
Ramna, Tejgaon
Gulshan, Uttara
Lalbag, Kotwali
Demra, Sutrapur
Sabujbag, Motijheel

Illustration-8: List of product distribution zones

Finished Nicotino products come directly to a Dhaka city warehouse from the plant. Sales
team will use firms covered vans to distribute the product to the dealers. It will use different
specific day for specific zone. Then the secondary distribution channel led by the dealers

Page- 11

distributes the product by using their own resources. Nicotino will also make strategic
alliance with super stores and educational institutes canteens to sell its products.

5.6 Marketing communications strategy

Nicotino uses pull strategy as its promotion mix strategy which is spending a lot on
advertising and consumer promotion to build up consumer demand. It makes the promotion
mix efficient enough to activate customers to ask the retailers for the product. Here is a
graphical view of the pull strategy:

Nicoti
no

Order

Distribut
ors and
retailers

Dema
nd

Custom
ers

Marketing
activities
Illustration-9: Pull strategy of Nicotino
Nicotinos marketing communication mix or promotion mix includes all the typical elements
like advertising, sales promotion, public relation, personal selling and direct marketing.
Heres the detail:
Advertising:

Electronic media advertisements, such as television commercials, FM radio

commercials.
Print media advertisements, such as newspaper ads, posters and leaflets.
Point of purchase advertisements, Shelf space advertisements.

Sales promotion:

SMS contest
Price discount at special occasion
Page- 12

Public relation:

Buzz marketingby using opinion leaders (doctors).

Written articles about awareness of nicotine gum and its benefits.
Written features in lifestyle pages of newspapers.
Sending press release about products.
Arranging seminars under Anti- tobacco awareness campaign.

Personal selling:

Temporary selling booth at super stores, hospitals and campus.

Nicotino quality assurance campaign a tour to production plant to know about the
eco-friendly production process.

Direct marketing:

E-mail marketing, web marketing

Page- 13

6.0

P R O J E C T I M PLE M E N TAT I O N S C H E D U LE

AND

O R G AN I Z AT I O N AL S T R U C T U R E

6.1 Project implementation schedule

The project starts at April 2012 and the commercial launch is on January 2013. The 6-month
project implementation schedule is as follows

July1
2

Aug1
2

Sept1
2

Oct12

Nov1
2

Dec1
2

Jan13

License and
approval
Product
development
Land, building
Machine
purchase
Installation
Premise
beautification
Pilot Production
Quality testing
Commercial
operation

Illustration-10: Project implementation schedule

6.2 Organizational structure

At the initial phase, the operation of Nicotino is monitored by six department heads Page- 14
categorized as finance, human resource, manufacturing, marketing, research and
development, procurement and storage. The head of the departments are taken from the
partners and requirement for labors, supervisors and managers are fulfilled from outsource.
Following is the organizational chart of Nicotino:
NICOTIN
O

Head of
Finance

Head of
human
resourc
e

Head of
marketi
ng

Head of
manufa
cturing

Head of
Procure
ment

Head of
R&D

Financ
e
manag
er

HR
manag
er

Marketin
g
manage
r

Manufa
cturing
manage
r

Storage
manage
r

R&D
manag
er

Staf

Staf

Supervis
or

Supervis
or

Supervis
or

Staf

Staf

Staf

Staf

Illustration-11: Organizational structure of Nicotino

At the initial phase, the operation of Nicotino is monitored by six department heads. The
needs of staffs can be illustrated below based on the organizational structure:
2012-13

2013-14

2014-15

1
1
3

1
1
3

1
1
3

Finance unit
Head
Manager
Staff
Human resource unit

Page- 15

Head
Manager
Staff
Marketing unit
Head
Manager
Supervisor
Staff
Manufacturing unit
Head
Manager
Supervisor
Staff
R&D unit
Head
Manager
Staff
Storage unit
Head
Manager
Supervisor
Staff

1
1
3

1
1
3

1
1
3

1
3
4
16

1
3
4
17

1
3
4
17

1
1
3
12

1
1
3
13

1
1
3
13

1
1
6

1
1
7

1
1
7

1
1
1
5

1
1
1
6

1
1
1
6

Illustration-12: Staffing needs

All the staffs are permanent and recruit by giving monthly wages
The production unit needs extra staffs each years due to process more raw-materials
The staffs are giving all privileges stated in Bangladesh Labor Code 2006.

Page- 16

7.0

S ALE S P R O M OTIO N

7.1 Distribution channels and process

The distribution channel of the Nicotino can be easily shown in the following figure:

Website

Nicotin

Nicoti

Consu
Order
form

Retaile

Consu

Website

Chief
Marketin
Illustration-13: Distribution channels
g Officer

As it is shown in the graph, the retail distributors and dealers can place order by using order
form or through internet. The customers can place orders only through the website. The
distribution process goes as the following:

Finished Nicotino products are transported from the Sirajganj plant to a warehouse
that is situated in Dhaka.
Nicotino uses intensive distribution strategy, which means that this product will be
available in all the outlets on basis of demand by dealers and consumers.
Our product representatives will deliver the finished products to super stores, drug
stores and departmental stores. They may use the firms covered vans to do this.
Specific day for specific zone are to be assigned, so the distribution operation may
continue systematically.
Retailers will then sell the products to the valued customers.
We will provide a 24/7 call center. Also retailer survey will be conducted quarterly by
the marketing team to know the first hand information of the customers.

7.2 Marketing organization structure

Nicotinos head of the marketing department, chief marketing officer holds overall
responsibility for all of the companys marketing activity. The following figure shows the
structure of eight personnel marketing organization-

Regional Sales
Regiona
l Sales
SalesManager

Advertisi
Advertisin
ng
g
Analyst
Manager

Promotio
n
Analyst
Manager

Page- 17

Illustration-14: Marketing organization structure

7.3 Advertising and promotional campaigns

Nicotinos nicotine gum will be first launched in the market in January 2013. Following is the
summary of the advertising and promotional campaign during the first year of Nicotinos
product:

In January, we will start advertising for our product with the help of newspaper ads
and creating Buzz by providing samples to selected product reviewers, opinion
leaders, and in its case, the renowned doctors of our country. Newspaper ads will
continue whole year. Also our marketing staff will use direct marketing by working

with retailers to explain nicotine gums health benefit and advantage.

There will be television commercials which we will launch at the month of March.
These commercials will create brand awareness among people faster. This will

continue throughout the whole year.

In May we will arrange SMS contest. We will also distribute new point of purchase

and shelf space ads. There will be also FM radio advertising.

In July we will hold internal contest among sales persons and the retailers offering
prizes and discount to those who will be able to sell most products in their zone
during the four week period.

Page- 18

We will launch create our own website and start online ads this in August.
In October, there will be a discount offer for the four week period.
In December we plan to roll out a massive advertising campaign. We will use
celebrity voices telling how Nicotino helped them stop their smoking habit.

The following schedule shows one year plan of our advertising and promotional campaign:

Jan
13

Fe
b1
3

Ma
r1
3

Ap
r1
3

Ma
y1
3

Jun
13

Jul
y1
3

Au
g1
3

Se
p1
3

Oct
13

No
v1
3

Dec
13

News paper ads

Direct marketing
Television ads
SMS contest
FM radio ads
Point of purchase ads
Contest among
retailers
Website and online
ads
Discount offer
Advertising using
celebrities

Page- 19

Illustration-15:
Advertising
and promotional
schedule
Following is the three
year allocation
of our marketing
budget atcampaign
affordable
method:

Advertising
Sales promotion
PR and personal selling
Direct marketing
Total

2012-13
2,983200
150,000
1,146,600
20,000
4,300,000

2013-14
5,146,400
200,000
933,600
20,000
6,300,000

Illustration-16: Three year marketing budget

2014-15
5,146,400
200,000
1,233,600
20,000
6,600,000

Page- 20

8.0

F I N AN C I AL A N ALYS I S

AN D

PROJECTIONS
8.1 Financial statement assumptions

Total original and flavored nicotine gum production proportion is 50:50.

The wages of production staff increased by BDT 300 yearly started from BDT 4200.
Wholesale price of both original gum and flavored gum is BDT 6.5/ piece.
Salaries of employees increased by BDT 1000 yearly.

Marketing and promotion expense is the highest indirect expense and the marketing
budget is calculated using affordable method.
Office rent includes the rent of Dhaka office and warehouse.
Accounts receivable is 10% of sales revenue each year.
Accounts payable is 35% of the raw materials cost.

8.2 Accounting assumptions

Depreciation policy is straight line method.

Depreciation rate is 5% for long term assets.
Inventory valuation is done by FIFO method.
Tax rate is assumed to be 40% on net income before tax which is payable annually.

8.3 Financial assumptions

The firms initial investment is BDT 8,493,500 which is financed by 69% equity and

31% debt.
The cost of capital or discount rate is assumed to be 20%.
Interest for loans is 15% per annum repayable annually.
Page- 21

8.4 Initial investments

Amounts in BDT
Startup Expenses:
License and approval
Patent and trademarks
Product development cost
Infrastructure development
Others
Total startup expenses
Startup Assets:
Land and registration
Building
Machinery and equipment
Vehicle
Cash requirement
Other short-term assets
Total startup assets
Total Requirement

52,000
25,000
64,000
327,500
45,000
513500
722,500
600,000
4,302,600
606,300
1,698,600
50,000
7,980,000
8,493,500

Means of finance
Equity
Debt

Amount in BDT
5,870,775
2,662,725

% of Total
69%
31%

Loan repayment schedule

Loan taken ( in BDT)
Date of loan taken
Repayment years
No. of installation per year
Interest rate
Periodic loan repayment

Period
1
2
3
4
5

Beginning Balance
2,622,725
2,493,551
2,345,000
2,174,167
1,977,710

2,622,725
July 1, 2012
10
1
15%
522,583

Loan Repayment
522,583
522,583
522,583
522,583
522,583

Interest
393,409
374,033
351,750
326,125
296,656

Principal
129,174
148,550
170,833
196,458
225,927

Ending Balance
2,493,551
Page- 22
2,345,000
2,174,167
1,977,710
1,751,783

8.5 Projected Income Statement

2012-13
Operating revenue

2013-14

2014-15

Sales revenue
Less: Cost of goods sold
Gross Margin
Less: Operating expenses
Salaries
Marketing expenses
Office rent and utilities
Depreciation
Insurance and others
Total operating expenses
Income from operations
Less: interest expense@ 15%
Net income before tax
Less: income tax @ 40%
Net income after tax

15,200,000
8,232,000
6,968,000

41,800,000
20,739,500
21,060,500

51,300,000
24,166,100
27,133,900

825,000
4,300,000
210,000
275,445
210,000
5,820,445
1,147,555
393,409
754,146
301,659
452,488

1,782,000
6,300,000
420,000
275,445
220,000
8,997,445
12,063,055
374,033
11,689,022
4,675,609
7,013,413

1,914,000
6,600,000
480,000
275,445
225,000
9,494,445
17,639,455
351,750
17,287,705
6,915,082
10,372,623

Estimation of cost of goods sold

Purchase of ingredients
Transportation cost
Packaging cost
wages
utility
Other direct expenses
Cost of goods sold

2012-13
4,390,000
550,000
1,520,000
756,000
960,000
56,000
8,232,000

2013-14
10,820,000
1,100,000
4,180,000
1,782,000
2,700,000
157,000
20,739,500

2014-15
12,070,000
1,400,000
5,130,000
2,073,600
3,300,000
192,500
24,166,100

8.6 Projected Balance Sheet

Cash
Accounts receivable
Inventory
Other current assets
Total current assets
Long term assets
Accumulated depreciation
Total long term assets
Total assets
Accounts payable
Other current liabilities
Total current liabilities
Long term liabilities
Total liabilities

2012-13
2,082,550
1,520,000
3,800,000
64,229
7,470,779
6,231,400
275,445
5,955,955
13,426,734
2,881,200
1,728,720
4,609,920
2,493,551
7,103,471

2013-14
4,668,825
4,180,000
9,500,000
3,266,461
21,615,287
6,231,400
550,890
5,680,510
27,295,797
7,258,825
4,355,295
11,614,120
2,345,000
13,959,120

2014-15
9,664,310
5,130,000
10,450,000
8,767,107
34,011,418
6,231,400
826,335
5,405,065
39,416,483
8,458,135
5,074,881
13,533,016
2,174,167
15,707,183

Page- 23

Paid up capital
Retained earnings
Total equity
Total liability and equity

5,870,775
452,488
6,323,263
13,426,734

5,870,775
7,465,901
13,336,676
27,295,797

5,870,775
17,838,524
23,709,299 Page- 24
39,416,483

8.7 Projected Cash flow Statement

2012-13
Cash flow from operating activities
Cash received from buyers
Cash paid for cost of sales
Cash paid to employees
Cash paid for promotion
Cash paid for rent and utilities
Cash paid for other purposes
Cash paid for interest
Cash paid for income tax
Net cash provided by operating activities
Cash flow from investing activities
Cash paid for startup assets
Cash paid for startup assets expenses
Net cash provided by investing activities
Cash flow from financing activities
Cash received from loan term loan
Cash received from paid up capital
Cash paid for loan payment
Net cash provided by financing activities
Net increase in cash
Cash balance at the beginning of the year
Cash balance at the end of the year

2013-14

2014-15

13,680,000
(8,232,000)
(825,000)
(4,300,000)
(210,000)
(210,000)
(393,409)
(301,659)
(792,067)

37,620,000
(20,739,500)
(1,782,000)
(6,300,000)
(420,000)
(220,000)
(374,033)
(4,675,609)
3,108,858

46,170,000
(24,166,100)
(1,914,000)
(6,600,000)
(480,000)
(225,000)
(351,750)
(6,915,082)
5,518,068

(6,281,400)
(513,500)
(6,794,900)

0
0
0

0
0
0

2,622,725
5,870,775
(522,583)
7,970,917

0
0
(522,583)
(522,583)

0
0
(522,583)
(522,583)

383,950
1,698,600
2,082,550

2,586,275
2,082,550
4,668,825

4,995,485
4,668,825
9,664,310

Page- 25

8.8 Break even analysis

2012-13

2013-14

2014-15

Total costs
Per unit selling price (BDT)
Break even selling unit
30 piece /packet

9.0

14,445,854
6.50
2,222,439
74,081

30,110,978
6.50
4,632,458
154,416

34,012,295
6.50
5,232,660
174,422

C O N T I N G E N C Y P LAN

Nicotino will use tight control measures to closely monitor Quality and consumer
satisfaction. It will enable us to react quickly in correcting problems that may occur. If there
comes any crisis that pushes Nicotino to exit the market, then we have the following
strategies to lessen the risk

Firms primary exit strategy is converted into private limited company from

partnership firm to reduce capital problem (if occurs) and skill managing.
Firms secondary exit strategy will be to convert the product from nicotine chewing
gum to a usual chewing gum. This will lessen the risk of being dissolute.

Page- 26

10.0 A P P E N D I X
Nicotinos product offerings

Quit Smoke Smartly!

Page- 27

Nicotino Drug facts

Ingredients
Nicotine Polacrilex

Purpose
Stop smoking aid

source
Nicotine compound, solid,

Chewing gum base,

Carrier of ingredients and

n.o.s. UN1655
Produced from chicle or

containing butylated hydroxy

mouth freshener

rubber

toluene (E321)
Sorbitol

Sweetener

Obtained by reduction of

Sodium carbonate, anhydrous Reduces acidic taste

Sodium bicarbonate
Works as mouthwash

glucose
Produced from soda ash
Produced from soda ash,
dissolved in water treated

Flavor

with carbon dioxide

Vegetable based

Flavor

(cinnamon, mint)
Produced from Haverstroo

Glycerol

Sweetener and mouth

compound ZD 4932
By product of biodiesel

Talcum
Calcium carbonate

bacteria cleaner
Creates gum substance
Works as gastric antacid

Produced from talc carbonate

Retrieved from calcium

Flavor for smoker

Haverstroo flavor

carbonate compound