New Venture Development Business Model (Canvas) Assessment 2 Lecture: Rizvan Anis Student ID: 21332677 1. Table of Content 1. Table of Content........................................................................................................ 02 2. Introduction ...............................................................................................................03 3. Customer Segmentation.............................................................................................05 4. Value Proposition...................................................................................................... 07 5. Distributing Channel ................................................................................................ 09 6. Customer Relationship…………………………………………………………...... 10 7. Revenue Stream………………………………………………………………….... 11 8. Key Resource............................................................................................................ 13 9. Key Activity.............................................................................................................. 14 10. Key Partnership......................................................................................................... 14 11. Cost Structure........................................................................................................... 15 12. Appendix ………………………………………………………………………..... 18 13. References................................................................................................................ 24 2. Introduction Synotecx Polymer (Pvt) Ltd is targeting to be the leader in marketing & distributing specialty petrochemicals and polymer additives for the plastics and rubber industry. We will serve the quality polymer needs of various industrial and commercial manufacturers. As we are targeting to become the market leader, we have acquired a strong research and development team. We are representing the world’s leading manufacturers of petrochemicals in Iran and we are the sole agent of Jam Petrochemical Company, Amir Kabir Petrochemical Company, Laleh Petrochemical Company, Arya Sasol Polymer Company & Pooya Polymer Company. Plastic raw material business is one of the world’s largest businesses. Plastic industry commenced operation in 1970s in Sri Lanka and 15 Billion rupees have been invested in the industry. Sri Lanka is a major player in the plastic product domain. From the annual production 60% of products are exported while the other 40% serves the local market. Sri Lanka is a prime market for petrochemicals and polymer additives due to its place in the plastic product market. 3. Customer Segmentation Sri Lanka is a fast growing country and spends billions of rupees for purchasing goods. Plastic is a commodity used in the day to day life and it has become essential product. There are over 400 register and 100 to 150 unregistered companies that are manufacturing plastic product. (Export Development Board) Petrochemical market in Sri Lanka is a segmented market. It can be broadly categorized into three more categories based on the manufacturing (ergo, petrochemical consumption) volumes. ● High volume manufacturers. ● Medium volume manufacturers. ● Low volume manufacturers. Synotecx Polymer is targeting all these manufacturers in the Sri Lanka market. High volume manufacturers There are 200 to 250 high volume manufacturers according to the (Export Development Board). The major product of these high volume manufacturers is blown film grade polythene. These manufacturers’ main raw materials are LLDPE, HDPE, LDPE and MASTER BATCH. The raw material consumption of these manufacturers per month ranges from 6000Mt to 7500Mt monthly. Their companies target the European market and exports 100% of their produce. Due to their contribution to the Sri Lankan economy the government has given them the opportunity to import duty free raw materials. They are largely identified as BOI (Board of Investment) companies. Medium Volume Manufacturers There are about 150 to 200 medium end manufacturers in Sri Lanka according to the (Exports Development Board). They are manufacturing all types of plastics, through processes like Injection Molding, Blow Molding, Rotational Molding, Thermoforming etc. Main raw materials consumed by these manufacturers are LLDPE, HDPE, PP, PVC, LDPE, and MASTER BATCH. Their products include things like Pipes, Bottles, Water Tanks, Wires, Cables, etc. Their monthly raw material quantity is between 4000 Mt to 5000 Mt monthly. Low Volume Manufacturers There are about 100 to 150 unregistered small scale manufacturers in Sri Lanka as well. They mostly cater to the Sri Lankan market, and their products vary across the board. Their main raw materials are LLDPE, HDPE, PP, PVC, LDPE, and MASTER BATCH. These small manufacturers consume between 2000Mt to 3000Mt monthly. 4. Value Proposition Why we are different from others Synotecx Polymer Company has made, supplying highest quality plastic raw material to the Sri Lankan market its mission. We can supply the world's best petrochemical from Iran market to fill the gaps in Sri Lanka market. Our products are 30% efficient and 5% cost effective than our competitors. And our exclusive three month credit period hasn’t been matched by any competitors. Competitive advantage Customers falling under the High Volume Manufacturer category are mostly looking for the quality of material than the price. We offer them the highest quality material from Iran with a lower price point of 1030 USD per ton. Competitors are offering lesser quality materials for around 1070 USD per ton. For all raw materials there is a technical data sheet, which shows the material thickness and other parameters relevant to the manufacturing process. Please refer (appendix A) for TDS. For the customers categorized as Medium Volume Manufacturers we offer the same quality with the price point of 1050 USD per ton. While we cannot offer a better price due to the lower volume of sales we have still managed to beat the price of our competitors at around 1090 USD per ton. For the customers categorized as Low Volume Users we can provide a price point of 1070 USD per ton and our competitors at around 1110 USD per ton. Please refer (appendix B) for Price Offer. These prices however depend on the world crude oil prices. There is a huge benefit to the manufacture with highest grade material at a lower price point. They can be extremely competitive at the market with other manufacturers because the cost effectiveness and efficiency of our raw materials results in much lower manufacturing costs. We perform better than our competitors in these ways. We offer to the market lower prices and fast delivery within a month. We will provide the manufactures with a three month credit period, which will result in lower risks for the manufacturers. In addition to that our brand is highly recommended globally. Possibility of stand out from competitors There are eight major players in the Sri Lankan raw material market. They are SABIC, LOTREEN, EXXONMOBIL, TASNEE, REPOL, BASF, SGS and LOTY. These players were, however, not being able to fill the complete market demand, leaving a market gap that we will be able to fill. As an agent of an Iran petrochemical company we are able to offer 5000Mt per month to the market, which should plug the existing gap. Competitors are charging higher price for low efficient raw materials, buyers had to buy it because they had no better option. Once we enter to the market, we expect a huge WOW factor, which should enable us to expand beyond, just filling the existing market gaps and become a major player. In Sri Lanka most manufactures are facing language problem when dealing with international raw material suppliers. We will handle the supply chain from the initial order, to the final delivery to the manufacturer's. 5. Distribution Channels In any business there are multiple channels to the customers as well as suppliers. As a B2B business our channels are somewhat different than others. As an agent of an Iranian petrochemical company we should have direct contact with the petrochemical company. As a B2B business we do an agent ship. We can speak directly with the raw material manufacturer and negotiate and lock a price for the raw materials each month. Then we can offer the price to our customers in Sri Lanka. The price is as volatile as the crude oil prices and change every month. We will also be maintaining an online presence using a web site and various social media. We will also be having meetings with each customer every month to open LCs and smooth over any operational complexities that might arise. We will also create and maintain a web portal, which will allow our customers to login and check the available quantities and prices every month. They will also be able to fill an online form and place their order with us. We will then follow up with the customer and provide assistance until the goods are delivered to Sri Lanka. This streamlined process will be the most convenient way to order petrochemicals in the Sri Lankan market. We will bring convenience to the doorsteps of our customers with these innovative ideas. Furthermore our sale force will follow up each customer regularly to ensure that the sale is done as smoothly as possible. In the beginning the business will be based mainly on referrals. Our trade agent in Iran will also follow up with the customers through direct calls. The trade agents in Iran will also visit Sri Lanka in three months time to maintain a good relationship with the customers and make sure there are no issues. 6. Customer Relationship Customer relationship is the most important aspect of this business. There are eight major players in the market supplying raw material. But they will not be able to retain the customers due to our price and availability of quantity along with the superior quality. Customer Retention Plan We personally assist each of our customers every week. We offer each customer competitive prices, high volume customers will get another 10 to 50 USD lowered per ton. We will also offer customers incentives based on their total annual consumption. Increase Customer Profitability Whatever the business, people are looking for a good profit. With our high efficiency and low cost we will help our customers increase their profitability by lowering production cost. We will also provide them with a technical data sheet containing the parameters necessary to maintain an highly optimized production line. To provide a concrete example, we will tell them how much CaCo3 to use to increase the production. Drawing in a new customer in an already established market is really difficult because they are already attached to one brand or product. Once we do gain a customer, our customer retention plan will help us keep the customer happy by creating a win win situation for both us and the customer. 7. Revenue Stream The main purpose of any business is to have good revenue stream. As an agent and as a B2B business it’s easy to become profitable due to our low overhead. We need to provide the customers with a price that is capable of covering our agent commission. While the world crude oil prices vary monthly, we will target a 15 USD per ton commission and a monthly quantity based sales target as described in the business plan. This has been illustrated in the below graph per month and yearly profit. Projected sales per month JANUARY FEBRUARY MARCH APRIL MAY SALE(QUANTITY-TON) 1000 1400 2500 2000 1800 COMMISSION per ton (USD) 15 15 15 15 15 Commissions Income(USD) 15,000.00 21,000.00 37,500.00 30,000.00 27,000.00 EXCHANGE RATE 148.25 148.25 148.25 148.25 148.25 Commission Income(Rs.) 2,223,750.00 3,113,250.00 5,559,375.00 4,447,500.00 4,002,750.00 JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER 1700 1800 1900 2000 2300 2700 2500 15 15 15 15 15 15 15 25,500.00 27,000.00 28,500.00 30,000.00 34,500.00 40,500.00 37,500.00 148.25 148.25 148.25 148.25 148.25 148.25 148.25 3,780,375.00 4,002,750.00 4,225,125.00 4,447,500.00 5,114,625.00 6,004,125.00 5,559,375.00 Yearly expected revenue YEAR 01 YEAR 02 YEAR 03 SALE(QUANTITY-METRIC TON) 23600 25960 28556 COMMISSION per Ton (USD) 15 16.5 18.15 Commissions Income(USD) 354,000.00 428,340.00 518,291.40 EXCHANGE RATE 148.25 152.5 157.5 Commission Income(Rs.) 52,480,500.00 65,321,850.00 81,630,895.50 *Other expenses have been shown in the Cost Structure (p. 14 to 16). 8. Key Resources Synotecx Polymer Company is well placed and capable of supplying main plastic raw materials such as LLDPE, LDPE, HDPE, PP, PVC and MASTER BATCH. 140,000Mt of these raw materials are used annually in Sri Lanka. One of our key resources is having the dealership of a petrochemical manufacturer capable of supplying all these raw material grades. Currently there’s no competitor capable of supplying all these grades of raw materials in Sri Lanka. Another key resource is the agreement Synotecx Polymer will have with the Iranian petrochemical manufacturers. It will be exclusive agreement tenure 5 years, rendering Synotecx Polymer the only agent in Sri Lanka for their products. Furthermore we will have a sales team who will be well experienced in the field with a good referral base. They will be highly skilled in marketing and will be a key resource of Synotecx Polymer. Our last key asset will be the manufacturing process technical expertise we can bring to the table. We will have technical experts that can provide our customer with advice on how to fine tune and optimize their production lines to get the maximum yield from our high efficient petrochemicals. 9. Key Activity One of the key activities in our business is CRM (customer relationship management). It is the strategic process of selecting customers to the organization which will maximise the profit of the company. Our expert marketing team will follow up with all types of plastic manufacturers to gain customers to the company. We are maintaining our supplier relationship regularly and our product brand will be synonymous with the highest quality of material and customer service available in the market. 10. Key partnership As a local agent our key partnerships are with Iran, Arya Sasol polymer Company, Amir Kabir Petrochemical Company and Pooya Polymer Company for the supply of petrochemicals. We are also expecting to have a key partnership with one or more of the banks in Sri Lanka. This is a business with a high revenue turnover. We are planning to stock 2000 Mt of raw materials in Sri Lanka in the long term. Roughly calculated, the value is around 23 Million USD. Such a high value will require a partnership with one or more banks, to effectively finance and manage the cash pipelines. 11. Cost Structure As per revenue stream, cost structure has been shown with all expenses. As an agent we have a few variable costs to maintain, such as salaries, marketing expenses, office rental etc. which will show in the costing detail. Synotecx Polymer (Pvt) Ltd. Project Income Statements Monthly JANUARY FEBRUARY MARCH APRIL MAY Income Commission Income 2,223,750.00 3,113,250.00 5,559,375.00 4,447,500.00 4,002,750.00 Expenses Building Rent 150,000.00 150,000.00 150,000.00 150,000.00 150,000.00 Salaries 350,000.00 350,000.00 350,000.00 350,000.00 350,000.00 EPF 42,000.00 42,000.00 42,000.00 42,000.00 42,000.00 ETF 10,500.00 10,500.00 10,500.00 10,500.00 10,500.00 Utility Expenses 300,000.00 300,000.00 300,000.00 300,000.00 300,000.00 Telephone/Internet 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 902,500.00 902,500.00 902,500.00 902,500.00 902,500.00 Commission 378,037.50 529,252.50 945,093.75 756,075.00 680,467.50 378,037.50 529,252.50 945,093.75 756,075.00 680,467.50 Finance Expenses Bank charges 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 Net Income 918,212.50 1,656,497.50 3,686,781.25 2,763,925.00 2,394,782.50 2nd Graph JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER 3,780,375.00 4,002,750.00 4,225,125.00 4,447,500.00 5,114,625.00 6,004,125.00 5,559,375.00 150,000.00 150,000.00 150,000.00 150,000.00 150,000.00 150,000.00 150,000.00 350,000.00 350,000.00 350,000.00 350,000.00 350,000.00 350,000.00 350,000.00 42,000.00 42,000.00 42,000.00 42,000.00 42,000.00 42,000.00 42,000.00 10,500.00 10,500.00 10,500.00 10,500.00 10,500.00 10,500.00 10,500.00 300,000.00 300,000.00 300,000.00 300,000.00 300,000.00 300,000.00 300,000.00 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 902,500.00 902,500.00 902,500.00 902,500.00 902,500.00 902,500.00 902,500.00 642,663.75 680,467.50 718,271.25 756,075.00 869,486.25 1,020,701.25 945,093.75 642,663.75 680,467.50 718,271.25 756,075.00 869,486.25 1,020,701.25 945,093.75 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 2,210,211.25 2,394,782.50 2,579,353.75 2,763,925.00 3,317,638.75 4,055,923.75 3,686,781.25 Synotecx Polymer (Pvt) Ltd. Project Income Statements Annually Year 1 Year 2 Year 3 Income Commission Income 52,480,500.00 65,321,850.00 81,630,896.00 Expenses Admin Expenses Building Rent 1,800,000.00 1,980,000.00 2,178,000.00 Salaries 4,200,000.00 4,830,000.00 4,829,998.85 EPF 504,000.00 579,600.00 579,599.86 ETF 126,000.00 144,900.00 144,899.97 Utility Expenses 3,600,000.00 3,780,000.00 3,969,000.00 Telephone/Internet 600,000.00 630,000.00 661,500.00 10,830,000.00 11,944,500.00 12,362,998.68 Selling Expenses Commission 8,921,685.00 9,813,853.50 10,795,238.85 8,921,685.00 9,813,853.50 10,795,238.85 Finance Expenses Bank charges 300,000.00 315,000.00 330,750.00 Net Income 32,428,815.00 43,248,496.50 58,141,908.47 12. Appendix Appendix A Technical Data Sheet of Competitors Technical Data Sheet of Competitors LLDPE Film Grade Iran TDS HDPE Blow Molding Grade Iran TDS Appendix B Price of TASNEE Brand We are pleased to offer as follows: Item Grade Over 10 Shipment 5 to 10 Shipment 1 to 5 Shipment (US$ PMT/C&F) (US$ PMT/C&F) (US$ PMT/C&F) 1 PP Yarn PP H1030 (MI: 3) 1070/- 1090/- 1110/- 2 PP Yarn PP H1045 (MI: 4.5) 1070/- 1090/- 1110/- 3 PP Injection PP H4120 1070/- 1090/- 1110/- 4 PP Injection PP H4300M (MI: 30) NA NA 5 PP Injection PP H4260 (MI: 26) 1070/- 1090/- 1110/- 6 PP Injection PP H2250 (MI: 25) 1070/- 1090/- 1110/- 8 HDPE Film HD F0455 1150/- 1170/- 1190/- 9 HDPE Blow HD B1258 1150/- 1170/- 1190/- 1170/- 1190/- 10 LDPE Film LD 1925AS (MI: 2) 1250/- 1270/- 1290/- 1170/- 1190/- 11 LDPE Film LD 4025AS (MI: 4) 1250/- 1270/- 1290/- 12 LDPE Film LD 0725N (MI: 0.75) 1250/- 1270/- 1290/- Qty: minimum 2 fcl (16 or 17MT in one 20FT FCL & 24.75MT in 40ft FCL) Payment: C&F Colombo Lc at sight / LC at 60 days Shipment January / February 2017 from Tasnee Petrochemicals – Saudi Arabia Validity 30th December 2016 subject to qty availability and final confirmation. – orders confirm after validity is subject to approval and cannot guarantee qty. Offer Conditions: 1. LC can be accepted only from the approved Bank. 2. Reimbursement charges on Applicants Account. 3. Lc should be DIRECTLY advised to “Alinma Bank” as per PI. TASNEE doesn’t accept LC advised through any other channel – clause 57D 4. Payment term will be ONLY on C&F BASIS 5. All Lc should be established on or before 10th January 2017, LC’s received after validly subject to final approval and availability from TASNEE. Look forward for your confirmation to issue PI. 13. References () Pooya polymer company , Available at: http://www.pooyapolymer.com/ (Accessed: 31/12/2016). () Sri lanka custom , Available at: http://www.customs.gov.lk/ (Accessed: 31/12/2016). (2010) Central bank, Available at: http://www.cbsl.gov.lk/ (Accessed: 31/12/2016). (2012) Laleh Petrochemical Company , Available at: http://www.lapc.ir/en/home (Accessed: 31/12/2016). (2015) Arya Sasol Polyme Company , Available at: http://en.aryasasol.com/ (Accessed: 31/12/2016). 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