January, 2000

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1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.3 Keys Success Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3 Company Locations and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3.0 Product Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.1 Product Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.3 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.4 Sales Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.5 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.6 Future Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4.2.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4.3 Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.3.1 Competition and Usage Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.3.2 Main Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

5.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115.1 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5.1.1 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.1.2 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.1.3 Promotion Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135.1.4 Distribution Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

5.2 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145.2.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

6.0 Human Resources Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156.1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156.2 Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156.3 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156.4 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166.5 Feedback and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166.6 Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197.2 Key Financial Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207.3 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217.4 Revenue Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217.5 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227.6 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237.7 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247.8 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Table of Contents

7.9 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

8.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268.1 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278.2 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Table of Contents

1.0 Executive Summary

The disposable nappy, an invention that revolutionized the baby care industry, exists today as a practical solution to the problem of dirty, smelly, wet baby bottoms throughout the world.

We are on the verge of entering a lucrative market in a growing country. The current population fertility rate estimated at 4.2 children

1

, and increased admissions in hospitals and clinics presents an opportunity for Baby Nappies World to enter and penetrate the baby nappies and sanitary pads market. Baby Nappies World is poised to take advantage of this growth rate and minimal local competition, with a dedicated and experienced staff, excellent order procurement, and effective management and marketing. The initial intention will be to provide nappies and sanitary pads to institutions and organisations including hospitals and wholesalers throughout Botswana.

Initial plans are to produce approximately 300 diapers per hour 5 days a week, utilizing an 8 hour working day, enabling us to produce a total of 48,000 diapers per month. As time progresses and we become more efficient in their production this figure should rise to approximately 56,000 per month. This would be for the diapers only though we do intend to also produce sanitary pads, though on an order basis. We realise the fact that for us to prosper in this relatively untapped market, there is need to be flexible and responsive, to delight our customers by providing them with what they want, when they want it and in the exact quantity. Our primary goal will be to establish and strengthen our existence in the market, which will be bestowed by the business environment in which we function.

Our marketing strategy will be based mainly on ensuring that customers know about our existence and the products we produce. Hence our intention is to make the right information available to the right target customers. This will be done through implementing a market penetration strategy that will ensure that we are well known and respected in the market. We will ensure that our products' prices are favorable relative to our South African counterparts' prices, and that our potential customers appreciate the quality of our products. However, the prices we charge will also take into consideration the cost of production and distribution so as to ensure that we remain viable and operational. We appreciate the fact that the majority of wholesalers and intermediaries that order our products perceive South African products to be of higher quality and reliability. To counteract this there will be need for us to not only aggressively market the high quality of our products, but also to go out of our way in serving our customers and clients so as to establish a good long-term relationship.

Our target markets will primarily constitute institutions, wholesalers and other intermediaries who often order in bulk for their customers, and concerned individuals. Hence there will be need to network with the various decision-makers/order-makers to ensure we receive orders for our products.

We intend to compensate our personnel well, so as to retain their invaluable expertise and to ensure job satisfaction and enrichment through delegation of authority. We intend to achieve optimal productivity whilst realizing the full potential of each of our employees through provision of health care, generous profit sharing, plus a minimum of three weeks vacation. Awards will be given out to outstanding individuals for hard work and production so as to not only show our appreciation, but to instill a sense of fun into the work and promote the maintenance of high standards.

We project sales to increase from more than P748,800 the first year to more than P1,075,200 the second, and P1,142,400 in the third year. Profits are calculated to be around P281,682 before tax the first year during the start-up phase of this business.

Ultimately the attractiveness of our venture lies with the fact that customers will choose our

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products above those of competitors because of the relatively lower prices as well as their high quality. Hence Baby Nappies World's ongoing initiatives will be to drive sales, market share and productivity so as to provide additional impetus towards attainment of the corporate goals and objectives.

1

Courtesy: Central Statistic Office

NOTE: All currency figures in this plan are in Botswanan Pula (P).

P0

P200,000

P400,000

P600,000

P800,000

P1,000,000

P1,200,000

2000 2001 2002

Sales

Gross Margin

Net Profit

Highlights (Planned)

1.1 Objectives

Our business strategy will revolve around the need to provide quality disposable baby nappies, geriatric/adult diapers and sanitary pads to the various institutions and wholesalers that need them, in the process fully satisfying their requirements. This shall be undertaken through adequate training and recruitment of a professional team dedicated to providing and catering the customer's needs.

We intend to ensure that our marketing campaign increases the knowledge of our products and services to the various market segments we shall be targeting. This is particularly so with organisations increasingly looking at obtaining quality products at the lowest prices as they strive to increase profitability.

We also intend to have well laid out introductory letters and other promotional material that will enable clients to have an understanding of the types of products we offer and advantages of utilizing them. In addition well-done company profiles and business cards often have a triggering effect on clients contemplating ordering our products. Hence this will undoubtedly generate increased sales of our products.

In summary we intend to attain the following objectives:

• Continuously provide high quality diapers and sanitary pads on time and on budget.• Develop enthusiastically satisfied customers all of the time.• Ensure economical use of resources from capacity utilization, minimising

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inventory/stock and low cost, and high quality materials.• Contribute positively to our communities and our environment.• Establish a market presence that assures short-term and long-term profitability,

growth and market share, which will ultimately convert to business success.

1.2 Mission

We are fully committed towards the production and delivery of high quality disposable baby nappies, geriatric/adult diapers and sanitary pads to the respective communities. Internally we intend to create and nurture a healthy, productive, satisfying and enjoyable environment, in which our employees are fairly compensated and encouraged to respect the customers' requests and the quality of the products we intend to produce. We seek fair and responsible profit, enough to keep the company financially healthy for the short and long term, and to fairly remunerate employees for the work and effort.

1.3 Keys Success Factors

1. Timeous response to customers' requests: We cannot afford to delay our clients for whatever reason, as this will have a negative bearing on our image and reputation,as well as impacting future business. Hence we need to be continually communicating with the client, so as to ensure that products are delivered on time and according to the customer's specifications. This will go a long way towards instilling a sense of trust in our ability and establishing long-term relationships.

2. Excellence in fulfilling the promise: We intend to produce and provide products of uncompromised quality to our customers, and excellent service. This is so as to meet their needs and standards. We acknowledge the fact that the company's success will be based on timeous response to customer orders and hence we intend to set high standards and work procedures.

3. Assembly Technology: To ensure quality diapers and sanitary pads it is essential to utilize the latest and most efficient production machines. We also intend to keep abreast with technological developments, which will ensure we gain and maintain a competitive advantage utilizing the latest production techniques.

4. Networking: As the majority of our customers will be wholesalers and intermediaries there is need to effectively network with the various decision-makers and order-makers to ensure a ready market.

2.0 Company Summary

The primary nature of the business is to manufacture and sell disposable baby nappies, geriatric/adult diapers and sanitary pads. Our intention is to produce disposable nappies that will meet all the requirements of a quality standard, particularly considering that the majority of those currently on the market are imported from South Africa.

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2.1 Company Ownership

Baby Nappies World is a company incorporated at the Registrar of Companies through the foresight and vision of Mrs. X and Mr. X. Though relatively new, the directors realize their Company's vast potential market and opportunity for growth given implementation of the appropriate strategies, aided by the necessary finances.

2.2 Start-up Summary

Total start-up capital and expenses covered (including legal costs, business plan compilation, stationery and related expenses) came to approximately P5,000. Start-up assets in the company's possession include a vehicle, computer, printer and fax, the last of which is relatively new.

Table: Start-up

Start-up

Requirements

Start-up ExpensesLegal P1,000Stationery etc. P100Brochures P900Consultants P0Insurance P1,000Rent P1,000Research and development P0Expensed equipment P1,000Other P0Total Start-up Expense P5,000

Start-up Assets NeededCash Balance on Starting Date P37,043Start-up Inventory P3,680Other Short-term Assets P0Total Short-term Assets P40,723

Long-term Assets P54,277Total Assets P95,000Total Requirements P100,000

Funding

InvestmentInvestor 1 P100,000Investor 2 P0Other P0Total Investment P100,000

Short-term LiabilitiesAccounts Payable P0Current Borrowing P0Other Short-term Liabilities P0Subtotal Short-term Liabilities P0

Long-term Liabilities P0Total Liabilities P0

Loss at Start-up (P5,000)Total Capital P95,000Total Capital and Liabilities P95,000

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P0

P10,000

P20,000

P30,000

P40,000

P50,000

P60,000

P70,000

P80,000

P90,000

P100,000

Expenses Assets Investment Loans

Start-up

2.3 Company Locations and Facilities

At present the business is located at Plot Number 5767, Partial, Gaborone. However, as time progresses and the business expands, the intention will be to move into a more accessible and attractive commercial area. This regardless of the fact that our type of business is not too dependent on office location and size, with the quality of our products being the primary concern.

3.0 Product Portfolio

Baby Nappies World intends to manufacture and sell disposable baby nappies, geriatric/adult diapers and sanitary pads. These products shall be of high quality standard so as to ensure customer satisfaction and meet all the customers' requirements.

3.1 Product Description

Baby Nappies World initially intends to focus on the production of the following products:

1. Baby NappiesThe disposable nappy may be described as an invention that revolutionized the baby care industry. It exists today as a practical solution to the problem of dirty, smelly, wet baby bottoms throughout the world. The vast amount of births here in Botswana dictates that the baby nappy is very much in demand, and that demand continuously increasing. With this in mind we intend to produce a quality nappy. Our diaper will have (discussion omitted).

2. Geriatric/Adult & Sanitary Pads

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These are mainly used in medical institutions such as hospitals and clinics where patients often require disposable pads to overcome the problem of dirty, smelly and wet bottoms. This is particularly so as these adult patients are incontinent and often do not have the ability to control their bladder. The (discussion omitted).

3.2 SWOT Analysis

We shall be in a highly lucrative market in a growing economy. We foresee our strengths as the ability to respond timeously to customer's orders and provide them with the correct quantity. Our key personnel will be well trained in the actual production of our products so as to ensure on time deliveries to the client. This will go a long way towards penetrating the market. Below are the summarized strengths, weaknesses, opportunities and threats.

3.2.1 Strengths

• Relationship selling. We intend to get to know our customers, one on one. Our direct sales efforts will seek to maintain a relationship with our customers.

• Diversified customer base: We intend to obtain orders for our products from a wide customer base. This will ensure lack of dependency on one customer.

• Low production costs: The costs of our products will be approximately a third less than the famous brand names and end user prices.

3.2.2 Weaknesses

• A limited financial base compared to our South African counterparts. • The introduction of new organisational practices and personnel who have not previously

worked together presents a challenge to the organisation. • Our infancy dictates that wholesalers and other intermediaries might be skeptical about

our products.

3.2.3 Opportunities

• Service. As our intended target markets are in relatively accessible areas we intend to be able to meet their requirements in the shortest possible time.

• Current drive by government towards encouraging the participation of indigenous entrepreneurs and diversification of the economy presents an opportunity that we may fully utilize.

• Presently there is no reliable local manufacturer of diapers and sanitary pads, with less than a handful currently on the market.

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3.2.4 Threats

• The "Foreign is good, local is poor" belief may present a difficult hurdle to be overcome.• Existing competition, both local and foreign. Wholesalers and institutions may express

satisfaction with their current diapers and sanitary pads.• The possibility of other start up diaper/sanitary pad manufacturing companies

generated by healthy economic growth, establishing in the market.

3.3 Competitive Comparison

There is very little competition from local companies manufacturing products similar to our main products. However considering the pace of change and current growth rate of the economy luring companies into the market, this may be short-lived. Hence there will be a need to not only firmly establish ourselves in the market, but also strongly differentiate ourselves from these other businesses. However on a broader scale our competition comes in several forms:

1. The most significant competition are South African manufacturers of diapers and sanitary pads including reputable brands such as X and Y, which have a well established distribution network in place. This network ensures that their products are widely available on the market. Our key advantages over these producers will be our order response time as well as lower costs, which will be attractive to many of our prospective clients.

2. Existing local manufacturers of diapers and sanitary pads are few with research indicating that there are currently two in Gaborone and one in Francistown, though additional information regarding their products and operations were still being collected during compilation of this plan.

3. An existing textile company is also contemplating entering the baby nappies market.

An analysis of competition is provided in the competition section of this plan.

3.4 Sales Literature

The business will begin by formulating letters of introduction establishing its position on the market, as well as the products it manufacturers. These letters will be developed as part of the start-up expenses together with the business cards and the Company Profile, mainly for the large organisations and institutions. Complementary coupons are also intended so as to raise awareness of the company and its products.

Hence literature and mailings for the initial market forums will be very important.

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3.5 Technology

The machine responsible for the manufacturing process is a new and unique concept. It is capable of producing different sized nappies, that is, small, medium and large geriatric/adult and sanitary pads. It is capable of producing 350+/- diapers per hour, which converts to 2,500+/- per day, or 8,000+/- sanitary pads per day.

The one certainty in our industry is that technology will continue to evolve and develop, changing the quantity that can be produced at any one time, as well as its quality. Our aim will be to be aware of the implications of this new technology and utilize it in our existing framework where possible. However our initial aim will be to pay back the initial cost of the machine.

3.6 Future Products

In putting the company together we have attempted to offer enough products to allow us to always be in demand by our customers and clients. The most important factor in developing future products is market need. As time progresses we intend to produce towels, t-shirts and sportswear. However, we should stress that in doing so, we will strive to ensure that it is compatible with the existing products and company personnel.

4.0 Market Analysis Summary

The current drive and emphasis by the government on diversification of the industrial base away from the minerals sector presents an opportunity for Baby Nappies World to make a valuable contribution towards achieving this goal. Having undertaken a thorough and comprehensive research of the market we realized that there was a vast opportunity for a local manufacturer of diapers and pads, with less than a handful currently on the market.

Aware of the fact that operating in such a market is largely dependent on good networking, we intend to establish networks and strategic relationships with various wholesalers, clinics and hospitals to ensure a steady stream of orders. In so doing we intend to ensure that the products we produce are of extremely high quality and fully serve their purpose. Our initial overall target market share shall be 10% of the market, mainly focusing on the wholesalers and organisations in Botswana.

We appreciate that entering such a market is not a 'bed of roses' and will require us establishing strong networks and links with several organisations and institutions as outlined previously. Hence we intend to implement an aggressive marketing strategy, well supported by the other business functions. The above prognosis influenced our decision to enter the diaper and sanitary pad manufacturing industry.

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4.1 Market Segmentation

We will be focusing on wholesalers, academic institutions, hospitals and clinics that either sell or utilize our intended products. We also intend to focus on government tenders for our diapers and sanitary pads.

Our main target market is large enough to order from us and ensure that we are kept busy meeting their orders. Though we do not intend to fully depend on them, they shall constitute our 'core' market. One of our intentions will be to offer organisations an attractive alternative to South African companies mainly marketing our lower costs and shorter order fulfillment time.

4.2 Target Market Segment Strategy

Our marketing strategy will be based mainly on making our products available to the right target customer. We will ensure that our products' prices take into consideration organisations order-makers' budgets, and that these people appreciate the quality of our products, are aware our products exist,, and know where to order them. Our low production costs, which will naturally be reflected in lower prices for our products, will ensure that we have very good opportunities to win hospital, clinic, and institution tenders for our products, besides obtaining orders from all the other markets including wholesalers, chemists, informal traders and supermarkets we shall be targeting.

We realize the need to focus our marketing message and our product offerings. We need to develop our message, communicate it, and make good on it. This shall be undertaken in order to establish ourselves on the market and long-term relationships.

4.2.1 Market Needs

Baby Nappies World will set out to provide high quality disposable baby nappies, geriatric/adult diapers and sanitary pads that will facilitate the hygienic and easier changing of individuals, both adult and children. The quality of raw materials and assembly technology we shall utilize will be evident in our products, serving to enhance the appearance of our customers, in turn adding to their comfort. The large market is due to the fact that admissions are increasing at an enormous rate in hospitals and clinics resulting from increased diseases and infections, as well as the increase in the population growth rate.

We understand that our target markets need more than just something that absorbs. Our target customer wants something that absorbs as well as being hygienic, comfortable, easy to use and of good quality. Price also plays an important part in the purchase decision.

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4.2.2 Market Trends

Botswana currently has one of the fastest population growth rates in the world, resulting in a population of over 1.6 million now compared to just 600,000 in 1971

1

. By 2021 the workforce between 25-59 years old is expected to increase from around 500,000 to over 1 million. However, a drop in the fertility rate is anticipated because of increased opportunities and better education. In 1981 Botswana women had an average of 7.1 children, in 1991 they had 4.2 children and this is forecast to fall below there in the next 10 years. This is causing a shift in the demographic structure of the population, from a situation where over 50% of the population are under 19 years old, to one where more of the population is of working age. As a result the dependency ratio is likely to fall, resulting in increased household savings. The current population growth rate shows that there is a demand for diapers and nappies in households, particularly considering the increase in the workforce prompting mothers to stock diapers, especially disposables, as they are easier and faster to handle.

1

Source: Central Statistics Office

4.3 Industry Analysis

Industry competition information appears in the following subtopics.

4.3.1 Competition and Usage Patterns

The key element in service utilization decisions made at the company's client level is trust in the reputation and reliability of the firm. The most important factor in this market will be the quality of the product. Unlike our competitor's nappies and pads, ours are going to have double the absorbent super gel making our absorbency superior to most top brands. This converts into fewer diapers and pads being used per day, encouraging customers to order our products.

4.3.2 Main Competitors

There are currently few local companies competing in our market niche. However upon closer research it was identified that South African products constitute approximately 70% of the market, dominating the market. Hence we intend to market ourselves as a local quality manufacturer of diapers and pads in such a way that with time customers will choose our products over competitors' on the basis of our lower costs, faster order fulfillment times and high quality. The following were identified as our main local competitors:

1. XLocated in Francistown, X, also known as N, specializes in the manufacture of baby napkins, bath and hand towels, face and wash cloths, beach towels, bath sheets and waffle gowns. With a large share of the northern market, mainly due to the large distance between Francistown and South Africa, N is an established player on the market and was rated as the best performer in the textile sector in 1999. It has had tremendous growth in a short time, with state of the art machinery currently in place.

During 1999 the company pursued the European markets with employment rising to 340 people. It has a well-coordinated sales office, which ensures orders are met and delivered on time, as well as a professional sales staff that ensures customer inquiries are well handled. Its customer base is largely from South Africa with few local

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customers. Prices are extremely competitive with a pack of four black diamond napkins (70x70cm) selling for P27.08. Though the local orders are few they tend to be of large amounts. It obtains most of its raw materials, including yarn from Zimbabwe, with the actual weaving being done in the factory. Transport is normally provided for bulk orders of above P2,500.00 throughout Botswana taking four weeks at maximum to deliver the order. The actual delivery time often depends on whether the stock is available in-house. The company is an investment product of B, with a considerable degree of financial and technical backing.

2. YLocated in Gaborone West, Y specializes in the manufacture of baby napkins, towels, face cloths, tea towels and dish cloths. It has a large warehouse whose logistics/operations are well organised, coordinated and closely supervised. Prices are extremely competitive due to the above-mentioned factors with baby napkins selling at approximately P4.00 (70x70cm); Infant napkin approximately P3.00 (60x60cm) and a printed baby napkin selling at P6.00 (70x70cm). It targets both retailers and consumers ensuring a large customer base.

3. ZLocated in Tlokweng Industrial, Z specializes in the manufacture of baby napkins, towels, face cloths, dishcloths, swabs and other textiles.

4. KLocated in Tlokweng, K intends to go into manufacturing of baby napkins in bulk in the near future. It currently has the capacity to do so and manufactures face cloths and dish towels, all for the South African market. It employs 145 people and is also an investment product of B.

5.0 Strategy and Implementation Summary

Baby Nappies World intends to win and maintain customers by providing products that add value in terms of price, quality, safety, availability and functionability, and are supported by a dedicated, well-trained team. This shall be important to the successful implementation of our overall strategy and hence the need to ensure we are focused and working harmoniously towards attainment of the goals and objectives. We initially intend to be focusing on satisfying the local market.

Our marketing strategy emphasises focus. We are a new company and hence must focus our efforts towards informing customers of our existence and the products we are able to supply. Initially Baby World Nappies will focus on the local market before contemplating entering the regional market. This is mainly due to our limited resources and the need to instill confidence in our products as well as business operations. The target customers will include key decision-makers and order-makers in hospitals, clinics, wholesalers and informal traders, who often order or recommend on behalf of the whole organisation, the aim being to obtain an initial order and fully satisfy the customer from then on. Hence:

• We intend to focus on delivering quality products at affordable prices that in turn will produce good referrals, which can then generate revenue.

• We intend to build image and awareness through consistency and distinctiveness in our order fulfillment.

Our strategy is to grow the business by nurturing clients and establishing good one to one relationships with them. All criteria from customer satisfaction, order fulfillment, price competitiveness to staff attitudes are to be looked at thoroughly in the initial stages so as to

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identify areas of improvement. To attain low lead times (the time it takes to meet orders) we need to ensure that all functions are communicating properly and formally, using valid and accurate data to derive achievable plans and schedules for all stages of procurement, manufacturing and delivery. Baby Nappies World will develop new channels of distribution as the company grows. Its plan to become a nationally known brand may be pushed forward by entering into contracts with the numerous clinics and hospitals throughout the country, such that it gives Baby Nappies World exclusive access to the relatively remote areas in the country.

5.1 Marketing Strategy

We intend to implement a progressive marketing strategy. In terms of marketing we intend that our name and products are marketed on an extensive basis to ensure that customers are aware of our existence. In price, we intend to offer reasonable and competitive prices in comparison to South African competitors and we need to be able to sustain that. Our marketing will strive to ensure that we establish long relationships with clients.

5.1.1 Positioning

We intend to position ourselves as a desirable alternative source of high quality disposable baby nappies, geriatric/adult diapers and sanitary pads. This shall be undertaken through use of high quality raw materials and production processes so as to ensure the efficient delivery of quality products. The product strategy will also be based on quality, combined with making the product easily available to the customers. An important competitive edge will be our assembly strategy, which will be based on good quality, such that production and delivery are not only a pleasure, but also a feature that enhances the sense of quality and perception by clients. Our faster delivery, relative to our South African counterparts, will also serve as an important competitive advantage on the market.

Through our lower prices, made possible by reduced local delivery charges, we intend to attract a large portion of the market, both directly and indirectly through referrals.

5.1.2 Pricing Strategy

Baby Nappies World's products will be competitively priced in relation to its South African competitor's products. Due to the introductory nature of our products we intend to implement a penetration pricing strategy which will ensure that potential customers are attracted by our lower prices, up until our products are fully appreciated on the market, especially in terms of their quality. We will initially charge PX per nappy. However this will dictate that our costs are prudently kept so as to ensure our financial goals come to fruition.

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5.1.3 Promotion Strategy

The promotion strategy shall initially revolve around informing customers of our existence, the products we produce, and how to order them. The intention will be to highlight the following key benefits of ordering our products instead of competitors, including:

• Our lower production costs which will convert to lower order prices. • Quality products able to compete with the top brands. • Faster order fulfillment times.

We intend to be well known by all our stakeholders in particular wholesalers, hospitals and other such institutions that may utilize our products, as well as informal traders. Hence we shall leverage our presence using introductory letters, brochures and other sales literature. We intend to spread the word about our business through the following:

1. Personal Selling. Undoubtedly customer solicitation face-to-face will be our most powerful form of promotion mainly due to the fact that our products are mainly ordered by individuals in organisations and institutions. Its flexibility will enable us to give our customers concise details of what we have to offer and the benefits of using our products. Another important determinant in utilizing personal selling is the fact that we are relatively new on the market. As such potential customers/clients will to a certain degree be skeptical towards our products and their efficacy.

2. Advertising. In view of the fact that we are new on the market we intend to undertake adequate advertising of our name and products we offer. This is to instill awareness and knowledge of our existence in the market place, which hopefully shall convert into market share. A constant look out will be made of any special editions in the local newspapers, which may provide an opportunity for us to advertise our products and business name.

3. Direct Marketing. This will be used to a limited extent in the form of telemarketing and informing potential customers and obtaining referrals where possible. In the case of telemarketing it will involve our targeting potential customers of our products and informing them of our existence. We may then arrange for an appointment with the respective decision-maker/order-maker, with the intention being to encourage them to order our products.

4. Events. We intend to attend trade shows and exhibitions to increase awareness of our products and services. These events will also enable us to interact with potential clients who may decide to order our products. Trade shows that instantly come to mind include Botswana International Trade Fair (BITF) and BITEC, though the latter might not be as important as the former.

5.1.4 Distribution Strategy

Our products shall initially be mainly sold through personal selling and referral business, with relationships and customer experience being, by far, the most important factor. Relationships in this regard means establishment of links with the various wholesalers, hospitals and clinics which often order or require our products for their customers. Invariably the experience a customer has with our products will go a long way toward influencing the intermediary to continue to order our products, and whether they should refer their friends to order our products. To this end we intend to ensure we provide a quality product with superior absorbency and comfort. Hence we initially intend to use the following channels: (discussion omitted).

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5.2 Sales Strategy

For the short term at least, the selling process will depend on personal selling/networking and advertising to inform potential customers about the products we offer and the benefits of utilizing our products. Our marketing does not intend to affect the perception of need as much as knowledge and awareness of the product category.

5.2.1 Sales Forecast

Sales forecast information is presented in the chart and table below.

P0

P10,000

P20,000

P30,000

P40,000

P50,000

P60,000

P70,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Nappies, diaper, pads

Other

Sales Monthly (Planned)

Table: Sales Forecast (Planned)

Sales ForecastSales 2000 2001 2002Nappies, diaper, pads P748,800 P1,075,200 P1,142,400Other P0 P0 P0Total Sales P748,800 P1,075,200 P1,142,400

Direct Cost of Sales 2000 2001 2002Nappies, diaper, pads P361,920 P389,760 P389,760Other P0 P0 P0Subtotal Direct Cost of Sales P361,920 P389,760 P389,760

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6.0 Human Resources Summary

Our human resources strategy shall constitute an important element in realizing our business objectives and goals. By having enthusiastic, capable and motivated staff we intend to meet customers' order fulfillment times and ensure their satisfaction with our products and service. This will also ensure that we build the competitive advantage of being able to comprehensively meet our customers' needs. There will be need to evaluate jobs and remuneration packages against market benchmarks to employees for their agreed and set out tasks so as for ensure they are competitive.

6.1 Organizational Structure

Baby Nappies World shall be managed primarily by the directors/owners. The company will engage a non-formal functional organisation structure whereby people shall be focusing on their prime area of expertise. A non-formal structure is flexible and responsive to the market dictates, enabling the company to delight customers by providing them with what they want, when they want it and faster than the competition. In engaging this organisation structure we intend that there is open communication between all personnel at all levels.

As the company grows there will be more structure to the organisation, with new employees being assigned a supervisor or subordinate. When the company is at its full staff potential, it will operate as any closely held organisation, but maintain the personal interest in each employee's personal and family welfare and their contributions to the business.

6.2 Management Team

The founders of Baby Nappies World are passionate about the activities it will promote and offer on the market. Management style will reflect the participation of the directors/shareholders. As outlined previously we do not intend to be very hierarchical especially considering our size and need to respond timeously to customers' orders. Management's ongoing initiatives will include driving sales, market share and productivity. Please find below a brief outline of the directors' work experience and qualifications. (discussion omitted)

6.3 Personnel Plan

We believe this plan meets the commitments of our mission and business objectives. We intend to grow into a large organisation, though in doing so ensure that we wish to stay responsive to customers orders and requests. We want the company to stay lean and flexible so that we can respond to our markets' needs quickly. As we expand and increase in size we do expect to increase our personnel.

Baby Nappies World recognises that our employees contribute fundamentally to the Company's long-term prosperity, acknowledging our obligation to remunerate them competitively. We intend to compensate our personnel well, so as to retain their invaluable expertise and to ensure job satisfaction and enrichment through delegation of authority. Our compensation will include a competitive salary, generous profit sharing, plus a minimum of three weeks vacation. As time progresses we intend to enhance our capacity to attract and retain people of quality, inter alia, through benefits such as housing and family education grants.

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Table: Personnel (Planned)

Personnel Plan2000 2001 2002

All departments P43,824 P76,174 P104,661Other P0 P0 P0Total Payroll P43,824 P76,174 P104,661

Total Headcount 7 10 12Payroll Burden P6,574 P11,426 P15,699Total Payroll Expenditures P50,398 P87,600 P120,360

6.4 Training

At the onset training shall be obtained from Q, the suppliers of the manufacturing equipment, in the actual operations of the machines. Thereafter in-house training shall be undertaken. This training will not only include product and technical aspects, but also expand to give much greater knowledge of customers, market trends, products, new technology aids, and time management amongst other such variables. This is to ensure that we are continuously able to anticipate our markets needs-a proactive approach, which is so essential if we are to gain and maintain a competitive advantage on the market.

External training will be conducted, mainly in South Africa with reputable organisations to stay aware of the latest products and services on the market, and how to install or maintain them. This will also ensure that our personnel are able to meet the high standards, of these organisations.

6.5 Feedback and Control

1. Important notices and developments will be continuously communicated to employees to keep them abreast of developments and promoting a sense of belonging and oneness in the organisation.

2. We will encourage our employees to put forward any suggestions they might have regarding the improvement of any of the company's functions-an open door philosophy. Such a culture will enhance innovativeness and creativity, in turn leading to job satisfaction and enrichment.

3. We intend to make sure that our employees understand the goals of the firm, are customer focused, proud of their work and work as a team. This will encourage employees to become entrepreneurial and customer responsible, in addition to unifying staff in customer focus and values.

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6.6 Corporate Social Responsibility

We recognise the fact that the broader community in which we operate affords us our 'license to trade'. We intend to establish relationships based on trust and mutual advantage through engaging in a wide range of active social responsibility programs. Our efforts on community service will show that the company has its own community at heart, contributing towards the establishment of a good and reputable image. We intend to be a responsible corporate citizen fully contributing positively towards the environment in which we shall operate. Furthermore, (discussion omitted).

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7.0 Financial Plan

The financial plan shall be essential if we are to meet our objectives. The intention is to finance growth through cash flow. One of the most important factors will be the payment terms as agreed between the client or customer. We can't push our customers hard on collection days, because they are extremely sensitive and will normally judge us on our terms. However there are certain instances where we will have the bargaining power instead of the customer. Examples include informal traders and actual consumers of our products. Therefore there is need to develop a permanent system of receivables financing mutually agreed between both parties. Hence in the financial plan we intend to have the following:

1. A fundamental respect for giving our customers value, and for maintaining a healthy and congenial workplace.

2. Cash flow as first priority, growth second, profits third.

3. Respect for realistic forecasts, and conservative cash flow and financial management.

Of theses only (1) and (3) are flexible.

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7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are included in the financial plan as annual assumptions. The monthly assumptions are included in the appendices. From the beginning, we recognize that collection days are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions.

Some of the more important underlying assumptions are:

• We assume a strong economy, without major recession.• We assume, of course, that there are no unforeseen changes in economic policy to

make our products and service immediately obsolete.

Other key financial assumptions, including 30-day average collection days, sales entirely on invoice basis including a favorable deposit policy, expenses mainly on a net 30 day basis, 30 days on average for payment of invoices, and present-day interest rates.

Table: General Assumptions

General Assumptions2000 2001 2002

Short-term Interest Rate % 10.00% 10.00% 10.00%Long-term Interest Rate % 10.00% 10.00% 10.00%Tax Rate % 17.00% 17.00% 17.00%Expenses in Cash % 10.00% 10.00% 10.00%Sales on Credit % 75.00% 75.00% 75.00%Personnel Burden % 15.00% 15.00% 15.00%

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7.2 Key Financial Indicators

We foresee growth in sales at a faster rate than operating expenses, and a bump in our collection days as we seek to spread the business during start-up.

Collection days are very important. We do not want to let our average collection days get above 30 under any circumstances. This could cause a serious problem with cash flow, because our working capital situation is chronically tight. However, we recognize that we cannot control this factor easily, because of the relationship with our clients.

0

0

0

1

1

1

1

1

2

2

Sales Gross OpEx AR Est. Turns Est.

2000

2001

2002

Benchmarks (Planned)

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7.3 Break-even Analysis

Our break-even analysis will be based on running costs, that is costs we shall incur in keeping the business running, including salaries and wages, rent, machine maintenance costs, water and electricity, insurance amongst others. We estimate average monthly fixed costs of around P9,250. With the average per-unit price of P1.20 and the average cost of P0.48, the company will comfortably exceed the break-even sales volume of P15,417.

(P10,000)

(P5,000)

P0

P5,000

P10,000

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

Table: Break-even Analysis

Break-even Analysis:Monthly Units Break-even 12,847Monthly Sales Break-even P15,417

Assumptions:Average Per-Unit Revenue P1.20Average Per-Unit Variable Cost P0.48Estimated Monthly Fixed Cost P9,250

7.4 Revenue Generation

Baby Nappies World will receive its revenue streams from sales of its diapers and sanitary pads. However we will also look into whether we are able to generate revenue from by-products obtained from manufacturing our main products. Additional research into the above shall be undertaken.

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7.5 Expense Forecast

Initial expenses shall not be extremely high considering the fact that the manufacture of our products does not require much electricity (220v) or water. Expenses will be brought about by transport charges incurred in delivering our products to customers, as well as going out on sales calls procuring orders. However the strategy will involve including these charges in the prices of our products. As time progresses we intend to undertake marketing programs to ensure awareness of our existence on the market. Invariably this will result in marketing expenses being incurred.

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7.6 Projected Profit and Loss

Our projected profit and loss is shown in the appendix, with sales increasing from more than P748,800 the first year to more than P1,075,200 the second, and P1,142,400 in the third year. Profits are calculated to be around P281,682 before tax the first year during the start-up phase of this business. This will be representative of a net profit margin of approximately 31.22%, which though may not seem that impressive is relatively good for a start-up firm in our line of business. Hence we do expect to more than break-even in the first year of operation. As with the break-even, we are projecting very conservatively regarding cost of sales and gross margin. Our cost of sales should be much lower, and gross margin higher, than in this projection.

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss2000 2001 2002

Sales P748,800 P1,075,200 P1,142,400Direct Cost of Sales P361,920 P389,760 P389,760Other P0 P0 P0

------------ ------------ ------------Total Cost of Sales P361,920 P389,760 P389,760Gross Margin P386,880 P685,440 P752,640Gross Margin % 51.67% 63.75% 65.88%Operating Expenses: Advertising/Promotion P7,200 P9,600 P9,600General&Adminstrative P1,200 P1,800 P1,200Travel P3,600 P4,800 P4,800Miscellaneous P2,400 P2,400 P2,400Payroll Expense P43,824 P76,174 P104,661Payroll Burden P6,574 P11,426 P15,699Depreciation P10,800 P10,800 P10,800Maintenance P800 P1,000 P800Utilities P2,400 P3,000 P4,200Installation Costs P600 P0 P0Insurance P12,000 P12,000 P14,400Rent P12,000 P13,200 P14,520Bank Charges P1,800 P1,800 P2,400

------------ ------------ ------------Total Operating Expenses P105,198 P148,000 P185,480Profit Before Interest and Taxes P281,682 P537,440 P567,160Interest Expense Short-term P0 P0 P0Interest Expense Long-term P0 P0 P0Taxes Incurred P47,886 P91,365 P96,417Extraordinary Items P0 P0 P0Net Profit P233,796 P446,075 P470,743Net Profit/Sales 31.22% 41.49% 41.21%

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7.7 Projected Cash Flow

Our cash flow is shown in the following chart and table.

(P50,000)

P0

P50,000

P100,000

P150,000

P200,000

P250,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Net Cash Flow

Cash Balance

Cash (Planned)

Table: Cash Flow (Planned)

Pro Forma Cash Flow 2000 2001 2002

Cash ReceivedCash from Operations: Cash Sales P187,200 P268,800 P285,600From Receivables P512,880 P785,163 P852,428 Subtotal Cash from Operations P700,080 P1,053,963 P1,138,028

Additional Cash ReceivedExtraordinary Items P0 P0 P0Sales Tax, VAT, HST/GST Received P0 P0 P0New Current Borrowing P0 P0 P0New Other Liabilities (interest-free) P0 P0 P0New Long-term Liabilities P0 P0 P0Sales of other Short-term Assets P0 P0 P0Sales of Long-term Assets P0 P0 P0Capital Input P0 P0 P0 Subtotal Cash Received P700,080 P1,053,963 P1,138,028

Expenditures 2000 2001 2002Expenditures from Operations:Cash Spent on Costs and Expenses P51,509 P53,572 P54,050Wages, Salaries, Payroll Taxes, etc. P50,398 P87,600 P120,360Payment of Accounts Payable P428,231 P480,733 P486,120 Subtotal Spent on Operations P530,137 P621,906 P660,530

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out P0 P0 P0Principal Repayment of Current Borrowing P0 P0 P0Other Liabilities Principal Repayment P0 P0 P0Long-term Liabilities Principal Repayment P0 P0 P0Purchase Other Short-term Assets P0 P0 P0Purchase Long-term Assets P0 P0 P0Dividends P0 P0 P0 Adjustment for Assets Purchased on Credit P0 P0 P0 Subtotal Cash Spent P530,137 P621,906 P660,530

Net Cash Flow P169,943 P432,057 P477,498Cash Balance P206,986 P639,043 P1,116,541

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7.8 Projected Balance Sheet

The balance sheet shows healthy growth of net worth, and strong financial position. The three-year estimates are included in the appendix.

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

AssetsShort-term Assets 2000 2001 2002Cash P206,986 P639,043 P1,116,541Accounts Receivable P48,720 P69,957 P74,329Inventory P64,960 P69,957 P69,957Other Short-term Assets P0 P0 P0Total Short-term Assets P320,666 P778,957 P1,260,827Long-term AssetsLong-term Assets P54,277 P54,277 P54,277Accumulated Depreciation P10,800 P21,600 P32,400Total Long-term Assets P43,477 P32,677 P21,877Total Assets P364,143 P811,634 P1,282,704

Liabilities and Capital2000 2001 2002

Accounts Payable P35,346 P36,762 P37,090Current Borrowing P0 P0 P0Other Short-term Liabilities P0 P0 P0Subtotal Short-term Liabilities P35,346 P36,762 P37,090

Long-term Liabilities P0 P0 P0Total Liabilities P35,346 P36,762 P37,090

Paid-in Capital P100,000 P100,000 P100,000Retained Earnings (P5,000) P228,796 P674,872Earnings P233,796 P446,075 P470,743Total Capital P328,796 P774,872 P1,245,614Total Liabilities and Capital P364,143 P811,634 P1,282,704Net Worth P328,796 P774,872 P1,245,614

7.9 Business Ratios

Standard business ratios are shown in the following table. The Industry Profile column shows ratios for Standard Industry Code (SIC) 2676, Sanitary Paper Products.

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Table: Ratios (Planned)

Ratio Analysis2000 2001 2002 Industry Profile

Sales Growth 0.00% 43.59% 6.25% 0.00%

Percent of Total AssetsAccounts Receivable 13.38% 8.62% 5.79% 27.60%Inventory 17.84% 8.62% 5.45% 11.20%Other Short-term Assets 0.00% 0.00% 0.00% 27.70%Total Short-term Assets 88.06% 95.97% 98.29% 66.50%Long-term Assets 11.94% 4.03% 1.71% 33.50%Total Assets 100.00% 100.00% 100.00% 100.00%

Other Short-term Liabilities 0.00% 0.00% 0.00% 33.80%Subtotal Short-term Liabilities 9.71% 4.53% 2.89% 32.20%Long-term Liabilities 0.00% 0.00% 0.00% 20.00%Total Liabilities 9.71% 4.53% 2.89% 52.20%Net Worth 90.29% 95.47% 97.11% 47.80%

Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 51.67% 63.75% 65.88% 33.60%Selling, General & Administrative Expenses 20.44% 22.26% 24.68% 21.20%Advertising Expenses 0.96% 0.89% 0.84% 0.40%Profit Before Interest and Taxes 37.62% 49.99% 49.65% 2.90%

Main RatiosCurrent 9.07 21.19 33.99 1.77Quick 7.23 19.29 32.11 1.24Total Debt to Total Assets 9.71% 4.53% 2.89% 53.80%Pre-tax Return on Net Worth 85.67% 69.36% 45.53% 6.20%Pre-tax Return on Assets 77.35% 66.22% 44.22% 13.50%

Business Vitality Profile 2000 2001 2002 IndustrySales per Employee P106,971 P107,520 P95,200 P0Survival Rate 0.00%

Additional Ratios 2000 2001 2002Net Profit Margin 31.22% 41.49% 41.21% n.aReturn on Equity 71.11% 57.57% 37.79% n.a

Activity RatiosAccounts Receivable Turnover 11.53 11.53 11.53 n.aCollection Days 16 27 31 n.aInventory Turnover 10.55 5.78 5.57 n.aAccounts Payable Turnover 13.12 13.12 13.12 n.aTotal Asset Turnover 2.06 1.32 0.89 n.a

Debt RatiosDebt to Net Worth 0.11 0.05 0.03 n.aShort-term Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity RatiosNet Working Capital P285,319 P742,195 P1,223,737 n.aInterest Coverage 0.00 0.00 0.00 n.a

Additional RatiosAssets to Sales 0.49 0.75 1.12 n.aCurrent Debt/Total Assets 10% 5% 3% n.aAcid Test 5.86 17.38 30.10 n.aSales/Net Worth 2.28 1.39 0.92 n.aDividend Payout P0 0.00 0.00 n.a

8.0 Controls

The diapers and sanitary pads market has not been fully explored. With this in mind we intend to aggressively market our existence. The introduction of quality sales and marketing literature will enable the company to effectively market to potential customers with a positive image and impression. This will be supported by the relationships we would have established with several of our customers and clients.

Throughout the year the intention will be to undertake regular evaluations of our products and marketing programs so as to ensure that we are inline with our intended objectives. In summary we intend to undertake the following:

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1. Tracking and follow-up: We intend to have the discipline, as an organisation, to track results of the business plan and make sure that we implement.

2. Market segment focus: We intend to have the discipline to maintain the market segment focus.

3. Saying no: Though difficult initially we intend to be able to say no to special deals that take us away from the target focus but in particular those that are unprofitable.

8.1 Contingency Planning

1. We intend to watch our results very carefully. We may need to drop a certain product type(s), if we cannot get the margin up or it seems to be unviable. We might be able to avoid the straight competition with the major companies by focusing more on the target market mentioned previously.

2. Another possibility is the introduction of a new company(s) in our niche. Hence the need to undertake aggressive marketing and networking.

8.2 Implementation

Baby Nappies World will start by obtaining trial orders from several wholesalers and institutions with the objective being to impress them regarding our products’ quality. This will see us obtaining long-term contracts that will ensure we grow in the right direction. We will prepare our sales literature, including business cards mainly through engaging a reputable printing organisation. In undertaking the above we intend to ensure that the goals of the organisation are achieved as well as delegation of responsibility for maximum effectiveness.

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Appendix Table: Sales Forecast (Planned)

Sales ForecastSales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002Nappies, diaper, pads P57,600 P57,600 P57,600 P57,600 P57,600 P57,600 P67,200 P67,200 P67,200 P67,200 P67,200 P67,200 P748,800 P1,075,200 P1,142,400Other P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Total Sales P57,600 P57,600 P57,600 P57,600 P57,600 P57,600 P67,200 P67,200 P67,200 P67,200 P67,200 P67,200 P748,800 P1,075,200 P1,142,400

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002Nappies, diaper, pads P27,840 P27,840 P27,840 P27,840 P27,840 P27,840 P32,480 P32,480 P32,480 P32,480 P32,480 P32,480 P361,920 P389,760 P389,760Other P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Subtotal Direct Cost of Sales P27,840 P27,840 P27,840 P27,840 P27,840 P27,840 P32,480 P32,480 P32,480 P32,480 P32,480 P32,480 P361,920 P389,760 P389,760

Appendix

Page 1

Appendix Table: Personnel (Planned)

Personnel PlanJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002

All departments P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P43,824 P76,174 P104,661Other P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Total Payroll P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P43,824 P76,174 P104,661

Total Headcount 7 7 7 7 7 7 7 7 7 7 7 7 7 10 12Payroll Burden P548 P548 P548 P548 P548 P548 P548 P548 P548 P548 P548 P548 P6,574 P11,426 P15,699Total Payroll Expenditures P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P50,398 P87,600 P120,360

Appendix

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Appendix Table: General Assumptions

General AssumptionsJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002

Short-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%Long-term Interest Rate % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%Tax Rate % 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00% 17.00%Expenses in Cash % 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%Sales on Credit % 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00% 75.00%Personnel Burden % 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%

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Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and LossJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002

Sales P57,600 P57,600 P57,600 P57,600 P57,600 P57,600 P67,200 P67,200 P67,200 P67,200 P67,200 P67,200 P748,800 P1,075,200 P1,142,400Direct Cost of Sales P27,840 P27,840 P27,840 P27,840 P27,840 P27,840 P32,480 P32,480 P32,480 P32,480 P32,480 P32,480 P361,920 P389,760 P389,760Other P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Cost of Sales P27,840 P27,840 P27,840 P27,840 P27,840 P27,840 P32,480 P32,480 P32,480 P32,480 P32,480 P32,480 P361,920 P389,760 P389,760Gross Margin P29,760 P29,760 P29,760 P29,760 P29,760 P29,760 P34,720 P34,720 P34,720 P34,720 P34,720 P34,720 P386,880 P685,440 P752,640Gross Margin % 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 51.67% 63.75% 65.88%Operating Expenses: Advertising/Promotion P600 P600 P600 P600 P600 P600 P600 P600 P600 P600 P600 P600 P7,200 P9,600 P9,600General&Adminstrative P100 P100 P100 P100 P100 P100 P100 P100 P100 P100 P100 P100 P1,200 P1,800 P1,200Travel P300 P300 P300 P300 P300 P300 P300 P300 P300 P300 P300 P300 P3,600 P4,800 P4,800Miscellaneous P200 P200 P200 P200 P200 P200 P200 P200 P200 P200 P200 P200 P2,400 P2,400 P2,400Payroll Expense P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P3,652 P43,824 P76,174 P104,661Payroll Burden P548 P548 P548 P548 P548 P548 P548 P548 P548 P548 P548 P548 P6,574 P11,426 P15,699Depreciation P900 P900 P900 P900 P900 P900 P900 P900 P900 P900 P900 P900 P10,800 P10,800 P10,800Maintenance P0 P0 P200 P0 P0 P200 P0 P0 P200 P0 P0 P200 P800 P1,000 P800Utilities P200 P200 P200 P200 P200 P200 P200 P200 P200 P200 P200 P200 P2,400 P3,000 P4,200Installation Costs P600 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P600 P0 P0Insurance P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P12,000 P12,000 P14,400Rent P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P1,000 P12,000 P13,200 P14,520Bank Charges P150 P150 P150 P150 P150 P150 P150 P150 P150 P150 P150 P150 P1,800 P1,800 P2,400

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Operating Expenses P9,250 P8,650 P8,850 P8,650 P8,650 P8,850 P8,650 P8,650 P8,850 P8,650 P8,650 P8,850 P105,198 P148,000 P185,480Profit Before Interest and Taxes P20,510 P21,110 P20,910 P21,110 P21,110 P20,910 P26,070 P26,070 P25,870 P26,070 P26,070 P25,870 P281,682 P537,440 P567,160Interest Expense Short-term P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Interest Expense Long-term P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Taxes Incurred P3,487 P3,589 P3,555 P3,589 P3,589 P3,555 P4,432 P4,432 P4,398 P4,432 P4,432 P4,398 P47,886 P91,365 P96,417Extraordinary Items P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Net Profit P17,023 P17,521 P17,355 P17,521 P17,521 P17,355 P21,638 P21,638 P21,472 P21,638 P21,638 P21,472 P233,796 P446,075 P470,743Net Profit/Sales 29.55% 30.42% 30.13% 30.42% 30.42% 30.13% 32.20% 32.20% 31.95% 32.20% 32.20% 31.95% 31.22% 41.49% 41.21%

Appendix

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Appendix Table: Cash Flow (Planned)

Pro Forma Cash Flow Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002

Cash ReceivedCash from Operations: Cash Sales P14,400 P14,400 P14,400 P14,400 P14,400 P14,400 P16,800 P16,800 P16,800 P16,800 P16,800 P16,800 P187,200 P268,800 P285,600From Receivables P1,440 P43,200 P43,200 P43,200 P43,200 P43,200 P43,440 P50,400 P50,400 P50,400 P50,400 P50,400 P512,880 P785,163 P852,428 Subtotal Cash from Operations P15,840 P57,600 P57,600 P57,600 P57,600 P57,600 P60,240 P67,200 P67,200 P67,200 P67,200 P67,200 P700,080 P1,053,963 P1,138,028

Additional Cash ReceivedExtraordinary Items P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Sales Tax, VAT, HST/GST Received 0.00% P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0New Current Borrowing P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0New Other Liabilities (interest-free) P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0New Long-term Liabilities P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Sales of other Short-term Assets P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Sales of Long-term Assets P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Capital Input P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 Subtotal Cash Received P15,840 P57,600 P57,600 P57,600 P57,600 P57,600 P60,240 P67,200 P67,200 P67,200 P67,200 P67,200 P700,080 P1,053,963 P1,138,028

Expenditures Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002Expenditures from Operations:Cash Spent on Costs and Expenses P8,748 P3,498 P3,514 P3,498 P3,498 P3,514 P4,974 P4,046 P4,063 P4,046 P4,046 P4,063 P51,509 P53,572 P54,050Wages, Salaries, Payroll Taxes, etc. P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P4,200 P50,398 P87,600 P120,360Payment of Accounts Payable P2,624 P77,154 P31,486 P31,625 P31,481 P31,486 P32,068 P44,489 P36,421 P36,560 P36,416 P36,421 P428,231 P480,733 P486,120 Subtotal Spent on Operations P15,572 P84,852 P39,200 P39,323 P39,179 P39,200 P41,242 P52,735 P44,683 P44,806 P44,662 P44,683 P530,137 P621,906 P660,530

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Principal Repayment of Current Borrowing P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Other Liabilities Principal Repayment P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Long-term Liabilities Principal Repayment P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Purchase Other Short-term Assets P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Purchase Long-term Assets P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Dividends P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 Adjustment for Assets Purchased on Credit P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 Subtotal Cash Spent P15,572 P84,852 P39,200 P39,323 P39,179 P39,200 P41,242 P52,735 P44,683 P44,806 P44,662 P44,683 P530,137 P621,906 P660,530

Net Cash Flow P268 (P27,252) P18,400 P18,277 P18,421 P18,400 P18,998 P14,465 P22,517 P22,394 P22,538 P22,517 P169,943 P432,057 P477,498Cash Balance P37,311 P10,059 P28,459 P46,736 P65,158 P83,558 P102,556 P117,020 P139,537 P161,931 P184,469 P206,986 P206,986 P639,043 P1,116,541

Appendix

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Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

AssetsShort-term Assets Starting Balances Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002Cash P37,043 P37,311 P10,059 P28,459 P46,736 P65,158 P83,558 P102,556 P117,020 P139,537 P161,931 P184,469 P206,986 P206,986 P639,043 P1,116,541Accounts Receivable P0 P41,760 P41,760 P41,760 P41,760 P41,760 P41,760 P48,720 P48,720 P48,720 P48,720 P48,720 P48,720 P48,720 P69,957 P74,329Inventory P3,680 P55,680 P55,680 P55,680 P55,680 P55,680 P55,680 P64,960 P64,960 P64,960 P64,960 P64,960 P64,960 P64,960 P69,957 P69,957Other Short-term Assets P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Total Short-term Assets P40,723 P134,751 P107,499 P125,899 P144,176 P162,598 P180,998 P216,236 P230,700 P253,217 P275,611 P298,149 P320,666 P320,666 P778,957 P1,260,827Long-term AssetsLong-term Assets P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277 P54,277Accumulated Depreciation P0 P900 P1,800 P2,700 P3,600 P4,500 P5,400 P6,300 P7,200 P8,100 P9,000 P9,900 P10,800 P10,800 P21,600 P32,400Total Long-term Assets P54,277 P53,377 P52,477 P51,577 P50,677 P49,777 P48,877 P47,977 P47,077 P46,177 P45,277 P44,377 P43,477 P43,477 P32,677 P21,877Total Assets P95,000 P188,128 P159,976 P177,476 P194,853 P212,375 P229,875 P264,213 P277,777 P299,394 P320,888 P342,526 P364,143 P364,143 P811,634 P1,282,704

Liabilities and CapitalJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2000 2001 2002

Accounts Payable P0 P76,105 P30,431 P30,576 P30,431 P30,431 P30,576 P43,275 P35,202 P35,346 P35,202 P35,202 P35,346 P35,346 P36,762 P37,090Current Borrowing P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Other Short-term Liabilities P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Subtotal Short-term Liabilities P0 P76,105 P30,431 P30,576 P30,431 P30,431 P30,576 P43,275 P35,202 P35,346 P35,202 P35,202 P35,346 P35,346 P36,762 P37,090

Long-term Liabilities P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0 P0Total Liabilities P0 P76,105 P30,431 P30,576 P30,431 P30,431 P30,576 P43,275 P35,202 P35,346 P35,202 P35,202 P35,346 P35,346 P36,762 P37,090

Paid-in Capital P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000 P100,000Retained Earnings (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) (P5,000) P228,796 P674,872Earnings P0 P17,023 P34,545 P51,900 P69,422 P86,943 P104,299 P125,937 P147,575 P169,048 P190,686 P212,324 P233,796 P233,796 P446,075 P470,743Total Capital P95,000 P112,023 P129,545 P146,900 P164,422 P181,943 P199,299 P220,937 P242,575 P264,048 P285,686 P307,324 P328,796 P328,796 P774,872 P1,245,614Total Liabilities and Capital P95,000 P188,128 P159,976 P177,476 P194,853 P212,375 P229,875 P264,213 P277,777 P299,394 P320,888 P342,526 P364,143 P364,143 P811,634 P1,282,704Net Worth P95,000 P112,023 P129,545 P146,900 P164,422 P181,943 P199,299 P220,937 P242,575 P264,048 P285,686 P307,324 P328,796 P328,796 P774,872 P1,245,614

Appendix

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