Implementation risk is moderate due to the scarcity of funding. Any Company was incorporated in a specific year. In the one and half years of its construction period, the Company has procured the last portion of machinery. The entrepreneurs do not fully depend on a bank loan for local machinery.
The management does not have sufficient experience in the mineral water industry. The Directors are new in this business arena. It observes the shortfall in the management planning of the project. It also observes the management did not make detailed homework for the project. The management might need to hire a competent human resource for successful operation. Moreover, the labor shortage is observed in Sitakunda region for the related industry, which may affect the production.
The minimum amount of product portfolio. Revenue of the Company based on only different sizes of mineral water bottles which may create a business risk in case of ensuring a stable profit margin during the operation period. Since it has to defend only one product. If it can maintain a combined product portfolio it may ensure its stable business operation and profitability.
Has a moderate backward linkage may stable the profit margin. The Company has a backward linkage for providing an uninterrupted water supply to the product line. It plans to procure raw materials from different places of the country and outside of the Country. Since the Company has an established backward linkage, the profitability may not shrink due to little value addition of the product line.
The low brand may increase the ramp-up period. The company is in the initial stage of its branding preparation. It also has a plan to introduce its products in the name of the “Fresh Drinking Water” brand. In its developing stage, the Company may face huge completion from the known brands of the same product lines. The company has low competitive advantages over known brand products. Product quality and quality control are crucial for the success of the business.
Timely raw material procurement is crucial for smooth production. The Company has planned to procure raw materials from different international producers and local importers of the country. The Company does not have any plan of making a contract with raw material suppliers or local importers. The raw material crisis and price hike may affect the smooth operation, company turnover, and profitability.
A proper distribution channel is crucial for expected selling. Management of the Company has not yet planned to establish its distribution channel but has a plan to make a distributor channel with monitoring an effective marketing team. Since proper distribution channel and good collection team is crucial for the smooth operation of the Company.
Financial risk is high due to a high credit burden i.e. financial leverage. Company ABC has already availed loan approximately BDT 24.12 million for purchasing PET bottle, cork, label production, and wrapping machines. The Company has also taken a loan from shareholders to develop its land, civil construction, and procuring machinery from the local market which will have to be paid within several years. Bank finance is near about BDT 26.31 million including IDCP for six months grace period that may impact the Company's profitability.
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